Garnaut on Feed In Tariffs
Saturday, 05 July 2008 08:51
Garnaut's report includes a section on Feed-In-Tariffs. Garnaut correctly points out that it should be Gross. Despite the headline on the section it doesn't recommend a value, which is a pity.
Key Point: There is a case for special feed-in tariffs for household electricity generation and co-generation. The case can be quantified by reference to timing and
17.2.2 What should the value of a feed-in tariff be?
There are two main ways by which feed-in tariffs can be paid—gross metering
and net metering. Gross metering pays the embedded generator for all electricity
it generates, while net metering pays for just the energy exported to the grid
(gross generation minus local energy consumed).8 Feed-in tariffs in Spain and
Germany, for example, are calculated on a gross-metering basis. In Australia,
most feed-in tariff commitments have been based on the net quantity of energy
exported to the grid.
For small embedded generation systems installed by households or firms
that are consuming electricity throughout the day, it is likely that no exports
to the grid will be possible. However, the benefits of embedded generation
(lower transmission losses, deferred costs for network augmentation, and
displacement of high-cost generation during peak periods) are present for every
unit of electricity produced, not just the amount exported. A feed-in tariff based
on gross metering is thus a more accurate means of pricing these benefits.9
note 9: Some argue that a gross-metered feed-in tariff is undesirable because, from a sustainability perspective, it does not encourage embedded generators to consume less electricity, whereas under a net-metered scheme profits can only be made by exporting more to the grid. This reasoning is erroneous because the incentives to consume should come through the retail tariff paid for electricity, not through the feed-in tariff system
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