There are tens of thousands of Queensland households benefitting from the state’s Solar Bonus Feed-in Tariff Scheme, which offers a generous rate of 44c per kilowatt-hour (kWh) to those who put in applications by 9 July 2012. The Queensland Productivity Commission recently released a report suggesting that the program (which ends in 2028) be brought to an early close, but the state government has already dismissed the idea – much as similar proposals have been thrown out in NSW and WA.
The QPC wants the program ended early because of its costs to others in the state who are not signed up for the program, but can’t legally just take the benefits away. Regional network company Ergon has previously mulled offering a voluntary buyout for its roughly 80,000 Solar Bonus Scheme customers – reasoning that some of these folks would be happier with a discounted up-front payout than the larger but slower ‘trickle’ benefit that they would otherwise see. There would be no pressure for current recipients to opt out of the scheme, but surely some of them would (especially if they think they may end up moving house and losing the benefit anyhow).
Recently, the idea of an alternative to a plain, cash-in-hand buyout has come across our table. What if the Queensland government (or network companies) were able to minimise their long-term Solar Bonus Scheme liabilities while at the same time encouraging early adopters of battery storage technologies? Specifically, what if Solar Bonus Scheme recipients were offered an up-front buyout of their FiT benefits – provided that the money was put towards the cost of a home battery storage system? This would allow households that want batteries to get them, while at the same time avoiding a potential tax ‘penalty’ on a one-off windfall buyout payment.
How much would the FiT buyout / battery incentive be worth?
While the whole idea of such a buyout is still purely hypothetical, we though that it would be interesting to explore what parameters might be put on this kind of scheme and what the outputs would be. How much could a Solar Bonus Scheme recipient potentially receive if they were to collect an up-front payment/battery incentive for their FiT liability?
The government could take a number of approaches, but the main questions regarding payout would revolve around the following variables:
- Solar system size
- The percentage of their solar energy that they export vs self-consume
- The date of the buyout (i.e. how many years of FiT payments remain?)
- Assumed percentage of the buyout (the government would probably not offer a full-value buyout, but rather a discounted payout of 50-75%)
- Location (Brisbane sees less sun than far north Queensland)
- Assumptions about how the system degrades (all solar panels become less efficient over time)
Based on these factors (plus a few others), we’ve put together the following tool to help anyone who is interested get an idea of how much they could stand to benefit. The intent of the tool is not to be prescriptive, but to stimulate conversation on the topic.
The outputs vary dramatically depending on the inputs – from as little as about $8,500 to as much as over $42,000, depending on what terms the government or utility (presumably after consultations with the public) would determine to be most fair. A ‘middle of the road’ result would be about $12,000-$15,000 for someone who accepted a buyout sometime next year.
How much battery capacity would the FiT payout buy?
How much battery capacity would that that buy? That also depends. Lithium-ion and lead-type are the two most popular battery chemistries for home energy storage on the market at the moment. The former are a great option for grid-connected systems while the latter are the tried-and-trusted solution for off-grid systems, but may also be used for on-grid. The table below provides a quick glance at how battery system installation costs would stack up at a range of price points – from ‘very optimistic’ on the low end to ‘realistic but possibly still pricey’ on the high end. (For actual system pricing from installers in your area, you can request a Quote Comparison from Solar Choice by filling out the form to the right of this page.)
| Battery type | Price point
(per kWh capacity) |
5kWh | 7kWh | 10kWh | 20kWh |
|---|---|---|---|---|---|
| Lithium-ion | @$700 | $3,500 | $4,900 | $7,000 | $14,000 |
| @$1,000 | $5,000 | $7,000 | $10,000 | $20,000 | |
| @$1,200 | $6,000 | $8,400 | $12,000 | $24,000 | |
| @$1,500 | $7,500 | $10,500 | $15,000 | $30,000 | |
| @2,000 | $10,000 | $14,000 | $20,000 | $40,000 | |
| Lead-type | @$300 | $1,500 | $2,100 | $3,000 | $6,000 |
| @$500 | $2,500 | $3,500 | $5,000 | $10,000 | |
| @$700 | $3,500 | $4,900 | $7,000 | $14,000 | |
| @$800 | $4,000 | $5,600 | $8,000 | $16,000 |
As noted, for a lithium-ion battery bank fully installed, a retail price of $1,000 per kWh of capacity (e.g. $7,000 for a 7kWh battery storage system) is fairly optimistic at the time of writing. At around this price, a moderately optimistic FiT buyout for a 5kW solar system (~$15,000) would allow a home to purchase about 13-15kWh battery storage system. A battery bank of this size – while not being enough to allow a home to go off-grid – is still significant. For many homes, it would be enough for them to become energy self-sufficient for most days of the year (that is, purchasing no energy from the grid). If the home in question had very low daily electricity demand in the first place and decided they wanted to go off-grid (or even just partially off-grid), they might opt for a lead-based battery solution instead (pending some very serious consultations with a number of solar installers, of course).
Would cashing in be worth it?
Even if the total savings from this battery bank over its lifetime doesn’t add up to the projected value of the FiT, it’s hard to argue that it won’t be alluring for at least some proportion of FiT recipients. For one thing, a battery bank is a concrete asset whose value will at least be partially retained or recouped if the home is sold, whereas FiT payments evaporate if the property changes hands. There’s also something to be said for the emotional value of being more grid-independent and knowing that most of your energy is home-grown and emissions free. How else could Tesla’s Powerwall – which, for many, has come to embody these aspirations – have become such a monstrously popular item?
For those who would only accept a feed-in tariff buyout on the condition that it nets them a greater savings in the long run, it would almost definitely be a safer bet to stay on the Solar Bonus Scheme until it expires in 2028. Buyouts would presumably be offered at a 50% discount rate based at least in part on the fact that many households would ‘naturally’ lose the benefit anyway as they buy, sell and move house.
With these thoughts in mind, those who are interested in exploring the possibilities are encouraged to do the maths either using the calculator below (whose outputs are indicative only!), or with the NSW Farmers / AgInnovators calculator which is accessible here. It might also be useful to have a chat with an accredited solar installer about the economics of installing a battery storage system – even without the hypothetical incentive we’ve proposed in this article!
© 2016 Solar Choice Pty Ltd
