Impacts of feed-in tariff and metering types on electricity consumption efficiency in Australia

Abstract

Small scale renewable energy technology mainly includes rooftop solar photovoltaic (PV) panels for electricity generation at household level. Solar feed-in tariff (FiT) is meant to encourage households to alleviate import from electricity grid especially during peak demand, via investment on on-site generation. We investigate the impact of FiT, net and gross metering types on household energy consumption, in Australia. A macro level model is developed for New South Wales (NSW) using a recent Australian household energy consumption dataset. The results indicate that net metering is more effective than gross metering, in terms of curtailing electricity consumption. Additional micro level analysis is conducted for Queensland (QLD) and other states which also verify similar effects. In the last four years the cost of production of solar panels has declined by 80 percent, which alongside high FiT would increase the number of prosumers. An immediate response is that most states have already reduced FiT to one third or less. However, further decline in technology cost and the advent of new technology are expected to lead to massive uptake. Today, more than 10 percent of Australians use solar power. The 8,000 rooftop solar systems in 2007 have increased to 1 million in 2013, a number first expected for 2030 (ABC, 2013). On the other hand, since the intermittent PV electricity is not fully reliable, the stable grid electricity has become more pricy. In Australia, average annual electricity price is now rising at 8% (ABS, 2013). Accordingly, households opt to either invest more on renewable technologies or adapt to lowered consumption. Statistics show average annual electricity consumption decline by 5.8% since 2009 (AER, 2014). This reduction is at both households with or without renewable electricity technology (ABS, 2014b). An implication is that non-generating households now have to suffer from high price of grid electricity, while generating households have less difficulty. In fact high FiT would even make profit. The situation signifies the need for a minimal FiT that could still encourage sustainable uptake of the renewables. In this article, we analyse and evaluate solar FiT in Australia since its introduction in 2008. Our focus goes on investigating the impacts of metering types (gross and net) with low and high FiTs on electricity efficiency behaviours in Australia, however regardless of Renewable Energy Target (RET) incentives and possible retail price-tariff structures. In gross metering (GM), imported electric energy (Ein kWh) and exported energy (Eout kWh) are metered separately and respectively equal to total consumption and solar generation, while in net metering (NM), the offset values are equal, i.e., Eout-Ein = generation minus consumption. Dwellings with no onsite electricity generation use non-generating meters (ngM). The notations, GM, NM, ngM, are used frequently in this article. This study indicates that high FiT only encourages higher consumption and does not effectively alleviate demand from grid. This in particular applies to GM where FiT profit is more visible. In comparison, under high FiT, GM households tend to consume more electricity than NM households, while in general all generating households (whether GM or NM) consume more electricity than non-generating households. This could be further discussed with regards to the rebound effect. Another implication of this study is in line with maintaining low FiT. For example Victoria has reduced FiT per kWh from 60c to 25c and to 8c, from 2009 to 2014. The FiT currently offers minimum premium of 8c per kWh for excess electricity exported to the grid. Some electricity retailers may offer higher rates although not obligated to do so. The Essential Services Commission (ESC) has released a decision to adopt a minimum FiT of 6.2c per kWh from 2015 (FiT, 2014a). Other states have reduced FiT, capped generation capacity, or cut premiums.