Solar tax - a kick in the guts for consumers and a step backwards for the grid

There are better ways to manage rooftop PV than penalising the export of solar which will slow down the shift to zero emissions electricity grid we urgently need.

A new solar levy from NSW poles and wires company Ausgrid is a kick in the guts to Australians who have invested thousands to avoid fossil-fuel electricity use at home.

And worse, it could mean future electricity consumers do not invest in adequate solar panel systems in order to avoid the levy, which instead of bolstering the power grid will just kneecap renewable energy growth.

There are better, tried and tested, ways to manage the load on the grid instead of introducing new charges. It would be smarter to implement flexible exports that do not burden panel owners.

Flexibility allows for fair distribution of existing network over capacity among users, considering any local constraints.

Ausgrid’s announced 1.2 cent/kWh tax on electricity exported to the grid looks doomed to fail eventually if the Spanish experiment with a similar tax is anything to go by.

The controversial Spanish levy was subsequently overturned, but for the years it was in place it decimated progress on renewable energy uptake by individuals.

Back Down Under, the revenue raised by Ausgrid supposedly will be used to upgrade the grid to handle ever increasing solar exports from rooftops, despite the fact that the grid already has huge extracapacity for renewables.

The tax has the blessing of the Australian Energy Regulator (AER), yet nowhere to be seen is the cost Ausgrid will incur for such upgrades. How can the public do due diligence on Ausgrid’s claims that it needs to raise a new tax to cover its costs?

Meanwhile, the federal government has already committed $20 billion to the NSW electricity grid, including modernising distribution infrastructure as part of the Rewiring the Nation program.

Essentially, Ausgrid is double dipping.

“The network needs to change to support the exported (solar) energy while continuing to provide a safe, reliable supply to all our customers,” Ausgrid says in a flyer posted to the AER website.

“There is a cost to making this change; while we expect the total cost increase over the next five years to be fairly small, it could grow significantly in the future.”

Ausgrid calculates that solar panel owners will only have to pay about $6.60 a year in new taxes for the upgrades that will supposedly make power bills fairer for struggling consumers who don’t have solar panels.


How is a $6.60 annual fee paid by a solar panel owner going to substantially lower the electricity cost for the neighbour who rents and doesn’t have panels?

The fact is that Ausgrid’s calculation is based on 1.2 cents/kWh for electricity exported above a free threshold of around 200kWh per month between 10am and 3pm.

The more realistic estimate is that the tax would be in the range of $100 to $300 based on the average growing size of modern panel installations. Such installations have a bigger bang for their buck, making a substantial contribution to electricity supply and thus are better for the environment.

But the tax will disincentivise householders from installing anything larger than a token set of panels that will make a mockery of the nation’s meaningful transition to renewables at the grassroots level.

You have to laugh at the company’s improved offer of 2.3 cents/kWh for power exported in the evening, just when it is most needed by householders with batteries, because sunlight is tapering off.

There is no guarantee the tax will enhance Ausgrid’s assets. There is no guarantee that Ausgrid will not pass on to consumers future costs of “gold plating”. But a fattening up of its bottom line is guaranteed.

The levy is a step backward, penalising the export of clean renewable energy, slowing down the adoption of solar and the zero emissions electricity grid we urgently need.

If revoked, it would encourage the use of solar energy and only allow AER consideration of additional grid infrastructure once current capacity is fully utilised.

SAPN in South Australia has demonstrated flexible export systems working at scale. Ausnet is implementing it in Victoria and will be followed by Citipower and Powercor.

How ironic that a company almost 50 per cent owned by the NSW government, as Ausgrid is, is penalising small solar exporters in a way its more capitalist rivals are not.

Mind you, we should not be surprised, as Ausgrid’s indirect shareholders include the likes of BlackRock and Vanguard, which are among the most profit-hungry fund managers in the world.

Ausgrid’s money grab is not an answer. The federal government, NSW state government, the AER, and Ausgrid need to immediately postpone, then rescind this decision.

This article was first published by One Step off the Grid. You can read it here.

Mathew Wright
June 3, 2024
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