IEEE Power & Energy Magazine - July/August 2015 - 57

(Billions of Australian Dollars)

These calculations also pertain
Avoided Energy
to the costs and benefits of PVs
Capital Outlay
Purchases
received by the initial owners of the
(11.0)
3.2
$PV systems, i.e., those households
who incurred the outlay to install the
Retailer Payments
2
Mandatory
0.9
systems, the original PV owners, and
Production Subsidy
consequently received the capital
3.3
4
and production subsidies. Many of
Capital Subsidy
6
these homes will be sold before the
3.5
assumed 25-year life of the PV sys8
tem. When the house is sold, mandatory production subsidies end in
10
some states.
It might be argued that house12
holds obtain other benefits (beside
a financial return on investment) figure 5. Discounted present value (to households) of their investment in PVs
from installing PV systems. Such (in billions of Australian dollars).
benefits include greater control over
their electricity supply or meeting personal environmen- Production Subsidies
tal objectives. Households also have tax advantages for Figure 5 shows that the present value, discounting at the
their PV investment; their income produced from PVs is IRR, of the mandatory production subsidy (the FiT) is estinot taxed. Therefore, it might reasonably be argued that mated to be AU$3.3 billion, varying by jurisdiction. The
households would have been willing to accept a lower rate undiscounted total FiT subsidy is AU$4.5 billion. Figure 7
of return than 8.9%. In this sense, it might be argued that shows the profile of the payment of FiTs to 2030, at which
households with installed PVs have profited unreasonably point they will all have terminated. The large hump for NSW
from their investment in rooftop PV systems. However, it reflects the use in NSW of a "gross" FiT.
would be hard to argue that a return on investment of 8.9%
In total, approximately AU$10 billion (undiscounted)
is excessive; investors in grid-based generators are likely will be paid in capital and production subsidies for the 1.4
to have expected more, and in this sense households have million rooftop PV systems. Per MWh produced over the
been willing to invest with lower expected returns than life of the PV, the subsidy is around AU$100/MWh. Energy
grid-based competitors.
users, including the households with rooftop PVs, are bearing this subsidy. While the subsidy can be valued with reasonable certainty, it is more difficult to be certain about the
Electricity Consumers Without PV Systems
Electricity consumers without PV systems have been benefits that all users would share as a result of the impact
impacted in a few ways. As production and capital subsidies of PV systems on the wholesale electricity market and on
have been recovered from consumers, they are bearing the networks. A preliminary discussion follows.
consequence of higher network charges as a result of lost
revenue from houses that have PV systems, and they are get- Electricity Distributors
ting the benefit of lower wholesale prices as a result of merit- The beneficial impact of household PVs in reducing network
order effects. In the next section, we quantify the impact of losses and effectively augmenting capacity by pushing electricsubsidies and then examine the impact of network revenues ity back into the grid in the opposite direction to the predomiand wholesale market prices in the following section.
nant flows is likely to be significant. For example, in Western
Australia, the Independent Market Operator (2013) estimates
that PV systems in Perth are producing generation equivalent
Capital Subsidies
In the period 1 January 2010 to 31 December 2014, approxi- to around 27% of their installed capacity at the time of regional
mately 153 million solar PV renewable energy certificates peak demands. Rooftop PV production at the typical time of
were created. The estimated total undiscounted cost of these regional peak demand is estimated to range between 28%
certificates is A$5.5 billion. As shown in Figure 5, the esti- (Queensland), 29% (NSW), 35% (Victoria) and 38% (South
mated present value of this, discounting at the IRR, is AU$3.9 Australia) of its installed capacity, according to the Australian
billion. Figure 6 shows that the value of capital subsidies Energy Market Operator (2012). Assuming that 30% of the
peaked in 2011 so that despite continued (solid) increases 3.75 GW of rooftop PV capacity coincides with the simultanein PV installation rates over the period (see Figure 1), the ous peak demands in the regional electricity markets of Ausdecline in the PV multiplier meant that total certificate sub- tralia, this amounts to an aggregate average demand reduction
of a little over 1,000 MW at the time of the peak demands.
sidy declined significantly.

july/august 2015

ieee power & energy magazine

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