Australia’s ancient electricity distribution system was designed for one-way flow. Large, centralised power stations sending power out to users. But now the system needs to offer two-way flow as households with solar panels often have excess power available to send back into the grid.
A recent draft ruling of the Australian Energy Market Commission has proposed charging a tariff for household solar energy producers who want to sell their excess power back to energy distributors. The funds would go to designing a new grid for two-way flow. But as Alison Crook argues, any tariff will be a disincentive for those considering investing in rooftop solar and will support the old idea of centralised power distribution rather than the new model of microgrids and community generation and storage.
Listen to Enova Community Energy Chair Alison Crook's response to the AEMC's proposed tariff on solar on The Science Show, Radio National, with Robyn Williams:
Duration: 8min 7sec
THE TRANSCRIPT FOLLOWS:
Robyn Williams: We begin Australia where a scheme has been mooted to make us pay to put our excess energy into the grid as solar peaks in household systems and we have spare. Is this a good idea? Here's Alison Crook, a former Australian Businesswoman of the Year.
Alison Crook: I have talked on previous Science Shows about our social enterprise, Enova Community Energy, Australia's first community-owned energy retailer, and about our vision for self-sustaining, resilient communities in which power is generated, stored and shared locally. No one is left behind in the shift to renewables, jobs are created locally, and money is kept circulating in communities. Enova is now almost five years old, and we have much to celebrate. We now service the whole of New South Wales and have just moved into south-east Queensland. We are about to install our first community-size battery, our first social impact solar garden for community groups and low-income households is operating, and we will be reporting soon on our first pilot microgrid.
50% of our profits will go back to the communities of our customers, and already through the generosity of our customers we've been able to provide sizeable sums to groups such as the Black Dog Institute, Liberation Larder, and the bushfire relief efforts of BlazeAid and Red Cross. During COVID-19 in 2020, some of our wonderful customers even made the solar credits on their bills available to pay for the energy of households that were struggling.
Working with community groups around the country, we are on the way to proving that energy companies can operate at community level and be hugely beneficial while doing so. But today I'm here to talk about a recent draft ruling by the Australian Energy Market Commission, the AEMC, on access pricing and incentive arrangements for distributed energy resources. Or, as the headline news has it, a tax on solar exports.
To be clear, the ruling declares that the export of energy from households and other small providers by distributors (that's the poles and wires) is a service, and it permits the distributors to charge for this service in the same way that we're currently charged by distributors to bring energy to us.
The ruling has been made because our grid was constructed for one-way energy flows and it is gradually becoming incapable of supporting the two-way energy flows involved in a 21st-century energy system, with its massive amounts of domestic and business solar PV and storage.
Already 20% of customers in the national electricity market have rooftop solar, and this is conservatively expected to double or even triple by 2040. And all would expect to be able to export any excess energy to the grid. This is already causing bottlenecks and constraints in some areas, with some customers being limited in what they can export.
The AEMC argues that the ruling is the most cost effective and equitable way to address the issue, that at present there are no incentives or penalties for distributors to make the grid functional for two-way services, and that charging for export is the only equitable way to allocate costs for grid improvement so those without solar aren't penalised.
The change is framed in such a way that distributors are obliged to consult with consumers, they don't have to charge, they can also pay exporters (households and businesses) for providing energy at times beneficial to their management of the grid. And they have to develop a transition plan and a pricing structure to be approved by the Australian Energy Regulator. Different distributors, for example Essential Energy and Ausgrid, may have different approaches, and different states or jurisdictions may also take different approaches.
Enova recognises that the aim in making the draft determination is to promote incentives to invest in and use small-scale solar, and that the ruling is carefully crafted to deal with a complex subject and address the issues raised. However, we still have concerns.
The first, in my view, is that simply hearing of a possible export charge may well be a disincentive to people to install solar, unless they can afford household batteries, just as the concept of a road tax on electric vehicles is likely to slow down the uptake of such vehicles. Since in our climate emergency we need to be doing everything in our power to encourage the shift to renewables, this would be counter-productive.
The messages contained in the lengthy ruling regarding timing, flexibility, consultation, minimal impacts, ability to earn and variable outcomes according to the distributor, class of customer and jurisdiction are extremely complex to explain clearly to the general public.
Perhaps, more importantly, they will likely result in variable outcomes by state and by distributor. Cost of distribution already vary by state and distributor. This may simply strengthen existing inequities with regional areas already bearing higher costs than metropolitan areas.
The second concern relates to whether the proposed solution is really the lowest cost solution to the stated problem. I agree with those who argue for more evidence as to how widespread and difficult the problem is, and the need for trials to determine the most cost-effective approach to overcoming problems of system strength and capacity.
Many technological and software developments are underway, and we will see increasing use of demand and management solutions, including use of home water heaters and electric vehicles. All of these may be used to alleviate system strength problems.
In terms of overall cost minimisation, shared community batteries are potentially more beneficial than multiple individual residential batteries. In my view, export charges, if imposed, are likely to undermine the value of shared street, community or microgrid batteries. The whole concept of regional sustainability and increased resilience at the community level is threatened unless agreement can be obtained from distributors. There also seems to be a failure to recognise all the implementation costs of the solution proposed. Retailers will be involved in costly negotiations with multiple distributors, and costly modifications to billing systems. Such costs must be passed through to end users to some extent.
Finally, while the report argues that small-scale solar and storage have an important role to play in our overall energy system, the ruling still appears to favour the old, centralised engineering paradigm.
Distributed resources are positioned as creating problems for the grid and networks, which small-scale providers should address, rather than being seen as the starting point for developing a preferred solution.
Enova has been making the case since our inception that the time has come for a paradigm shift in which engineering planning commences from distributed resources in a region, town or group of suburbs. A system based on the implementation of microgrids, community scale storage and virtual power plants, with the aim of self-reliance and local resilience, and minimising energy coming from transmission might well see a different, lower cost outcome for all consumers. Rule changes might then focus on enabling energy sharing.
Many are already aware of the considerable subsidies which have been in place for many years for fossil fuel generators. Most are aware of the federal government focus on a gas led recovery and what that will mean in terms of using taxpayer dollars funnelled through government renewable energy bodies. If the aim is really to shift rapidly to a zero-carbon economy built on renewable energy at lowest overall cost, then surely it is within grasp to apply government subsidies as required, after evidence is gathered, to develop a network that will be fit for the 21st century.
Robyn Williams: Alison Crook, who chairs Enova Community Energy in northern New South Wales, and you can hear her talk once more from The Science Show online or our repeats on Mondays and Wednesdays on RN.