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Utilities say no to gross tariffs, yes to battery storage

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In a nod to the emerging power of the “pro-sumer”, Australian energy network operators and retailers have rejected a suggestion to move to gross tariffs for rooftop solar, saying it risked turning customers against them. Some suggest tariffs that would encourage homeowners to invest in more battery storage.

Operators of electricity networks in Queensland and the energy retailers have overwhelmingly rejected a proposal by the state’s competition authority to introduce gross tariffs for rooftop solar, saying they would be complex, expensive and unfair to owners of rooftop panels.

The Queensland Competition Authority raised some eyebrows, and a few hackles, last month when it raised the prospect of a gross tariff in an issues paper it prepared for deliberations around a “fair and reasonable” tariff for solar.

The solar industry immediately condemned the proposal, saying the idea of forcing customers to sell all their solar power to retailers and then buy it back at a much higher price was inequitable and would effectively mean the death of the industry, as it would remove the attraction of rooftop systems as a hedge against rising electricity costs. And it seems that the utilities, who were suspected by some, of quietly advocating the move, have recognized the risk of putting consumers offside if such a tariff was introduced.

Most of the submissions put to the QCA by network operators and retailers pointed to the potential complexity and cost of a gross tariff – particularly in having to change metering arrangements.

Interestingly, it was TRUenergy, under fire over its proposal to sharply reduce the development of utility scale wind and solar developments by curtailing the ambition of the renewable energy target, which said most clearly that gross FITs were unfair because they were not equitable to consumers.

It noted that households that invested in rooftop photovoltaic systems do so in the expectation that they will be able to consume less grid energy, and thereby gain a sense of control over their costs.

“Under the proposed changes, households would be required to ‘sell’ energy to the grid at the cost of energy, and then ‘purchase’ energy for their own use, at up to three times the price,” it noted in its submission. It said it would be confusing and “may create the perception that electricity retailers are benefiting at the consumer’s expense.”

TRUenergy’s position is a recognition about the power of the newly emerging “pro-sumer”, customers that have the ability to produce at least some of their own electricity needs.

The utilities are not quite sure how to deal with this, and how to manage its impacts on their business models. But there are signs that some see advantage in seeking ways to embrace the technology, and its fellow travellers such as smart technology, electric vehicles and storage options, rather than simply hoping they will go away.

In that context, it was fascinating to note that TRUenergy also suggested that new rooftop PV customers should be hit with higher charges at times of peak demand under “time of use” tariff arrangements.

It justified this by saying it would provide an incentive to the embryonic battery storage industry, and would encourage customers to store PV exports for use at peak times. We believe that linking the installation of PV to the time-of-use tariff should provide the right price signals for the investment in PV and will support the objective of trying lower peak demand.”

It is an interesting position for a retailer to take. Last week, we wrote in our story “have we pointed 2GW of solar PV in the wrong direction, about a submission to the Senate inquiry into electricity prices from WA energy academic Adam McHugh, who said we had gotten it all wrong on tariffs, and suggested they should be designed to encourage PV owners to face their panels to the west (rather than the north), so they are better able to meet peak demand, rather than simply produce more electrons. North facing panels, TRUenergy noted, provide little energy after 4pm, and simply sharpened the peaks.

One of the country’s longest established solar installers, Solar Guys, took up this issue, but rather than suggesting, as TRUenergy did, to hit solar customers with higher costs from the grid, proposed that the grid operators should reward solar customers by paying a premium net feed-in tariff  at peak times – of say 44c/kWh between 4pm and 8pm, and the prevailing rate of around 8c/kWh at other times.

It said this will clearly help reduce peak demand and would do so at a far lower cost than upgrading infrastructure. And, it said, this could drive investment in grid-connected battery systems, which it predicted could be very affordable within a few years.

“The technology to save solar power to energy storage during the day and then release it back into the building in the evening via a net metering scheme is already available on the Australian market today,” the company wrote.

“We don’t actually need a stronger grid, we need a smarter grid and the fastest way to achieve that is to embrace solar power, not reject it. It’s time to start seeing solar power as the solution not the problem.” (We have published the Solar Guys’ submission in full. It’s not very long).

But while the utilities were prepared to concede that homeowners would be ripped off if they were force to sell their solar-powered electrons to their utility and buy it back at three times the price under gross tariffs, they were not ready to concede that homeowners could feel similarly miffed about the paltry offering made to exports to the grid under the net metering system, where those electrons could be sold to neighbours at three times the price offered to the owners of the rooftop panels.

TRUenergy admitted that retailers “receive financial benefit from electricity exported to the grid from PV customers”, but it and other utilities argued that they faced greater fixed retail costs from PV customers, because of things like extra paper work, “multiple phone calls” and other matters.

The utilities continue to argue against a mandatory net tariff – even one as low as 6c to 8c a kWh, arguing that “competitive forces” – supported by a healthy retailing margin and extra “headroom” would ensure customers get a fair deal. They did note, however, that some utilities do not offer any tariffs in Queensland and elsewhere at the moment, because they couldn’t be bothered.

The solar industry argues that net tariffs should be set at or near the retail electricity prices, perhaps allowing for some unavoidable network costs, which they say would be minor. The utilities, however, have managed to convince most state-based pricing regulators that the network costs are significant and to offer a deeply discounted tariff.

It’s a question of equity, but in the end it won’t really matter, because as TRUenergy noted, the cost of PV is coming down so quickly it will be a compelling idea for most customers. So while retailers might smugly pocket a few hundred million dollars of worth of cheap electrons over the next few years, there greatest challenge lies in coping with the fact that customers now have cheaper options than simply plugging the toaster into the grid and paying whatever bill comes down the line. That’s what makes the response to gross tariffs, and battery storage so interesting. Evolution is at hand!

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  • Roy Ramage

    I love the squealing sound of status quo energy managers on a sunny day as the future runs over them. Roll on batteries and the opportunity to bury traditional energy companies.

  • keith williams

    Sounds like TRUEnergy are paying attention to the possibility of doing a Kodak.

    There is little doubt that gross tariffs would galvanise interest in becoming energy self-sufficient. Most individuals won’t bother to get off the grid if they feel they are reasonably treated for their investment in solar PV, but it is a very different situation if they feel ripped off for every bit of energy they generate.

    With battery technology on the edge of being viable, it isn’t surprising that the energy retailers might think carefully before pushing the gross tariff barrow.

  • Mike Reeves

    The smartest way to get battery storage available at peak times would be to offer a TOU price instead of the rubbish ‘fair and reasonable’ tariff currently offered to ‘prosumers’. Surely the number-crunchers can work out that a decent incentive for millions of small systems makes a lot more sense than gold-plating the grid for those short periods of excess demand.

  • David

    Those people suggesting domestic batteries are just naive.
    To get a level of service equivalent to a grid connection you would need at least a couple of weeks of storage. Apart from being very very expensive, this is also very dangerous. It would need to be housed in a specific enclosure with ventilation and fire protection. Try telling your insurance company you have a 400 V, 100 kWh battery sitting in the garage!
    If, on the other hand, you expect to have just a day or so of storage and rely on the grid for bad weather coverage, then you are dreaming if you think the grid operators are going to allow people to do this en mass. What they would (quite reasonably) do is to increase the fixed connection charges so that they recover costs. It might cost you $1000 dollars a year or more just to have the grid connected.

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      David, if someone has solar PV and enough battery storage to last the evening, then they can simply buy a small generator and go off grid if the electricity distributors try to charge them $1,000 or more a year for a grid connection. And since they have battery storage, a very small and thus cheap generator will do. If electricity distributors raise connection charges they will simply lose customers and the higher the connection charges, the more customers they will lose.

      • David

        Just imagine Ronald, a series of grey days in Melbourne (it happens a lot) and one million households start up their generators – delightful.

        • http://ronaldbrak.blogspot.com.au/ Ronald Brak

          It seems kind of dumb to use generators when Melbourne has a perfectly servicable grid.

    • Ken Fabian

      In Europe the Sol-Ion project aims to get storage into PV fitted homes – sufficient to carry the home through the evening peak, not to carry the home through several or more days. Enough fitted means that multiple days of sunny conditions will mean not having to ramp up supply from other sources every night to compensate for a whole lot of small energy producers going offline and become energy consumers every evening. It actually makes a lot of sense IMO. A similar technology from Hitachi in Japan is aimed at getting home owners to use off peak power during peak periods. Here it would be PV owners using it to prevent the big power companies from screwing them for evening peak consumption with TOU metering.

      I expect that large scale storage at grid level to do similar would be more economical but our energy companies are not leading the way – burning a bit more coal or gas is seen as cheaper and easier; it involves no new or exotic infrastructure or any real change to how they do business and as long as the shift to low emissions is (aggressively) treated as not merely optional but something to avoid they will keep on being impediments rather than enablers.

  • Chris Fraser

    I need a better idea of what makes up PV customers “fixed costs” than that described by TRU’s complaint, above. I’ve had PV for three years and never rang the retailer once. Is it because they had another meter to read, albeit remotely, on four occasions per year. Those poor people !

  • Concerned

    “reward solar customers by paying a premium net feed-in tariff at peak times – of say 44c/kWh between 4pm and 8pm, and the prevailing rate of around 8c/kWh at other times”
    Amazing, tonight I will wonder outside after 5pm and see the sun shine until 8pm.
    Amazing technology.

    • http://ronaldbrak.blogspot.com.au/ Ronald Brak

      Concerned, batteries can export power after the sun goes down. The idea is to encourage people to face solar panels to the west to better meet summer demand and also to encourage people with battery storage to export electricity during periods of high demand.

      • Concerned

        Ronald, I have left the front yard in Brisbane.The sun has not been really around since 4.45.
        My PV stopped working then.
        Lovely night, however the stars did not do anything for me,or my PV or my Solar HWS.

        • http://ronaldbrak.blogspot.com.au/ Ronald Brak

          That’s because solar power tends to rely upon the sun. While the full moon can seem quite bright to the human eye, the sun is about 400,000 times brighter.

          • Concerned

            Thanks for that,I did not realise that fact.

  • Roger

    Well if they did try to rip me off with 8 cents a kWh that I produced , I would go Batteries and cut the cord to my house. I have a friend who has been on solar batteries for over 30 yrs in 2 different houses and only uses a generator for welding or if he gets 5 cloudy days in a row.All battery set ups are covered by home Insurance and are only the size of 1/2 of a garden shed with venting, nothing Hi-tech. I have a 1.9 kw system with a 3 kw inverter .No more bills , just a small $56.70 check every 1/4 bill time. I got in (DEC ) before Canjoh Coal Newman started ripping off solar producers with 8 cents a kWh,having a 3kw inverter but only 1.9 kw of panels , i can add another 6x 190 watt panels at a later stage from the money i save on having NO electricity bills of $170.00- $190.00 a quarter + $50 + checks.Wish to thank Cando for pushing me into buying solar power before he changed it.Along with my 15yr old solar hot water system , its 1 bill i don’t have to worry about anymore.

    • Rupert

      Nice to see some real-life examples in this debate. Theorizing is all very well but we need more data on what is being done and how. Thanks

  • Russell Moore

    What annoys me is my energy company, Origin, requires me to contact them every quarter when I have a credit, so I can supply them with my bank details to get the credit deposited.

    I have told them that because I have a 5kW system I will always be in credit and could they please just automatically forward the credit into my account, but no. This way they get to hang onto to countless amounts of credits for many weeks if we fail to contact them. Not only that it can take up to 10 days for the credit to be transferred!

  • Yann

    I find interesting these debated about the concern of setting up a gross feed in tariff. This is the model used in many european countries and several US states and customers DO get quite a large premium (around 3 times what they buy back) to export clean energy to the grid (solar or wind). So the model works and there should not be any doubt about this; the discussion should just be about the mandated tariff rate and shall be set nationally by the federal government.
    Australia is lucky to have peak demand caused mostly by residential usage of air conds during very hot days – isn’t it when solar panels work?? Europe is not so lucky since peak demand is mostly at dusk and this pose quite some challenges to offset it with solar panels. But it looks quite straight forward in Australia! The challenge is for the government to decide how to invest to meet its clean generation targets (into utilities companies or into households)? Whatever way, one half will be strongly against!

  • Geoff

    It gets complex doesn’t it? I started off with assumption of putting in solar in house renovation, then research of current feed-in tariffs, caused me to abandon. Then further research & a new quote, has made me think that by ensuring dishwasher & washing machine have delayed start, so they run during the day, also A/C during day only. Then during AGL’s ‘Peak time’ of 2pm – 8pm when paying 44c/kwh I will have only led lights & TV (Hopefully). Have been looking up batteries, and within 1-2 years hope to have these new LIFePO4 batteries & most days use no grid. Putting in 4kw now, so it will be a learning curve. Ultimate aim, yes to go off grid & yes the providers will raise ‘connection’ charges as they lose kwh charges, perhaps in 10 years, we can go off grid, without all the fluffing around, just an auto system.