Value of generation from small scale residential PV systems

16 Nov 2011

This report presents a detailed analysis of 'fair price' for exports from residential solar Photovoltaic (PV) systems.

The NSW Solar Bonus Scheme provided strong support for the uptake of small scale PV systems through a gross feed-in tariff of around 60 c/kWh, reduced to 20 c/kWh in October 2010. Rapid uptake of small scale rooftop PV systems under the scheme has led to the level of installations breaching the scheme cap of 300 MW, resulting in the closure of the scheme in May 2011. A key issue going forward is to develop support mechanisms to support the industry until such time as it becomes economically self sufficient. However, the NSW government is concerned that any support does not increase costs faced by electricity consumers.

Framing ongoing support is likely to be based on the two key issues.

  • First, what is the value of net exports (that is, electricity generated but not consumed within the residence) from roof-top systems? For electricity consumed internally, the value is equivalent to the avoidable component of the retail tariff. One view is that the value of net exports should also equal the retail tariff as any electricity generated is likely to be consumed by nearby residences. The alternative view is that the tariff on exports is the value of generation on the wholesale market.
  • Second, what level of support in the form of a premium tariff rate on net exports, is required to allow the industry to continue to develop to the point where it becomes economically sustainable. Based on conservative estimates of the level of future cost reductions, it is likely that the cost of generation from small scale systems will be equivalent to the cost of grid supplied electricity sometime towards the end of this decade. But in order to achieve these cost reductions some level of support may be required.

This report contains the findings of an assessment of these issues.

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