Solar feed-in tariff

Mr BARBER (Northern Metropolitan) — I move:

That this house calls on the government to introduce a fair price for electricity exported by small-scale solar generators, whereby the feed-in tariff is paid by the electricity retailer at the same rate per kilowatt hour that the customer is charged.

Just to give the chamber a bit of context to this motion, under the Victorian Electricity Industry Act 2000 the Essential Services Commission makes a recommendation annually as to the amount that should be paid for the solar feed-in tariff for small-scale generators. That is to say that if you have solar panels on your house or your business and you are feeding any excess electricity into the grid, the minimum amount that your electricity retailer is required to pay you for those excess electrons is determined by the processes under that act.

We know that the Essential Services Commission has made a recommendation to the government on this. In fact, they are required to do so by the end of August. The last time I checked the government had not made public or gazetted the particular amount that will apply from 1 January next year.

There is another piece of context here too. First of all the government has cut the amount paid to solar homes and businesses through this tariff in each of its two years in government. The second matter is that there are about 80 000 homes and businesses out there that have been getting a 25-cent or one-for-one feed-in tariff — 'one-for-one' meaning that whatever their retailer charges them is what they get paid. That group in particular are going to get a huge shock when they realise their tariff has been cut all the way down to 5 cents under the current level. Those homes and businesses, who may not even know about this until 1 January or later, can expect hundreds of dollars extra on their electricity bills next year.

We are right at the point where the government needs to make a decision about this. I have brought this motion before the house so that members from the various political persuasions can all put forward their view on what they think is a fair feed-in tariff. Why am I arguing that a one-for-one feed-in tariff is the fair level? First of all it is a number that is simple to administer. People are enormously confused by the different retail electricity plans out there. I have tried to understand all the different offerings and how they might impact me. I know a fair bit about my energy consumption, and I find it almost impossible to understand what I am signing up to.

That is the reason, despite high churn, there is actually a very low level of engagement with the various offerings from the power companies. It is the reason that those power companies have been able to go on and basically churn and burn customers using vast numbers of phone callers and doorknockers, it is the reason that those retailers have been fined up in the millions now for misleading practices by the Australian Competition and Consumer Commission and it is the reason that they have given up on those methods and are using new and different methods. Despite a high level of churn that goes on between different retailers, which this government claims, and the previous government claimed, is a sign of healthy competition, in fact what it really shows is a market failure. People just are not that engaged, and they are not able to understand and model those different plans, and therefore people are constantly being dragged in using other methods — really forms of non-price competition — simply to get them to switch.

So what we need is a very simple system, and a one-for-one system is the simplest way, both for consumers to understand and also for retailers to administer. We do not want people signing up to what looks like a good deal on their solar tariff but then actually getting shafted on some other charge that is hidden away somewhere in their bill. Make no mistake, Victoria and Australia have some of the most expensive electricity supply charges in the world and also some of the most punitive fixed charges, which are distorting the market. They are making it very hard for us to move smoothly towards what needs to be our new future.

A second issue is that a one-for-one tariff provides a fair rate of return for those who have invested in solar panels; and yes, I should disclose that I am one of those, but I am one of millions now, so I am certainly sharing that in common with a large part of the Victorian citizenry. At the moment while the Latrobe Valley generators largely may get paid 5 cents or 6 cents for the electricity they produce, it basically costs 13 cents to deliver that electricity to my house, and therefore paying me for what I produce and use locally at the same price as what a big coal-fired power station in the Latrobe Valley gets paid really ignores the fact that that electricity has to be delivered and all the other costs are then added, including the profit margins by retailers and all the other people along the chain. It is not right to compare electricity charges produced at the place it is being used with the wholesale electricity rate by incumbent generators a long way from the source of demand.

That brings us to the third issue of why we need to bring in a price that is a commensurate and fair price — that is, solar panels and their associated battery systems are getting so cheap now that they are going to transform the grid. Anyone with solar panels who is getting charged 25 cents for electricity, but getting paid 6 cents for their excess, faces a quite perverse set of market choices. They can either use up all their electricity so that they do not export any and basically give it away to a retailer who then turns around and sells it to their next-door neighbour at 25 cents, which kind of encourages in a way inefficient use of energy, or they do what I have done at my house as part of an experiment and invest in batteries and store that energy to make sure it does not get exported and does not go off to the power company at a bargain basement price so that the company can use it later that night.

Realistically, it would be a lot easier if we just treated the grid as a big battery. You have got all these different people using power, demanding power and in many cases also producing power, and all those loads tend to balance themselves out. A fair price for solar electrons would allow me to just export whenever I wanted; it would be my neighbours that would be using it, and I would get a fair price for that. Instead, what the perverse market incentives we have got have done is driven me to invest in batteries — which are quite expensive at the moment but I expect they will get a lot cheaper as time goes on — so that I can try and recoup some of that value that at the moment I am effectively giving away free, or almost free, at 5 cents per kilowatt hour to the power company, which then gets to sell it to my next-door neighbour or the bloke down the road for 25 cents. As I said, we have got these perverse pricing arrangements. It is not by any means a free market. Theoretically anybody can connect to the grid after going through various hurdles, red tape and delays imposed by power companies, but to be able to obtain a fair price in the market is very different, depending on whether you have a 1400-megawatt coal-fired power station or a 3-kilowatt set of solar panels.

I am not proposing that we pay this price because I want to be generous. I am not proposing that we pay this price because I think solar needs further incentives. The reason we should pay this price — a one-for-one feed-in tariff — is that it will stop people disconnecting. Over time, if we continue with these poor pricing practices, the huge fixed charges and the really crappy rate of pay for export electrons, then people are going to invest in batteries — they will probably overinvest in terms of the size of their system — and then the power companies will find that there are less electrons going through the system. They still want to recover their costs, so they will hit you with even bigger fixed charges, and then people will disconnect.

It is happening of course out on the fringes of the grid, where it is expensive to run new poles and wires, but the CSIRO is examining scenarios where as much as a third of people disconnect from the power grid even in built-up and urban areas. At that point the power companies are going to want to hit their remaining customer base even harder, and this irrational spiral — what has been described as an electricity market death spiral — will just go on and on because politicians are not willing to step in and, for the first time really since privatisation, make a serious reform to the way the market operates in recognition of what technology has already done and is doing. It is for that reason that we think a one-for-one feed-in tariff is the appropriate price.

By the way, and just in relation to one more matter that came up since I first proposed this motion, the Infrastructure Victoria body presented its report and proposed that we introduce compulsory time-of-use tariffs across all electricity users — that is, that according to the time of day you might be charged a different amount for your electrons. This is something that the Greens have proposed for some time. If that was to come into place, then of course the continuing growth of solar would drive down the price of midday electricity and you would be paid less and the mechanism would become self-correcting. That is a final rationale as to why we think a one-for-one feed-in tariff is the appropriate price.

We hope that the house will support our motion, and we hope that the government, which actually controls the levers of executive power and actually gazettes the decision for a feed-in tariff, overdue in terms of the decision, coming into effect on 1 January and affecting many, many prosumers, let us call them — producers of electricity who are also consumers — will see the way things are going and make a wise decision.

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