Feed-in tariffs

Nicola Mares • 20 April 2020

Author: Sarah Morton
Contributor: Damien Moyse Updated: John Edgoose
In Australia, the enhanced Renewable Energy Target (RET) and Large-scale Generation Certificates (LGCs, formerly known as Renewable Energy Certificates RECs) support the growth of large renewable energy facilities like wind farms.
For small generation, there are Small-scale Technology Certificates (STCs), and Feed-in Tariffs (FiTs), where a premium rate is paid for any renewable electricity fed into the grid. With a FiT, the price is fixed, but it's not clear how much energy this will help to create. Some FiTs set a limit on the total amount of installed capacity.
Internationally, FiTs are extremely popular. In 2011, there were over 50 countries around the world with a feed-in policy.
How does it work?
Typically, FiTs guarantee a price for renewable electricity over a fixed period. Often, the price differs according to the source of energy (wind, solar or bioenergy) or other factors, such as the size and capacity of the system, or its location (rooftop or ground-mounted, in the case of solar).
The cost of FiT schemes are usually borne by all consumers – either electricity users across the market or just in certain sections of it (such as, residential or industrial consumers). A few FiT schemes have tried using government-consolidated revenue for funding, with limited success.
Tariff rates are set, to give investors a reasonable return. But if the rate is too low, no deployment will occur. Alternatively if the rate is too high, the market may be over-incentivised and the cost of the scheme will increase, with disproportionate payments going to the renewable energy owners at the expense of other electricity customers.
The tariff rates can be fixed or may decrease over time (this is called a 'degression rate'). The reducing price reflecting the lower costs achieved over time, and economies of scale in the market.
In most cases there is a regulation requiring compulsory grid connection and purchase of the electricity, provided the renewable energy system meets certain standards.
Metering configurations
Most FiTs around the world are based on a metering configuration called 'gross metering'. This means all electricity generated by the system is metered separately and every unit is paid the premium tariff. However, Australia has a different system, with a number of state-based schemes based on 'import and export metering'. This means only the electricity sent to the grid after use in the home or property receives the premium rate.
The disadvantage of net metering is that the certainty usually associated with FiTs is compromised. This is a problem for generators who use energy on the site at the same time as the renewable electricity's produced, as this reduces the amount of electricity going to the grid. So it's very hard to predict the 'export rate' accurately - for which the generator is paid the premium tariff.
How much solar electricity we can expect households to export will vary depending on many factors - to do with load profile. This gives the renewable energy investor little certainty.
FiTs in Australia
In Australia, FiTs are different in each state, and generally only support small-scale renewable energy installations (typically, solar power systems and sometimes small wind systems) located on a customer's premises. They are paid to the 'micro-generator' by the customer's electricity retailer, generally as a credit off the micro-generator's household or property consumption (with any outstanding credit owed to the micro-generator usually paid directly).
State policies set minimum tariff rates as listed below, but some retailers may offer a rate above the minimum. FiTs are generally available in addition to any REC eligibility under the RET scheme.
Summary of current available feed-in tariffs around Australia (as of March 2013)
FiTs are relatively new in Australia and each has specific arrangements. Prospective renewable energy owners should check the details of the relevant scheme carefully before buying a system. In particular, check:

  • all eligibility requirements
  • whether some retailers are paying an above-minimum rate
  • terms and conditions of retail contracts
  • whether you're likely to need a new meter or metering configuration
  • what arrangements exist for customers in credit at the end of each year.

More information

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