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Incumbents erect another barrier to solar, storage and shared energy

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Last month, Andrew Vesey, the chief executive of AGL Energy, made a frank admission. Regulations in the energy industry, he said, were not designed to protect consumers. They were put in place to protect investors.

“The consumer is the last thing in the regulator’s mind,” Vesey told the Energy Disruption conference hosted by RenewEconomy. His shareholders should be thankful. Consumers less so. And there are few signs that things will change anytime soon.

Consumer groups this week have again cried foul over yet another ruling by the main policy maker in Australia’s energy markets, describing it as yet another roadblock to a transition to a clean affordable grid, and the shift to locally generated solar, battery storage and shared energy.

The Australian Energy Markets Commission on Thursday announced it would reject a proposed rule change that would give credit to customers using less of the grid because they would share and store more of their locally generated electricity.

Proponents of local generation network credits (LGNCs), which gives value to generation produced locally, say the initiative would have saved $1 billion or more in avoided network costs.

The AEMC decision, if upheld, is likely to throw a big spanner in the ability of community groups, councils, property developers and townships to share energy that they generate on one their buildings. In effect, it protects the dominance of the energy incumbents.

Proponents of the rule change – which included numerous councils including Sydney, Byron Bay and others – were damming in their criticism of the AEMC and of the modelling it produced that claimed the new rule would add costs to consumers, not remove them.

Jay Rutovitz, from the Institute of Sustainable Futures, described the modelling and the decision as “laughable”.

She said the modelling commissioned by the AEMC was distorted by a number of factors, such as the inclusion of existing systems, and by only including solar PV and no other technologies, and wrongly assuming that the proposed rule change would apply to small solar systems.

“I don’t really understand how they have not got that. I find it staggering,” she told RenewEconomy.

A co-sponsor of the rule change, Mark Byrne from the Total Environment Centre, was also damming, saying the ruling  would likely cause prosumers to reduce their use of the grid, to look at private wires and microgrids, and potentially to disconnect.

It is not the first time that the AEMC has frustrated consumer groups and new technology providers trying to break down the immense regulatory barriers that surround and protect the fossil fuel generators and other energy incumbents, such as networks and retailers.

Last year, proposed rule changes that could have reduced network bills were delayed another five years, following fierce resistance from coal generators. The proponents said the decision could mean higher bills, and more grid defections, as networks and retailers engage in a turf war over battery storage.

More efforts to encourage demand response were rejected last month, again because the AEMC ruled that the current rules were just fine.

It also delayed a response to another rule change on settlement periods – the so-called five minute rule – that could encourage battery storage and unlock the grip over market pricing current enjoyed by a cabal of gas-fired generators. Again, the fossil fuel incumbents were fierce opponents of the changes.

The glacial place of policy change has become a subject of scorn and ridicule at most energy conferences, and has emerged as an issue with state and federal energy ministers, who resolved at the recent COAG meeting to put pressure on the rule maker to act more quickly, and in the interests of consumers.

Nicky Ison, a director of the Community Power Agency, says the rule-maker needs to get with the times.

“Our energy system is rapidly modernising but the rule makers are failing to catch up. The federal energy minister and his state and territory counterparts must now step in and fix this so it is cheaper and easier for communities and local business to keep building and using more renewable energy.”

The consumer lobby group Solar Citizens described the decision as yet another lost opportunity that fails to grasp consumer demand or intent.

“It is just one more example of how our energy institutions have their faces firmly turned against the future, and are simply not responding to what consumers want – more renewables, more local energy, and more control over their power bills,” said Reece Turner.

“This rule change could have unlocked hundreds of new decentralised renewable energy projects but instead, it is another in a long line of decisions which clearly demonstrate one thing – our ageing energy institutions have failed, and continue to fail us.”

Many believe that the fact that the AEMC is able to justify such decisions is because of the National Electricity Objective, which makes no mention of any environmental outcomes in any decision on the national electricity grid.

“The AEMC ignored the environmental or social outcomes of this decision because they aren’t in the one sentence that rules them all, so are in effect hostage to that one line – it’s an absurd situation,” Turner says.

The inclusion of an environmental objective has been argued for years, but has been resisted by the incumbent industry and the regulators and rule makers because of the obvious threat to one of the most highly polluting and costly grids in the world.

Ironically, the AEMC constantly defends its role in “protecting” consumers. Its chairman John Pierce, gave a speech in UK this week where he insisted that consumers were at the centre of the policy maker’s universe.

Pierce also claimed that the NEO, as it currently stood, with its focus on efficiency and no mention of environmental outcomes, had effectively tied his hands.

“Ultimately these are government decisions. They receive advice of course but ultimately it is the government’s call to specify objectives. If officials or regulators don’t like the call my response tends to be “Well guess what sport? You get to vote just like everyone else in the country. In the meantime get on with what you are paid to do.”

But the proponents say that even without an NEO that includes environmental outcomes, the rule-maker has failed.

The irony of Pierce’s defence is that Australia might have an efficient grid, but it does not have an affordable one. Layers upon layers of regulation and complexity have conspired to exploit what was once regarded  the world’s cheapest source of power and turn it into the most of expensive form of electricity delivered to consumers.

And most of this has occurred in recent years, as a consequence of numerous policy, regulatory and business decisions designed to exploit and profit from the market. Even the most ardent economic rationalist would argue that this is a stuff up of major proportions.

As Vesey told the conference, the push away from centralised generation is unstoppable (although to be fair, some groups like AGL are accused of trying to slow it down).

“It was once thought that the bigger you made some thing, the cheaper it got,” Vesey said then. That is no longer true, he said, technology is growing exponentially, but regulation and policy was only able to grow in a linear fashion. The yawning gap in between is what he defines as disruption.

Hopefully, now that there are a new group of environmental ministers in the COAG who have responsibility for both environment and energy, this can change.

 

  

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  • Andrew Thaler

    Quoting the end of the article: “Hopefully, now that there are a new group of environmental ministers in the COAG who have responsibility for both environment and energy, this can change.”
    Oh Giles… you make me laugh. These ‘ministers’ are firmly wedded to coal and CSG. You might as well ask Santa Claus to bring regulatory change at christmas…

    Victoria is banning on-shore CSG but not off-shore per the exploration in the GAB and brown-coal developments.. and canberra sure has a lot of RE purchasing commitments but is still overwhelmingly relies on the black-coal generators of NSW to provide the ‘actual’ power it uses.. NSW and Qld are coal + CSG all the way and WA/NT are a long way off a significant RE system and firmly wedded to CSG now 🙁
    And the new federal minister is known colloquially as the ‘minster for coal’…
    I thank Vessey for being frank and blunt.

    • Brian Tehan

      The “GAB” is in SA, not Victoria. Victoria has Bass Strait offshore gas. No need for fracking – the excuse is that the miners have been allowed to over-export. WA did something about that by reserving some gas. Let’s see what the Labor energy ministers come up with. They might surprise us.

  • Kenshō

    I can’t see how federal and state regulators can interfere with local City Councils, if they decide to setup their own local grids. Councils could locate RE close to where they need it, including their buildings, all local infrastructure and carparks for their EV’s. A linesman has two years of theory and two years of on the job training.
    https://au.jora.com/Linesman-jobs?utm_campaign=dynamic&utm_source=google&utm_medium=cpc&gclid=COOmlLPmpM8CFRNvvAodqo8MqQ#email_alert_modal

    • Jonathan Prendergast

      The proposed Local Generation Network Credit rule would have allowed local generation to happen using existing infrastructure. I agree about the pathway you suggest of local groups or councils owning microgrids with majority locally supply RE power.

      • Kenshō

        Yes the problem with the LGNC rule idea is it has to seek permission from established federal and state authorities to get a credit from those networks. Councils could start with really small networks around their most important infrastructure and it would be more reliable, not vulnerable to long runs of poles and wires where wind and fire can so often be a problem causing outages in country areas. When the first part of the Council’s network makes a profit, they could keep rolling the infrastructure out to their next most important premises.

        • nakedChimp

          Right.. they ‘just’ rebuild the local grid to make the law happy.

          • Kenshō

            Local City Councils have their own jurisdiction.

          • nakedChimp

            Right, but before they actually hand over perfectly fine infrastructure they will make sure that this tiny competition doesn’t start to become a snowball down the road that works as example and spoils their future markets..
            You really think you got it? Think again sweety.

            Example: German government sold railway into single unit privacy (trains, rails, buildings) and put a watchdog up.
            The new entity got rid of a lot of surplus trains (still wroking gear by the hundreds) by demolishing them instead of selling them off to the tiny competition that would have loved to take some by paying for them.

            We should not expect anything else from any monopolistic incumbent.
            So before any small community with it’s ‘own rules’ – ha – will be able to leverage the old infrastructure the ‘land’ will have been burned by the incumbent and it will be a lot harder to pick up where those dudes left off.

          • Kenshō

            Councils have their own land. They can begin with that by strategically locating their RE in relation to it.

        • Geoff James

          Kensho, this is hardly the most societally efficient outcome! The existing network would be just fine for encouraging local energy if encouraged to do so. Generation and storage costs are falling but network costs are not – doubling up on those makes no sense. Avoiding the incentive to do that is why the rule change was proposed.

          • Kenshō

            Hi Geoff, I understand the electrical and community benefit of using existing infrastructure and agree a smart grid would be far more efficient. The issue is the pace of technological change is much faster than the pace of structural and institutional change, which has been noted as a glacial pace. I also understand the continuum of human development and the readership of this website and its authors are different from the centre of gravity of those forming societies institutions. We have at least another conservative few years in the political arena. Change can only go ahead in smaller pockets of community based action and then only where those leader and proactive groups exist. We see these leaders emerging in specific communities who are making changes with local infrastructure and attempting to improve the lives of their citizens. City Councils can do allot. They can re-zone land they think suitable for renewable energy and buy cheap land that suits their purposes where they lack it. If power lines cannot currently be wired from one site to the next due to larger institutional laws, it is no hassle for City Councils to even amalgamate adjacent sites. City Councils need to provide security of water, sewerage and waste removal anyway, as well as provision of new power generation for their premises, future transportation and their own utilities. There’s allot to do to secure a solid foundation for this countries food, water, farming and economic future, when there is allot of environmental remediation ahead.

          • Kenshō

            If raising humanities awareness isn’t central, there will never be the political outcome to create more universal solutions. The way human development works, is concrete on the ground solutions are easier for humanity to appreciate and relate to than universal solutions or workshopping policy frameworks. Cognition develops from “concrete operational thought”, to “formal operational thought” to “dialectical relations”. In other words, people need to be able to see and walk around RE in their community if they will ever vote for it. I think you’ll find if you do a survey of the people living around the RE projects I posted pictures and diagrams of, there won’t be an argument around whether RE is beneficial and works.

      • Kenshō

        The hardware needed could begin with:
        PV feeding battery storage
        Inverter/charger capable of managing two AC sources e.g. wind with diesel generator backup
        Could be built to any scale. Has been done in developing countries and remotely located microgrids for many decades. Experienced solar installers know how to do all the above equipment. Communities already have the knowledge. Linesman and grade 2 electricians could be contracted to do the connections between different inverter/charger systems. Piece of cake.

  • BasM

    AEMC … chairman John Pierce, gave a speech in UK this week where he insisted that consumers were at the centre of the policy maker’s universe.
    He was a little short.
    It’s:
    Getting the most money possible out of consumers are at the centre of the policy maker’s universe.

  • suthnsun

    “Nicky Ison, a director of the Community Power Agency, says the rule-maker needs to get with the times.”
    A fundamental problem across so many of our political and regulatory oversights – one gets the impression that it is simply beyond the capacity/cognitive agility/experiential framework for most/all powerful protagonists these days. I admit I also find it very problematic to keep on top of the endless cascade of practical adjustments I need to make. If I don’t, chaos and pressures build, if I do, the question arises ‘why am I on this treadmill?’

  • MaxG

    Well, you can’t sell (privatise) the grid to corporations and then cry foul that you are taken to the cleaners. Get real people- participate in politics by voting for the right people… not the one that sell your assets!

    • Brian Tehan

      The problem now is how do you get them back into public ownership?

      • Kenshō

        Councils could begin behind the meter. There’s some pretty big community infrastructure and PV/wind/storage can be built in any level of scale. I’ve posted pictures and equipment diagrams of what other countries are doing.

        • Roger Brown

          My local “Logan City” council has solar panels on the roofs of some of their buildings . They have a large one on the Dump Recycle Shop roofs .

      • Brian

        Nationalize them. Nations do it all the time.

    • Kenshō

      Why not begin again with local City Councils? RE is more a local phenomenon and locals would be more likely to take interest in their utilities.

    • Phil

      Or take your bat and ball and go home in disgust

      That translates to ……….. Go 100% off grid

      At least us off gridders MIGHT use some of the other investment infrastructure that the sale / lease paid for.

  • Ray Miller

    “Layers upon layers of regulation and complexity” the Liberal party only seems to remove regulation which disadvantages fossil companies and adds regulation to advantage the same companies.
    How can the Commonwealth of Australia have an energy system without including the end users and environmental considerations being the major stakeholders?
    As per MaxG comment we do not seem to be voting for the right people.
    The whole management of AEMC should be totally removed as soon as possible, maybe offering Berni Frazer the top job?

  • Kenshō

    Councils could build all sorts of systems. Here’s a system where the inverter/charger is managing two AC sources, though the grid could be replaced with a wind turbine (AC IN 1). The inverter/charger doesn’t care what the AC source is.
    https://www.victronenergy.com/upload/documents/Brochure-Off-Grid,-back-up-and-island-systems-EN_web.pdf
    https://uploads.disquscdn.com/images/8532cc91ed2a2a4a7a69d6b41783be58b9f124e352974a2314a2f08338f29876.jpg

  • Kenshō
  • Kenshō
  • Kenshō
  • Kenshō

    This traditional house in the Sahara Desert is probably not relevant to community development projects in Australia, though some might like it. Solar can do anything for everyone.
    https://www.victronenergy.com/upload/markets/Brochure%20-%20Off-Grid,%20back-up%20and%20island%20systems_rev%2013_EN_web.pdf
    https://uploads.disquscdn.com/images/7f59644c3c50f7457b7142ef69a79b3a433579952d119ea744517bc96800a23c.jpg

    • Phil

      They make Mobile wireless antennas look like palm trees on parts of the Gold Coast in Australia

      Maybe some smart people can make solar panels that look like their surroundings

      They look OK on a modern build , but this image is a prime example of how out of place they can look

      Another option though is to build a mud brick wall , or vegetate around a solar panel array to hide it without shading it.

  • Kenshō

    It’s not hard to design a microgrid. This piece of land can have up to five townhouses or so and to three stories high. I started by getting the architect to go ahead with dual occupancy, as each succeeding level of infrastructure adds cost. I thought I’d begin with three detached buildings with PV/storage connected in a microgrid and have another community administered PV system for the carpark. Surveyors have diagrams of what Council will allow on each of our blocks of land. It’s just finding out the rules from the surveyor and taking to Council. Council can of course do whatever they like. I just began with the existing structures that were already on the land.
    https://uploads.disquscdn.com/images/0d102ad8e3e25f36206a23ba48d3ed29c4ff6a5f6eef529335ec681b1be51a33.jpg

  • Ren Stimpy

    News a few hours ago – Hazelwood will shut. Firstly a hope those HW workers not ready for retirement will be employed elsewhere, which I’m sure they will. Secondly hoo f**king ray! Another one of the most dreadfully polluting plants in the world shut. We’re getting there.

  • Kenshō

    “Pierce also claimed that the NEO, as it currently stood, with its focus on efficiency and no mention of environmental outcomes, had effectively tied his hands… Ultimately these are government decisions.”

    The brutal truth is Pierce is right. LGNC’s are unlikely to ratified until there is a Greens/Labor Party government in power – at the very least. If we can stop fighting with reality, then we can get on with realistically achievable strategies.

  • Kenshō

    A large part of our focus has been a smart grid and needed changes in macro policy. These would virtually need a Labor/Green government to implement. On the other hand, storage is now sufficiently cost effective, that communities can begin to recession proof themselves against a poorly performing grid, along with all the widespread challenges that declining, unreliable and expensive energy will bring to the economy. This will include water pumping, farming, food, transportation, everything.

  • Charlie

    Never expect incumbents will cave in easily. Probably it’s the time for some pioneering-spirited councils to seriously consider micro-grids.