Horizon finds a smart way to price a solar tariff | RenewEconomy

Horizon finds a smart way to price a solar tariff

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WA utility Horizon Power has become the first in Australia to offer differentiated solar tariffs to customers in varying locations. If energy utilities adopted the same policy in the eastern states, they could defer, or even avoid, costly upgrades to networks.

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Western Australia energy utility Horizon Power has achieved what appears beyond the capabilities of its larger peers in the eastern states, the Victorian and NSW governments and regulatory pricing authorities, and produced Australia’s first differentiated feed in tariff for rooftop solar PV.

Horizon, which services 100,000 residents and 9,000 businesses in towns and communities across the state, beyond the grid located in the south-western corner, is introducing area-specific solar feed-in tariffs which recognise a higher value for solar put back into the grid from remote locations, and a lower value for solar energy fed from near towns and alternative energy sources.

For instance, in remote townships such as Meekatharra, Cue and Wiluna (and a dozen others), households will receive 50c/kWh for any surplus energy exported to the grid, more than double what they currently receive in their 1:1 net tariff. In major towns such as Broome, Esperance, Exmouth, Port Hedland and Karratha, where the cost of power is lower, a rate of 10c/kW will be paid. Towns such as Kununurra, Wyndham and Lake Argyle, which are remote but close to hydro-power sources, will receive a rate of 16 c/kWh.

All these payments – described as a “renewable energy buyback” – will replace the 1:1 net tariffs that Horizon currently has in place and will change automatically from July 1. And all these payments will be over and above the mandated state tariffs, and will compare with the 5.4c-10.3c/kWh range that is being suggested in NSW as a voluntary rate by energy retailers. A full list of the pricing proposed by Horizon, and how different towns and communities are affected, can be seen here.

Horizon says the changes will reflect, more closely, the cost of generation in each town, and that they follow unprecedented demand in the last two years from customers.

“Our new pricing method will continue to reward customers for the energy they are producing and is more closely aligned to what it would have cost us to produce or purchase – and in many towns, customers will receive double the buyback rate they get today,” said Scott Davis, the head of sales and marketing at Horizon Power.

“There is an obvious customer appetite for renewable energy and this product review will ensure that Horizon Power is able to continue to offer customers a buyback product for many years to come,” he said.

As Solar Choice, a NSW solar installer wrote in a recent blog: “Horizon, in implementing the town-specific, differentiated, flat-rate tariffs, has done what no other electricity retailer has done to date: Attempt to incentivise the uptake of ‘distributed generation’ (i.e. small-scale wind, solar, and other renewables) on a localized basis to harness the potential benefits.”

It noted that this had been considered by the NSW government in its review of its solar feed-in tariff, but had been thrown in the too-hard basket due to the larger scale and more complicated nature of the grid. Indeed, as we pointed out in this article, IPART simply walked away from the task of ascribing the value of PV among generators, distributors and other customers.

Such a move has long been recommended by the Australian solar industry. Muriel Watt, the chair of the Australian Photovoltaic Association, said similar measures could prove very effective in other parts of Australia, particularly in regional areas which were suffering from network constraints because of increasing demand, particularly during the day.

“It would make a lot of sense in Australia generally,” Watt told RenewEconomy. She said providing incentives for customers to install more solar could save millions of dollars in network upgrades, in much the same way as installed PV avoided the need for a costly upgrade to the network link on Magnetic Island. Germany also used similar incentives to get wind farms built in less windy areas, to spread the geographic diversification of wind farms, rather than installing them all in one area.

“It’s a good approach, but politicians have been loathe to provide differential support,” she said, adding that while it would avoid capital expenditure by the network operators, it was not clear they wanted to avoid those costs while the regulatory framework rewarded them more for building bigger and longer network connections.

In regional WA, demand for solar PV has been so great that it has created other network issues, and Horizon was forced last year to put caps on the amount of solar PV that could be installed in some towns such as Carnarvon and Exmouth. However, it has now introduced “generation managed” systems, which allows them to control the amount of solar PV being put into the grid at any one time, and drop some systems out if it causes a voltage surge.

“Like other utilities, Horizon Power has been grappling with the challenge of managing customer demand for renewable energy technology with the need to provide reliable and secure power supplies,” Davis said. “From 1 July 2012, customers will have the option… of installing a generation-managed system, that is a system where the output can either be stored or managed by Horizon Power, in towns where restrictions are currently in place.”

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  1. Craig Askings 8 years ago

    Nice to see some innovation happening in the power retailer space. Would I be correct in assuming these areas are in separate networks from the main grid in the SW corner of WA?

    • Giles Parkinson 8 years ago

      Yep, that’s right. Horizon looks after all non SWIS clients, I believe.

  2. Derek B 8 years ago

    In principle, a higher tariff should apply for feed-in in industrial suburbs than residential ones. The peak demand in residential areas is summer evenings, 4pm-8pm, not a great time band for PV. But in industrial areas it’s earlier, more like 2pm-5pm, making PV more valuable, both in terms of avoiding expensive peaking supply and in not needing such a high capacity network.

    A key barrier is that the network savings would be shared by all retailers, not just the ones providing the tariff. A logical solution is for the network operator to contribute to the FiT.

  3. Martin Nicholson 8 years ago

    With only 100,000 residences in the whole network it is like a moderately sized town generating its own power disconnected from the grid. It’s not difficult to see that with significant numbers of solar PV systems in such a small network, system control could become very erratic without the ability to automatically curtail PV output into the network. I assume this is done automatically with network frequency and voltage monitors disconnecting the PV output from the grid when needed – at the loss to the PV panel owners.

    This should be a warning to those who want to see PV on ever roof in the NEM. The same problem would apply in certain nodes so the PV panels would need to be disconnected when required to stabilise the network. This could make an analysis of payback time very difficult not knowing what was likely to happen in the network and how often you would get disconnected.

    • Glen 8 years ago

      Good point. It seems like remotely switching on loads such as hot water , pool filters etc will be important to deal with excess daytime solar in the grid of the future. Maybe electric vehicles and some form of battery storage would also be better solutions than switching pv off, using this stored power could also assist with getting over the nighttime peak.

    • Chris Fraser 8 years ago

      Martin, i had it understood a good inverter synchronized perfectly with AC frequencies on the network and didn’t create voltage anomalies, but added more current on a single phase wire. If true, is it possible to manage individual systems’ Current output to the network and permit the rest for batteries or personal use ?

      • Martin Nicholson 8 years ago

        Chris the problems arise when there is more generator output in the network than demand to absorb it. When this happens the voltages in the network rise. To keep the voltages within a closely defined range, generator output is reduced to match the load. Certainly, if there is sufficient storage in the network this could be used to increase the load and absorb the generator output but storage is very expensive and most networks have very little storage.

        If PV becomes a substantial part of total network generator output (which today it never is in most networks) then it will need to be curtailed sometimes to match the load.

        • Chris Fraser 8 years ago

          Thanks Martin for that response. I’m sure with embedded generators there might occasionally, somewhere, be more energy on a local system than is needed during the day. My hope for the moment that PV becomes widespread is that network operators have enough spatial monitoring and control to ensure dangerous charging doesn’t occur. I think such monitoring works (caused by embedded PV alone) would be inexpensive in comparison with the investment currently being spent on network capacity.

          • Martin Nicholson 8 years ago

            Unfortunately you can’t afford to EVER have more power in a network than is required to meet the load. They have to be balanced continuously otherwise it will impact cycles and voltage. This is why this balancing has to be automatic. With a non-PV generator (rotating synchronous or asynchronous) typically there is a governor control that monitors the system frequency and speeds up or slows done the engine driving the generator (steam, gas, hydro or wind turbine) to maintain the system frequency. With PV (and some wind turbines) the effective “slowing down” or “speeding up” is done electronically to control the power output. This means that sometimes wind energy and PV energy has to be curtailed to ensure that supply exactly matches demand at all times unless you have large load-following rotating generators in the network that can do all the balancing which is what often happens now.

        • Jonathan Maddox 8 years ago

          This is not a plug but an earnest hope … power storage is getting cheaper with technologies like this


          competing with fancier stuff like flywheels, supercapacitors, new and old battery chemistries (sodium-sulfur or nickel-iron), and ambitious non-conventional pumped hydro storage like this


          so I expect one day before too long it simply won’t be a problem to switch on the storage pumps when the sun shines brightly, rather than curtailing generators.

  4. David Osmond 8 years ago

    To establish a fair price for solar PV electricity, wouldn’t it be great if the retailers had to bid against each other for your PV output. It would only work where there was competition, and no doubt there are other major problems with the idea. But it seems that the retailers are always going to claim that PV power is not worth much more than the wholesale price if they are the only buyer, however if they have to bid against each other, then you’d get a much fairer indication of the true value.

    Kudos to Horizon Power for their innovative pricing.

  5. Warwick 8 years ago

    PV makes sense in these remote networks and should be encouraged. This is because the underlying wholesale price is dictated not by base load coal but by expensive distillate and OCGT plant that burn gas that is 2 to 3 times the price available in the East coast of Australia.
    i.e. Instead of wholesale prices around 4c/kWh, the implied wholesale price may be 20 to 30c or more and solar can better grid parity. It should also be noted that some of these networks have inherent flexibility to deal with mining loads and therefore intermittent generation may better accommodated than other networks.

  6. Gillian 8 years ago

    The IPCC report into Renewables in 2011 found that — “As infrastructure and energy systems develop, in spite of the complexities, there are few, if any, fundamental
    technological limits to integrating a portfolio of RE technologies to meet a majority share of total energy demand in locations where suitable RE resources exist or can be supplied.”

    Wonderful to see Horizon moving forward in a constructive way. Renewables are competitive where there is no coal powered incumbent who has recouped their initial investment and are benefiting from onogoing subsidies for coal.

    Now we need to work to get fossil fuel subsidies wound back.

  7. marc mattison 3 years ago

    ive just heard from a resident in Esperance the famous wind turbines have been denied permission from Horizon power to feed that power into the grid , also residents have to go through a lucky dip to be able to feed their solar power into the grid . Another example of the public being bled by a monopoly

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