Solar Feed-In Tariffs: Examining fair and reasonable retail rates using cost avoidance estimates

Abstract

Growing Solar Photovoltaic (PV) electricity systems in geographically diverse regions presents a complex policy problem for governments. During 2013-16, the Queensland government in Australia, examined establishing a fair and reasonable retail Feed-in Tariff (FiT) policy, noting it regulates state retail electricity consumption prices. A combined cost avoidance and stakeholder analysis was applied to show that determination of a fair and reasonable FiT for all stakeholders, while aspirational, is difficult to achieve. Typically, agreement on a fair tariff rate will depend on stakeholders’ relative position in energy supply chains (service providers, retailers, suppliers, customers, advocates), and interpretations of fairness that can be shaped by competition in the supply area. Also, increases in financial benefits to PV customers might be considered unreasonable by non-PV customers and retailers that experience increases in electricity prices and operating costs. Importantly, the application of a retail FiT in regional and isolated areas requires careful energy policy design, taking account of network losses, remote and isolated customer metering, cost effective network control technologies, and diesel generator operating limits. The study also observed that shifting funding of FiT schemes from electricity distributors to competitive retailers will likely have negative consequences for retail FiT offerings and PV customer servicing.