SUBMISSION ON FEED-IN TARIFF FOR REGIONAL QUEENSLAND FOR March 2014.

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1 SUBMISSION ON FEED-IN TARIFF FOR REGIONAL QUEENSLAND FOR March AMENDMENT B (21 APRIL 2014) 1. INTRODUCTION This submission has been prepared in response to an invitation from the Queensland Competition Authority (QCA) concerning its assessment of an appropriate feed-in tariff to apply in Regional Queensland for The 2013 Report Preamble states:- To be sustainable and fair to all consumers, any new scheme must be structured so that the price received for exports of electricity reflects the true, quantifiable savings and benefits that are being achieved by the installation and on-going operation of Solar PV panels Further the report states that:- There must be no consequential increase in electricity prices in Queensland or cost to the Queensland Government Budget 2. DECLARATION OF INTEREST The author and the author s wife live on Magnetic Island and have been participants in the Solar Cities Project hosting a 5.0kW rooftop installation for the Magnetic Island Solar Suburb initiative. The project has reached its conclusion (31 May 2013) and the installation has been offered for sale to the author and the author s wife as owners of the site. This offer to purchase has been accepted and relevant processes are in place to finalize the sale. 3. AUTHOR S ELECTRICITY BILL DATA The following data is extracted from various electricity bills over the past 12 months; Electricity Consumption March 2013 March 2014 Tariff 11 Tariff 33 Total Consumption 4262 kwh 3177 kwh 7439 kwh Ergon Energy s Solar Cities Officer has advised that the amount of energy exported was 9741 kwh. Thus the export potential once the author obtains the ownership of the installation is around 2300 kwh.(or 23.6%) The amount of carbon tax paid for the period has been calculated as $ based on $ for 6.3 MWh as shown on the electricity bill.(calculation is $ x 7.439/6.3) The rate of the Federal carbon tax and the renewable energy target derived from the information on the electricity bills is cents per kwh. ($ divided by 6300) The electricity bill data indicates that GST has been charged on top of the Carbon Tax price. 4. GENERAL COMMENTS ON 2013 REPORT A general comment on this report is that it fails to identify or quantify the level of compliance by Queensland power suppliers with the Renewable Energy (Electricity) Act 2000 and the associated acts and regulations. 1

2 It would have been helpful if the basis for the original 44 cents per kwh had been outlined so that a reasoned analysis and comparison could be made. The author had understood at the time the feed-in tariff was adopted that the projected Tariff 11 was to increase substantially to cover network renewal costs presumably for reliability reasons. Although the Queensland Government has promised to retain the 44 cents per kwh tariff for the qualified customers, the author suggests that the feed-in tariff could be adjusted while ensuring that no individual customer suffers a loss on their investment. The author also suggests that the situation is similar to a Force Majeure as in Contract law, and perhaps this avenue might be explored with a view to relieving the purported cost impact. Again it is imperative that the basis for the original 44 cents per kwh be reviewed. Presumably the cost impact for compliance with the Renewable Energy (Electricity) Act 2000 and its associated acts and regulations was a significant component of the original feed-in tariff. The report contains numerous other assumptions that may now prove to be incorrect. The implied truth that customers of lower economic status are disadvantaged by customers who can afford a solar PV installation needs to be tested, as indications are that the poorer customers are the ones investing in Solar PV. An industry group reports:- The suburbs with the highest percentage of solar installations are overwhelmingly low- to middleincome suburbs and places with a high proportion of retirees. These are the households that are the most concerned about rising electricity prices. The report also intimates a perception of higher network costs due to loss of reticulated electricity market and uncontrollable demands at peak times. The Solar Cities project findings for the Ergon Energy network disputes this although Energex maintains that this is still the case. There is a need to revisit the 2013 Report in the light of the experiences, outcomes and conclusions derived from the Magnetic Island Study, and to test the assumptions and statements by the various respondents who provided input to Final 2013 Report REPORT Section 4.5 Green Scheme Costs The author considers that the above section of the 2013 Report has not been adequately addressed, and the position adopted by QCA is neither reasonable nor fair in respect to PV customers. The Renewable Energy (Electricity) (Small-Scale Technology Shortfall Charge) Act 2010 imposes a penalty of $65.00 per MWh for failing to meet the target set by the Clean Energy Regulator. On Page 23 of the 2013 Report, the Clean Energy Council noted that the price of $40.00 for the Small-scale technology certificate (STC) has not been realised and the actual costs were around 25% lower than the Authority s estimates. Therefore the realised price of the STCs was about $30.00 per MWh. The Clean Energy Regulator states that the 2014 small-scale technology percentage (STP) is 10.48% On Page 20 of the 2013 Report Ergon Energy indicates that only about 0.4% of its energy is provided by PV. ABC NEWS Fact file: How does the Renewable Energy Target affect your power bill? (14 March 2014) reports:- In Queensland, the regulator estimates that the cost of the RET to an average yearly household bill in is at least $55.24 and would rise depending on what energy products households use. A spokesman for the Queensland Energy Minister, Mark McArdle, told Fact Check that renewables make up 5.7 per cent of energy generated in the state It would be safe, therefore to conclude that Ergon Energy as a liable entity, has a high exposure under the Renewable Energy (Electricity) (Small-Scale Technology Shortfall Charge) Act 2010 of some $35.00 per MWh. (3.50 cents per kwh) at the wholesale price. The QCA did not identify this impact in the final 2013 Report Based on the statement attributed to QCA on average consumption for domestic consumers power bills, the shortfall charge is costing $ per annum (calculation $35.00 per MWh). It would appear that the Queensland Government 2

3 is subsidising households to the amount of some $ each per annum if renewables are not installed. (Calculation is $ $55.24 = $165.26). This avoided cost must be accounted for in either the Retail Feed-in Tariff, or at wholesale level as an annual payment. For a 5Kw set this avoided cost, based on 9kWh pa, amounts to $ per annum. (Calculation is 9 x$35.00) Based on the author s power usage statistics, the avoided cost equates to cents per kwh.(wholesale)(calculation $315 divided by 2300kWh exported) A report by Giles Parkinson titled Ergon says renewables and batteries may be cheaper than grid (October 2013) says The Queensland Government spent $600 million in 2012/13 under its bridging the gap between the cost of delivering coal and gas fired generation to regional centres and what it charges customers. The taxpayer funded subsidy equates to $ per customer The author notes an expenditure of $ per customer is a lot less than $ per customer and saves a further $ per customer for the Carbon Tax levy (see below), and provides for quite a deal of scope for future solar storage installations. 6. CARBON TAX IMPLICATIONS Energex provides a table showing the amount of CO2 per kwh produced 1.04 kg. The author has not been able to locate a similar table for Ergon Energy. However assuming that Ergon and Energex would have similar performances, the indicative amount of CO2 gas saved by a 5.0kW installation is 9369 kg per annum, at an avoided value of $ per annum. (Calculation is x $23.00) Based on the author s power usage statistics the avoided cost would equate to If all the solar power was exported the saving in cost of Carbon Tax would be cents per kwh.(wholesale) cents per kwh (Wholesale) 7. GENERAL COMMENT ON THE RENEWABLE ENERGY (ELECTRICITY) SUITE OF ACTS AND REGULATIONS The acts provide for the purchase of renewable energy certificates, and penalties for shortfalls in not meeting the targets. However the Renewable Energy (Electricity) (Large-Scale Technology Shortfall Charge) Act 2010 allows for credits were there is excess renewable energy generated, whereas the Renewable Energy (Electricity) (Small-Scale Technology Shortfall Charge) Act 2010 doesn t provide for this. The author considers that it would be helpful to all parties if both acts allowed for credits to be interchangeable between Small-scale and Large-scale Technologies, thereby minimising the overall costs. 8. APPARENT DISCREPANCY BETWEEN CARBON TAX AND RET VALUES As mentioned above in the section on Energy Bill Data the price of the carbon tax and RET determined from the personal bills of the author is cents per kwh (Retail) In Table 5 on Page 10 of the 2014 Draft Report, the value of the Carbon Tax shown as cents per kwh (Retail) 3

4 From Section 5 above the value of the RET is determined as (Calculation is $55.24 divided by 6300 = cents) cents per kwh (Retail) This leaves the value of the carbon tax charged at cents per kwh (Retail) However the STC price of $44.00 per MWh (includes GST) at 10.48% compliant with RET amounts to (Calculation is $44.00 x 10.48% divided by 1000) cents per kwh (Retail) The corrected value for the Carbon Tax on the electricity bills for 6.3MWh consumption should be $ (ex GST) (Calculation is 6.3MWh x 1.04 tonnes per MWh x $23.00 = $150.70). The corrected value for the RET should be $26.46 (incl GST) (Calculation is 6300 kwh x cents per kwh = $26.46) The correct amount on the bill to cover carbon tax and renewable energy target should be $ Several questions arise from these apparent discrepancies as follows; Have the carbon tax and RET costs shown on the electricity bills been correctly calculated? Have consumers paid too much carbon tax and RET? Has GST been incorrectly added on to the carbon tax? (i.e. a tax upon another tax?) Have the wholesalers and the retailers overpaid the carbon tax to Commissioner for Taxation? Does this apparent discrepancy impact on Queensland Government subsidies? There is a need to resolve these apparent discrepancies in the application of the Carbon Tax and the RET charges. 9. CARBON TAX ON RENEWABLE ENERGY SOURCES Magnetic Island Solar Suburb The author mentions above that he and his wife have hosted a 5 kw installation at their residence on Magnetic Island. The author has noted that carbon tax has been charged on imported electricity. The Solar Cities website says that the scheme has saved some tonnes of CO2 and meets 34 % of the island s energy needs. The value of the carbon emissions saved is $ million, with more than half this amount saved since the carbon tax was introduced. It seems unreasonable that Solar Cities hosts and Magnetic Island residents have not received a reduction in the carbon tax charge from this scheme. Cogeneration Plants In the Burdekin District there is a substantial cogeneration plant fuelled by sugar cane bagasse which produces enough energy with the other sugar mills in the group to supply the requirements of 100,000 households (CSR News Release Pioneer Mill renewable energy plant in final stages of commissioning (31 August 2005)). The article recites the production of 620,000 MWh of electricity which represents a saving in carbon tax of $14.8 million per annum ( x 1.04 x $23.00) 4

5 There is a similar installation in Mackay and together with all the other sugar mills the author suggests that the overall saving in carbon tax per annum to Queensland consumers would be in the vicinity of $35 million. The author poses the question to QCA Does the carbon tax levy imposed on consumers reflect the above savings on carbon tax? Other Renewable Energy Sources The author requests QCA to examine whether carbon tax is being incorrectly charged on wind generators, solar concentrators and hydro electric schemes. 10. SO WHAT IS A FAIR AND REASONABLE FEED-IN TARIFF? The author submits the feed-in tariff determined below is appropriate for a 5kw set. The Author does not necessarily consider that this feed-in tariff is suitable for other sized installations. The wholesale cost of energy, NEM fees, Ancillary service fees and the Network loss percentage (13.5%) are taken directly from the 2014 Draft Report. Feed-in Tariff on a wholesale basis With Carbon Tax cents per kwh Without Carbon Tax cents per kwh Wholesale cost of energy Value of Small-scale technology savings Value of Carbon Tax NEM fees Ancillary Service fees Subtotal Network Losses 13.5% Value of avoided costs The author notes that there is a considerable contribution by the Queensland Government that may need to be examined to identify other avoidable costs. This examination is beyond the author s resources. 5

6 11. SUMMARY AND CONCLUSIONS There is a need to revisit the 2013 Report in the light of the experiences, outcomes and conclusions derived from the Magnetic Island Study, and to test the assumptions and statements by the various respondents who provided input to Final 2013 Report. It would appear that the Queensland Government is subsidising households to the amount of some $ each per annum if renewables are not installed. For a 5Kw set the value of the avoidable costs in meeting the renewable energy targets and based on 9kWh pa, amounts to $ per annum. Based on the author s power usage statistics, this avoidable cost this equates to cents per kwh.(wholesale)(calculation $315 divided by 2300kWh exported) The Queensland Government spent $600 million in 2012/13 under its bridging the gap between the cost of delivering coal and gas fired generation to regional centres and what it charges customers. The taxpayer funded subsidy equates to $ per customer. The author notes an expenditure of $ per customer is a lot less than $ per customer and saves a further $ per customer for the Carbon Tax levy (see below), and provides for quite a deal of scope for future solar storage installations. The indicative amount of CO2 gas saved by a 5.0kW installation is 9369 kg per annum, at an avoidable carbon tax value of $ per annum. Based on the author s power usage statistics the avoidable value of the carbon tax would equate to 7.97 cents per kwh.(wholesale) The author considers that it would be helpful to all parties if the relevant acts allowed for credits to be interchangeable between Small-scale and Large-scale Technologies, thereby minimising the overall costs. Carbon Tax Discrepancies As mentioned above in the section on Energy Bill Data the price of the carbon tax determined from the author s personal bills is cents per kwh (Retail) In Table 5 on Page 10 of the 2014 Draft Report, the value of the Carbon Tax is derived as cents per kwh (Retail) Several questions arise from this apparent discrepancy as follows; Have the carbon tax and RET costs shown on the electricity bills been correctly calculated? Have consumers paid too much carbon tax and RET? Has GST been incorrectly added on to the carbon tax? (i.e. a tax upon another tax?) Have the wholesalers and the retailers overpaid the carbon tax to Commissioner for Taxation? Does this apparent discrepancy impact on Queensland Government subsidies? There is a need to resolve this apparent discrepancy in the application of the Carbon Tax and the RET charges. There is a need to revisit the 2013 Report in the light of the experiences, outcomes and conclusions derived from the Magnetic Island Solar Cities Study, and taking into account the uptake of PV installations in the Ergon 6

7 Network, and to test the assumptions and statements by the various respondents who provided input to Final 2013 Report. The feed-in tariff determined on the basis of avoidable costs is cents per kwh with Carbon Tax, and cents per kwh without Carbon Tax Submission prepared by R. I. Ballard, Magnetic Island 17 April Amended 21 April 2014 (Amendment B) Source information for this submission QCA draft report March Numerous personal electricity accounts from Ergon Energy Letter of Offer from Ergon Energy dated 3 March 2014 for the purchase of the installation from Julie Heath Ergon Energy s Solar Cities.. Clean Energy Regulator Compliance, Education and Enforcement Policy (2012) Clean Energy Regulator Financial Incentives for Solar Panels (no date) Clean Energy Regulator About the small-scale technology percentage (March 2014) Review of the Renewable Energy Target Expert Panel Call for Submissions (5 April 2014) CSR News Release Pioneer Mill renewable energy plant in final stages of commissioning (31 August 2005) Renewable Energy (Electricity) Act 2000 Renewable Energy (Electricity) Regulations 2001 Renewable Energy (Electricity) (Small-Scale Technology Shortfall Charge) Act 2010 Renewable Energy (Electricity) (Large-Scale Technology Shortfall Charge) Act 2010 ABC NEWS Fact file: How does the Renewable Energy Target affect your power bill? (14 March 2014) Renewable Energy Target Review IPART s submission to the Climate Change Authority (September 2012) Final Report 2013 Residential Electricity Price Trends (13 December 2013) Energex Support Material #10 Energy Calculations (no date) Australian Renewable Energy Agency A Case Study of Increasing PV Penetration in Electricity Networks (September 2013) 7