rss
12

How solar PV is turning utilities against consumers

Print Friendly

It the solar industry ever harboured any illusions about the challenges it is facing in imposing itself on a sector that has been virtually unchallenged for more than half a century, then they were certainly shattered by a series of attacks on their industry from utilities and pricing regulators over the last few weeks.

It is now clear – if it wasn’t before – that Australian energy utilities are moving decisively against the proliferation of solar PV in an attempt to protect their revenues and business models, as we predicted they would back in June. This is the claim of the solar industry, and they point to numerous examples of tariff changes, network impediments and the lobbying and influence over regulators.

Last week’s revelation that the Queensland pricing regulator was contemplating a tariff that could effectively kill the attraction of solar PV to households struggling under the weight of rising prices from the grid, was proof enough. The attempt by TRUenergy to bring a halt to the deployment of both wind and solar – citing the potential of both to cripple the conventional energy industry – is a further sign of the desperation of those utilities struggling to adapt.

There is no doubt that the debate over clean energy has moved beyond day to day concerns around climate change (even if it should not), and now that technologies such as solar can deliver electricity at equal or lower prices at the socket, the issue of technology cost is also nearly redundant. The battleground has moved to regulation, and policy decisions on the framing of tariffs and how to reflect the true value of producing and consuming energy. And it’s largely played out out of the public eye.

What is required is a new way of looking at the energy system. The hub-and-spoke model, like fixed-line telephony, is creaking under the strain of the so-called “self consumption” market and the ability of customers to produce their own energy.

And the regulation has gotten off to a bad start. The premium tariffs designed to give rooftop solar a kick-start and help reduce its “soft costs” – those for installing, pricing and maintaining the systems – were so badly managed in some key states (NSW, in particular), that utilities seeking to defend their territory and business models were able to gain the moral high ground and win favourable tariff structures under the lofty goal of protecting disadvantaged consumers.

Most tariffs in the country are now structured around a net tariff, which enables a household to use the electrons they produce to offset their consumption and rising retail prices from the main utilities. But any excess production is sold back at a peppercorn rate (under the guise of network and other costs) to the retailers, who then sell it to a nearby customer for between two and four times as much.

However, the utilities have been quietly pushing for an even more draconian measure to be introduced – a gross tariff, which will require households to sell all their output to the retailer and then buy it back at an inflated price.

The Australian Photovoltaic Association says state and national electricity regulators are taking the easy way out, and focusing on ways to stop the PV uptake from affecting their existing market arrangements, rather than acknowledging the disruptive nature of current developments and the urgent need for new market structures to be implemented.

“Regulators are focusing on maintaining the income and profits of incumbent distributors and retailers, rather than on assessing ways and means to achieve the best long-term outcomes for the Australian public,” the APVA wrote in a submission to the QCA.

It wants net metering arrangements to be the norm for residential and commercial customers – in effect, treated the same way as energy efficiency or demand management – until such time as electricity tariffs are cost reflective and suitable changes are made to provide an active market for distributed energy services. It describes the QCA recommendation as an effective subsidy from the owners of PV systems to retailers and presumably to all customers, if and when retailers do pass the savings on.

“Forcing PV owners onto gross metering isn’t going to solve the problem, it will just disadvantage people trying to produce low emission electricity, become more self-reliant and hedge against future electricity price rises,” the APVA writes.

Geoff Bragg, from the Solar Energy Industries Association, says the action of the utilities are self defeating. By refusing to give a “fair value” of solar, the utilities are simply encouraging the self consumption market to grow.

This would be made worse with gross metering because it would simply create a perverse outcome where consumers will purchase less kilowatt hours from the grid, by combining solar PV and on-site storage “By more people effectively leaving the grid, connected only as a backup,” he writes in the SEIA’s submission to the QCA. “This will lead to the very situation such a policy is trying to avoid. They (the retailers) will price themselves out of the market.”

Bragg said it seemed clear energy networks and retailers who made their money by selling kWh appear to be positioning themselves to block out PV where possible. “The problem is that regulators appear to be encouraging this behaviour, at the expense of a technology of the future which holds benefits for all.”

The Clean Energy Council also joined in on Tuesday, saying the proposed gross tariff was “anything but” fair and reasonable. “Installing rooftop solar panels is one of the best ways households can save money on their electricity bills because it can significantly reduce the amount of electricity they need to buy from the grid. Changing to a gross scheme now would change all of that,” policy director Russell Marsh said.

Other measures being contemplated (and introduced) by network operators include increasing standing charges, or placing a limit of the capacity of solar PV on a network. They won’t be reassured by this Californian study that suggests that local rooftop solar could account for 100 per cent of local demand – far beyond the 15 per cent rule that is normally cited. It fits, though, with the idea of  “virtual” power stations that the CSIRO has promoted.

So does technology – and the interests of consumers – win out in the end? It was the question put by Alan Pears earlier this week in this excellent piece, on whether utilities will adapt or die. And it is the very same question that is being put across the world.

In the US last week, GreenTech Solar reported that the CEOs of five of the biggest solar companies and investors were asked at the conclusion of a solar conference about their predictions for the US industry out to 2022. They ranged from 45GW to 75GW, from just 5.7GW now, with storage becoming economically viable, and commonplace, within two to four years.

Venture capitalist Nancy Pfund, the managing partner of DBL Investors, said it would be like the early adoption of cell phones. “Solar isn’t there yet, but signals are everywhere of mass adoption.” But she wasn’t too optimistic about changing business models to adapt to that. “It took 100 years to build a dumb grid. Don’t hold your breath for a smart grid.”

SMA America president Jurgen Krehnke drew on the analogy of the MP3 player and how disruptive that was to the recording industry. He saw a completely new role for utilities as managers of transmission and distribution networks. “Completely new business models will emerge. It will happen.”

Which begs the question: what happens to the vertically integrated retailers (who combine retail and generation)? As Peter Marte, the head of Georgia-based Hannah Solar, said: “Southern Company is a fourth branch of government in the Southeast. It is not going to go away.” Solar companies in Queensland and NSW would recognise that problem – the network operators and some retailers are not just the fourth arm of the governments, they are owned by the state governments.

At least the US industry got a great pep-talk by former president Bill Clinton, whose best advice was to “make sure in this political season that the candidates in both parties know what you’ve done” – which was the creation of more jobs than the coal industry and the availability of cheap energy. This is a point that RenewEconomy made several months ago.

“You are going to bring America to a tipping point,” Clinton said. “You just need to bear down.” Sooner or later, he promised, “people will see this is good economics, helps in the climate change struggle and improves national security.”

RenewEconomy Free Daily Newsletter

Share this:

  • http://thisnessofathat.blogspot.com.au/ Gillian

    We live in the midst of an innovation goldrush. You quote US industry CEOs predicting that storage will be economically commonplace and viable in 2-4 years.

    This household battery by Toshiba is making that happen.

    http://phys.org/news/2012-09-toshiba-rollout-entire-home-battery.html

    Incompetence should not be rewarded. I’m looking forward to going off grid.

  • colin

    Firstly to possible imposition of the Gross tariff. It is little more than an old fashioned Soviet collective. You are not allowed to consume your own potatoes. You must sell them all to the state run collective and buy them back at a highly inflated price. I’m sure a legal challenge is possible here. Secondly … remember the old chant of the fossils that Australia was so small that going green would make no difference globally and we didn’t want to be out front in any case. Well it is the other way around now. Australia not going green will make no difference globally, and we will be left behind

  • Roy Ramage

    Giles – the energy company reaction is to be expected and it would serve our politicians well to be advised to anticipate their status quo manoeuvrings. What every politician must understand is that there is now a product that can reduce costs or even negate them! This product is made of the same silica computers are and will go through the same price performance curve. Energy costs, which place all Australian commerce and industry at a disadvantage can be greatly lessened and negated in time. All buildings, sheds, houses even paddocks can now be massive energy collectors. Network companies in charge of the grid will in time pay for this energy and Australia will gain a more competitive commercial environment. Desirable? Yes! Inevitable ? Yes? And when the lazy executives of the mostly foreign energy companies play their games, then batteries will give all of us the opportunity to be on or off grid as we choose. Then listen to them squeal!

  • J

    Like many of our historical Federalist obstacles to free trade such as different gauge railways, banking, education, workplace regulation etc, it will take strong Government at the Federal level to dissolve this policy tension. The tension between Federal climate change policy and State based de-facto tax collectors (aka grid operators, generators)is unworkable and inefficient. It is simply not in the State’s budgetary interest to allow solar friendly tariffs like they have in the US.

    It will take Federal intervention to align the State and Federal policy goals before we get anywhere. Given the current crop of “political pygmies” in Canberra it may take some time.

  • http://energyinachangingclimate.info Martin Nicholson

    Giles a better analogy for the “hub-and-spoke” generation/transmission/distribution system is reticulated water – commonly used in all cities and most townships. Both water and electricity are considered essential in our communities and must be available on demand.

    Unlike electricity, water is easy to store relatively cheaply. We could get rid of the water grid(s) and we could all collect our own water from our roof. Just as we can ‘collect’ our own electricity from the roof. If we had a reasonable water storage volume we could rely on it for a while. But during a dry period there is a big risk that the stored water would run out and we would no longer have water on demand. The general community would not accept such a proposition. Some of us in rural areas do not have reticulated water and we either have to have huge storage tanks (I have about 70,000 litres of storage – impossible on most town blocks) or we get water trucked in when we need it. Either way we get “water” anxiety from time to time and urban dwellers would consider it intolerable.

    Electricity is expensive to store. Just as it doesn’t always rain sometimes the sun doesn’t always shine for several days. We do not want to run out of electricity so we each could have some local electricity storage but at some stage it will not be sufficient as with the water analogy. We cannot easily “truck in” electricity (mobile diesel generators on the street corner come to mind) and is unlikely to be popular in urban areas. Most off-grid rural properties have their own diesel generators for just such an eventuality. A very bad solution for GHG emissions.

    The “hub-and-spoke” grid exists for a reason. I seriously doubt moving away from this model would be generally accepted once the public understood the possible exposure of relying on producing their own electricity exclusively. The two need to coexist as with water with most of the resource being generated “centrally” (either in reservoirs of water on large electricity generators) and supplemented with local generation. We need grids for both water and electricity and I doubt they going away anytime soon.

    • http://beyondzeroemissions.org Matthew Wright

      Diesel generators produce lower emissions (CO2) electricity than grid average electricity. – Not that I’m advocating it, just correcting you on that fallacy.

      I have a grid tied water system. I provide 60% of my water onsite via 3×3000 litres of storage and rooftop collection on my inner city property. Which is smaller than an average property. I am not forced to sell the water back to the grid but am allowed to self consume and then buy in when I am out. It’s a good system that works.

      If I grow my vegetables, it could be argued that I am reducing the supply efficiency of the hot house grower to coles/woolworths. I’m reducing the trucking/logistics efficiency etc.

      So central government protecting big business approach I must sell my vegetables (electrons) which must be used immediately – home tomatoes and other home grown fruit and vegetables can’t be stored as they loose freshness. So I get wholesale price the grower gets at the gate. Even though I can supply to the retail market.

      If reliability is something we’re paying for then that is currently worth 2-3cents per kWh on the grid ( There’s a market for reliability service) So I should not get paid that, I should get paid retail rate minus the reliability rate as I can’t guarantee to dispatch.

    • Giles Parkinson

      I think the energy utilities find it as hard as you to imagine anything other than a hub and spoke grid. But the costs are rising so high they are simply inviting other technology solutions to compete. We “store” energy with off-peak hot water systems, and with solar hot water. We will soon be “storing” heat and cold with products such as solar air conditioners and other technologies. The battery people i speak to say that the utilities have left a door so wide open they could drive a bus through it. They just need to find a smaller bus.

    • Colin

      Martin,

      Before coming to Australia I lived in a country with reticulated water, electricity, gas and sewerage. There was never a disruption in 40-odd years but for one unplanned power outage.

      After coming to Australia we soon discovered that it was no problem at all to make do without reticulated water, gas and sewerage. You just become a bit more aware of how much you use or produce and, as far as water is concerned, you install enough storage.

      The electricity grid turned out to be a different experience. In the early days there were twice-weekly power outages. This was when I first considered disconnecting from the grid. But battery storage proved to be a fairly convenient back-up solution. In the mean time grid reliability has finally improved, but I haven’t forgotten that batteries work.

      The reason I would now disconnect from the grid has to do with our goal to use 100% renewable energy to run our home and drive our car. We have seriously invested in energy efficiency and solar. An electric car would be next. Only if the grid can support our renewable energy goal, will we remain connected. If pricing and regulation frustrates this goal, we are well prepared to disconnect from the grid in a very short time.

      It would be great if the electricity utilities could develop a socially legitimate business model based on energy efficiency, clean energy and electric transport. But I’m not holding my breath. Which could mean we all might have to…

      • http://energyinachangingclimate.info Martin Nicholson

        Colin, as far as I know there is nothing stopping you from disconnecting from the grid and being self sufficient in energy generation if that is what you wish. My point was that I believe the majority of the population would not follow your model and centralised energy generation and water supply is likely to be the model for many decades to come.

        • Colin

          Here in WA, if scheme water runs past your property, you’re not allowed to disconnect and you’re not allowed to hook up rainwater to your taps. Similar restrictions could be imposed to prevent disconnections from the electricity grid.

          What is centralised energy generation? In Albany, WA most electricity is produced locally: 80% from wind and 10% from rooftop PV. Sydney is working on decentralised co-generation. At least one utility in Australia is trialling decentralised storage. Maybe you are right, but I don’t see the signs that centralised energy generation will remain the model for many decades to come.

  • Chris Fraser

    I think i can feel a conspiracy theory coming on. The reaction of the greedy fossil generators and retailers should have been anticipated ! It’s just that we, we our eyes turned up to the skies for our energy needs had our attention diverted and could not have anticipated their deviousness. Of course ! Force everyone to sell their PV output to the retailers ! Keep in mind these diabolical retailers have also snapped up our RECs at a bargain price, so once they have cornered all the genuinely clean energy provided at our own cost, they could sell us all the dirty energy they feel like because they didn’t have to make a scrap of their own clean energy for years. I have to hand it to them, it’d be an idea born of pure genius if it wasn’t illegal.

    It makes you wonder how it was presented to grinning politicians, their eyes like dishes as the ‘business proposal’ was explained to them. Perhaps they conveniently forgot there was a mandated requirement for 20% clean energy by 2020, or they said the RET was being watered down anyway ? (Well it fits their plan). Or were they so confident that the eastern states were being run by conservative dingbats and muggles and would throw their lot in with big business in any case without even a thought in their heads for competition and fairness ?

  • Photomofo

    Get organized and counter-attack. Counter-attacking with the goal of establishing a value based tariff on net-production is the way to go.

    The utilities are hiring hacks to come up with intellectual propaganda that supports this nonsense about a gross FiT. PV advocates should be paying economists to generate research on Value based net-FiTs themselves. Contact Mr. Martin Green at UNSW and see if he knows anyone at the university that could help. Get a hold of the Australian Solar Institute and see how the recent research on indeterminacy can be applied to valuing excess generation. Cover as many bases as possible.

    Make You Tube videos against the Gross FiT. The Gross FiT is such a preposterous idea you could come up with some very funny spoofs against it. Have two little girls at a Lemonade stand selling cups of lemonade for 25 cents. So then some business man comes by in a suit and he takes their stand and awkwardly spins it around, sharpies out their price and puts his on it and sits down. Oh… and pours himself some Lemonade. Alternatively, he could just walk up pour himself some lemonade, drink it, make a refreshed sigh and then says… That will be 25 cents. Makes no sense but that’s part of the point. The tagline could be… Gross FiTs don’t make sense either.

    Anyways… To repeat… I think you guys should be arguing for a Value based tariff. That’s probably going to be lower than you’d like (10ish cents/kWh) but you can make enough profit on self-consumption that PV will continue to grow. Net metering is greedy at this point and definitely unsustainable. Pricing on value is fair and completely sustainable. Most people won’t argue with that. You’re always going to have the odd nut arguing against reasonable things like Christmas. Don’t be that guy in this situation.

    To sum up… Get the academics involved if you can. Get the kids involved doing the you tube thing – post a reward for the funniest clip. Send out some Opeds starting this Sunday. Be reasonable. On balance spend less time being opposed to the Gross FiT and more time standing in support of a value based FiT or some other reasonable measure. Come up with a concise set of talking points and sprinkle those in the YouTube videos, Opeds and so on. Forward March…