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The $500-a-day service charge designed to kill solar

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Queensland businesses are being hit with daily service charges of more than $500 a day on their electricity bills, in a move the solar industry says is designed to kill the roll-out of commercial-scale rooftop solar across the state.

The charges were quietly unveiled by the Queensland Competition Authority and the state government in July. But their implications are only now being absorbed as business operators do the numbers on proposed solar installations.

The new tariffs affect a range of businesses, but the worst hit are those that use more than 100MWh of electricity a year, and are deemed to be “large energy” users.

qca tariff 46In tariff 46, for instance, those daily charges for “service” – originally a charge for reading the meter – have jumped to $488 a day from $42 a day. The “energy” price on consumption is dropped to 10.4c/kWh from 11.6c/kWh. (See right, does not include GST)).

The fixed service charge replaces a “demand charge”, which could vary according to consumption. There is still a demand charge, but only if a customer uses more than a 400kW threshold in any 30 minute interval.

This is how Ergon Energy has structured its tariff 46. With GST, the service charge rises to $537 a day.

ergon tariff

The changes have horrified members of the solar industry, businesses looking to install solar, and those who have invested tens of thousands of dollar in energy efficiency measures such as LEDs or upgraded machinery.

That’s because, according to Steve Madson, director of Country Solar, one of the country’s largest installers of commercial-scale solar, the new tariffs reduce any incentive for businesses to lower consumption from the grid, either by installing solar panels for their own use, or by investing in more efficiency machinery and lighting.

Madson says the charges appear designed to stop the rollout of commercial-scale solar in Queensland.

“The changes are clever in their design,” Madson told RenewEconomy. “They do not actually result in an increase in total electricity costs, and in some cases they actually cause a fall. But they kill the possibility of reducing the bills by installing solar.

”How can they charge $500 a day to read the meter, that is what the daily service charge is after all.”

The QCA, and the state government has long been accused of acting only to protect the interests of the network operators and retailers, and to boost the dividends paid to the government.

Last year, as RenewEconomy reported, QCA came out in favour of special tariffs on residential solar customers, even though it admitted that they would be more costly, ineffective, unfair and possibly illegal. But they favoured the move because it would protect network revenues.

The raising of fixed charges has been a common response among utilities fearing the impact of rooftop solar and a “death spiral” of falling revenues on a fixed asset base.

Analysts such as Morgan Stanley have ridiculed the practice of imposing high fixed charges, saying it was ultimately self-defeating and could simply accelerate that death spiral, and encourage people to go off-grid, particularly when battery storage became commercially viable.

“There may be a ‘tipping point’ that causes customers to seek an off-grid approach — higher fixed charges to distributed generation customers are likely to drive more battery purchases and exits from the grid,” the Morgan Stanley researchers wrote.

Madson agrees: “In three years’ time (when battery storage improves), this will also be enough for a mass exodus from the grid altogether.”

It is not the first move by Queensland authorities against rooftop solar. In June, as RenewEconomy revealed at the time, new rules were imposed that allow the network operators to stop businesses and homes from exporting excess electricity from rooftop solar systems back into the grid.

Ergon Energy, which operates in the regional areas that cover 97 per cent of the grid, has admitted that the move could encourage more battery storage - and ultimately consumers to leave the grid, which would not be the most efficient social outcome.

John Grimes, from the Australian Solar Council, says the QCA ruling is discriminatory, and aimed squarely at shutting down solar PV in Queensland.

“It is also really dumb,” Grimes told RenewEconomy. “Commercial and industrial solar is exactly where we should be supporting solar, not locking it out.

“That is because when the sun shines, business is hard at work. Solar is feeding electricity into businesses at exactly the right time, when
the machines spin and the computers run. There is a direct correlation between the production and demand curves for electricity in this sector.

“In turn, this reduces peak demand, bringing wholesale prices down, and delaying or eliminating the need for expensive infrastructure upgrades. Queenslanders are already playing a heavy price for past unneeded infrastructure spending.   Now a shortsighted government wants to double up and compound the problem further.”

Madson has crunched the numbers for a number of clients in Queensland on various tariff structures, and how they will be impacted by the changes.

For those transitioning from tariff 20, and using 300kWh a day, the new structure and fixed service fee means the benefits of cutting consumption by one third will narrow from a 30 per cent reduction in the annual electricity bill to just a 10 per cent reduction. To those using more energy, the benefits of reducing consumption by one third will fall to just a 4 reduction in the bill.

These will affect businesses such as motel owners, and any other business with large amounts of air conditioning or refrigeration needs.

“This is a blatant cash grab by the Newman Government,” Madson said.

“The Queensland government is in such a financial mess because of coal, and the forecasted royalties from coal in particular that never eventuated.

”Small and medium business employee the majority of people in our state and yet small and medium businesses are the one constantly being slammed to provide for the short falls in coal revenue. Electricity prices have doubled in 5 years, gas prices are set to triple.

“We have been successful in reducing peak demand which was the all evil 10 years ago causing rolling blackouts all over the state. “With Battery storage coming online in multiple forms we have the opportunity to level our demand which means that no capital will need to be spent on upgrading our network until our population doubles in 140 years!!! This is evident by the huge surge in profits by the networks.

“By preventing businesses investing in renewables and energy efficiency, this government are killing Queensland.”

“These businesses are spending their money in improving the state-owned assets, creating jobs, improving the environment and upgrading in efficient  infrastructure.

“We see that renewables are the push to teach these people that there are better ways and these are measurable, once a business sees the results of going solar they soon reinvest their savings into extra measures to get further reductions which creates more jobs.”

 

 

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  • juxx0r

    “For those transitioning from tariff 20, and using 300kWh a day, the new structure and fixed service fee means the benefits of cutting consumption by one third will narrow from a 30 per cent reduction in the annual electricity bill to just a 10 per cent reduction.”

    No, it means you’re better off getting in a genset and running on diesel because at 60c/kWh for diesel, that’s only 35% of the fixed daily charge.

    This is surely going to lead the extension of many a middle finger.

    • adam

      300kWh/day would probably translate to, at worst, Tariff 44 on Ergon which is a daily charge of 50 bucks, not 500.

      i.e., the demand threshold for Tariff 46 is 400kW so 300kWh/day would be 30-120kW which is Tariff 44.

      no doubt there’ll be special cases where this will work but I don’t think it’s as obvious as all the comments are making it seem.

      Quite a shortsighted move though.

  • Simon

    This seems outrageous

    • Phil Gorman

      It is outrageous.

  • Winston

    They think they’re protecting the grid, but they’re killing the grid.

    The AER is currently determining Energex and Ergon’s 2015-2020 revenue settings. Now is the time to make your displeasure known, to the people who can do something about it.

    https://www.aer.gov.au/node/20186

  • Pedro

    That’s $180,000/year in fixed charges. That would buy a pretty decent solar diesel hybrid system

  • http://www.mcloughlinpost.com Diane V. McLoughlin

    lobby political representatives to work with the business community for a fair solution. But does the business community have proposals prepared that they can bring forward, would be one question worth considering.

  • RobS

    $180,000 a year in fixed charges, they just made solar/battery and hybrid solar diesel set ups completely viable in one foul swoop, let the grid defections begin.

    • conspiracy is for idiots

      Valid point, although the expression is “one fell swoop”. Just saying :)

      • Christopher Mardell

        In this instance I’d say the swoop was rather foul. ;)

        • Randall Mathews

          I think that’s why this particular cliche has almost completely transitioned from the original in the popular mindset. It’s a wonderful fit, and the context of falconry diminishes by the moment.

  • Andrew

    These high prices will create demand for off-grid solutions.

  • MrMauricio

    Just another reason the maniac Newman has to go!!!

  • http://euphemize.net jufemaiz

    It’s effectively a minimum block payment for capacity (30kW, 120kW, 400kW depending on Tariff 44/45/46) then a per-kW for anything above that value.

    That being said, the crossover points for least cost do not occur at 120kW for Tariff 44, or 400kW for Tariff 45.

    It would have been better for them to be a tad more transparent and list it is:

    First block of capacity (30/120/400kW): $X/kW/month
    Second block of capacity: $Y/kW/month

    Minimum capacity commitment: 30/120/400kW.

    What’s more interesting is the complete lack of time-of-day pricing in these tariffs.

  • barrie harrop

    Sounds like good timing for our “distributed hybrid energy” offer to launch in Qld, we expect to be up o 50% below the Qld grid price for Industry–no batteries needed.
    http://www.remotenergy.com

    • Phil Gorman

      An interesting scheme Barrie. Do the proposed hybrid systems include wind turbines? How are the MAN diesels to be fuelled? Do bio-diesel, natural gas, coal gas or methane figure in the calculus? The importation and carriage of conventional diesel may prove problematic in the medium term.

  • Ronald Brakels

    Local Councils may be interested in making their areas more business friendly by offering better rates on electricity through making the local grid independent.

  • Chris Fraser

    From appearances it seems they have thoroughly scuttled their ship. Now that the price on carbon has been removed, they have nothing to blame for their over-the-top charges.Given all the chat about comparative systems, what brainless twit must they be employing to set their daily services charges ?Remember all the sanctimonious BS about the damage wrought by a price on carbon ? About now that’s starting to feel a bit like a Sunday School Picnic !

  • Rob G

    I guess if businesses are hurt enough they’ll take their business elsewhere. A really dumb move by QLD – it’s only going to hurt them in the long run.

  • Greg stevens

    I would pay the money to put in solar to drop me under the level just to piss the bastards off dont do it in conjunction with a power company do it independantly even if it was just my office and lighting and it got me under the minimum threshold

  • Beat Odermatt

    From Sunshine State to Shady Banana Republic in a single move.

  • Ron Horgan

    Open breech , insert cartridge, place muzzle on foot, gently squeeze trigger!!!
    $180,000 pa is 10% return on the investment required to replace the supplier.
    Buy a pretty good set up for that I guess?

  • Zvyozdochka

    It just has to be anti-competitive. Where is the ACCC? If banks can be taken to court for charging more in ‘cost recovery’ of a service fee than it really costs them, then this should be a candidate.

  • Wombat

    Roll on storage!!

  • Ben Verbaasd

    Just fine. Businesses will start to invest in solar, storage, efficiency and demand management to get under the lower treshold.

    • Malcolm Scott

      Agree, was about to write the same. Once under the lower 100,000 kWh threshold the marginal return becomes a great incentive to do even better.

  • http://organicandsustainablegardening.yolasite.com/ Paulpot

    This will have to go to court.

  • John Leslie Thirgood

    Best reason to move business premises interstate, who knows , another state like Tasmania may even offer spiced up deals on cleaner power and set up costs etc to come here and use NBN too. It really matters little for many businesses where they base themselves head office wise.
    Start the conversation corporate Qld

    • TechinBris

      That is awesome. :)

  • Jordan Vdb

    What the actual fuck is happening to the world….

    Tony has approved the world’s largest coal mine at Abbot’s point next to the Great Barrier Reef!

    The government thinks 5million tonnes of drenched spoil into the Great Barrier Reef won’t affect it… -.-
    Besides already having populated shipping routes through the reef (disturbing ecosystems and damaging them with falling containers), it also faces the wrath of the ‘Crown of Thorns Starfish’.
    http://www.gbrmpa.gov.au/
    “outbreaks account for 42 per cent of coral damage on the Great Barrier Reef since the mid 1980s”
    Fueled further by increased algae levels from agricultural runoff.

    Now the company entrusted to oversea the environmental protection of the reef from the mine’s activities (Adani – corrupt Indian energy company). They’re known to flood mangroves with drenched sludge and drain the water (it dries up) after PROMISING they wouldn’t touch them.
    Oh and don’t mention the bribery and corruption to keep their environmental damages a secret…
    Some HISTORY OF ADANI:

    OH YEAHHH
    Heard about the NSW state government to give votes to businesses…….?

    http://www.theguardian.com/commentisfree/2014/aug/13/compulsory-voting-for-sydney-businesses-makes-a-mockery-of-democracy?CMP=soc_567

    • Phil Gorman

      The barbarians have already taken over! It’s too late to flee! We have to stand and fight! But how?

      • TechinBris

        When it comes to Electricity, it is easy to bring the Fascist Jerks to their knees. It will inconvenience us too, but the price the Fascists and Big Business would pay, may actually be deadly, but for us, a very inconvenient period of adjustment for a while.
        It only would take a spontaneous moment on all our parts, to watch the Power Network of this country collapse.
        The French know what happens when you treat the populace with contempt. They celebrate it every year too, in remembering thier hard learned lesson. It is a lesson people in positions of “power” always forget in the mad rush of their “Game”. The People/Populace will always hold the switch on what works and what does not.

      • David

        There will be no fighting back. We cheered as they took away the mechanism for free men to resist an authoritarian government back in 1996. You could try throwing a rock at them but you’ll probably get labelled a “terrorist” and vaporized by a remote low orbit drone.

        Serfs Up !

  • gus

    An inverse carbon tax?? The state intervenes to prop up carbon production?

    • riley222

      You might be onto something there, would fit right in with the warped belliefs we’re being bombarded with from the IPA and their agenda pushing media stooges.

  • WR

    It’s not clear from the text but that Tariff 46 $488/day charge is a disincentive to reduce peak demand.

    The 44, 45, 46 tariffs used to be charged in 3 parts. For Tariff 46, these were:

    – a fixed daily charge of about $40/day or $1200/month,

    – a consumption charge of 11c/kWh, and

    – a monthly charge based on the business’ peak power use during that month of about $30/kW/month of peak consumption.

    So, during a month, if you used 30,000 kWh of electricity with a peak demand of 400kW, then your charge for that month would be

    $1200 + 11c x 30,000 + $30 x 400 = $13,200 + 11c x 30,000 per month.

    If you divide that sum by 30 to get a daily charge, then the sum becomes

    $440 + 11c x 1,000

    So you can see that the sum can be thought of as having 2 parts, a daily charge of $440 for using a peak demand of 400kW at some stage during the month, and a consumption charge of 11c/kWh.

    The new 2014/15 tariff now charges that $440 ($488 for this year) per day part in one chunk, regardless of whether or not you used a peak of 400 kW during the month. It appears that if your monthly peak use is only 300kW you will still be charged as if you had a peak of 400 kW. So it’s a disincentive to reduce peak demand. (By the way, there are extra charges if you exceed the 400kW peak. Basically, the distributors get to have their cake and eat it too.)

    The justification for this pricing strategy is that it is meant to encourage businesses to stay below the nominated tariff peak usage of 30/120/400 kW for Tariffs 44, 45, and 46 respectively. https://www.ergon.com.au/retail/business/tariffs-and-prices/large-business-tariffs
    It’s hard to see the logic of that justification because there is no reward for staying below the peak, only a penalty for exceeding it. And the penalty is just having to pay the old $30 /kW/month charge for the number of kW that you exceed the nominated peak value. So it basically reverts to the previous pricing strategy when you exceed the peak value.

    The reduction of the consumption value from 11c/kWh to 10c/kWh is due to the removal of the carbon price. The original consumption rate was going to be 13c/kWh.

    The attack on solar is occurring for residential and smaller business user tariffs like Tariff 20 quoted in the article. For them the fixed daily charges are increasing while the consumption charges were set to fall regardless of any carbon price changes. Countering the demand drops from the uptake of rooftop-solar appears to be the sole reason for changing the pricing strategy of those tariffs.

  • http://www.rag.org.au Barry Wilson

    Lets all turn OFF all our solar panels for week at a time and see if they can handle peak loads.

    • Ben Wilson

      the network will meltdown lol, even during the blackouts some places had already begun installing solar energy

    • RobS

      I think thus is a fantastic idea, wait for the next time they call solar owners leaches on the system then arrange for all solar owners to isolate their systems for 24 hours during the next heat wave. The grid would collapse which will fairly clearly establish whether solar systems aid or harms grid stability.

    • Pedro

      Suggest the first Friday where the weather forecast is over 40 degrees. Might see an aircon driven brownout.

      • michael

        that could be quite humorous, imagine if the large generators saw the funny side and switched off the power stations and grid operation for a day or two to join in the joke

  • Gregg O’Grady

    PLLeeasse inform me with something I don’t expect from this economically priviliged group of surrogates that currently run the state..If you install a water tank on the Gold Coast and save money on water, you are hit with a fee because you don’t pay enough as is, I am bludgeoned to death with the visceral tendencies that THIS government inflicts daily…APPARENTLY we voted him in… ‘Cause Anna did such a great job…/bad job.. Thats right.. Can’t get the current mongrels out quick enuf”…..and we can’t have daylight saving either!… The curtains will fade quicker!

  • Motorshack

    In reading both the article and the comments I am a little puzzled as to why everyone is so mad. I should think renewable proponents would be celebrating the fact that the Queensland government is making solar power and storage not only attractive, but very cost effective.

    I mean seriously, think about it for a moment.

    They use fossil-fuel money to pay for their election campaigns. Then, once elected, they work hard to oppose the carbon tax in order to keep their donors fooled, but they also turn right around and do stuff that can only accelerate the uptake of solar and storage at the maximum possible rate.

    Of course, they might just be too stupid to live, and they honestly do not see the effect this will have long term, but, either way, they are apparently doing a wonderful job of evangelizing for solar PV and efficiency measures.

    So, why throw them out of office? Why not leave them in peace to go right on blasting away at their own feet?

    • Ben Wilson

      No, if this was a centralist government or a hidden greens government that could be the truth. But Liberals have no real business sense, the days of the Liberal party being the party of business has long since past they have no idea. Labor shows a lot more aptitude at that these days even though Labor is supposed to be the party of laborers and low-paid/middle class people. Don;t forget the Liberals don’t listen to expert advice, even if someone did advise them against this ploy because of the consequences they wouldn’t have listened

      • riley222

        Agreed , the Libs both at State and Federal levels seem to make decisions based on a warped ultra right wing ideology with a large dose of cronyism thrown in.
        The only thing they seem competent at is attacking any opposition to their ratbag ideas. Even the machinery for achieving that is recieving less and less credibility from voters, as it sinks in what a bunch of sick hopeless ideologues we’ve got running the show at present.

        • Ben Wilson

          It is like they’re convinced we are the hopelessly brainwashed sheep of the American public who believe the bullshit they are fed to them by the corrupt Republicans and Murdoch run propaganda networks.

          • David

            … hate to break it to you Ben but “We” ARE !

      • michael

        funniest comment yet… labour shows more aptitude! nice one. Wayne Swan over the last week has confirmed how little clue he has through trying to rewrite history

    • Jason

      I tend to agree with you. This has the potential to be revolutionary!

  • Antony

    Not sure what this article is trying to do but here is the 2012 gazette where it shows the tariff 46 daily cost @ 373 per day : https://publications.qld.gov.au/storage/f/2013-02-25T025005/06.07.12Combined.pdf

    • michael

      it’s trying to beat something up…

  • Graham

    Seems to be a direct correlation between Newmans planned asset sales and guaranteed income for purchasing companies, I smell a ra

  • Ben Wilson

    When Labor wins the election we must push to have these blatant con jobs abolished

    • Roger Brown

      After the 10 or 20 Royal Commissions are started to jail these con artists.

  • Jason

    The math is as follows:

    126,000 kWh per annum consumption or 345 kWh per day on avg or 14.38 kWh over 24hr period

    126,000 kWh X .10421c = $13,130
    $488 ex GST X 365 = $178,120
    Total = $191,250 + GST

    No demand charge since company only pulls 60kW max over any half hour period in billing cycle.

    Have I missed anything?

    This can’t be right someone correct me please…

    under the above level of consumption will this company’s bill reflect this calculation?

    If not show what a bill will look like under the changes….

    Thank you

  • patb2009

    this is aimed at large users, but it does justify some fairly decent investments in end user terminal production gear.

    they are aiming that at 100MWH/month users, well, that would be big businesses and big industry. so, figure 3-4 MWH per day to trip this, say a 12 hour day, 300-500 KW
    continous demand.

    that’s a big user, some 4000 amp feeds, but, the tariff is 11 cents/KWH and 33 cents/KW.

    So they are looking at not just $500/day network charge but also
    100-200K of Demand capacity charges per month.

    So these large users are looking at $180K/year in Service fees and million/year in capacity charges and then $100K/ year in energy charges.

    It would seem if you put some decent solar in and a hybrid diesel gen set, you would immediately be good, and just have a small 400 amp feed to provide emergency power and lighting (Sumps, comms) and provide bootstrap power for your generator set.

    tell the utiltity company to open the switches and you will take a heavy residential feed,
    and mostly go offgrid.

    did i mess up a calcution somewhere?

    • taiyoo

      You misread – 100MWh a year, not month.

      • patb2009

        in the header it said “Billing Period” so i assumed month.
        well that just means that almost any big user, an apartment building, a
        large house, a restaurant would want to swap. jeez, that’s going to accelrate grid defection.

  • Matt McPhee

    These scumbags in canberra are BEGGING us to go off the grid. 5 more weeks of set up and I will be saying good bye to the trap called “the grid” everyone needs to follow suit.

    • taiyoo

      Queensland decision, nothing to do with Canberra

      • TechinBris

        LOL :/

    • lucy

      How much roughly does it cost for you to go off grid? I know it’s dependent on house size/usage etc, but I just want an idea of how much you had to pay. I really want to do it too

  • Glen

    Am I the only one who sees the tariff and reads it at $53 not $537? Is this whole article blatantly wrong?

    • taiyoo

      Yes you are – cents are divided by 100 to get dollars, not 1000. 53700 cents = $537.

  • patb2009

    the plus is this is a capacity demand scheme, but they will find that it chases people off grid fast.

  • Ergon Energy

    The supply charge referred to relates to Tariff 46 customers and effects approx. 34 Ergon large customers (shopping centres etc.) with average consumption equivalent to 375 households. The actual fixed cost component of all charges increased from $429.28 in 2013/14 to $488.36 per day from 1 July 2014. It is not a meter reading charge but rather to” maintain the electricity supply to a premises including costs associated with meter reading” etc. The consumption component dropped from 11.667c to 10.421c per KWh. Overall the Queensland Competition Authority estimated that for Tariff 46, 1 July 2015 changes would result in a 0.7% reduction in average bills – http://www.qca.org.au/getattachment/c3c0b51e-8ab3-4028-82fb-d920346f1083/Business-electricity-prices-from-1-July-2014-–-upd.aspx – Ergon Energy