Feed-in tariffs seem to be the flavour of the month in Australian political circles. The South Australian Government passed Australia’s first feed-in tariff legislation back in February this year, closely followed by the announcement of a similar scheme in Queensland in March which passed through state parliament last night.

The Victorian Government looks to be moving on a feed-in tariff commitment made in the lead-up to the last state election 18 months ago, a private members bill has been introduced in the ACT, Kevin Rudd has promised the unification of state-based schemes and Martin Ferguson mentioned feed-in tariff no less than seven times during a recent ABC TV interview.

So what are they? Feed-in laws require electricity utilities to pay renewable energy generators such as roof-top solar panel owners a mandated price over a guaranteed time period for electricity they feed back into the grid.

Internationally, feed-in tariffs have fast become the incentive of choice for increasing the uptake of solar and other renewable energy technologies, being implemented in over 40 countries around the world.

Not all feed-in tariff schemes are equal. Feed-in tariffs internationally are almost exclusively paid on the entire production from the chosen renewable energy source. This guarantees a payback on investment within a given time, providing the certainty required to encourage people to go out and invest in solar and other renewable energy technologies.

However, the schemes introduced in Australia thus far are designed to reward homeowners for the electricity exported to the grid minus what is consumed in the home at the time of production. This system of “import-export metering” significantly discriminates against certain classes of consumers, as well as making calculation of the cost of the scheme, and potential financial return, extremely difficult.

An import-export metering regime for feed-in tariffs discriminates against both owners of smaller grid-connected systems and those who are more likely to consume electricity during the day, such as senior citizens or stay-at-home parents. Alternatively, “double income no kids” families who are able to afford a larger solar system and are typically away from home at work during the day will are set to do very well.

As well as being discriminatory, such a system makes calculating payback times very difficult. It is virtually impossible to know what portion of the electricity generated will be returned to the grid without undertaking a detailed energy audit. And people’s circumstances change.

Feed-in tariff schemes paid on total production from renewable energy systems, such as in Germany and elsewhere, suffer from none of these problems. They provide certainty of return, and it is this guarantee that encourages people to adopt these technologies.

Since introducing feed-in tariffs in 2000, Germany has doubled the proportion of electricity it generates from renewable energy sources, reaching the 2010 target of 12.5% three years ahead of schedule. As a result of this success, Germany has recently increased its national renewable energy target to 27% of all electricity generation by 2020. Further, Germany now employs nearly a quarter of a million jobs in renewable energy, with solar power creating three times the number of jobs per installed megawatt than coal fired electricity.

International experience tells us that feed-in tariffs can be very successful in stimulating the uptake of renewable energy, addressing climate change and creating booming local industries and employment. However, state, territory and federal governments looking at introducing feed-in tariffs would be wise to learn international examples and ensure that any measures they do adopt are efficient, effective and equitable.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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