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A fair price for rooftop solar, part 2: Rewarding local generation

This is the second of a series of articles produced by the fair value for distributed generation project. In the first article in this series we looked at the many values of distributed generation.

In this article we look in more depth at one aspect of this value – the avoided use of transmission networks.

Around 6 per cent of the typical Australian residential electricity bill pays for the transmission network, but an increasing amount of energy comes from local generation which does not use this network. Changing the electricity market rules to reflect this reality could provide a bonus for solar owners and encourage a more cost effective electricity system.

Under the national electricity rules, the cost of building and maintaining the transmission network is passed on to retailers, who pass it on to customers. On average transmission network charges make up about 6%[1] of a residential electricity bill and distribution network charges about 40%[2].

Transmission charges are levied on all the electricity used, but an increasing proportion of electricity consumed comes from local generation (mainly household solar) which makes no use of the transmission network.

Customers should not pay transmission costs for the proportion of their energy that is sourced locally.

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