How fossil fuel incumbents hope to tame solar juggernaut

The Australian solar sector is warning that the industry could be facing its toughest challenges in the coming years, as cost-competitive solar PV puts enormous strain on the business models of fossil fuel technologies.

Muriel Watt, the chair of the Australian Photovoltaic Association, said the solar industry should be prepared for a fight-back from the incumbent businesses in the form of regulatory and tariff protection, and even a campaign to demonise solar in the same way that had affected wind farm developments.

She cited the release of a report last week by the Electricity Supply Association of Australia, which represents many of the incumbents, was just a foretaste of things to come. Our report on the impact on coal-fired power stations is another example of the damage being inflicted on the industry. Tariff changes and connections issues are already becoming common.

“Things are getting serious,” Watt told the Solar 2013 conference in Melbourne. “The incumbents have found that renewables actually work. They thought that we would always be in the R&D bucket.”

More than 2.5GW of solar PV had been installed in Australia, and this could rise to at least 8GW by 2020, and to as high as 34GW by 2030 – with modules on households and businesses, as well as utility scale installations.

Watt said this will have a real impact on incumbents, which are already having network load factors reduced, retail kilowatt hour sales dropping, and fossil fuel plans closing down or operating less.

“This threatens the entire electricity structure which is based on kilowatt hours being passed through grid or sold at retailer level,” she said. Other associated technologies such as storage, solar hot water, demand management and energy efficiency would have a similar impact on demand from the grid, which would respond by putting prices up, giving further motivation for consumers to seek alternatives. This was a theme taken up by the head of the Clean Energy Finance Corporation Oliver Yates.

These are the examples cited by Watt of how the incumbent utilities would attempt to push back on solar:

Low buy back rates – low or no payments for electricity exported back to the grid from rooftop solar systems. This has already happened in most states.

Gross metering – a proposal made in Queensland which would force households to sell all the output from their rooftop systems to the grid operators, and buy it back at a higher price

Higher fixed charges –  This is happening across Australia, and was the basis of the ESAA paper, but Watt and others in the industry say it ignores the benefits brought by solar PV to the network.

Restrictions on new connections – like higher fixed charges, this is happening at both household and commercial level. Some grid operators insist on having the right to curtail output when they don’t want it.

Discriminatory offerings: There was evidence that retailers were offering discounts to consumers but refusing them to solar users. Watt questioned whether discrimination between customer types on the issue of connection fees, discount and charges was legal. “They are going to be pushing really hard to get these sort of options on the table. Even if they got half of it, they would feel it was a  success.

Restrictions on operation – Some grid operators insist on having the right to curtail output when they don’t want it.

Attempts to divide customers with have and have nots. – another theme from the ESAA report and other utility-sponsored studies which seeks to portray a large disadvantage to those without solar. She used this graph below (and Yates used a similar one) to highlight how the incumbent grid was responsible for most of the cost rises, but green energy got most of the blame.

Screen Shot 2013-04-30 at 9.19.52 AM

Mobilizing anti renewable lobby groups – the industry is concerned that the same tactics deployed by the anti-wind lobby could be adapted for solar. As a foretaste, several landowners had opposed the siting of the proposed 20MW Royalla solar farm in the ACT – which is to be the largest in Australia to date. The landowners said they wished to sub-divide their properties and were concerned about the impact of the solar farm on visual amenity. “In a general sense people like solar … but when you start to move to large systems, putting solar in a field or next to farms next to them, that could create a  different dynamic,” Watt said.

Political and regulatory support – Watt said that the current rules of the National Electricity Market favour the incumbents. The regulatory framework has to change – it has facilitated overspending and doesn’t cater for reduced demand and demand management measures. (Another point highlighted by Yates and Greens leader Christine Milne)

Watt cited the example of recent inquiries into protecting networks against natural hazards such as storms and bushfires. Proposals such as laying transmission underground had been considered, but cheaper and most efficient options such as distributed generation and min-grids had not.

But she said it was inevitable that the industry would have to move to a service and energy solutions model rather than a pure volume sales model. This would include “net zero energy buildings”, storage, and links to the electric vehicle rollout. This is something that the utilities have considered, but do not yet appear ready to embrace.



20 responses to “How fossil fuel incumbents hope to tame solar juggernaut”

  1. Warwick Avatar

    Maybe it’s time to actually consider the welfare issue rather than maintaining the status quo and on that front the ESAA has a valid point. Essentially, the main thing PV does as far as the network is concerned is reduce kWh through the meter even though the costs of the network are related to a fixed connection (i.e. maintaining the poles and wires to your house) and a demand cost (i.e. the capacity required in transformers etc). If PV is actually reducing network demand then those customers will benefit under the proposed changes as the current model is broken. i.e. the current situation actually can support the worst customers who get a reduced bill by having PV run less energy through the meter but pay no penalty for their airconditioner which comes on late in the summer afternoon when they return putting maximum strain on the network. So, it’s true that fossil fuel generators may not want solar if it reduces wholesale demand but the network operators receive a legislated income and are pointing out the inequity in the current charging methodology that actually unfairly subsidises PV owners and those with air conditioning. The charging methodology is broken but what is upsetting PV promoters is that fixing the system will mean that the benefit from the mispricing of network charges may be reduced and consequently new PV sales. A proper pricing method is appropriate, that will recognise the potential savings of reduced network demand from technologies such as PV and storage, if and when they eventuate at the network meter. This will also charge a/c owners more which is entirely appropriate.

    1. adam Avatar

      “that actually unfairly subsidises PV owners and those with air conditioning.”

      How are network charges passed on for other generators that don’t participate in the NEM? Perhaps I’ll have a go and tell me where i”m wrong:

      1. Embedded generation signs an off-take agreement with a NEM retailer

      2. Retailer forecasts demand considering an embedded retailer ‘model’ as part of NEM (and thus their forecast demand is reduced)

      3. Network charges are attached to NEM transactions

      4. Network charges for embedded generation thus don’t get considered

      Is that roughly how it works?

  2. David McInnes Avatar
    David McInnes

    The graph in this article provides an excellent and easy to understand summary of why our electricity prices have gone up so much lately. Have you thought about publishing this (and some of your other interesting graphs/articles) in the mainstream press? So doing on a regular basis might help to reduce the confusion amongst the general public surrounding energy politics in this country.

    1. Sean Avatar

      full page add in the tele
      title: Cutting through the bullshit.

      1. Giles Avatar

        Probably the only time it gets into mainstream.

  3. Sid Abma Avatar
    Sid Abma

    I think this is Great. The fossil fuel Natural Gas and the renewable sector of solar and wind and others have to work together.
    It is going to be a long time yet before the renewables can phase natural gas out of the picture.
    Natural gas can and will be operating almost as efficiently as these renewables.

    Natural gas has been that forgotten Energy Source. “Out of Sight, Out of Mind”.
    It enters a building in a little pipe, then goes through this “box or cylinder” and then leaves out of this other pipe sticking out of the roof. Can’t see anything leaving that pipe either. Must be Clean.
    Natural gas can be consumed to near 100% Energy Efficiency.

    Increased natural gas energy efficiency = Reduced utility bills = Profit
    Increased natural gas energy efficiency = Reduced global warming
    Increased natural gas energy efficiency = Reduced CO2 emissions
    Increased natural gas energy efficiency = Water conservation

    Natural gas can be consumed so efficiently that the Water can be recovered from these Cooled exhaust gases, and this distilled water is very usable.
    Do Not Waste The Water!!

    We need solar and we need wind energy and tidal and geothermal, and others.
    Today we still need electricity and heat and steam and hot water to provide everything we need to get through today.
    We have to work together ~ With an Environmental Goal.

  4. Chris Fraser Avatar
    Chris Fraser

    It does appear PV users will have to defend themselves through an ‘association’. Anyone have a link?

    1. David Osmond Avatar
      David Osmond

      for a start, there’s:

  5. Martin Nicholson Avatar

    This statement (repeated twice) caught my eye. “Some grid operators insist on having the right to curtail output when they don’t want it.”

    Not sure what Watt (don’t you just love that surname for the chair of the Australian Photovoltaic Association) meant by “want it” but they sure has hell must have the right if they can’t use it! If they can’t use it, what will happen is that voltages will rise probably tripping circuit breakers, shutting down the network.

    1. Chris Fraser Avatar
      Chris Fraser

      Martin could you give you view on ‘automatic tap changers’ ?

      1. Martin Nicholson Avatar

        As I understand it, not all local distribution transformers support them so we might need even more investment into the distribution network. The very thing that environmentalist like to complain about.

        1. Louise Avatar

          If you were to build self-sufficient buildings, what do you need the grid for?

          Isn’t the grid only assisting those who want to maintain the “Master and Servant” relationship that high earning utility executives like so much?

          There are around 60 companies, who either have island/off-grid systems on the market, or have announced, that they will be introducing them over the next year or two.

          – Siemens

          – BAE Batterien GmbH

          – IBC Solar AG

          – Kostal, Litron GmbH

          – Nedap NV – Energy Systems

          – SolarWorld AG

          – Prosol Invest Deutschland GmbH

          – Varta Storage GmbH

          – ASD Sonnenspeicher

          – and many more.

          1. Martin Nicholson Avatar

            The grid provides reliability of electricity supply without installing more expensive storage/backup systems.

          2. Louise Avatar

            “The grid provides reliability of electricity supply without installing more expensive storage/backup systems.”

            I doubt that the storage/backup system are more expensive.

            If you are connected to the grid you have to pay quarterly fees.
            If you build a self-sufficient building you have the up-front cost but you do not receive a quarterly bill form your electric utility.

            My energy plus house has been operating for 6 years without any maintenance or repairs.

          3. Concerned Avatar

            Louise, I love the sentiments, however there are a lot(most) of people without the resources. In addition the economics do not stand up. There is already a working system in place.

          4. Louise Avatar

            If you build new buildings/residential subdivisions, then it is cheaper to build island/off-grid energy autonomous buildings than to continue the old way of laying cables to houses.

            The old way is becoming rapidly functionally obsolete.

            It costs approximately $20,000 dollars per dwelling if you build a new residential subdivision and put cables in the ground.

            If the developer of a residential subdivision would purchases PV equipment the houses could be electrified permanently for the same amount of money.

            If you were to order 1000 times 10kW PV panels and inverters you could be purchasing at high volume wholesale price, which is as low as US$0.45 FOB per watt for PV panels and US$110 FOB per kW inverter capacity, and have the goods ship to an Australian port.

            After adding up all the accumulating costs involved and added the 10% GST you would end up with a price of less than Au$7500 dollars for 10kW PV panels and inverters.

            You would still have the cost of installing the equipment.

            How much does that cost?

            Total cost – equipment cost – installation cost
            $20,000 minus $7,500 equals $12,500.

            Even if the cost of installation were to cost $12,500 dollars to install a 10kW solar system, (the gold plated price), it would be as expensive as providing the electricity connection to a residential home.

            The difference is the energy self-sufficient house would not have the quarterly electricity bills that the grid connected house has.

            There is something seriously wrong with the way we keep insisting on propping up regional monopolies.

            Go 100% renewables now, not in 100 years from now.


          5. Concerned Avatar

            I must go back to Uni.

      2. Louise Avatar

        1. Chris Fraser Avatar
          Chris Fraser

          Thanks That’s Good. I understand better this issue from a centralised generator – transmission stability perspective. I’m interested in the embedded generator – reticulation side too.

  6. Miles Harding Avatar
    Miles Harding

    The tax office is in fear of negative gearing of solar installations. So far they have managed to keep these out of the consumers expenses and income, but meddling with ownership penalties by the states may allow these to be included in income (and expense) at some future time.

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