Energy retailers making millions buying solar power on the cheap from homeowners

Extract from ABC News

By business reporter Liz Hobday

Updated about 2 hours ago

Photo: Household solar is a bargain for power retailers. (Reuters: Tim Wimborne, file photo)

Related Story: Solar power 'cheaper than fossil fuels in most capital cities'

At a property on Victoria's Mornington Peninsula, workers are up early to install a rooftop solar system. While there's been anger in South Australia over its blackouts this summer, here there are outages every day.

The panels being installed will provide a back-up and generate extra power for the grid.
It's been called the great solar scam: households investing in solar energy and feeding electricity back to the grid for just a fraction of what it's worth, and sometimes for free.
At the same time, the energy market operator is complaining that even it can't find out how much solar is going into the grid at peak times that are critical for the network. It comes amid surging power prices and calls for a bipartisan energy policy.
"This installation is large enough to that we expect it to cover all our costs and also feed back in, so supporting the grid on an ongoing basis," says Ingrid Williams, a solar customer.
The electricity market is weathering a series of shocks, with extreme heat in New South Wales and in Victoria. The Hazelwood power station will close down within weeks.
About 1.6 million Australian homes already have solar panels installed.
"In the places where there isn't a regulated minimum then there's a lot of evidence that retailers are really getting quite a good deal by paying customers either nothing or four or five cents and avoiding having to buy on the wholesale market for seven, eight, nine cents," said Jack Gilding, executive officer at Tasmania Renewable Energy Alliance.
That may sound like small potatoes, but these days, solar generates huge amounts of electricity for households.
And, for the network, it supplies well over half the annual output of a big coal plant like Hazelwood.
Solar flowing into the grid means retailers don't have to source that power from the wholesale markets, which have more than doubled in the last year, and can have massive price spikes at peak times.
"You can get prices up to $14,000 per megawatt hour, which is $14 per unit at the household level and the solar feed-in rate is five cents," said Bruce Mountain, energy economist at CME.
That energy is then sold to other customers at retail prices of about 20 to 30 cents.
But the energy industry says the price the market sets for household solar is correct.
"It costs money for a retailer to pull that energy from a solar PV system into the grid and redistribute it to a customer base," says Sarah McNamara, the general manager of corporate affairs at the Australian Energy Council.

"That is not a costless exercise, and the cost of the wholesale energy on the spot market, or on the long-term contract market, has different variables at play than solar PV does."

Generous payments phasing out

There are still thousands of households getting generous payments on premium feed-in tariffs that were put in place to kickstart the solar industry. But these are being phased out.
In Tasmania and regional Queensland, the state sets a minimum feed-in price, while Victoria is more than doubling its minimum to about 11 cents.
The rest of the country relies on market forces.

"We support market-based tariff schemes for that energy that might be fed back into the grid because we believe the market is best placed to set the rate at which that energy is valued," Ms McNamara says.

The market is complex, with more than 50 retailers selling contracts to households, and more than 8,000 contracts on offer.
"Many retailers are offering nothing or next to nothing and it's very difficult for households to discern if they're getting a good deal because it's wrapped up in a purchase contract," Mr Mountain says.
"You need to split apart the purchase contract and the sales contract to figure out if you're getting the best offer overall."
Part of the problem is that no-one knows for sure how much rooftop solar is going into the national network.
The market operator says not even it knows, and that's a problem.
It says with increasing so-called "behind-the-meter" power generation, such as solar, "there is a real risk the power system will increasingly operate inefficiently, with assets under-utilised, less informed investment decisions being made and increased costs being borne by customers".
Even making some conservative assumptions, household solar is a bargain for power retailers.
Solar households are being paid between five and seven cents per unit for power that would cost between eight and 10 cents to buy wholesale.
On these numbers, retailers are making between $74 million to $370 million a year by getting rooftop solar on the cheap.
And with the massive price spikes on the wholesale spot markets, the real figure would be much higher.
As solar and battery technology improves, the reality is that households may decide to leave the ageing and increasingly unreliable national grid, especially if they think their solar energy is undervalued.
"That's certainly a possibility and people call that the death spiral for networks," Mr Gilding said.
"It's actually a situation in which everybody loses."