5
Victorian feed-in tariffs: selling electricity
5.1
Introduction
This chapter provides an overview of the current Victorian feed-in tariffs (FiTs) and, to
the extent possible, identifies and assesses the key objectives of the FiT schemes. In
particular, it seeks to establish whether the objectives are appropriate in light of the
planned introduction of a price on carbon, and the extent to which the FiTs represent
the best instrument to achieve other stated policy objectives.
Given that the Victorian FiTs operate in the context of the National Electricity Market
(NEM) it is important that they are consistent with, and support, the overarching
National Electricity Objectives (NEO) set out in the National Electricity Law.
Acknowledging the important role of competition in the Victorian electricity market, this
chapter considers whether there are any barriers that may prevent the full benefits of
competition being realised in relation to establishing fair and reasonable FiTs. It also
discusses some of the potential issues within the broader energy regulatory framework,
whilst acknowledging that many of these issues are currently subject to major reviews.
5.2
Victorian feed-in tariffs
5.2.1
Overview
As discussed in chapter 2 there are three Victorian FiT schemes. All electricity retailers
with 5000 customers or more are required to make offers to eligible customers under
these three schemes:
(1) Standard feed-in tariff (SFiT): requires retailers to publish the prices, and terms and
conditions under which they will purchase electricity supplied by generators. This FiT
varies among retailers according to their business strategy and applies to
renewable technologies (including solar). It is available to specified households,
community organisations and small businesses with a solar generation capacity
greater than 5 and less than 100 kW in size, and is also available to eligible
customers generating other forms of renewable energy, such as wind, hydro or
biomass, with a system size of less than 100 kW.
(2) Premium feed-in tariff (PFiT): This scheme (now closed to new applicants) provided
participating households, businesses and community organisations (all of whom
operate solar photovoltaic (PV) systems of 5 kW or less) a credit of at least 60 cents
per kWh for excess electricity fed back into the grid. This net tariff was calculated to
provide a 10 year payback period for a small-scale solar system. When the PFiT was
first introduced, solar system costs were significantly higher than current costs.
(3) Transitional feed-in tariff (TFiT): Under the TFiT scheme, households receive a
minimum of 25 cents for every kilowatt hour they feed back into the grid. It is only
available to new solar PV customers with systems of 5 kW or less. The TFiT
commenced 1 January 2012 and is available for five years or unless a capacity limit
of 75 MW is reached or $5 per customer cost is reached.1
An explicit minimum feed-in net tariff is established within the PFIT and TFIT which only
applies to solar PV technology. There is no minimum FiT for other technologies except to
1
This caps the extent to which the costs of the FiT scheme are borne by other electricity users at $5 per bill.
VICTORIAN FEED-IN TARIFFS: SELLING ELECTRICITY
85
the extent that the prices and terms and conditions must be fair and reasonable.
However, the Commission notes that a guidance paper, released by the Essential
Services Commission (ESC) outlines the methodology for the assessment of ‘fair and
reasonable’ FiTs and includes that an offer (by a retailer) must:
Specify that the retailer will pay or credit the customer, for electricity
supplied by the customer under a feed-in contract, at a rate not less than
the rate the customer pays to buy electricity from the retailer. (DPI 2011f)
In effect this sets a minimum FIT for renewable technologies and is considered further in
section 5.4.
5.2.2
Objectives of the three feed-in tariff schemes
The importance of having clear public policy objectives is emphasised by AGL who
commented that:
There is a lack of overarching public policy objectives unpinning the
development of feed-in tariff policies throughout Australia. AGL believes
that the lack of underlying public policy objectives being determined
before the implementation of FiT policy is the main driver of the poor
outcomes experienced in most jurisdictions in relation to FiT policy.
(sub. 72, p. 1)
Ceramic Fuel Cells Limited (CFCL) also suggested that:
Where feed-in tariffs have become clouded is that the design and rate of
the tariff have been set to achieve other objectives, notably to support the
solar PV industry as a form of industry development (and as a subsidiary
goal, to reduce greenhouse gas emissions). (sub. 41, p. 10)
Table 5.1 highlights that each of the FiTs has different objectives and would therefore
appear to be seeking to address various problems that may have been identified at
the time the FiTs were designed.
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POWER FROM THE PEOPLE: INQUIRY INTO DISTRIBUTED GENEATION
Table 5.1
Type of FiT
Objectives of Victorian Feed-in tariffs
Established
Original Objectives
Develop Victoria’s substantial wind energy resource
Ensure timely and efficient connection of wind energy
generators
Standard FiT
2004
Address problems where the benefits and costs of
connecting wind farms are not shared equally
amongst market participants
Remove market barriers that constrain the
development of a small wind turbine industry in
Victoria
Reduce cost barriers to installing small-scale solar PV
systems
Encourage the continued uptake of solar PVs as part
of a greenhouse gas abatement strategy for Victoria
Premium FiT
2009
Modernise the regulatory approach to crediting and
qualifying customers
Assist households to make a personal contribution to
tackling climate change
Ensure certainty for owners of solar PV systems
Ensure certainty for retailers and distributors
Support the solar industry
Ensure that the level of subsidy is equitable, given the
cost to electricity users, including those on concessions
Support renewable energy in the transition to a lower
emissions future
Transitional FiT
2011
Provide a fair and reasonable price to households
feeding solar back into the grid
Manage changing prices as PV costs have dropped
by around 50 per cent
Reduce the boom and bust cycle for the solar panel
industry
Provide an average payback period of less than 10
years.
Source: (Brumby 2004; Batchelor 2009; O’Brien 2011).
Overall the objectives cited for FiT schemes in the past appear to fall into three
categories:

reduce greenhouse gas emissions, including assisting households to make a
personal contribution to environmental outcomes

support innovation and the development of a new industry by stimulating the
demand for investing in distributed generation by more efficiently allocating risks,
including risks to customers and energy market risks to small-scale PV investors

ensure fair payments for electricity from small-scale PV investments.
VICTORIAN FEED-IN TARIFFS: SELLING ELECTRICITY
87
The ongoing relevance of these objectives needs reconsideration in light of the
introduction of a price on carbon and the maturing of distribution generation
technologies.
5.2.3
Objective of reducing greenhouse gas emissions
Central to considering a FiT objective of reducing greenhouse gas emissions is the
introduction of a national approach to the pricing of carbon.
On 10 July 2011, the Commonwealth Government announced a ‘price on carbon
pollution’ as part of its climate change plan, which will come into effect from 1 July
2012. Under this pricing mechanism, around 500 of Australia’s largest carbon emitters
will be required to pay for each tonne of carbon pollution they release into the
atmosphere.
Recent data (table 5.2) reported by corporations under the requirements of the
National Greenhouse and Energy Reporting Act 2007 (Cth) indicate a number of largescale generators will be subject to the carbon pricing mechanism.
Table 5.2
Greenhouse gas emissions (by registered
corporation) – Top 10 by Total Scope 1 Gas
emissions
Registered corporation
Example of generators
owned by the corporation
Macquarie Generation
 Lidell power station
 Bayswater power station
Delta Electricity




Greenhouse gas
emissions (t CO2-e)
20 330 773
Mount Piper Power Station
Munmorah Power Station
Vales Point Power Station
19 792 536
Wallerawang Power
Station
Great Energy Alliance
Corporation Pty Ltd
 Loy Yang A Power Station
19 378 906
International Power
(Australia) Holdings
 Loy Yang B Power Station
16 764 353
TRUenergy Holdings Pty Ltd
 Yallourn Power Station
16 143 406
CS Energy Limited
 Callide Power Station
 Kogan Creek Power
Station
14 880 516
 Wivanhoe Power Station
Eraring Energy
 Eraring Power Station
11 725 490
BlueScope Steel Limited
11 371 293
Loy Yang Holdings Pty Ltd
10 165 819
Oz Gen Holdings Australia
Pty Ltd
9 717 866
Source: (Clean Energy Regulator 2012c).
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From 1 July 2012 a price of $23 per tonne of carbon pollution will apply. It is also
intended that by 2015 the price on carbon will be determined by market forces. The
price on carbon is a mechanism that provides a market-based incentive to reduce
carbon pollution.
Explicitly pricing carbon ensures all companies and individuals either
explicitly or implicitly factor into decisions the costs of greenhouse gas
emissions. Companies and individuals do not need to make complex
calculations about the emission intensity of particular goods, as the price of
the goods will reflect that key information.
Over time, as prices reflect the emission content of goods, producers and
consumers will have an incentive to find ways to reduce emissions. For
instance, electricity producers will look to reduce the use of emissionintensive fossil fuels to generate electricity and consumers will be
encouraged to use less electricity. (Commonwealth Treasury 2011, p. 19)
The Productivity Commission (PC) found that the costs of reducing emissions are lower
when consumers and producers make the decision, rather than government (PC 2011).
Looking at over 1000 carbon policy measures across nine countries the PC also found
that:
Emission trading schemes were found to be relatively cost effective, while
policies encouraging small-scale renewable generation and biofuels have
generated little abatement for substantially higher cost. (PC 2011, p. xiv)
More importantly, stylised modelling by the PC for Australia suggests that relative to a
price-based approach ‘the abatement from existing policies for electricity could have
been achieved at a fraction of the cost’ (PC 2011, p. xiv).
Implications for Victorian feed-in tariffs
One of the objectives of establishing the premium and transitional FiTs was to reduce
greenhouse gas emissions at a time when there was great uncertainty regarding any
national approach. From a regulatory design perspective it is important to ensure that
the most appropriate regulatory instrument is assigned to a given problem — provided
that the case for government intervention is established. It is also important to ensure
consistency with national electricity objectives as previously stated.
The Commission notes that work by the Commonwealth Government and the PC
indicates that the objective of reducing greenhouse gas emissions is most appropriately
addressed through a price on carbon.
If the objective of the FiT was to reduce greenhouse gas emissions then it would appear
that this objective is no longer valid, on the grounds that a more appropriate regulatory
(market-based) instrument will operate shortly. It is also the case that FiTs will not be
necessary as a complementary policy. As noted by ACIL Tasman ‘if distributed
generation is not the lowest cost of abating greenhouse gas emissions, but a FiT is
designed to include this objective, it will increase the cost of meeting greenhouse gas
emissions reduction targets.’ More importantly, ‘this would cause electricity prices to be
higher than necessary…it would be contrary to the NEO and the long term interests of
consumers’ (ACIL Tasman 2012b, p. 38).
There are also other Commonwealth initiatives that seek to achieve environmental
objectives similar to those of the Victorian FiTs.
VICTORIAN FEED-IN TARIFFS: SELLING ELECTRICITY
89
The Renewable Energy Target
The Renewable Energy Target (RET) is designed to deliver the Commonwealth
Government's commitment to ensure that 20 per cent of Australia's electricity supply will
come from renewable sources by 2020 and consists of the Large-scale RET (LRET) and
the Small-scale Renewable Energy Scheme (SRES). These schemes create a financial
incentive to invest in renewable energy sources through the creation and sale of
certificates. The purposes of the schemes are to:

encourage additional generation of electricity from renewable sources

reduce emissions of greenhouse gases in the electricity sector

ensure that renewable energy sources are ecologically sustainable.
This is achieved by the creation of online certificates by eligible renewable energy
sources based on the amount of electricity either generated (by a renewable energy
power station, or small-scale solar panel, wind or hydro system) or displaced by a solar
water heater or heat pump. A legal obligation is placed on electricity retailers to
purchase and surrender a certain amount of these certificates each year.
The LRET creates a financial incentive to establish and expand renewable energy
power stations, such as wind and solar farms, or hydro-electric power stations. It does
this by legislating demand for Large-scale Generation Certificates (LGCs). These LGCs
are created based on the amount of eligible renewable electricity produced by the
power stations. LGCs can be sold or traded to liable entities (usually electricity
retailers2), in addition to the power station’s sale of electricity to the grid. RET liable
entities have a legal obligation to buy LGCs and surrender them to the Clean Energy
Regulator annually (Clean Energy Regulator 2012a).
SRES provides a financial incentive to install small-scale renewable energy systems
including solar panel systems, small-scale wind systems, and small-scale hydro systems.
Under this scheme Small-scale Technology Certificates (STCs) are created (with the
number of certificates relating to the amount of electricity produced or displaced),
which are bought by RET liable entities who are legally bound to do so. Further to this,
‘Solar Credits’ increase the number of STCs able to be created for eligible installations
of small-scale solar panel, wind or hydro systems by multiplying the number of
certificates for which the system would normally be eligible. Solar Credits apply to the
first 1.5 kW of on-grid capacity installed in an eligible location or to the first 20 kW of
capacity for off-grid systems.
Some inquiry participants argued that the Clean Energy Act 2011 (Cth) and the
Renewable Energy Target are more efficient than mandated FiT schemes in terms of
their likely impact on changes to greenhouse gas emissions. For example, Simply Energy
noted:
… the Clean Energy Act and the LRET scheme will drive change in the mix
of generation capacity and achieve that change in a more efficient
manner than mandated FiT schemes. The advantages that the carbon
price and LRET scheme have are that they are generally broad-based and
not technology specific and are thus more likely to produce efficient
outcomes without the perverse social outcomes generated by mandated
FiT schemes ...
2
For more detailed information refer to ss 25 and 31 of the Renewable Energy (Electricity) Act 2000 (Cth).
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The Clean Energy Act removes the case for FiT schemes as an instrument to
reduce greenhouse gas emissions. A price on carbon will force business and
consumers to factor the cost of climate change into their investment and
purchasing decisions and will likely transition the economy to make more
energy efficient or cleaner energy choices. (sub. 58, p. 1-2)
However some participants questioned whether the price on carbon reduces the need
for a Victorian FiT.
We do not believe the emissions trading scheme, or the introduction of a
carbon price generally is sufficient or adequate to remove the need for a
FiTs, or to encourage distributed renewable energy generation. It is our
understanding that the emissions trading system will simply penalise carbonintensive forms of wholesale generation. Whilst this will have a small impact
on retail prices, we do not believe the connection is sufficiently strong to
overcome the needs of small to medium generators ... (Warburton
Community Hydro Project, sub. 69, p. 3)
While there are mixed views from participants regarding whether Commonwealth
policies adequately deal with greenhouse gas emission issues, the Commission
considers that the combined effect of these policies is likely to be substantial and
provide additional assistance for households to make a personal contribution to
reducing greenhouse gas emissions (an objective of the PFiT).
Given current Commonwealth policies in this area the Commission is of the view that
the Victorian FiT(s) are no longer an appropriate regulatory instrument to assign to the
objective of reducing greenhouse gas emissions, particularly noting the cross-subsidies
and potential inequities inherent in the current FiT. (chapter 3). This does not preclude
distributed generation from helping in the adjustment to a low carbon economy. The
Commission envisages that the current and imminent Commonwealth programs,
combined with improvements proposed in this draft report will result in incentives to
invest in distributed generation when it is a cost-effective way of reducing greenhouse
gas emissions.
5.3
Industry support
A further objective often cited in support of regulated FiTs is the development of, or
support for, a particular industry. Current Victorian FiTs are skewed towards very small
solar PV technology, and to other forms of distributed renewable generation
technology. This is achieved through the tariff and eligibility criteria.
Several options are available to assist customers to minimise their expenditure on
energy, including:

purchasing and using energy efficient appliances (lighting, heating, cooling) or
production processes

reducing demand for energy at times where energy from the grid is more costly

investing in technologies to generate electricity, which may also include on-site
storage and /or export to the grid

substituting between different fuel sources.
In a competitive market, customers would optimise between the various options
available to minimise their spend on energy.
VICTORIAN FEED-IN TARIFFS: SELLING ELECTRICITY
91
The PFiT and TFiT are higher than a market determined price, and therefore assist the
solar PV industry. This assistance can change the way customers decide between the
energy saving options highlighted previously. For example, a higher FiT for solar PV
makes this option more attractive than would otherwise be the case, and potentially
crowds out alternatives. This reduces the demand for other industries such as those
supplying energy saving technologies and those building and operating large-scale
renewable generators.
More generally the current SFiT arrangements are specifically targeted towards
‘renewable’ generation technologies. This may implicitly disadvantage other possible
technologies that have ‘low-emission’ characteristics. Electricity generated from fuel
cells, for instance, is not considered a ‘renewable’ form of distributed generation as it
relies on gas (a non-renewable energy source) to produce electricity and heat.
However, it is considered to be low-emission and highly efficient.
CFCL argued that:
In terms of choice for consumers who want to provide their own electricity
or who want to reduce greenhouse gas emissions, under the current feed-in
tariff regime the only effective choice is to install solar PV panels or not.
CFCL believes that small business, householders and community groups
should be given a wider choice – the choice to generate their own
electricity using a high efficiency fuel cell. By giving consumers this choice,
the government would allow business and householders the ability to
rationally decide between installing a renewable energy generator (solar
PV) or a low emissions generator (fuel cells) - or of course installing neither
and continuing to buy power from the grid. (sub. 41, p. 4)
While additional assistance to solar PV (through the PFiT and TFit) may benefit the solar
PV industry, it is likely to be at the expense of other distributed generation technologies
(or more generally to other industries supplying innovative energy efficiency related
products or services). As outlined in the Commission’s inquiry into the Victorian
manufacturing industry, ‘selective assistance that lowers the costs of a particular firm or
industry may improve its competitiveness, but at the expense of other sectors’ (VCEC
2011, p. 90). Industry assistance, through regulated tariffs and discriminatory eligibility
criteria, may not be the most appropriate way to support the establishment of a
sustainable industry, particularly when (in the case of the solar PV industry) the industry is
already reasonably well established. The industry support argument is also undermined
by uncertainty created by previous FiTs, which have been subject to significant change
at short notice.
5.4
Providing a ‘fair and reasonable’ price
One of the objectives cited in support of FiT schemes is to ensure that households and
small businesses have access to a fair and reasonable price for the electricity that they
export into the grid.
The Commission is of the view that this is the most relevant objective for Victorian FiTs
and is consistent with COAG national FiT principles. However, the mechanism for
achieving this objective may not require a FiT to be specified and regulated.
The following discussion relates to current Victorian FiT arrangements which cover
generation capacity of up to 100 kW. Under these arrangements the owner of a
distributed generator has a relationship with (and is a customer of) an energy retail
business. The Commission understands that the policy intent of Victorian FiTs (particularly
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POWER FROM THE PEOPLE: INQUIRY INTO DISTRIBUTED GENEATION
the SFiT) was to encourage system installations where generating capacity is
proportionate to the electricity consumption at the site — for instance it was not
intended to capture installations that are primarily solar generators.
Consistent with COAG national principles for FiT schemes, the Commission considers that
micro and small generators of electricity exported to the grid (or distribution system)
should receive a fair and reasonable price. The key question is how ‘fair and reasonable’
is defined, especially in view of the proposed appropriate objective for a FiT.
From submissions it appears that views on what constitutes ‘fair and reasonable’ fell into
one of two basic groups:
(1) providing consumers with a rate of return on their investment in solar PV and
therefore providing an incentive to invest
(2) providing a price that reflects the full value of the energy exported to the grid,
noting that there were some significant differences in views on what constitutes full
value.
The Commission’s view, as noted in chapter 3, is that the main remaining appropriate
objective for a FiT is to provide a price signal to investors in micro/small distributed
generators, that will help achieve efficient use of distributed generation in a
competitive energy market. The Commission sees little value in providing additional
State-based incentives for development of renewable generation technology.
Accordingly, the Commission accepts the second approach, namely that the term ‘fair
and reasonable’ refers to a price that reflects the value of the energy exported to the
grid and that would encourage efficient use of resources in the electricity industry,
including the economic use of distributed energy.
In the past, fair and reasonable has been accepted as at least a one-for-one tariff.3 This
arrangement resulted in a tariff that is greater than a market-determined price, and is
likely to overstate the energy value of distributed generation, particularly if it is based on
a retail price that incorporates network components. In some cases, retailers may vary
their retail prices based on customer characteristics (residential or small business for
example) which is independent of the network value of the distributed generation.
There are also other potential issues with a one-for-one FiT, especially that it can lead to
inequitable outcomes. Under a scenario where the FiT is greater than its value to the
network, the gap between the FiT and the market value of the electricity needs to be
funded by someone, which in general will be other electricity customers.
ACIL Tasman also noted that:
Even if the FiT payment is equal to the sum of the network and energy value
of distributed generation, an X for one FiT causes equity issues. These arise
because customers who generate electricity and use it on site reduce the
amount of network charges they pay (because these are charged on a per
kWh basis). However, there is no particular reason to expect that the
network value provided by a distributed generator will increase in
Section 40I of the Electricity Industry Act 2000 (Vic) enables the Minister for Energy and Resources to refer
retailer FiT offers to the ESC for assessment when not satisfied that a term or condition is ‘fair and reasonable’.
A guidance paper which outlines the methodology for the assessment of fair and reasonable FiTs and terms
and conditions was released by the ESC in March 2008 which refers to a one-for-one tariff.
3
VICTORIAN FEED-IN TARIFFS: SELLING ELECTRICITY
93
proportion to the reduction in that customer’s electricity use … regardless of
whether X for one FiTs are efficient, they are inequitable. (ACIL Tasman
2012b, pp. 61–62)
As discussed in chapter 3, efficient FiTs have equity benefits whereas crosssubsidised FiTs risk creating inequitable outcomes. In the Commission’s view, the
equity impact of FiTs will depend on pricing policies and the nature and extent of
any resulting subsides to particular groups. An efficient distributed generation
model will have positive long-term benefits for all energy users.
5.4.1
Is there competition within the Victorian electricity
retail market?
In a competitive and well informed energy market it is reasonable to assume that
competition between the various energy retailers would lead to efficient price and
service outcomes. In an ideal scenario price would reflect the true value of the
electricity supplied taking into account factors such as the time and location the
electricity is produced, and the demand at that time and location. If the price is
determined within a competitive retail market, it is reasonable to assume that this would
be consistent with a ‘fair and reasonable’ price.
It is relevant therefore to consider whether there is effective competition within the
Victorian electricity retail market.
Since 2002, when full retail competition commenced, Victorian electricity customers
have had the opportunity to choose their preferred electricity retailer from an
increasingly larger pool of energy retail businesses. The objective of this move toward
retail competition was to deliver efficient prices and services to energy customers and
the opportunity for customers to exercise choice among competing retailers and their
price and service offerings. The extent to which consumers are exercising choice is
partly reflected in the volume of transfers occurring between the various retail
businesses. Recent data showing small consumer transfers each month is shown in the
figure 5.1 below.
Table 5.3
Transfer statistics – February 2012
NSW
Qld
SA
Vic
Small consumer transfers
completed in February
2012
44 220
19 808
16 350
51 983
Total number of
consumers transferred in
the NEM to date
3 038 602
1 391 268
1 189 291
5 085 079
1 month annualised
transfer rate
16%
12%
23%
23%
Source: (AEMO 2012).
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POWER FROM THE PEOPLE: INQUIRY INTO DISTRIBUTED GENEATION
Figure 5.1
Monthly small customer transfers between
retailers: February 2010 to February 2012
75000
70000
65000
60000
55000
50000
45000
40000
35000
30000
25000
20000
15000
10000
VIC
NSW
QLD
Feb-12
Mar-12
Jan-12
Dec-11
Nov-11
Sep-11
Oct-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Jan-11
Feb-11
Dec-10
Nov-10
Sep-10
Oct-10
Aug-10
Jul-10
Jun-10
Apr-10
May-10
Mar-10
5000
SA
Source: (AEMO 2012)
Recent reviews of the effectiveness of retail energy market competition
in Victoria
Following reviews of the effectiveness of energy retail competition in Victoria by the ESC
in 2002 and 2004, the Australian Energy Market Commission (AEMC) released its final
report of a Review of the Effectiveness of Competition in Electricity and Gas Retail
Markets in Victoria in 2007.
The AEMC found that competition in the Victorian electricity retail sector was effective.
In particular it found that:
The majority of energy customers are participating actively in the
competitive market by exercising choice among available retailers as well
as price and service offerings. There is strong rivalry between energy
retailers, facilitated by the current market structures and entry conditions.
Customers are demonstrating a clear willingness to participate in the
competitive retail market if approached directly by a retailer ...
… retailers have a strong incentive to be pro-active in seeking and retaining
customers in competition with other rivals. [With] evidence of vigorous
marketing rivalry between retailers who are contacting customers directly.
Retailers are offering customers discounted tariffs together with a range of
non-price incentives in an effort to differentiate their energy services from
those of their rivals …
The current market conditions encourage efficient entry, thereby creating a
credible threat of competition from actual or potential new retailers and
constraining the pricing and output decisions of existing retailers. (AEMC
2007, p.vii, ix–x)
VICTORIAN FEED-IN TARIFFS: SELLING ELECTRICITY
95
The Commission notes that the review undertaken by the AEMC was in the context of
the market for the retail supply of electricity and not in the Victorian FiT market. While it
may be useful to rely on the AEMC finding as a proxy to infer that there is effective
competition in Victorian FiT market, the Commission notes that, in practice, retailer
processes and responsiveness to attracting new customers appear to be more active in
the retail electricity supply market than for distributed generation. Some reasons why
this may be the case include:

The complexity of the decisions involved in assessing the case for installing
distributed generation and selling the excess electricity is greater than for
purchasing electricity alone

There is currently a lot of change in the broader regulatory environment for retail
customers, including distributed generators. This is likely to add to the uncertainty
and confusion in the market in the near term

Many retailers and most, if not all, major retailers own centralised generation assets
which may affect their incentives to offer competitive tariffs to distributed
generation that potentially competes with their own generation businesses

Some sectors of the market have only emerged recently. Consumers and retailers
have not had the opportunity to develop systems and expertise and gain the
experience needed to operate in a competitive market.
Removal of electricity retail price regulation in Victoria in 2009
The findings of the review undertaken by the AEMC formed the basis for the removal of
electricity (and gas) retail price regulation in Victoria in January 2009. The Commission
notes that s 13 of the Electricity Industry Act 2000 (Vic) (EI Act) allows for the
reintroduction of price regulation in the event that the AEMC concludes that
competition in the retail market for electricity is not effective and recommends price
controls be reintroduced. (This would be based on the findings of a, MCE directed,
review by the AEMC).
In a submission to the Independent Pricing and Regulatory Tribunal (IPART) review of
solar FiTs, Origin Energy noted that ‘the nature of the feed-in tariff “market” is very
different from energy supply to a small customer as a result of retailers being the
consumers of the energy exported by PV customers’. However, IPART did not accept
this view ‘given that customers purchase both “services” — the services being the retail
supply of electricity and the provision of feed-in tariffs for electricity exported to the
grid’ (IPART 2011, p. 129). IPART also noted:
If the NSW Government determines that the [NSW retail electricity] market is
sufficiently competitive to remove retail price regulation, then arguably,
there would be no need to provide a regulatory framework for feed-in
tariffs. (IPART 2011, p. 16)
Current feed-in tariff offers
Current FiT legislation requires electricity retailers to publish their FiT offer terms and
conditions relating to each of the FiT schemes in the Government Gazette and on their
website.
AGL made the point that most energy retailers are voluntarily offering a FiT for
renewable embedded generation. AGL stated that it ‘believes that no market failure
has been identified which justifies additional mandated feed-in tariff policies being
introduced or maintained’ (sub. 72, p. 2).
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The information provided on Victorian electricity retailer websites and in the
Government Gazette is summarised below (table 5.4). The Commission notes that some
retailers are offering FiTs that are greater than the TFit and PFiT statutory minimum tariff
price. The additional or ‘top up’ amount ranges between 2 and 8 cents per kWh — this
may reflect the additional value of the solar PV generated electricity to the retailer.
Table 5.4
Example of retailer feed-in tariffs
Distribution zone
Standard FiT
c/kWh
Jemena – Domestic General
21.38
Jemena – Small Business
24.79
United Energy – Domestic
General
20.61
United Energy – Small Business
26.32
CitiPower – Domestic
General
18.99
CitiPower – Small Business
23.19
Powercor – Domestic
General
22.01
Powercor – Small Business
23.63
SP Ausnet – Domestic
General
22.47
SP Ausnet – Small Business
29.03
Retailer
AGL
All
Transitional
FiT c/kWh
33
Premium FiT
c/kWh
68
Australian Power
and Gas
25
60
Click Energy
25
60
Country Energy
31
60
Diamond Energy
33
68
Dodo
25
60
Energy Australia
25
60
Lumo
25
60
Momentum
25
60
Neighbourhood
Energy
25
60
31
66
31
68
Origin
All
23.5
SP Ausnet
22.5
CitiPower
19.4
United
20.5
Powerdirect
TRUenergy
Red Energy
All
Jemena
27.28
CitiPower
23.32
Powercor Zone 1
25.96
Powercor Zone 2
26.51
SP Ausnet
23.1
United Energy
19.91
Simply Energy
Note:
25
27.5
62
31
66
As at 30 March 2012
Source: (DPI 2012d) and Commission analysis.
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In contrast to the point made by AGL, some participants argued that from their
experience retailers are reluctant to offer a FiT if there is no requirement to do so. For
example, CFCL commented that with the exception of Origin Energy in the context of a
particular demonstration project:
… based on our discussions with many retailers over several years we do not
believe that retailers would offer a fair and reasonable rate without being
required to. (sub. 41, p. 16)
Warbuton Community Hydro Project also referred to some difficulties in reaching
agreement with retailers:
… our project has had some difficulty in identifying retailers willing to enter
into an agreement with us under the SFiT. This is in large part due to the lack
of similar projects as ourselves, and the overwhelming number of
households seeking connection under the PFiT.
In large retailing
organisations it has been difficult to find the person or team responsible for
SFiT’s, even when they publicly publish documents on websites stating they
do offer such arrangements in line with the legislation. Those that do offer
them often limit them in terms of MWHrs annually, which seems to us not to
be in the intent or legislation of the SFiT. (sub. 69, p. 3)
In the presence of a competitive market for electricity from distributed generation,
there is no rationale for government intervention, unless it can be demonstrated that
there are significant impediments (market failures) that would lead to inefficient
outcomes. While there is sufficient evidence to suggest that the retail electricity market
is competitive, participants were concerned that retailers are not as responsive to
distributed generation. For example, unlike the process for changing retailers to supply
electricity, signing up to a FiT is complex and lengthy.
These experiences raise questions about whether the behaviour in the market for
electricity from distributed generation reflects that which would be expected in a
competitive market that would set ‘fair and reasonable’ FiTs. The potential barriers are
discussed further below.
5.5
Are there barriers preventing the establishment
of ‘fair and reasonable’ feed-in tariff prices?
5.5.1
Structural issues
The current regulated structure of the electricity industry contains impediments to the
establishment of fair and reasonable FiTs. The current structure separates retail,
distribution and generation businesses. Furthermore, while distributors and transmission
businesses operate under a price or revenue cap, the retail sector operates in a
competitive market. These structures can impact the incentives faced by retailers,
particularly when they may not be able to access the full benefits of electricity
exported by distributed generators.
It is important to note that due to the disaggregated centralised energy
supply chain in Australia, no one business in this supply chain can capture
the full value of the distributed energy. This acts to dilute the incentive to
invest, and has the potential to result in significant investments that do not
achieve socially efficient energy supply. (CSIRO 2009, p. 40)
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Given these structural realities, there is potential that retail businesses will not be in a
position to offer of FiT that is truly reflective of the value of the electricity to the network.
For instance, retailers may not be able to access monetary rewards for the broader
system benefits (such as reduced augmentation of the network) attributable to the
installation of distributed generators. This results in a FiT that will be less than the true
value of the electricity generated in those locations where distributed generation has
network benefits.
However, the potential solution(s) to this issue are likely to be resolved through
amendments to the broader network regulatory arrangements which will ensure that
appropriate incentives exist to efficiently accommodate distributed generation. In
relation to this issue, ACIL Tasman noted:
Our view is that it would be more appropriate to address any shortcoming
in the economic regulatory regime by changing those arrangements than
by adding to the complexity of regulated FiTs. (ACIL Tasman 2012b, p. 43)
For the reasons outlined in chapter 6, the Commission’s view tis hat a FiT is not the
appropriate regulatory instrument to resolve these, more fundamental issues, which
may be improved by various reform processes currently being pursued at a national
level (for example, by the AEMC). Processes for providing value to distributed
generators for network benefits are discussed in chapter 6.
Impacts of other policy settings
In relation to medium-scale distributed generation, there may be some concern from
distributed generation proponents regarding:

the ability to attract a retail FiT

barriers to selling (exporting) electricity — a need to obtain a retail licence to on-sell
electricity through the grid, and regulations that support retail contestability (which
constrain distributed generation proponents’ ability to require local users to take up
locally generated electricity).
These constraints increase the commercial risk associated with distributed generation
projects. Not being able to require local users (such as building tenants or users in a
defined precinct) to take distributed generation as a condition of locating in the area
makes it difficult to estimate and guarantee base-load demand. Combined with the
potential difficulty in establishing a FiT for surplus electricity, this makes demand
uncertain and can lead to the scale of projects being smaller than technically efficient
(particularly in the case of co-generation). In the case of distributed generation for an
office or commercial building, for example, distributed generation units may be scaled
so they do not generate the full building load to avoid the risk of underutilisation of
capital and sub-optimal financial returns, which may occur if tenants choose a
network-based retailer.
While retail contestability rules are designed to increase competition, the Commission is
considering whether the Victorian Government should consider mechanisms that allow
building owners to sign new tenants to an agreed electricity contract for distributed
generation as a condition of their tenancy.
On-selling of distributed generation from 1 July 2012
When the National Energy Customer Framework (NECF) commences on 1 July 2012,
electricity retailers will be regulated by a retailer authorisation and exemption regime,
administered by the AER. Under this framework, sellers of electricity are required to have
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a retailer authorisation or be exempt from the requirement to have an authorisation.
The AER has published an Exempt Selling Guideline (2011c), which sets out its approach
to retail exemptions and the types of available exemptions: deemed, registrable and
individual exemptions. The AER may grant a retail exemption subject to specific
conditions.
Retail exemptions commonly apply where electricity is being ‘on-sold’ within an
embedded network. For example, shopping complexes, caravan parks, retirement
villages and bodies corporate (AER 2011c, pp.2–3). Under the National Energy Retail
Law (NERL), the AER must consider a number of policy principles (including choice of
retailer) and may consider exempt seller characteristics and customer-related factors,
in determining retail exemptions (s 114).
The AER considers that exempt selling is often not in the long term interests
of customers. We have seen particular growth in on selling within high
density residential developments such as apartment buildings. We do not
want on selling to be a motivating factor for developers in deciding how
these developments are structured… The most effective way of affording
customers the right to a choice of retailer is to ensure that network
configuration and metering arrangements for new developments and
redevelopments facilitate customer choice of retailer going forward. (AER
2011c, pp.3, 8)
The Exempt Selling Guideline advises that decentralised energy (including on-site
co-generation and tri-generation) will be treated as an ‘exempt seller characteristic’ and
on-site distributed generators will need to apply for an individual retail exemption on a
case-by-case basis. The Guideline states that the AER ‘will grant exemptions in these
situations where the initiative is in the long term interests of energy consumers having
regard to all of the criteria and factors we are required to assess’ (AER 2011c, p.17).
The regulatory constrains to on-selling of distributed generation appear to have been,
or are in the process of being, addressed in the United Kingdom and Sydney (box 5.1).
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Box 5.1
On-selling of distributed generation in the United
Kingdom and Sydney
As part of the consultation process to develop the Exempt Selling Guideline, the
Australian Energy Regulator published an issues paper on retail exemptions in June
2010 and invited submissions from interested parties. A submission from the City of
Sydney discussed the Woking and London models in the United Kingdom (UK) and
the proposed Sydney model, part of the municipality’s Decentralised Energy Master
Plan 2010-2030.
In the UK, decentralised energy was stimulated by the Electricity
(Exemption from the Requirements for a Licence) Order 2001 which led
to the Woking private wire and other decentralised energy systems.
These were class exemptions, so permission was not required from any of
the vested interest energy players, including the distribution network
operator, or the regulator – the Office of Gas and Electricity Markets
(Ofgem). Compliance with the order was sufficient to implement
decentralised energy projects.
The exemption supply limits were 50 megawatts (without Secretary of
State approval) or 100 megawatts (with Secretary of State approval) for
each generation site over private wires. This enabled significant growth
in non-residential supply. However, the exempt limit for home use was
only one megawatt (about 1,000 homes) for each generation site with
limited exempt aggregated supply over public wires. This enabled the
growth of decentralised energy in towns and cities such as Woking and
London and led to the enactment of the Electricity Supply Licence
Modification 2009 or local electricity supplier licenses to retail electricity
over the local public wires distribution network based on the ‘virtual
private wire’ over public wires principle…
The City of Sydney model will utilise and take advantage of the
knowledge and features of both the Woking and London models but
adapted for the City of Sydney environment. The barriers to
decentralised energy and the solutions to those barriers are very similar
to those encountered in the Woking and London models.
Therefore, the strategic direction for the City’s own trigeneration and
renewable energy projects for its own property portfolio will need to
follow the foregoing principles by establishing decentralised energy
projects specifically designed to trade electricity with each other across
the local distribution networks using the ‘virtual private wire’ concept
and to utilise and incorporate other related monitoring and control
systems, such as Building Energy Management Systems, monitoring and
targeting software and metering, to provide a ‘smart grid’ approach to
delivering the Sustainable Sydney 2030 targets.
Source: (City of Sydney 2010, pp.3–4, appendix 1: 10–11; AER nd).
Information
request
Does the process for applying for an individual retail exemption
under the Australian Energy Regulator’s Exempt Selling Guideline
(2011c) address the regulatory constraints on distributed generators
who on-sell electricity? If not, what changes might be made to
reduce those constraints without compromising competition and
contestability in the retail electricity industry?
VICTORIAN FEED-IN TARIFFS: SELLING ELECTRICITY
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5.5.2
Information and transaction costs
In a well-functioning market, both the sellers of electricity (the owner of the distributed
generator) and the purchaser (the retail energy business) would have access to
sufficient information to make informed decisions and complete transactions. While
having access to information is critical, it is also important that the information is in a
form that is clear and accessible to the customer.
As noted by the AEMC:
When consumers are unable to access necessary information, or the
information which is available is perceived to be complex and costly to
decipher, there is a risk that consumers (or specific groups of consumers)
are not sufficiently well-informed. Consequently, consumers may make
inefficient decisions. (AEMC 2011d, p. 29)
Two potential problems may arise. First, information may be costly to obtain, particularly
for individuals participating in the small-scale distributed generator market. Without
adequate information, individuals may decide to not participate in the market, leading
to less than optimal levels of distributed generation. Alternatively, they may make poor
decisions where the products they purchase do not deliver the outcomes they expect.
Second, there may be information asymmetries, where one side of the market (for
example, the retailer) is more informed about the value of the benefits and costs of the
electricity being fed into the distribution system.
ACIL Tasman noted that:
Distributed generators, particularly residential and small business customers,
generally do not have perfect information as to the true value of the
electricity they would export to the grid ... (ACIL Tasman 2012b, p. 40)
This additional information could be used by the retailer to negotiate a price that is
lower than what would have been achieved if all parties had access to the same
information.
The Energy and Water Ombudsman Victoria (EWOV) noted that:
Between 1 January 2011 and 31 December 2011, EWOV received 8,524
solar cases and registered 17,993 solar case issues. During this period, 21%
of these cases - 1,805 cases and 3,229 issues - were about issues with the
application of the Premium Feed-in Tariff (PFiT) and Standard Feed-in Tariffs
(SFiT). (sub. 48, p. 1)
A case study provided by EWOV highlights some of the difficulties faced by consumers,
particularly when incorrect information is provided.
The customer owns two properties and decided to place solar panels on his
holiday home after his electricity retailer confirmed in writing that he will be
able to receive PFiT credits for this property. However, after the panels were
installed he received a PFiT form that stated eligibility required the residence
to be the primary residence of the customer. The electricity retailer
subsequently confirmed that he will not be able to receive PFiT credits for
this property. As a result of EWOV's investigation, the electricity retailer paid
the customer $2,800 in recognition of providing incorrect information.
(sub. 48, p. 3)
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The Commission notes cases come to EWOV only after customers have been unable to
resolve their complaint directly with their electricity retailer or distributor and have
subsequently chosen to take the complaint further.
Ideally data would be publicly available to allow FiTs to be compared. In this regard,
the Commission notes that the EI Act currently requires Victorian retailers to publish FIT
information (including tariffs and terms and conditions) as part of their retail licence
conditions.
The Commission has undertaken desktop research to determine the extent of
information on FiT offer terms and conditions available online. A number of
non-governmental organisations and businesses publish price comparator information,
including the Moreland Energy Foundation (Moreland Energy Foundation 2009) and
Energy Matters (Energy Matters 2009). However, much of this information is out of date.
The ESC’s ‘YourChoice’ website, allows comparison of retail electricity supply offers, but
does not allow direct comparison of FiTs.
The Commission has also visited electricity retailer websites to compare the information
available on FiT offers. The Commission notes that individual retailers present the terms
and conditions of their FiT offers in different formats and it is often hard to find
information on specific terms and conditions, making it difficult to compare offers
across retailers. In some cases electricity retailers have combined all offers into one set
of terms and conditions; in others they have separated the offers into discrete terms
and conditions.
This is consistent with observations made by the IPART in relation to information
disclosure by retailers operating in New South Wales:
We are concerned that the current practices of retailers in disclosing the
key features of their [FiT] offers are not assisting customers to assess these
offers and make well informed decisions. (IPART 2012, p. 99)
The Commission notes that IPART, in recommending a benchmark range for a ‘fair and
reasonable’ FiT, argued that:
… our recommended form of regulation needs to be supported by actions
to improve the quality and accessibility of information available to
customers about the financial consequences of installing PV generation
and retailers’ voluntary feed-in tariff offers. (IPART 2012, p. 98)
Information and transaction cost issues — including those resulting from the complexity
of the market, changing regulatory environment and the potential barriers to
competition resulting from the industry’s structure — were discussed in section 5.5.1. In
addition, consumer regulation in the retail electricity market is in a state of flux as
responsibility shifts to the AER and new connection processes and charging regimes are
introduced. These changes add further to uncertainty in the market.
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5.5.3
Market power issues: vertical integration of retail
energy businesses
There are significant ownership links between the energy retail market and upstream
energy production (including in renewable energy) (box 5.2).
Box 5.2
Examples of ownership links between energy
retailers and upstream energy production
AGL Energy

owns a number of wind farms

owns 10 hydro-electric generating schemes (comprising 16 power stations in
Victoria and New South Wales)

owns and operates two gas fired electricity generation plants in South Australia
and Victoria

has a 32.5 per cent equity investment in Loy Yang Power( one of Australia’s
largest coal-fired power stations)

owns and operates several renewable landfill gas and biogas (sewage)
generation facilities

owns and operates a 4.4 MW gas fired cogeneration plant at Symex Holdings in
Port Melbourne

owns one large scale solar electricity generator.
Origin Energy

Has a generation portfolio of 5,310 MW

operates eight power stations (mainly gas fired)

has a 50 per cent interest in three cogeneration plants

owns a wind farm facility.
TRUenergy

owns and operates a portfolio of electricity generation facilities, including coal
(Yallourn in Victoria), gas and wind assets
Snowy Hydro

owns Red Energy
Hydro Tasmania

owns Momentum Energy
Source: Commission analysis of retailer websites.
Some participants claimed vertical integration of retail energy businesses with upstream
generation facilities may impact on the incentives retailers face when engaging and
negotiating a FiT with small-scale (or aggregated groups of) generators. A view was
expressed by the Australian Solar Roundtable that:
The market for power from distributed and embedded generation is
distorted by an imbalance of market power. A small number of players
dominate the market. (sub. 56, p. 9)
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The Commission considers that following a transition period, this issue is not likely to
represent a significant barrier to the establishment of ‘fair and reasonable’ FiTs.
5.5.4
Limitations on time of use and locational pricing
Electricity use varies widely depending on the time of day and season. At times there
are large peaks in demand which drive much of the cost of generating and supplying
electricity. Large peaks in demand may cause network congestion in particular
locations, and lead to increases in the wholesale price of electricity when this is
supplied from more expensive peak supply sources (for example, gas-fired generators).
Time of use and location have two elements that impact on the value of distributed
generation:

Network value — at locations where the network is congested there is additional
value to distributed generation that produces at times when the extra local supply
delays network investment. The Commission has concluded that FiTs are not a good
way to approximate or reward distributed generation for this capital value
(chapter 6)

Energy value — output from distributed generation will have more value in
locations where the system losses from transporting electricity from centralised
generators are high and at times when demand is at its peak so the costs of
purchasing electricity on the wholesale market are high. These values should be
reflected in an efficient FiT and provide incentives for people to invest in distributed
generation.
Smart meters can allow consumers to monitor their electricity use more closely and
make more informed decisions about when and how they use electricity. Having
access to time of use and locational pricing information would also allow customers
considering installing distributed generation technology access to better information to
guide their decision-making process.
As noted by ACIL Tasman:
Peak demand, or a closer proxy such as the maximum electricity consumed
in any half hour interval, will be able to be measured with the smart meters
that are currently being installed in Victoria. However, there is currently a
moratorium presenting the additional information collected by these meters
being used in retail electricity pricing, although it has recently begun to be
used in settling the wholesale market. Customers with smart meters are
being billed as if they had the historic type of meters. This will continue for as
long as the moratorium is in effect, until 2013. (ACIL Tasman 2012b, p. 26)
Access to better information (price signals), within a competitive electricity market is
likely to lead to FiTs that better reflect the value of distributed generation. The
Commission notes that there is currently a ban on the rollout of time of use retail prices
before 2013. Modelling undertaken by Deloitte Access Economics indicated that
banning time of use tariffs until at least 2013 delays about 24 per cent ($490 million) of
the estimated benefits of smart meters, the proportion of the benefits attributable to
time of use tariffs and demand management (DAE 2011, p. 13).
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5.5.5
Conclusion on fair and reasonable prices
While there is sufficient evidence to suggest that the retail electricity market is
competitive, participants were concerned that retailers are not as responsive to
distributed generation. For example, unlike the process for changing retailers to supply
electricity, the processes for signing up to a FiT is complex and lengthy. And DG
proponents, particularly in area not subject to regulated FiTs, have found it difficult to
negotiate a FiT for electricity fed into the network. These experiences raise questions
about whether the behaviour in the market for electricity from distributed generation
reflects that which would be expected in a competitive market that would set ‘fair and
reasonable’ FiTs.
The Commission considers the underlying causes of these difficult, complex and lengthy
processes are likely to include:

structural issues relating to the separation of distributors and retailers

information and transactions costs

market power issues

limitations on time of use and locational pricing

uncertainty of the regulatory environment, coupled with the transition to a national
regime.
While on its own none of the above factors constitute a market barrier sufficient to
prevent competitive outcomes from emerging (as long as adequate consumer
protection, transparency and information is provided) combined they are likely to
present significant short term barriers.
A number of the changes in the NEM that are underway or have been foreshadowed
are likely to reduce these barriers, as will the Commission’s draft recommendations in
chapter 4, if accepted. Other aspects can be addressed through consumer protection,
reasonable access to information and maturing of the market. Accordingly, the
Commission considers a market-based FiT is likely to provide the most efficient outcome
in the long term. However, there are important transition issues and in the short term
moving too rapidly to market determined FiTs may cause unnecessary disruption and
hinder the transition to a fully competitive market. These issues are discussed further in
chapter 6.
5.6
Conclusion
The objectives for feed-in tariffs going forward
Victorian FiTs have a number of objectives which appear to be based on previously
identified issues or perceived problems. One of the main drivers appears to be related
to reducing greenhouse gas emissions. However, given the introduction of a ‘price on
carbon pollution’ by the Commonwealth Government and other current
Commonwealth initiatives (for example, RET, LRET and SRES), the Commission considers
the Victorian FiT(s) are not the most appropriate regulatory instrument to assign to this
objective. It should also be noted that given the carbon tax will affect the wholesale
price of electricity, it will be automatically incorporated into the value of a marketbased FiT.
Supporting the development of a particular industry (for example, solar PV) appears to
be a further objective of the current FiTs. The Commission’s view is that pursuing this
objective is likely to be highly distortionary. From a solar industry perspective this may
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create significant benefits. However pursuing the development of one industry (either
through a higher regulated FiT for solar PV, or through eligibility criteria which favours
solar PV) can be at the expense of other distribution generation technologies, or more
broadly other industry sectors that supply innovative approaches to minimising
electricity usage.
Ensuring that households and small businesses have access to a fair and reasonable
price for exported electricity is an important FiT objective, and is the most relevant
objective underpinning any future FiT arrangements. This is consistent with COAG
national FiT principles.
Tariff/price component
Victorian FiTs establish a minimum price for electricity exported to the grid whether it is
60 cents per kilowatt hour under the PFiT, 25 cents per kilowatt hour under the TFiT or a
one-for-one price under the SFiT. The Commission considers these prices are probably
above what would be expected in a well-informed competitive market. Given current
eligibility criteria which favour solar PV and to a lesser extent other ‘renewables’ it could
be expected that this will artificially increase the take up of these technologies, and
impose increases in electricity prices for non-users of solar PV. These cross-subsidies are
regressive to a greater or lesser extent.
The regulated PFiT and TFiT are based on an assumed payback period for solar PV
systems. This is inconsistent with the Commission’s view that the price for exported
energy should be based broadly on the value of the electricity to the network, and that
this price should be determined within a well-informed competitive retail electricity
market. Market determined FiTs would be consistent with a fair and reasonable price.
Feed-in tariff eligibility
The main FiT eligibility criteria relate to both the capacity or size of the distributed
generation system and the technology (table 5.5).
Table 5.5
Feed-in tariff eligibility – technology and capacity
Type of FiT
Eligible technology
System capacity
PFiT
Solar PV
5kW or less
TFiT
Solar PV
5 kW or less
SFiT
Small renewable energy generation
facilities (solar, wind, hydro and biomass)
connected to the distribution network
Less than 100 kW (excludes
solar PV with a capacity of
5kW or less)
Notes:
See Appendix B for greater detail on the various FiT schemes
Source: Commission analysis
As noted in chapter 3, the Commission considers that FiTs should not unnecessarily
favour one technology over another. There should be technology neutrality, with
differences in policy or approach only justified on technical or other appropriate
grounds. This would help support efficient market outcomes by ensuring that the
relative merits of all technologies are considered and no single approach is
advantaged over another. The terms of reference for this inquiry refer to renewable
and low-emission technologies, and it is these that the Commission has focused on —
that is that eligible technology embraces at least renewable and low-emission
distributed generators.
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