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The 40 Australian towns that could, and should, quit the grid

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A new study has identified at least 40 Australian towns that could, and probably should, quit the main electricity grid, because they would be saving money for themselves and for other electricity consumers.

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A study by energy management consultants Energeia says that many small towns, particularly those at the edge of the grid, will find it more cost effective within a few years to actually cut the main link and provide the power with local generation, principally solar, and battery storage.

That is, if regulations can be changed to allow the true cost to be reflected.

In the National Electricity Market, which covers eastern Australia and South Australia (along with Tasmania, although the island has lost its connection) around 40 towns fit that category just with solar. There may be more that could look after their own needs with biomass or geothermal.

The study, yet to be formally released, will show that in small remote towns at the end of the network the economics are already compelling now, or will be by 2020.

What may be surprising to many is the number of larger, regional towns that will fit this category by 2025. The cost of locally generated solar and storage is, or soon will be, lower than the cost of burning coal in large centralised generators and transmitting the output across the network.

This will not be news to network operators, particularly Ergon in Queensland, SA Power Networks, and Western Power in W.A, who have also said at various times that it may be cheaper to take towns off the grid. Nor will it be a surprise to the numerous communities that have expressed a desire to do just that.

“The message is that this is happening anyway,” says Energeia analyst Melanie Koerner. “We know that towns are looking to go off grid and that private networks are being built to get over some of those regulatory challenges.

Koerner says the purpose of the Energeia study (to be released next month)– and some other specific case studies done on behalf of the Australian Renewable Energy Agency, is to help identify which town should be encouraged to go off grid, and which ones maybe should not.

“We need to make sure we are not taking off least-cost towns and then networks are left with high-cost towns to serve. This is the message we want to take to government – so they can ensure that tariffs and other barriers are not in the way.”

Koerner says the study will show network location is the key. For some towns, everyone will benefit from leaving the grid because the cost to serve that town is more expensive than micro-grid alternatives. For others, it might be cheaper for the township, but more expensive for others, because of their network location.

One of the biggest barriers to towns leaving the grid is the massive cross-subsidy paid to provide networks to regional towns. This is particularly visible in WA and Queensland. In the Ergon network, for instance, the average network costs alone to regional towns amount to around 20c/kWh.

Another major barrier is the current requirement for networks to provide grid connection to towns. Koerner says the rules need to change to accommodate these new technologies and the alternative they offer, as well as rules that govern who can operate a microgrid.

The study by Energeia highlights the rapidly changing nature of the grid – from a centralised, hub-and-spoke model built around large fossil fuel generators and an expansive network, to a decentralised model where suburbs and communities use microgrids to serve their own energy needs. These may or may not be linked to a broader network.

SAPN said this week that it was looking to take some remote towns off grid, or provide a “thin link” back to the grid, while Western Power is looking at microgrids as a safety and cost measure, because of the threat of bushfires and storms and the cost of repairs.

And it may inspire more individual communities to pursue their dream of becoming “net zero towns”, or even leaving the grid altogether. One town, Tyalgum in northern NSW, is already considering this.

Others, such as Byron Bay, Lismore, and Yackandandah and Newstead in Victoria, are looking at rapid uptake of renewables and energy efficiency to become “net zero” or 100 per cent renewable towns.

The massive change is driven by the plunging cost of solar, and now battery storage, part of it by the huge cost of networks.

Already, numerous housing developers are looking at the option of not connecting to the grid at all, looking instead to provide their own energy needs through a mixture of solar, storage and in some cases small gas generators as back up.

These may or may not be linked to a broader network. Another study being finalised by Energeia also points to the benefits of “local energy trading system” – where utilities can provide customers with solar and storage and allow their output to be traded in a suburban network.

“The shift to local energy trading model requires significant regulatory change,” Koerner says.

And it will require a huge change in the way incumbent utilities look at their business models. Networks will need to look to a more “distributed” model, while the implications for centralised generation, and for retailers, is also significant.


  

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  • Nathan M.

    so, what are the towns? Is there a link to the report?

    • Mike Dill

      The report is not out yet.

    • Andrew Roydhouse

      Report not yet released;
      “The study, yet to be formally released, will show that in small remote
      towns at the end of the network the economics are already compelling
      now, or will be by 2020.”
      &
      Koerner says the purpose of the Energeia study (to be released next month)–

      • maxlyrical

        The South West town of Dunsborough has a very active group of residents and business pushing the idea of total energy (power) independence. We enjoy plenty of sun (increasing annually…), and lots of coastal wind. Geothermal houses have gone in with great success, and now the Bombora wave energy unit promises 24 hour power, desalination, marine habitat, potential surf breaks (!) and reduces coastal erosion. Even a tad of local/state/federal govt support could make it a reality.

  • Gerry

    Very encouraging. And this would likely also force the write-downs we require to prevent ever-increasing network charges and postpone the death spiral. Any chance you could link to the Energeia study?

    • Andrew Roydhouse

      See reply above to Nathan M.

    • Peter Grant

      Exactly, in a normal business the supplier would continue to sell and the company would still have value so long as they could earn the marginal cost of production. It is the marginal cost of maintaining the grid as it is, NOT the current regulated return on capital, that is the underlying economic value of this grid in this case. Politicians and regulators must get their heads around this soon if we are not to loose further national wealth by needless disconnections from the grid. Start the write down now!

      • energyAsFreeAsAir

        Transmission and Distribution rate design has nothing to do with earning marginal cost of production (energy). T&D rates are built on two fundamental principles
        1. allowable regulated return on assets (no marginal costs at all) and 2. approved utility cost of service studies methods
        The billing for these rates can be per unit of energy, demand or time.
        The biggest utility strategy worldwide today is to build centralized renewable facilities or community facilities and increase capital spending on modernizing the grid for the intermittent renewables.
        This utility strategy is all that utilities understand. The end state paradigm will turn the business model upside down. It is “energy harvesting at point of use” and it will happen over time because it is a true lossless cost of waste model that directly imposes all specific impacts on the user of energy. Once we understand this as true owners of our planet it will happen.

        • Peter Grant

          Yes, perhaps my language was a bit confusing, I was using ‘production’ in the general economic sense (i.e. means of production), I did not mean energy production.
          The earnings of the grid and the relevant charges in our current arrangements are as you suggest. However. there is a marginal cost to maintaining the grid as it is – it is just that is not quantified but is confounded with within the regulation of its ability to charge (i.e. charging using whatever method, income cap, regulated rate of return etc.). Regulation arises because the grid has been considered a natural ‘monopoly’. It is apparent nowadays that the ‘grid’ (transmission, distribution, and control) is no longer looking like a natural monopoly. Therefor it may be that the service is subject to competition – such as in this context of towns going off grid. In a competitive environment the grid operator would rationally price itself down to meet the market (as far as its marginal cost of operation plus energy losses) to retain the business.

          • energyAsFreeAsAir

            Understood, thanks for clarifying

  • News Views

    Assuming they do quit, these small edge of grid communities don’t and won’t have local expertise to fix their technology. They will be at mercy of weather access issues and availability of main city tech people who can repair this systems.

    • Barri Mundee

      I think it is an unwarranted assumption that off grid communities will not have the expertise to maintain and troubleshoot their sources of power.

      • News Views

        It is an assumption based on experience. Having lived in small rural and remote communities, it is very much a reality unfortunately. Even telephone and internet services can be take months to fix. And given competing priorities I tend to think small communities will be last when it comes to any repairs.

        • Barri Mundee

          I think that any community that takes itself off the grid will have built up the expertise to maintain the equipment to keep itself off the grid, As Andrew Roydhouse has outlined.

          • solarguy

            Guy’s you all have valid points in this discussion. It all depends on the design model a micro grid would use for any given location and size of population. There are more than a few possibilities. A village of a few dozen homes is less likely to have their own sparky. In a scenario like this, it would be better for each home to be energy self sufficient. e.g. if one house had a load demand on average of 15kwh/day, then a 15kw PV array would on days of inclement weather ( even if the weather event persisted for some days) would always have that demand met. Storage would only need to be for no more than 48hrs.
            However, if that home lost it’s inverter/charger and needed a replacement, they could get some power from their neighbours until a replacement arrives. Albeit at less than 15kwh, depending on weather at the time. A back up genset would be ideal though, as when shit hits the fan, it’s Murphy’s law it will happen at the worst possible time!

    • Andrew Roydhouse

      The same people (electricians) who are qualified to connect/disconnect solar rooftop panels now – will be qualified for the bulk of issues.

      The reality of grid management is a dozen of so people (and less) sit thousands of km away and watch a computer program run. Occasionally they may do something but from a regional town perspective there will be no LNG trains switching on causing massive spikes in demand, no blast furnaces nor aluminium smelters, car plants etc to cater for.

      This is the ‘secret’ that the grid companies do not want the public to know.

      Have a look at the power generation graph (so acts as very close indicator to power demand) at the top right of the screen. That is the key.

      Across Australia the top 20 users accounts for around 40% of peak demand historically. Take out Aluminium smelters (producing what people in the industry call solid electricity) and the figures are much more illuminating.

      Managed properly, and in such a way as to benefit the community NOT the grid companies – then rooftop solar is more dependable in natural disasters. Unfortunately the way rooftop solar is ‘required’ to be operated denies people this ‘black-out’ benefit unless they are totally off-grid.

  • Math Geurts

    A good idea, as far these towns accept that there will be nothing like “a bit on the grid”.

  • Ian

    This is a very encouraging development for renewables. The networks stand to gain from divesting edge of grid communities, and the communities now have access to cost effective technology to look after their own energy supply. The experience gained in independent minigrids would encourage further development of this concept for other communities. This also allows government to target subsidies to community electricity distribution buyback and battery storage. Towns like these may choose to share backup storage or generating equipment with the telcos or with the medical services located in the area. A previous article mentioned Telstra as showing interest in electricity supply. They could be a good patron for these minigrids. The government loves subsidies to corporates , Telstra could be just the ticket for government support. Care, however,would be needed to ensure a community/ telco sharing of resources, rather than the Telco taking over the provision of the distribution structure of the community’s grid thus swapping one form of energy bondage with another.

  • Reality Bites

    I am a bit confused here Giles, as your headline gives the impression that 40 Towns would decide to quit the grid, however they won’t because it would not be economic due to the cross subsidy. So is it the State Governments that would like them to quit, so they can cut the subsidy? Look forward to the actual report so we can see who is suggesting what.

    • I’m sorry it not totally clear. The report is done by a consultancy, Enegeia, in conjunction with a more detailed one on behalf of ARENA. If you look at the comments by the energy ministers of W.A. and Victoria, and the network operators in W.A. Queensland, South Australia and Victoria, it is pretty obvious that both governments and networks see value in micro-grids, and many of which may be entirely disconnected. And communities too. The problem, as the story indicates, is that this is hard to achieve because of regulatory issues – i.e. networks rewarded for building bigger and dumber grids, rather than these sort of options.

  • Alen T

    Important to remember that councils are obliged to also consider other criteria than purely the economic argument. Libraries tend not to make lots of money for councils, yet you can find them all over. The social and environmental benefits are sometimes equally as important. It’s always a bonus when the economics stack-up/are favourable, but if they don’t let’s not discard the idea out-of-hand.