Solar power: making electricity at home

It may appear counter-intuitive, but getting millions of solar panels onto rooftops saves more money than it costs. Feed-in tariffs enacted by state governments have enabled ordinary Australians using their savings to build a solar power station at home benefiting the community.

When those solar households who had saved to get their panels installed under the solar feed-in tariff programs export their solar production to the grid, which occurs mostly during higher demand daytime periods, they are given a slightly higher than average retail rate for the electricity they are selling. The prices they have been paid are relatively meagre when compared with the ridiculously high rates paid to big coal or gas power plants.

At the same time that little solar households who have invested their money in a rooftop power station are being paid between 44 and 60 per kilowatt hour, the old power companies with their dirty belching coal and gas plants are receiving as much as $12.50.

In other words, the coal and gas guys are being paid as much as $11.90 more than a home solar generator for just one unit of electricity.

A home solar system installed in NSW sized at 10 kilowatts, which was the limit for feed-in-tariff eligibility under the now-defunct state scheme, would export roughly 9kWh and reduce line losses by more than 10 per cent during a very hot sunny day when everyone was running their airconditioners. That meant a coal or gas plant would not need to generate 10kWh for every 9kWh a solar household produces at home during that period. During these high-price events, which account for more than 30 per cent of the cost of electricity, we can buy our power from a gas or coal plant at the inflated price of $125 or we can buy it from a home solar generator for just $5.40.

To buy the full 10 kilowatt equivalent output from the home solar generator saves everyone $120 each hour in power costs alone.

This is not the full story. At other times when your home solar system is generating, the coal plant may receive 6, 8, $1, $3 or $5 but you're still getting a steady 44 to 60. The reason customers were getting an average price under the state programs is because it's too difficult for ordinary home owners to set up a trading desk and participate in the national electricity market. So the 44 to 60 range is much more reasonable when you take into account the wild fluctuations that occur daily as power generators use their market power to game the electricity market, which ultimately is costing consumers.

All that said, the most important contribution from rooftop solar is through the ''merit order effect'', explained in a recent paper by the University of Melbourne's energy research institute, which showed electricity production from rooftop solar is brilliantly timed for when we're inside and running our airconditioners and can substantially reduce the wealth transfer from ordinary electricity consumers to big power generators. Eighty-five per cent of the time, during peak demand periods when the highest prices occur in the electricity market, rooftop solar is there to dampen, reduce and keep a lid on extreme prices.

At just 3000 megawatts of solar, which is what Germany installed in December during the Christmas holiday break, we would be paying at least a billion dollars less for our electricity, amounting to a more significant saving on bills than if we choose not to encourage people to put more solar on their roofs.

Today, the government, through IPART , is performing a review into feed-in-tariffs to find a ''fair and reasonable'' price to pay enterprising householders for the solar electricity they produce. In the government's terms of reference they were asked to recommend a price with ''no resulting increase in electricity prices in NSW'' and to make the scheme so that ''the government would not pay''. They also asked for it to support a competitive electricity market. The University of Melbourne paper showed that a net feed-in-tariff price of 35 to 40 a kilowatt hour, handled by the distribution companies, would lower electricity prices by more than it would cost to fund it and that the government's existing low-income household rebate could be increased slightly to accommodate any shifting in network costs from solar to non-solar households.

The reward from the merit order effect should not be handed to dirty fossil fuel generators as they are able to withdraw their service, choosing whether to supply and game the electricity market, sending electricity prices spiralling, while on the whole solar households will reliably generate, day in, day out.