Solar buy-back in the spotlight
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Solar buy-back in the spotlight

Justin Ryan considers the future of electricity production on Canberra's home market

The recent changes to the ACTEW solar buy-back scheme put the local solar industry back on the roller-coaster. It does not, however, come as a surprise. This change was inevitable and was always coming. The only question was when.

The one-to-one gross metered buy-back scheme that ActewAGL has been offering (and still is until June 30) is unique for Australian utilities. It was generous and, irrespective of the ''true market value'' of the solar power being fed back into the grid, had no business case from Actew's perspective to support it. It was surprising that it was put forward in the first place after the feed-in tariff ended in 2011.

It if not often that a commercial enterprise voluntarily agrees to buy its sole product at the same price that it is selling it.

It if not often that a commercial enterprise voluntarily agrees to buy its sole product at the same price that it is selling it.Credit:Jay Cronan

ACTEW is like any other business - it buys its product at a lower price and sells it at a higher price.

It is not often that a commercial enterprise (albeit with a portion of public ownership) voluntarily agrees to buy its sole product at the same price that it is selling it.

The electricity market is not a predictable place for the energy utility of 2013. With the massive uptake of distributed energy such as solar and the beginning of the smart grid, the traditional business model for the utilities has changed rapidly.

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The new model of increasing amounts of distributed energy is not as attractive and simple as the old one of selling electricity to an increasingly energy-hungry public who has no choice but to buy it. It has been called the energy utility death spiral - the increasing price of electricity encourages people to produce their own, which then puts pressure on utilities to increase prices to cover the lost revenue - which then encourages people to produce more of their own.

Total Australian electricity demand has also become decoupled from economic growth. We now consume less electricity than we did three years ago. As the price has gone up, people have been consuming less.

So what is the true market value of the solar electricity being produced?

There is no agreement about what the price should be. Each player in the market will sell or buy what they can get away with. Right now, this means that ActewAGL is willing to pay a price similar to the base price for which they buy electricity. It would also be making a good profit on selling it.

If we want the price of solar to be more than this, it will have to come from a government instrument or legislation. The ball is now in the government's court. The problem is that there is no obvious road map. The ACT's gross feed-in tariff was introduced at a time when about 15 European countries had already implemented a similar policy. It was proven as a successful policy to increase the uptake of solar energy. It required, however, that governments would be able to accurately predict how the price of installing systems would slowly decrease. This did not happen.

The price decreased at a pace that no one imagined.

Right now, there is no obvious policy measure to help complete solar's journey to standing on its own economically. The most obvious thing to do is what most other jurisdictions in the world have done since winding down their own feed-in tariffs: Nothing.

The good thing about the introduction of net-metering is that it now links the energy produced by a PV system to the building or home that it is on. The house uses what it can of what the system produces (at the time that it is being produced) and the rest is fed back into the grid. This paves the way for homes to be more genuinely energy-independent. You produce your own energy and you use it.

In terms of solar that is mounted on the roofs of homes and other buildings, this is largely a positive step. It will change the way that we use solar - there will be a greater incentive to use the energy while it is being produced. For instance - running the washing machine when the sun is shining. More importantly, however, it opens the door for energy-storage devices to start playing a role.

At first this will be a lithium-ion battery that looks like a white good the size of a small fridge. It will be able to store the energy that the system produces during the day for you to be able to use at night. Solar standing on its own feet and with energy storage will be awesome. For the local solar industry, the game is about surviving the transition. The boom and bust of the feed-in tariff in 2011 wiped out 75 per cent of the established Canberra solar industry.

As for the next two weeks - welcome back to the solar circus!

Justin Ryan is the director of established local solar provider Armada Solar. He has been a participant, observer and commentator on the ACT solar market since 2006.