1 Intelligent Well Technology: Status and Opportunities for Developing Marginal Reserves SPE
Designing Solar Feed-in Tariffs for Australia: Lessons learnt from Europe?
Craig Froome, The University of Queensland, School of Engineering, Ph: +61 7 3365 1574, Email:
Liam Wagner, The University of Queensland, School of Economics,Ph: +61 7 3365 6601 Email:
Overview
Renewable energy within Australia has stalled due to a number of issues, but primarily due to delays in establishing policies aimed at increasing its deployment. Whilst the Federal Government has settled on the policy measures to be introduced, being a Carbon Pollution Reduction Scheme (CPRS) and a significant increase to the current Mandatory Renewable Energy Target (MRET).
Whilst Australia is considered a developed country, our adoption of renewable energycould be considered to be that of a developing country. Shafiei et al.(2009)noted that with renewable energy, developing countries simultaneously undertook three activities, namely: -
- Investment in research and development on renewable energy technologies.
- Absorbing knowledge from developed countries on the technologies under consideration, on the basis of replicating paths of existing deployment.
- Absorbing knowledge on similar new technologies that may create competitive advantages.
The choice of which technology to adopt will be dependent upon the resources of the proposed location, however can be assessed using the decision path analysis. The Federal policies noted above need to be accompanied by State policies which will target those technologies or resources which are most abundant within their area.
Looking specifically at solar technologies a number of different policies have been proposed including tax rebates, cash rebates, government guaranteed loans, portfolio standards by technology or resource group as well as feed-in tariffs(Fthenakis et al., 2009). As Australia has only just begun too now embrasing renewable technologies, they can follow the policies and deployment rates of those countries that have successfully achieved their goals, such as Germany, Spain and Italy.
The need to greatly expand the use of existing renewable technologies is important if Queensland is to meet their share of the proposed MRET.This will create opportunities for both solar thermal generation as well as commercial roof-top PV applications. The effective policy framework needs to be implemented so as to act as a driver for the research, development and deployment of these technologies.
Methods
When considering the economics behind policy decisions, the initial consideration is the cost curve of the technology under consideration. Our resultant model takes into consideration technology learning curves, the benefits to the electricity market and emission reductions.
Australia has proposed a cap and trade emissions scheme together with a renewable energy portfolio standard.
Additional policy measures will still be required to enable the deployment of renewable technologies at the rate required by the MRET scheme. A number of European schemes have been reviewed examining the policies that achieved the highest rates of deployment.
Feed-in tariffs have been the major policy measure adopted in Europe to drive the deployment of renewable energy technologies. Currently twenty countries in Europe have feed-in tariffs for PV systems. Of this group, fourteen countries are using the tariff with additional policy measures such as net metering, renewable energy certificates, capital subsidies, grants or rebates . In the European Union policy measures similar to Australia’s RET were favoured, however many have been replaced with by feed-in tariffs due to the certainty of income to the investor and the ability to integrate them with other policy measures, such as capital subsidies, grants or rebates (Campoccia et al., 2008).
The utilisation of feed-in tariffs to solve some of these policy issues has been widely discussed, with a number of advantages and disadvantages being identified. The advantages include long-term return for investors, simple to implement and different technologies can have different tariff rates, whilst the disadvantages include the need for transparency and monitoring systems, may not be cost effective and they may not ensure that long term goals are met (Gan et al., 2007, Menz, 2005).
Results
Previous research has indicated that the gross feed-in tariff is considered the more appropriate method as many external costs of generation, such as network augmentation benefits, peak-pricing benefits and reduced transmission losses are applicable to every unit of electricity, not just those exported to the grid (Access Economics, 2008). Feed-in tariffs were also considered by The Garnaut Climate Change Review (Garnaut, 2008), which also favoured the gross schemes. The report stated that quantification of external costs may result in a lower cost than is currently paid, however this must be weighed up with the incentive to drive deployment of the technology. This reaserch also quantifies the benefit of the infrastructure deferral to allow for comparison against the additional feed-in tariffs incurred.
In Europe the cost of the tariff is generally apportioned over all users, with the German system having estimated that the total cost to consumers amounted to 3% of the total retail cost. The cost is passed on as a levy to residential and commercial consumers only, with large industry and railways being exempt (Alternative Technology Association, Undated), although this may not be possible in with other options discussed.
The network augmentation benefits may be substantial, such that our modelling suggests that 3,000 MW of solar capacity could defer approximately 500 MW of other generation capacity, being the average size of new proposed generating capacity (fossil fuel based) within Australia. In addition to the network benefits, the delay will provide opportunities for other renewable or emission neutral technologies that are not currently commercially available to mature and become available for deployment.
Conclusions
Our modelling shows that the benefits of a gross feed-in tariff far outweigh the benefits achieved through a net tariff, however the costs to government are high.This must be weighed up against the emission reductions achieved and the environmental benefits that result. Further research is required to look at how this policy measure can be funded by government within the parameters that they have currently set and the deployment rates discussed within this paper. Whilst the need for further policy measures to help drive the deployment of solar and PV technologies is accepted and should be the subject of further discussion.
References
ACCESS ECONOMICS (2008) The Economic of Feed-in Tariffs for Solar PV in Australia. Clean Energy Council of Australia.
ALTERNATIVE TECHNOLOGY ASSOCIATION (Undated) The Case for a Feed-In Tariff for Solar Micro-Generation. Melbourne.
CAMPOCCIA, A., DUSONCHET, L., TELARETTI, E. & ZIZZO, G. (2008) Comparative analysis of different supporting measures for the production of electrical energy by solar PV and Wind systems: Four representative European cases. Solar Energy.
FTHENAKIS, V., MASON, J. E. & ZWEIBEL, K. (2009) The technical, geographical, and economic feasibility for solar energy to supply the energy needs of the US. Energy Policy, 37, 387-399.
GAN, L., ESKELAND, G. S. & KOLSHUS, H. H. (2007) Green electricity market development: Lessons from Europe and the US. Energy Policy, 35, 144-155.
GARNAUT, R. (2008) The Garnaut Climate Change Review: Final Report, Port Melbourne, Cambridge University Press.
MENZ, F. C. (2005) Green electricity policies in the United States: case study. Energy Policy, 33, 2398-2410.
SHAFIEI, E., SABOOHI, Y. & GHOFRANI, M. B. (2009) Optimal policy of energy innovation in developing countries: Development of solar PV in Iran. Energy Policy, 37, 1116-1127.