The fact that most Australian households with solar PV installed on their rooftops are being ripped off for the power they export to the grid has been reiterated in a new paper published today by energy and environment policy expert, Alan Pears.
The report – a submission to the Victorian government on its proposed Renewable Energy Roadmap – notes that in that state, as in many others in Australia, the current levy on PV exports to the grid pays rooftop solar owners around 6 cents/kWh, which is then resold to (mostly) nearby consumers at 20 to 30 cents/kWh, leaving 15-25 cents/kWh to be shared as a “windfall profit” by the retailer and network operator.
But according to Pears – one of Australia’s leading energy efficiency experts – this system could be a lot fairer for solar households, while also helping governments to fund renewables growth and the transformation of ageing grid infrastructure, and without cutting into the “legitimate” costs of power retailers and networks.
“The government should capture this [15-25 cent] margin (minus the legitimate costs of the retailer and network operator). Part of this should be paid to the PV owner, and part used to fund clean energy development.
“In particular, costs of grid upgrades to facilitate high penetration of distributed electricity generation could be funded via this mechanism.”
The recommendation is part of a number of strategies outlined by Pears as part of an integrated approach to clean energy, energy efficiency, smart management, storage and renewables the Victoria government could take.
According to Pears, this should include action on replacement of gas – by a mix of energy efficiency, solar thermal and advanced renewable electricity technologies – as well as clean transport alternatives.
The aim, says Pears, should be to ensure there is enough renewable energy and associated technologies, like energy storage, to keep wholesale electricity prices low – or at least, no higher than they are now – so that renewables “cannot be ‘blamed’ for increases caused by closures of coal power stations or other changes in the electricity market.”
He also recommends the Victorian government uses a similar approach to all this as the ACT government, by using a series of ‘contract for difference’ projects sourced via a bidding process possibly run, under contract, by ARENA.
“The clean energy strategy should identify and focus investment and interventions on niche markets where clean energy reduces overall societal costs, such as fringe of grid, areas where the grid is ‘stressed’, infrastructure that cuts peak demand, etc,” the submission says.
“This should be driven by transparent processes that identify the locations and timing of opportunities, and should encourage third party delivery of services.”
On this subject, Pears has a dig at national energy market regulators.
“In principle, AEMO should publish an annual ‘statement of opportunities’ for demand side action and renewable energy, but this seems to be outside its interpretation of the ‘industry’ whose market it manages,” he writes.
“So the Victorian government should produce this report as a model for AEMO to apply at a national level.”
And like the Australian Greens did last week, Pears also proposes inctroducing an increased brown coal levy as an additional revenue source to help finance both renewables development and the wind-up of the state’s coal power sector.
“Government should introduce revenue sources to help finance clean energy development (of all kinds) as well as rehabilitation of old coal mines, decommissioning of closed Victorian coal power stations and employment creation in the Latrobe Valley,” the submission says.
As we reported last Tuesday, Greens leader Richard di Natale unveiled his party’s policy proposal that would tax Australian coal companies to fund the “billions of dollars” needed to rehabilitate former mine and storage sites and to retrain coal industry workers for jobs in the emerging clean energy industry.
“As coal companies go bankrupt or leave Australia, it is coal workers who are hit the hardest, followed by state governments, who are regularly left to foot the bill for cleaning up the mine,” Dr Di Natale said.
Indeed, independent analysis of Australian mine closure and rehabilitation liability published in May calculated that Australian mining had generated at least $A18 billion of rehabilitation liabilities, mostly unfunded.
As Pears notes in his submission paper, the present brown coal royalty is approximately $1/MWh.
“There is scope to increase this to build a fund to cover the decommissioning and rehabilitation of brown coal power stations and mines beyond the amounts presently allocated. Revenue from an increased levy could also be used to fund a VRET and/or targeted energy efficiency and other measures designed to manage impacts on some groups of consumers,” he says.
An increase in the royalty would also increase the marginal operating cost of brown coal plants, increasing the likelihood of them being closed under market forces, says Pears.
Pears also highlights the importance of a working renewable energy target as part of an efficient energy market transformation.
“One argument often raised against a RET or other incentive program is that it transfers wealth from the existing generators.
“In a historical context, this is a weak argument. Past distortions in energy markets have worked strongly in favour of these generators. Indeed, some have even received substantial ‘compensation’ payments as part of the Commonwealth government Clean Energy Futures package but no longer pay the carbon price they expected to pay, so they are well ahead!”
“This issue of transfers among consumer groups can be dealt with by packaging other measures (such as energy efficiency) with a RET.”