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Network lobby proposes special tariff to keep households on grid

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Australia’s main network lobby is proposing a new tariff for stand-alone power systems that it says will encourage more than one million households with large amounts of solar and battery storage to stay connected to the main networks, rather than lead an exodus.

A new report commissioned by the Energy Networks Association predicts that by 2050 some 10 per cent of consumers – or 1.25 million households – will leave the grid because solar and battery storage will offer a cheaper solution.

SinglePrimary

It believes that by offering a “stand alone power system” discount, it can provide an incentive for most of these to stay, thereby avoiding added costs to other consumers, who would be required by networks to pick up the revenue lost from households leaving the grid.

The way the SAPS discount might work is by requiring those with significant solar and battery storage arrays to disconnect from the grid at times of “critical peaks” – effectively acting as a load shedding feature on the grid and trying to avoid those pricing surges that are passed on to all consumers.

There is no doubt that the threat of mass defections is an issue that troubles network owners, because if people do leave the grid, they will no longer be contributing to the networks’ regulated asset base, thereby forcing those networks to recoup their revenue from remaining customers.

That, in turn, leads to more defections, more price rises, and chaos and the so-called death spiral ensues.

Of course, many think that the value of the regulated asset base has been massively inflated, possibly by a factor of two or more, through “gold plating”. But the network lobby has rejected any calls for write downs, and indeed has even canvassed penalties to consumers who do leave the grid.

This new tariff proposal indicates a slight evolution from that thinking, as it appears to want to find a means to tap into the solar and storage resource of those households, and presumably use those assets and reward them for their ability to help meet peak demand, defer grid spending and provide grid security.

However, the forecast of a 10 per cent defection rate by 2050 contrasts sharply with recent work by the CSIRO through its Future Grid scenarios, which suggested that one-third of consumers could leave the grid by 2040 unless the network operators changed their business models.

ena solar grid modelling

This is the modelling done by Energeia. It shows that under Scenario 1, with no change to tariffs, grid defections begin in the early 2020s, reach around 1 per cent by 2026 and 10 per cent by 2050. But by offering a variety of tariff proposals, including a 5 per cent discount on “residual” network costs and giving centralised control to their storage, it estimates that the number of customers choosing to go off-grid falls to almost zero.

Energeia reasons that the ability to sell excess PV to the grid, save money via the SAPS solution (by needing less battery storage), and enjoy “higher combined reliability” will be attractive enough to keep solar households on grid.

Interestingly, the modelling shows that there would be 4 million stand alone power systems in Australia by 2050, but they would almost all be connected to the grid. Without the “special discount”, it suggest 1.25 million households might quit the grid.

Screen Shot 2016-10-27 at 2.55.51 PM(I’m not sure that fully captures the motivation or the economic factors that will inspire people to go off-grid. A 5 per cent discount would only represent $25 a year on a $500 fixed network fee. And while we recognise that it would be a better outcome if most remain connected to the grid, the network providers might need to offer something a little more compelling to keep consumers connected).

Energeia estimates this would result in $1.2 billion in savings for the potential off-grid customers and deliver $1 billion is savings overall to connected customers by 2050.

The ENA is at least prepared to acknowledge that there is some $1.7 billion to be saved by providing stand alone power systems – mostly centred around solar and battery storage – to some 27,000 “new” remote farms and other “edge of grid” communities.

It wants rule changes that will allow the networks to offer such solutions, rather than being forced to build new poles and wires – the underlying philosophy of politicians and regulators since the dream of “rural electrification” came into vogue in the 1950s and 1960s.

John Bradley, the CEO of the ENA, says providing solar and battery storage based stand alone power systems to these 27,000 new rural farm customers could save $700 million rather than building more poles and wires.

“By 2050 these customers could be supplied more cheaply and reliably with stand alone systems using 2GW of solar PV or more than twice Victoria’s solar PV capacity today and 7.5GWh of battery storage,” Bradley said in a statement.

Grid companies could save customers over $1.7 billion in costs and provide more reliable service to rural customers if they can make smarter use of off-grid technology

However, the modelling from consulting firm Energeia presents a surprisingly bleak view of the economics of micro-grids and stand alone power systems for customers in remote areas – suggesting only that farms more than 3km from a grid connection, and bigger farms more than 8km from a connection, would find staying off grid economically attractive.

It suggested that even small mines around 500km away from the nearest connection point would look to linking with the grid rather than go for a microgrid.

And it doesn’t seem to think that remote townships will even find it cost effective to cut their links to the grid by 2050, under any scenario.

“Energeia’s modelling found that Australia’s moderately sized communities (over 500 residents) at the fringe-of-grid, are generally unable to be cost effectively served by a microgrid by 2050 without specific local extenuating circumstances including significantly lower than average levels of reliability or significantly higher than average costs to serve,” it notes.

This conclusion appears to differ from a recent Energeia study that suggested that at least 40 Australian towns could, and probably should, quit the main electricity grid, because they would be saving money for themselves and for other electricity consumers.

That study found that it will be 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. The new study, however, suggests that those technologies will not be cost competitive until after most grids are upgraded over the next 20 years.

It is not the first time that the ENA has elicited a contrasting response from the same consultant. In August it released a report from Jacobs suggesting no large-scale solar plants will be built in Australia from now to 2030. Two months later, the Queensland government released a report from Jacobs into its 50 per cent renewable energy target plans that suggested more than 5,000MW of large-scale solar could be built in that state alone by 2030.

The Energeia study on the viability of micro-grids seems to contrast with the views of some individual network operators, such as Ergon in Queensland and Western Power in Western Australia, who admit that many customers, and some communities, in remote and not so remote locations would be a lot cheaper to serve if they did not have to rely on poles and wires.

Regional consumers in both those states enjoy a significant cross-subsidy from people in the city. In both states, that subsidy ranges from $300 million to $600 million a year. In WA it amounts to one-third the cost of electricity.  

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  • Phil

    I think this kind of thinking is too little too late.

    Depending on what happens with EV’s , ie how fast they can charge , the home may not even be where they are charged up , and possibly just “topped up” up using the home solar off grid and battery combo.

    If that’s the case i predict 50% or more off the grid by 2050. Many new estates will be off the grid with only 1 grid connection supporting the entire estate’s central storage for emergency power.

    Australia , instead of following the highly effective Singapore Tripartite model , where essential services are highly regulated for pricing and reliability, has become an uncontrolled money pit that is very predatory on the consumer.

    This has resulted in not only the highest electricity prices in the world , but has killed off a lot of industry as they cant compete in a global market.

    Based on all of that i cant see this industry doing anything smart. In fact the only thing smart are the consumers leaving the grid.

    • phred01

      I can imagine that customers with solar will be overjoyed with the generosity of the electricity industry 5$/ yr discount….. will only buy a cheap basic hamburger.
      The mentality of the Grid networks amounts to what Joh” Bjelke-Petersen would say Just feed the chocks crumbs. Wait for the predicted price drop in battery storage that will put the cat amongst the pigeons. With EV’s becoming popular there will be plenty of 2nd hand batteries with still 80% capacity for sale. Victoria proposes to amend the feed in tariff to track the TOU pricing from 6.5c to 8.5c yet power charges will cost to consumers in the 30c mark. U don’t need to be a rocket scientist to know @ this scenario there will major grid desertions

    • Andrew Thaler

      I’ve already had discussions with a residential subdivision developer along this line… houses 95% stand-alone, roof oriented to maximise solar harvest, and 1 connection for surplus export and top-up. This allows for inside-the-gate trading of energy between the houses etc.

  • wmh

    In the southern states of Australia, heating is the big energy consumer. When houses become well insulated ( including floors, walls, windows and doors) then the requirement for expensive battery energy storage will be reduced and going off-grid will become more economic.

    Another way to reduce the cost of storage is to use hot water storage, first in an existing electric domestic hot water tank and subsequently in a hydronic heating system. Hot water used this way can store 52 kWh in 1000 liters for not much more than the cost of the tank.

    • MaxG

      Spot on… it is interesting to see what inventions the network has in mind to retain the sheep. I hope people will see through all this and dump ’em (go off-grid) for good. Why would people have a supplier who constantly screws them until there is an out, and then try to be nice. I don’t think anyone — on a personal level — would tolerate such behaviour; it would lead to divorce; which is what should be done with corporate leeches who only have (rightfully so; it is capitalism after all) their profit in mind.

      • Ian

        Max, which leeches do you hate more the network leeches or the battery supply leeches.

        • MaxG

          The network leeches! due to the monopoly position they are in… yada yada…
          The battery leeches are doing what any business does at the beginning of the adoption curve = charge premium prices… and as I predicted, batteries price will plateau or even increase (as they have since last year). But since there is real competition, they can’t take you to the cleaners as the network leeches can 🙂

          • Phil

            No change in Wet cell or Gel OPzV (DIN spec) 2volt traction batteries ( forklift battery) pricing has been observed.Apart from the usual currency exchange rate variance

            It’s a pretty mature market (and large supplier) for batteries in it’s own right , so the off grid demand for the product is very small in comparison to the prime use.

            Not for all as far maintenance and bulk / weight , but a very robust and recyclable battery technology with a cost effective life cycle that is just right. If your batteries last 20 years then not only do you have to fund the greater upfront cost , but you may miss out on any price reductions or technology gains.

            I think a 7-10 year battery life is about right

          • MaxG

            Well, no intent to start a discussion, but who would buy old tech these days, hence, why they remained stable in price… But yes, exchange rate was a major factor for price increases, however, the end result remains the same, batteries went up in price.

          • phred01

            Many people are not familiar with a battery that was invented over 100 yrs ago. They are robust can be overcharged, deeply discharged etc with a projected of 25 yrs! Nife batteries were used in train carriages for electric back up. Today the main use is to start diesel generators in big buildings

          • Ian

            Nice answer. The leech has two daughters ‘gimme’ and gimme’ they cry!

    • Phil

      This is a cold climate solution in NSW . Right Here Right Now , Today

      They are at an Altitude of approx 800 meters and would be pretty close to a Melbourne Climate. Albeit more sunshine , so less solar panels required

      https://onestepoffthegrid.com.au/australias-first-energy-autonomous-medical-centre-built-in-dorrigo/

    • phred01

      Yes a close coupled evacuated tubes are very efficient. Generally from Sept to mid May. There are only 3 to 4 times the water temp needs boosting. Little wood heater like Tubulous boiler would easily cover winter and the few times in the warmer months. The selling point was Saturday age of old would give enough of hot water to take a hot steamy bath

  • Cooma Doug

    Poles and wires start to look really ugly when we believe that we dont need them.

  • Malcolm M

    Surprised the networks are not more keen to move consumers in bush-fire prone areas onto stand-alone solar and battery systems. Some of the largest bushfires in Victoria in 2009 were caused by sparks from poorly maintained power lines. Surely the insurers of the network owners would welcome a reduction in the risk exposure of covering power lines in such areas.

  • solarguy

    “Those with SAPS systems disconnect from the grid in times of critical peak”! WTF, that’s why they will have a system that will not need to use the grid at those times!

    That statement doesn’t contrast with the rest of the article, does it!

  • Ian

    2050 is too far off to make reliable predictions, these are more like a wish-list and tell more about the current thinking of these people then about the real future.

    It’s funny that EV do not even feature in this scenario. The widespread adoption of EV may well give the poles and wires a new lease on life similar to the internet having saved the telephone landline.

  • Ken Fabian

    It’s so far out to 2050 that I can’t see that any predictions are worth much.

    I don’t have intrinsic objections to what is proposed. I think most solar fitted households would stay grid connected as long as there are equitable arrangements in place; certainly that would be my preference. I think trading the opportunity to recharge onsite storage at off-peak rates during periods of low sun for having supply limited during periods of high demand could be a reasonable trade-off; decent weather and demand prediction combined with smart systems should be able to anticipate and integrate household requirements with the grid.

  • Chris Fraser

    Network Gold Plating – responsible for the most significant tariff increases we’ve had for the last ten years. Finally, the Networks’ admission that SAPS (ie built-in load shedding) puts downward pressure on gold plating, kills the idea that PV sponges off all the other consumers forever.If those mental giants have underestimated the defections in 2030 – if a connection to grid becomes the exception rather than common place – they can keep their hands off the batteries. Individual owners will decide how they’ll be used.

    • Andrew Thaler

      Our politicians had a big hand in the gold-plating desire… they wanted the big spending budgets and the kickbacks that that provides (construction tenders)

  • john

    The Victor model in NZ is the Battery PV system is put in the household by the company and used to meet peak and anything left over is the consumers.
    The consumer receives a lower bill the network and retailers can lower tariff’s a win for both.
    Perhaps this will not fly in Australia but for sure the use of PV and Backup on the fringes of the grid would lower electricity prices for everyone.
    If for instance the majority of consumers realized the amount more they pay to subsidize the lower number on the edges of the grid they would revolt.
    If tomorrow there was a change in my situation with the company that supplies me power then batteries possibly Red-flow would be ordered asap.

  • Kevin Brown

    They will have to do a lot better than this to match peer-to-peer blockchain trading!