Why is solar power undervalued in Australia?
Solar PV owners typically receive around 6c/kWh for their surplus electricity that goes back into the grid. This is then on-sold to neighbours—sometimes travelling only a few metres down the poles and wires—for 29c on average.
Why is there such a big difference?
The price of rooftop solar is determined by state-based regulators who have a very narrow view of what solar electricity is worth, based mainly on the average wholesale value of electricity. The rules that determine electricity prices are based on an old, centralised model of electricity flowing one way from large coal-fired generators to passive consumers. But with 1.6 million homes and businesses now equipped with solar generators on their rooftops and battery storage about to take off, the future of “distributed energy” is now. Our research suggests exported solar power is worth 10- 18c/kWh when all the network, environmental and health benefits are taken into account Your electricity bill unpacked. Your electricity bill is made up of costs allocated to different parts of the electricity supply system even though you won’t see these items on your bill.
The electricity generation costs are around 5c to 6c which is similar to the price set for exported solar. But solar electricity is often produced at times when electricity is most expensive—such as on hot afternoons when air-conditioners increase demand on the electricity network. The current price for rooftop solar paid by retailers doesn’t recognise this. Then there are the costs for the transmission infrastructure, (the large, ‘coathanger’ high voltage lines) and distribution (the poles and wires along your street). Rooftop solar doesn’t actually travel along transmission lines at all. And it uses far less of the distribution infrastructure. So electricity from rooftop solar shouldn’t be charged transmission costs and should pay less for use of the distribution network. What’s more, around 8% of the electricity that travels from large coal and gas fired plants to homes get lost along the way, whereas “distributed” rooftop solar experiences a tiny fraction of these losses.
On top of this, solar is much healthier, cleaner and safer than other forms of grid energy like coal, gas or diesel. The rules that govern electricity prices were designed to finance the investments of the past, not to build the energy system of the future. But the electricity sector is changing and our rules need to change with it. A crucial part of this reform is to make sure that the millions of Australians who have invested in solar power get a fair price for the clean energy they feed into the grid. Because rooftop solar has no fuel costs, doesn’t waste energy travelling hundreds of kilometres and doesn’t require a large expensive grid it’s actually a much cheaper way to generate and trade electricity. A fair price for solar will help create a cheaper, healthier and more robust electricity system that will benefit all consumers, whether they are solar owners or not.