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Networks push to take regional consumers, communities off grid

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Australia’s network operators have joined forces with two leading consumer groups to argue they should be allowed to disconnect remote and regional communities from the main grid, and instead provide them with renewables based micro-grids and stand alone power systems.

The move could save billions of dollars in costs to all energy consumers, and remove one of the biggest cross subsidies that supports the country’s ageing and fossil fuel focused centralised grids.

It will also likely result in consumers getting cleaner, safer and more reliable electricity, and over the longer term herald a complete rethink about the way energy is provided across the country.

Remote and regional communities are currently supported by billions of dollars in cross subsidies – paid for by other consumers – to deliver poles, wires and other infrastructure over thousands of kilometres.

Western Power estimates it can save nearly $400 million just by taking 2,700 consumers off the grid, and operators with bigger networks in other states have pointed to even bigger savings.

“This is as close to a ‘no brainer’ as we can get,” says Andrew Dillon, the interim CEO of Energy Networks Australia, which has teamed up with the Alternative Energy Association and the Public Interest Advocacy Centre to try to encourage regulators to come to the party.

The issue is the legacy of the massive “rural electrification” program of more than half a century ago, when state and federal governments were determined that all consumers should have access to electricity and be connected to the grid.

It was an admirable goal, and deserving of a modern economy, but the cost of stringing poles and wires across thousands of kilometres was, and remains, enormous.

The cross-subsides in Queensland and Western Australia remain more than $1 billion a year, while under what is known as “postage stamp” pricing, the service inflates the cost of networks for all consumers in other states like South Australia and NSW, likely to similar levels.

New technologies such as solar and battery storage now make it possible to build other options – such as stand alone power systems for individuals, or mini-grids for communities and towns – which are not just significantly cheaper, but also safer, cleaner and more reliable.

20171108_ena-piac-ata_submission_to_the_national_electricity_amendment_alternatives_to_grid-supplied_network_services_rule_2017_final

The three groups have come out in support of a rule change that is being pursued by Western Power, which operates the main network in the south-west corner of Western Australia, and find a way through the regulatory maze.

They argue that the networks are best placed to effect this transition, because there is no incentive for the consumer concerned: their costs are already heavily subsidised and they would be unlikely to be able to install off grid systems and keep their costs comparable to inner city customers.

The networks, however, argue that they can do this at a much cheaper cost than maintaining, upgrading, or even replacing the elongated networks, and so therefore can reduce the size of the subsidy paid for by all other users.

The problem is that, due to arcane rules, they are not able to do this. Networks are usually not allowed to provide generation and “retail” services to consumers – just the poles and wires – and the Australian Energy Market Commission has been reluctant to change this rule.

The ENA, the ATA and PIAF have joined forces to support Western Power in what will likely be a ground-breaking application to change this rule.

Western Power says it could save $388 million over the next 10 years if it could provide about 2,700 customers with solar, battery storage and back-up diesel generators rather than having to replacing ageing network assets. That is around $140,000 per customer.

It has already done trials with some rural customers in the Ravensthorpe, Lake King, Jerramungup, Lake Grace and Kondinin localities in the south of the state and it says the benefits have been outstanding.

Solar PV arrays were deliberately oversized to give customers greater comfort – and lithium batteries were sized to supply customers for two days if the sun wasn’t shining.

supply reliabitily vs SPS copyThe level of reliability has improved dramatically from an average outage duration of nearly 70 hours to less than five hours in the latest year. In all, 92 per cent of the power came from the sun and the batteries, and the diesel generators were rarely used.

The systems were also robust. In January 2017, a major storm event occurred in the region with storms and flooding washing away major road arteries, isolating communities and causing power outages of up to 24 hours. The SPS sites were unaffected.

“There are significant potential future benefits to customers associated with the deployment of lower cost off-grid solutions to some regions, communities or customers,” the document says.

Indeed, Western Power argues that the old way of thinking about grids should be discarded in favour of a more “modular approach” – which means some consumers and customers off the grid altogether, and some serviced by a micro-grid with a “thin wire” to the main network.

See our story: WA flags the end of the centralised network.

integrated vs modular network

Other networks – such as Ergon Energy in Queensland (way back in 2014) and South Australia Power Networks (also in 2014) – have also argued that it would be cheaper to take some communities off the grid, or serve them with a micro-grid, but have found little incentive to do so from the regulatory structure.

PIAC’s Craig Memery says it has been clear for nearly five years that stand alone power systems (SAPS) with storage offered a cheaper alternative, even before the latest big fall in solar and storage costs.

The push for such technology gained momentum after the royal commission into the Victoria bush fires identified the dangers of above ground power lines, and Memery says it is clear that SAPS and micro-grids are cheaper than burying the lines.

“We have found a bit of common ground (with the networks), Memery says. “Most networks now acknowledged that it is cheaper and more reliable” to have a stand alone power system.

The AEMC says it is supportive of the idea of off-grid supplies, but its rulings mean it will be all but impossible for the networks to play a role. The networks and the consumer groups say that doesn’t make sense.

They question the AEMC’s apparent inconsistency in its latest ruling, where it claims in one part that “it may be cheaper to provide off-grid supply than to maintain and replace long power lines linking remote customers to the national grid” and could provide other benefits, but in another says consumers risk facing “higher prices or receiving poorer service”.

But it is also part of a broader battle. The AEMC ruling is based on the idea that networks should not be involved in providing anything other than network services to consumers – and so not solar, storage and generators.

This is a battle over territory being fought out with the generators and retailers, particularly in the so-called “ring fencing” rules that makes it hard for the networks to compete in that arena.

That, say industry experts, is a legacy of Australia’s second best option of vertical integration. It would have been smarter to integrate retailers and network operators, because it would be easier to find value in reducing costs.

But there is little incentive for so-called “gen-tailers” to be efficient. That said, the networks have also been rightfully accused of gold plating their investments, in what is seen as yet another regulatory failure in the industry.

The idea of encouraging fringe-of-grid customers to be “independent” is also supported by the Clean Energy Council, which in a separate call to politicians ahead of the Queensland state election, says hundred of millions of dollars could be saved, and reliability improved.

“The decline in the cost of battery storage and solar brings cheaper, safer, more efficient and reliable clean energy opportunities for customers living at the edge of the electricity grid,” CEO Kane Thornton said in a statement.

“The rules of the National Electricity Market prevent Queensland networks from making the best use of new technologies like solar, energy storage and microgrids.”

Dillon says the ENA, along with PIAC and the ATA, is disappointed at the AEMC’s ruling, and will take the issue to COAG energy ministers to find a way through.

“You would struggle to find an issue that as concept has as much widespread agreement,” the ENA’s Dillon says. “We have to find a way to get the regulatory system to work this out.”

  

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  • Chris Schneider

    I can’t believe the Networks want to do it for altruistic purposes. They could give these people free power for the costs we pay per year! they could just do it and free us of the burden with in a year! I’m sure the farmers won’t mind free power and we would be glad to have them off the grid! What they are want to do is force the Farmers to pay them money! They want the guaranty in before the Farmers wake up to what is happening! They see the writing on the wall and want to ensure they still get paid!

    • Steve

      Savings work out at about $145,000 per customer over ten years.

      But from what I read teh Networks aren’t allowed to provide the farmers with free power. Provisions of services for free is still opeating in the retail market.

      Bizarre, but this is the modern world!

      • Chris Schneider

        Over ten years.. ok that’s a little longer, thought they were talking about 1 year with $145,000, still if they did 1/10 per year it would be all done and it would be the end of the subsidy, surely $145,000 is enough for each customer!

        You would think gifting wouldn’t be an issue… Only charging a company directly. They could even do this through retailers quite easily, $145,000 paid to any retailer over ten years who takes a customer off grid. This would be a license to print money for retailers!

        • Guy Stewart

          Why not just change the rules to reflect the new reality that efficient electrity distribution is no longer just poles and wires?

          • Absolutely – why can people not realise that the rules are an irrelevance maintained by and for the few who directly financially benefit in the short term, while everyone foots the bill in the short and long term? Fear, greed and cultivated ignorance rule Australia, the worlds “stupid” country.

      • Joe

        Well, just charge the farmers a token amount, say $1.00. Hell, the NSW Liberal Government gave away ‘the old girl’ Liddell to AGL for a token $1 million.

    • Mike Shackleton

      Farmers are waking up to the potential and doing the large scale installations themselves. Networks will shed themselves of the responsibility for maintaining the grid in regional areas by giving those sections of the grid away to rural community to maintain. If you have most of your users self producing and consuming, with a little export, the load on the grid drops.

      • Ian

        If you don’t use it you’ll lose it. This Kodaking of the grid has been talked about previously as a kind of middle finger salute to the monopoly of the grid , but the reality of the atrophy of the grid may happen far sooner in rural communities, they might have to make their own off grid arrangements – like it or not.

        My understanding of the historical investment in rural electrification and the use of cross-subsidies was to provide rural communities with electricity almost regardless of the over all cost.

        Well, previously there was not much other option beside such heroic long transmission infrastructure. Now of course there are other options. As rural electricity consumers make their own arrangements and successfully go off grid, the moral imperative to provide distant and remote individuals and communities is no longer there. Those people can be safely cut loose as it were. In the future any rural consumer may have to have solar plus storage and some sort of backup generating equipment if they want electricity

  • SA_Jack

    “Western Power estimates it can save nearly $400 million just by taking 2,700 consumers off the grid, and operators with bigger networks in other states have pointed to even bigger savings.” – Holy Hell! $150,000 in network savings per consumer in ten years, now I’m sure this is the extreme end of the scale but illustrates how much of factor networking and transmission costs are in our power prices. Set those communities up with localised generation and storage and save us all the costs!

  • Robert Comerford

    One again we have government department intransigence getting in the way of change for the good.

    • Chris Drongers

      A bit simplistic? Government departments operate according to rules, the rules are set by politicians who set the policies that become rules according to what they think their electors will reward.
      So it is us that are holding back the transition, in the timeframe of electoral cycles.
      WA is heading for major, major power supply shakeups. Coal generators are either old or running out of competitive coal, REC obligations hurtling towards cutoff dates, state budget limits ruling out non-optimal electricity supply and pricing, time-of-use pricing for households will be introduced soon, a gaggle of wind and solar developers are champing to be let loose on generation, Western Power is facing breakup.
      Articles like this one are part of educating the public about options, reasons and benefits/costs to the changes that will occur.
      Reneweconomy has its role in exposing attempts to glissade the unpleasant outcomes and puff the favourable ones.

  • Rob Passey

    This is something we recommended back in 2007. The wheels of progress turn slowly, and still the regulator is standing in the way … http://www.ceem.unsw.edu.au/sites/default/files/uploads/publications/CEEMSEDO-PVreport-FINALa_000.pdf

  • Michael Porter

    This looks like a disrupter that the NEG and its proponents will have difficulty coping with. It invokes a principle which violates the requirements of centralised generation. I didn’t realise that WA was included under the AEMC domain.

  • Ken Dyer

    Why am I not surprised that the AEMC is opposed to a regional solution for remote customers. The current head of the AEMC, John Pierce, has been in the chair for seven years since 2010. He is on record as bemoaning the early closure of coal fired power stations as affecting “baseload” and “driving prices up”.

    When organisations like AEMC at this level start quoting rules as a defence against progress of any kind instead of welcoming change and moving with the times, it it time to get a new chair and commissioners who understand and support the renewable technology revolution that Australia is so badly lagging behind in.

    • Jonathan Prendergast

      I once suggested that local energy is becoming cheaper than centralised energy and he scoffed.

      • Ken Dyer

        A fish rots from the head down.

        The Commissioners by law, are appointed for a period of 5 years. This means that all three commissioners are well into their second stint. They were all re-appointed during the term of the Abbott Government, with the longest serving since 2009. That means that their terms will not be up until 2019/2020, unfortunately.

        It is a fairly well accepted truism that high level executives should change jobs every 5 years for all sorts of reasons, and that was the thrust of the laws governing AEMC. The fact that these three were re-appointed under the coal loving, climate denying Abbott regime points to one thing and one thing only. It is really time for them to go and go soon.

        Until they do, the AEMC will continue to obfuscate, delay and generally drag Australia backwards into the conservative coal loving morass that is the COALition government today.

      • Rod

        Once people start leaving the grid or shifting load in droves he might stop scoffing.

  • Robert Westinghouse

    At last…regional electricity and micro-grids. The scientists have been talking about it for a long time…. Time to get on with it. But the Government and BIG Power will be hanging on to the HUGH profits…..

  • https://uploads.disquscdn.com/images/547753c45550c8c3990d58c0076ac1ec4e5108124e00cacdf21974db5b296f08.jpg

    I have been off grid for 30 years with solar, batteries and bottled gas in the first twenty years of that. I cried big tears when Australia sent all it’s solar industry to China – it could have been our biggest export with much automation, and could have given us the same low pricing we enjoy now – I have just bought a batch of 5 panels , 24V, 250W, for $500. in 1986 that bought me one 40 watt panel made from USA modules and assembled in W.A. Our governments failure-consciousness policies killed that industry then instead of fostering it, and did the same 20 or so years later with a Sydney Uni derived project which had 50% shareholder funding already, just wanted a boost from the idiots in Canberra. It went to China and became a 6bn export industry in two years. And yes, when all my neighbours are in the dark after a storm out here in the bush, I am not affected. I’ve got solar and storage, I use power wisely, and I can even weld with it on a sunny day. Our politicians are slow, corrupt, ignorant jabberwockies. Most of the LNP and Labor people would be more use to this country dead than they are alive. If one old pensioner can outperform the whole Australian establishment over thirty years, on a pension, what sort of fucked-up failures are we?

    • Chris Marshalk

      Australians are at fault for voting for a dumb Liberal government. If only Australians could see through the liberal lies during the election. The LNP are a cancer to a renewable Australia.

    • Malcolm Green

      Well said

  • Ian

    A quick google shows that there are about 400 rural towns in WA . How much could be saved repeating this SBS throughout rural WA?

    Flow batteries with the potential for days of storage in large electrolyte tanks with the cranking power of lithium batteries would obviate the need for diesel altogether.

  • Helen Poulter

    In the UK we are calling for the network operator role to be changed to one of a service provider – in effect the networks create a market so that the best option for an area e.g. standalone, microgrids, can be set up by a third party. This means the way the DNO’s are regulated needs to be changed to allow for this new role. This way the networks are independent of generation and retail but are still able to provide the most affordable solution for new connections, constraints etc.

  • MaxG

    doing the numbers… 400m$ 2700 customers; 150k$ each!!

  • bigtreeman

    We can’t trust corporate electricity suppliers who would be creating legally protected, isolated monopolies in small regional areas.
    Government should build and operate these utilities, it would be perfectly suited to operation by local councils. Give control of poles and wires to local councils and create a mix of off-grid and municipal-grid systems. Selling off copper would help subsidise solar installs.
    Once we see it working in the country, we would realise it would fit the suburbs and cities as well.

  • Mark W

    There are very good reasons not to allow grid operators into the energy production business and to get them out of the retail business as soon as possible when they are still in it. Tha most compelling of these reasons is that if the grid operator is in the energy sale business, then they will design grid infrastructure as a tool to sell energy to consumers, not as a tool to move energy from where it is in oversupply to where it is in undersupply. In a world where generation is becoming more and more distributed, we need grid infrastructure that treats every connection as a potential supplier as well as a potential consumer.

    As such, it would be a big mistake to allow distribution companies to take customers of the grid and then become generator, retailer and distributor to those customers even if it makes engineering and economic sense *in those cases* to do so – which it most certainly does. Hard cases make bad law, and the implications across the “economic” grid of allowing this thin edge of the wedge outweigh the benefits.

    I se the arguments being put forward by the DISTRIBUTORS as being self-serving. They want to discontinue the service they are contracted to provide and then keep the customer for themselves and take away the business of the generators and retailers. Not to mention get into the business of energy supply.

    From an overall perspective, however, there are significant benefits to be had from decomissioning those thousands of km of SWER lines and replacing with off-grid systems. And to my mind there is a workable solution.

    a) Make utility off-grid supply the province of RETAILERS and not distribution companies.

    b) Allow RETAILERS to install off-grid systems and charge customers for the generated electricity in locations where the grid is not economically available. Not economically availble could be defined as locations where the grid operator will not make (and subsequently maintain and if necessary upgrade!) the grid connection for less than $15,000 capital cost for example.

    c) Allow DISTRIBUTORS to nominate customers they wish to remove from the grid because it has become uneconomic to maintain/upgrade/replace the infrastructure that gets them. When they nominate such a customer, they must PAY either the retailer or indeed the CUSTOMER themselves to install the replacement off-grid system. That way, the end user gets the choice to either install their own system or allow a retailer on their premises. If they want to exit their obligations, they have to pay the cost. Should be a no-brainer for them according to their arguments,

    n’est-ce pas?

    This way, the uneconomic part of the grid could be deconstructed where it is in actual fact uneconomic, with an outcome that is neutral or beneficial to the consumer, and without allowing a land grab by the distributors. It would merely create a new class of retailer.

    ASIDE

    I grew up on a cattle station that was a “beneficiary” of the rural electrification scheme in about 1984. In hindsight, it was a mistake. Before the scheme came in we had off-grid power and had had since the 1950s. At the time the power came through, it seemed easier to just spend the $15,000 (equivalent to at least $60k now!) to get a grid connection rather than upgrade the existing off-grid system from 32V to 240V which we would have had to do because 32V appliances were becoming unobtainable and we were running dual generation infrastructure. Looking at the number and length of outages, the number of devices destroyed by surges on long lines with inadequate surge protection, the issues with low voltage, etc etc. It would probably have been easier and cheaper never to have connected. Certainly would have been cheaper for the taxpayer and the average electricity consumer.