Bonus solar: Utilities need to change their tune on time of use and flexible tariffs

The roll-out of smart meters in several states has provoked much debate about introduction of time-of-use and flexible electricity pricing.

The present approach reflects traditional utility behaviour. Poor consumer education and unexpected changes, and offers of cheaper electricity during daytime, due to solar, while increasing prices at other times, often dramatically higher is a recipe for greater mistrust. They need to change.

Keeping existing flat tariff prices for most of the time while offering a moderately lower daytime price, as solar is supposed to be cheaper, seems more likely to gain consumer acceptance. It could be offered as a ‘bonus solar/low carbon reduction’ on each bill, rather than a lower unit price.

This might also help PV owners feel less annoyance at the very low feed-in prices they now receive. It may also encourage people to shift demand by highlighting emission reductions as well.

Over time, it could possibly be varied by season, reflecting the lower solar generation in winter, though I am not sure how consumers would accept this, given widespread mistrust of the energy sector.

Back in the 1980s, the State Electricity Commission of Victoria’s time of use tariff was labelled the ‘dual income no kids’ tariff as it offered very low prices overnight when we were awash with excess coal-fired generation, but high prices during the day. Today, they offer low prices in the middle of sunny days and high prices in evenings.

The claims about time of use and flexible tariffs reflecting ‘real time costs’ are being challenged by many, including Energy Consumers Australia. At the same time, energy retailers are very conscious of the perceptions of their existing and prospective customers: customer ‘churn’ is a high cost for them.

Many consumers see high prices at times of high demand and low renewable generation as exploitation by the energy sector and failure of regulators to pull the industry into line, as prices increase at times when consumers most need electricity.

Indeed some regulators and policy makers seem to be encouraging this perceived exploitation as they pursue economic fundamentalist theory. 

Many families are very stressed in late afternoon and evenings as they try to feed their families and provide them with comfort. Energy is the last thing on the minds of many parents as they just try to survive the evening chaos.

Many vulnerable households face deep fear about their ability to pay for electricity to keep warm or cool in extreme weather. A colleague of mine described the situation of an elderly person who was too frightened to even turn on a fan to keep cool because of his fear that he would not be able to pay for the electricity, even though a fan costs very little to run. Perceptions can differ greatly from economic theory.

We invest in roads and other infrastructure that recognises consumer demand for services, while working to encourage a shift to public transport and other options, now including working from home.

Energy policy must reflect the reality that people don’t want energy for its own sake. They want services they need, think they need, or desire, and that their understanding of options is often not well informed. 

I suspect that, for many people, the popularity of rooftop solar reflects a desire to take some control of energy costs. So they are angry when they see feed-in prices drop and confront threats that their PV systems will be shut down, so they can’t even use their own output at times of extreme heat, high prices and risk of blackouts. 

Many energy policy makers just don’t seem to understand the real world, as highlighted by insightful comments from Ron Ben-David, one of the developers of the energy market, in recent public presentations.