Have we pointed 2GW of solar PV in wrong direction?

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Energy expert says best way to reduce costs of peak demand is to point rooftop PV to the west, instead of north, and design a tariff that encourages consumers to switch off their appliances and go to the cinema. That would make PV a competitor to transmission lines, so the networks probably won’t like it.

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A Perth-based energy expert has challenged the conventional view that time of use tariffs and the forced introduction of smart meters are the best way to address the challenges and costs of peak electricity demand, saying we should focus more on better use of solar PV.

Adam McHugh, a lecturer in energy economics and energy policy at Murdoch University, argues instead for a new pricing system that would encourage householders to point their rooftop solar PV panels westward rather than north. Or they could go to the shops, the cinema or the beach at times of peak demand rather than sit at home with the air conditioning.

McHugh says rooftop solar PV could play a major role in reducing network costs, because the price of these systems had fallen so much that they were economically attractive for households to install. However, under the current tariff arrangements, most systems – and it is estimated more than 2,100MW of rooftop solar PV will be in place in Australia by the end of the year – face north because that is where they produce most electricity, and deliver the best returns for households.

But McHugh says that if these systems were facing west, they would correlate with peak demand on the grid, and make a major contribution to lowering network costs. West-facing solar PV panels could reduce system capacity by 75 per cent of their rated output, and one solar PV 1.5kW system could offset a 1kW air conditioner at peak times. This could be significant, given that some forecasts put the extent of solar PV at 12,000MW to 18,000MW between 2020 and 2030.

McHugh’s tariff system is all about reducing the summer peak demand, which occurs in about a dozen interval periods marked by hot, sunny weather. And they occur in mid to late afternoon, when west-facing PV is producing.

“By basing tariffs around peak kW capacity, rather than overall consumption measured in kWh, McHugh says households would face significantly lower bills in winter, spring and autumn, and much higher bills in summer, the season of peak demand. This would encourage them to install solar PV, and point it west,  or enter other demand management arrangements that would see them switch off appliances when peak demand was reaching the top 10 or 12 peak intervals. (Tariffs based on individual peak demand would be a PV killer and would not be as effective at reducing network costs.)

Households would be alerted and could take action to slash their bills. In effect, they would be paid to switch off and go to the cinema or the shops, where the air-conditioning would be running regardless of whether there were 2 or 2,000 people in the store. “Why not get in a bit of movie time or retail therapy during the peak?” McHugh says. “Escape the heat and boost the retail sector while cutting your annual electricity bill in half.”

He says this system would encourage owners to orient their solar PV sytems to the west, and others to install interval meters, rather than an imposing an overall cost by rolling them out to all consumers. Everyone (except the monopoly network businesses) would benefit from the tariff change, but those who benefit the most will be customers who buy interval/smart meters that want to participate in system-peak demand reduction activities.

“About 40 per cent of the retail electricity price is caused by network costs,” he says. “Under system-peak pricing, if you had west facing PV and went to the movies during the peak you would not only avoid that 40 per cent, but would receive a credit on your bill for your negative system-peak contribution. North facing PV would also receive a credit, just not as much.”

McHugh says that solar PV facing west and meeting peak demand meant it was effectively acting as a competitor to transmission networks, which is delivering power from distant sources of generation to major demand nodes. This competition may explain some of the perverse tariffs that were now being contemplated, such as the “bi-directional” tariff approved recently by WA’s  Economic Regulation Authority which will allow Western Power to charge a higher rate to owners of rooftop panels, even though these mostly north facing panels have reduced peak demand by around 125MW, or the size of a gas-fired peaking generator. Western Power wants to extend such arrangements to battery storage and electric vehicle systems.

“In my view the ERA’s approval of the tariff is a case study in regulatory capture,” he writes in a submission to the Senate inquiry on power pricing. “It seems to me that the bi-directional pricing arrangements approved by the ERA are intended to serve the interests of the regulator and the regulated entity rather than the interests of the public.”

It would not be the only example, as RenewEconomy has pointed out here.

McHugh says a new pricing system would change the way in which consumers think about their contribution to those few half-hourly trading intervals of the year when most of the system costs are incurred. Given that network costs make up such a large proportion of a consumer’s bill, the effect of this change would be to incentivise consumers to reduce their contribution to system-peak demand and therefore lessen the need for network augmentation.

 “My hypothesis is that the price of electricity should reflect the cost; then people will orient their PV in whatever direction is best for them,” McHugh says. “North facing PV is good for energy production, west facing PV is good for meeting peak demand.”

“The fundamental flaw in spreading network costs that occur due to system-peak demand across units of energy consumption in other billing periods of the year. Energy-based average pricing (kWh pricing) of this nature does nothing to signal the actual cost of network augmentation to consumers.

“A customer’s individual peak demand will not affect the capacity requirement of the system unless it happens to coincide with the system-peak. So under energy-based network tariffs, or tariffs based on a customer’s individual peak demand, residents and businesses have few incentives to reduce their contribution to system-peak demand and, therefore, network costs.”

 He also suggests a new formula for network operators, which instead of rewarding them for inflating demand forecasts, would penalise them for ‘gold plating’ their network. He wants to put the risk of an overly high peak demand forecast on the regulated entity rather than on electricity consumers.

 

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16 Comments
  1. Paul 7 years ago

    The effect of temperature coefficient reduces PV output when hot, thus reducing West facing panel performance, especially during our very hot summer days. Adam’s hypothesis is worth examining but must take into account thermal effects in great detail.

  2. Tim 7 years ago

    This could be the biggest failure of the previously high net feed-in tariffs: to maximise exported power (and $$), your household shouldn’t use any power when your solar panels are producing.

    Now for new installations, you should face your panels to offset your consumption as much as possible, because the feed-in tariff is pittance. For many households (especially those with school-aged kids who get home mid-afternoon), this will be north-west or west. I hope solar PV installers have recognised this.

    Of course, if prices keep falling you could face some east, some north and some west to offset most of the day.

  3. Karl Jensen 7 years ago

    I’ve been saying this for over 2 years now, including to industry forums in discussions with Horizon power about their ridiculous FIT arrangements that encourage people to generate and export power when the grid doesn’t need it!

    Falls on deaf ears.

    My own Solar PV system limited to 5kW of inverter capacity, faces every direction 🙂 with 11+kW of panels it also offers the grid excellent capacity factor -meaning for most hours of sunshine it makes 5kWhr of power regardless of conditions.

    If more systems were designed like this capacity factor would be perhaps double what it is now for solar and as a result not nearly as many network issues would be caused AND the “loss” from limiting inverter capacity is so small it doesnt matter.

    CEC in fact recommend 20% more array than inverter but marketing by the industry shonks promoting bigger inverters and less panels causes more problems than it solves (peaks and troughs caused by cloud effects are a significant problem to the grid)

    • Tim 7 years ago

      Thanks Karl. With such an arrangement, how much power do you get out of your inverter on cloudy or overcast days, when the light source is more diffuse?

  4. Ray Wills 7 years ago

    2 GW installed so far will only be a small share of the total that is likely to be installed and was a reasonable outcome to ensure the start of deployment. By 2015 solar will be so cheap, we won’t just be putting it on north facing roofs for optimized generation, we will be applying generously on any roof with a hint of north too. By then I think we will have at least 4-5 GW installed, and within a few more years generating much of our electricity more cheaply on rooftops than we can buy from the grid, and this will be delivering the largest share of the electricity to power the appliances that are filling our homes.

  5. Mart 7 years ago

    Not sure if some of Adam McHugh’s statements are quite correct.

    “the “bi-directional” tariff approved recently by WA’s  Economic Regulation Authority”

    According to ERA’s website no new (2012/13) tariffs have been approved. The determination, dated 18 May 2012, was in fact NOT to approve Western Power’s 2012/13 Price List proposal. As a consequence, the currently approved price list would still seem to be the 2011/12 version.

    “which will allow Western Power to charge a higher rate to owners of rooftop panels”

    The 2011/12 price list does indeed show different time-of-use rates between reference tariff 3 (time-of-use residential exit service) and reference tariff 12 (time-of-use residential bidirectional service). But these are not the prices charged to retail customers. First of all, reference tariff 12 has never been implemented. Secondly, the reference tariffs are wholesale tariffs.

    Synergy is the sole retailer on the SWIS. According to Synergy’s website there are two commonly available residential plans: a standard “Anytime” plan and a “SmartPower” time-of-use plan. There is no mention of a bi-directional plan. Owners of grid-connected PV systems can choose either plan and pay the same rates as other residential customers. Net exports are credited at a wholesale-price equivalent per kWh. Some customers receive an additional net feed-in tariff.

    “Western Power wants to extend such arrangements to battery storage and electric vehicle systems.”

    Actually, what Western Power has proposed is to treat all residential supply to the grid, including residential wind turbines, as equal. Western Power would only support a separate set of tariffs if network monitoring suggests that battery storage and electric vehicles cause a different impact on the network as compared to photo-voltaic systems. Synergy, however, wants clarity from the Office of Energy whether battery storage and electric vehicle customers are entitled to a feed-in payment. To which Western Power counters that if the Government wants to distinguish between generation from separate sources, multiple metering may be required.

    ERA is already convinced, without any monitoring, that battery storage and electrical vehicles will have different network requirements and different network costs than PV. On that basis ERA has rejected Western Power’s proposal and has determined that bi-directional tariffs for PV must not be extended to battery storage and electrical vehicle systems. Note that no determination has been made about residential wind turbines. Note also that Western Power can still connect batteries storage, wind turbines or electric vehicles to the grid as a non-reference service.

    Most of this information comes from ERA’s “Final Decision on Proposed Revisions to Access Arrangement for the Western Power Network” dated 5 September 2012.

  6. Mart 7 years ago

    Some questions.

    “West-facing panels could reduce system capacity by 75 per cent of their rated output”

    By 75% or to 75%? And 75% of what? Of maximum rated capacity at a perpendicular insolation at noon?

    Or is the percentage a reference to this graph: http://www.yourhome.gov.au/technical/fs67.html#siting ? The text above the graph says “percentage of the maximum possible output”. I could be wrong, but this seems to refer to the maximum possible output in kWh per day or possibly year, not to the output in Watts at any given time of day.

    “and one 1.5kW system could offset a 1kW air conditioner at peak times”

    What are these peak times? I would be surprised if a 1.5kW system would produce 1kW in the two hours before sunset whatever the system’s orientation. What are the data that support the 1kW claim?

    “Why not get in a bit of movie time or retail therapy during the peak?”

    Why indeed? Turn off the air conditioner and start up the V8 or 4WD?

    “Energy-based average pricing (kWh pricing) [..] does nothing to signal the actual cost of network augmentation to consumers.”

    And would tariffs based around peak kW capacity do anything to signal the cost, including externalities, of overall demand?

    It seems to me that Adam McHugh is overly optimistic about the effects of PV orientation, rather fixated on network costs caused by peak demand, and ignoring overall costs of energy consumption and related emissions.

  7. Tim Buckley 7 years ago

    Adam McHugh’s points are interesting, and I would agree with the comment above that having panels facing a combination of North-East, North and West (as roofing and shading permit) could optimise inside the meter generation with usage. However, the outcome that Adam is looking for is an optimization of solar energy production when peak energy demand most needs it. Surely the best way to encourage solar installers to do this is to have a smart meter to enable time of use pricing. I would have thought a smart grid would encourage distributed electricity generation when it is most valuable. How do you optimise solar without a two way communicating smart meter? Oh, while we are at it, would also need IPART and the other energy regulators to regulate to allow a fair system for electricity customers e.g. critical peak time charges that better reflect the true cost of these extreme events so customers who are price responsive can moderate their behaviour so as to save money. But of course, I misunderstand IPART’s role – they arent there for customers!
    Tim Buckley, Arkx Investment Mgmt

  8. Justin Wood 7 years ago

    Just on the bi-directional tariff: ERA approved this in 2010. It is NOT the recent determination that is relevant.

  9. adam. 7 years ago

    “A Perth-based energy expert has challenged the conventional view that time of use tariffs and the forced introduction of smart meters are the best way to address the challenges and costs of peak electricity demand.”

    It doesn’t sound like much of a challenge. If peak demand is driven by consumer insensitivity to wholesale prices, change that and be done with it.

  10. colin 7 years ago

    This is a very short term view given that suitable electricity storage mediums in a few years will be able to time shift renewable energy at will. A square metre of panel might produce 700 watt hours on good day, and say we want to shift all of that, then one of the future technology batteries might weigh 5 kg and would need to cost about the same price as a sq metre of panels or say $120. That won’t be too far away

  11. Chris Fraser 7 years ago

    The Ausssies have some of the best minds working on solar batteries. Here’s one of them. Clearly they’re not being sponsored by a monopoly network operator !

    http://www.abc.net.au/radionational/programs/scienceshow/batteries-for-solar-and-wind-generators/4159740

  12. Photomofo 7 years ago

    You don’t want to do what this fellow is suggesting. It’s not a bad idea but he hasn’t thought it through far enough. You want to install PV to maximize production. Prices for power will evolve. If you build a sub-optimized system designed to produce during the current peak pricing period you could end up in a few years having a system that’s producing extra power at a time when prices aren’t especially high – that means you’ll be short the power you could have had if you designed for maximum production. It’s better to build for maximum production now and then try to figure out how to use that production. You can get a water heater that’s smart enough to know to consume your PV power during the day and lay off at the current peak. Your fridge and AC can do the same. Don’t think for a second that the conventional power pattern you currently know is going to stay in place. PV is going to change the pattern.

  13. Peter 7 years ago

    Appropriate demand charges and credits (not Tariffs) related to system peak demand certainly would provide a clear price signal regarding system costs.
    Grid argumentation occurs based on forecasts of peak demand growth. Although these forecasts have historically been optimistic (read high). In Western Power’s case they are based on modeling of inputs to peak demand growth at the transformer level that incorporate a variety of variables.

    Modeling of PV has only recently been incorporated into system peak forecasts and it a work in progress. The introduction of pricing incentives coupled with west facing solar has a strong potential to defer capital expenditure in the near term if modeled into the forecasts.

    The current STC arrangement does not support west facing panels however, as the number of STCs is discounted for West Facing arrays due to the reduced overall production from the system. This is an area where the State government or utility could step in to level the playing field and encourage West facing PV offering a complimentary incentive on the basis of reduced system peak.
    in WA.

  14. Mart 7 years ago

    “Just on the bi-directional tariff: ERA approved this in 2010.”

    That may be, but it has never been implemented. The reasons can be found in this Ernst & Young report: http://tinyurl.com/c3xr2k5

    It is interesting to read some of the WA Office of Energy’s objections to the original bi-directional tariff (RT12):
    – Western Power did not adequately justify its position that it was under-recovering from households with PV.
    – Two consultancies (MMA and CEEM) concluded there were network benefits associated with PV installation. Any network benefits should be recognised in the RT12 rate.

    “It is NOT the recent determination that is relevant.”

    Well, what seems relevant is that Western Power is now proposing residential bi-directional tariffs that are identical in structure and design to the existing residential tariffs. What I haven’t yet seen is the proposed pricing.

    ERA’s final decision on the 2012-2017 Access Arrangement can be found here: http://tinyurl.com/cv9gy6q

  15. Sean Sweetser 7 years ago

    I’d imagine if all 2GW was west facing it would make a difference to the solar generation peak.

    However, depending on latitude, solar noon for a North Facing system is 12.30pm. Solar noon for a West facing system is 1pm. Any PV Designer who has done in depth shade analysis’ and production prediction for a site knows this.

    Most people imagine a west facing system’s solar noon is something like 3pm. It’s simply not true. The generation graph is simply moved 2% to the right.

    Another poster mentioned this is a moot discussion because of the advent of battery backup. I totally agree, we, in the PV industry, are looking hard at batteries and will keep doing so. As soon as they become almost viable expect to see a big push.

    3kw system, 8kwh of usable battery backup
    5kw system, 12kwh of usable battery backup
    and for the mcmansions
    10kw system, 30kwh of battery backup.

    Go the EVs!

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