Network value of solar? Not much, says Victoria regulator

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Victoria regulator says network value of solar so small it is not worth adding to solar feed in tariff. It says battery storage could add significant value to rooftop solar, in some areas, but will need market reforms to deliver that value to households. In New York, meanwhile …

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The Victorian pricing regulator, the Essential Services Commission, appears to have dashed hopes that a significant network component could be added to the state’s solar feed in tariff.

In the second phase of a report commissioned by the state Labor government to find a “fair value” of rooftop solar, the ESC has concluded that there is value to the network in rooftop solar, but not as much as many might expect. And even then it is variable on time and location.

esc solar networkThe 176-page report released by the ESC on Tuesday puts the network value of the near 1 gigawatt of rooftop solar in the state at just $3 million.

That equates to about $3 per every kilowatt of solar PV capacity in the state. Based on the amount of solar exported to the grid, that represents a fraction of a cent per kilowatt hour.

It is so little, and so variable, that the ESC does not recommend adding any further to the state’s feed in tariff, which currently pays around 5c/kWh for excess solar to the grid, but will rise to between 6.5c/kWh and 7c/kWh after the state government incorporated its recommendations on the climate and environmental benefits of the technology.

A further peak rate, pushing the tariff up to around 8c/kWh or even as much as 30c/kWh in “critical peaks”, may also be added. But this reflects the cost of wholesale electricity in peak times, not the network value.

ESC network valueIndeed, the ESC says some of the solar sitting on around 300,000 rooftops in the state has no network value at all, because it is either located in the part of the grid that does not need replacement assets, or does not need upgrades because it is not congested.

The ESC does, however, see that the network value of solar could rise 20-fold if the solar installations are paired with other technologies – such as battery storage, smart inverters and energy management systems – that can make it “firm” and can add to network security.

But even then the ESC says adding battery storage in some areas will provide no further value to the grid – because of the reasons above. And where it does bring value, it is only at certain times. And to recognise the value that it does bring to areas that are congested or in need of an upgrade will need a new suite of market reforms and signals.

esc essendon

The conclusions will no doubt trigger intense debate from those involved in and around the solar industry, along with those incumbents whose business models are challenged by the new distributed generation technologies.

One of the great debates in Australia about the value of solar, and distributed generation in general, is how it should be valued in the context of the enormous sums invested in poles and wires across Australia in the past decade.

Those investments have pushed the cost of electricity at the household “socket” up by more than double in just five years, pushing the cost of electricity in states such as Victoria to around 34c/kWh.

That is around 10 times the cost of generation from the brown coal fleet in the Latrobe Valley, and about three times the levellised cost of rooftop solar. (Some say it might be more).

With the addition of a battery storage, this provides the remarkable possibility that households will find it cheaper to look after their own power and disconnect from the grid – if not in sun-challenged Victoria, at least in other states where the sun shines more regularly.

The difference with the ESC investigation and other international studies is that the Victorian regulator is looking at the grid as on ongoing asset, and makes no assumption to its changing business model, usage or costs.

In effect, they are ascribing value to rooftop solar in the context of what already has been spent on the grid. If the network is relatively new, or in part where sufficient capacity has already been built, no value is ascribed to the new technology. This line of thinking is not helpful when considering the massive changes afoot.

In New York, however, authorities have embarked on a remarkable transformation called the Reform the Energy Vision, which looks to reshape the grid around distributed generation, and because of that are looking at the value of distributed generation in a completely different light.

After the state’s experience with blackouts after Hurricane Sandy, local authorities recognise that the best way to make the energy supply secure, and cheap, and decarbonised, is through distributed generation.

The report from staff at the New York Department of Public Service agreed with the ESC that the value of solar was complicated, and was usually dependent on time and location. But to give you some insight into how differently the value of solar is treated differently in the states, the “hypothetical” tariff in New York is put at US19c/kWh.

That’s more than double the rate proposed in Australia.

The ESC recognises this, but doesn’t want to go there.

“Given the significant differences between electricity markets in New York State, the UK and Australia, it is not the Commission‟s intention to advocate for the adoption of a distributed system operator model in the Victorian context or more broadly in the NEM,” it writes.

“Such a proposal would need to be part of a much larger discussion about the future of electricity networks, and touches on key debates currently underway about ownership models, contestability and ring-fencing, which are not within the primary focus of this inquiry.”

Perhaps it should be. Someone needs to look into it soon, before consumers are tempted to take matters into their own hands.

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32 Comments
  1. Cooma Doug 3 years ago

    Great article again

  2. Les Johnston 3 years ago

    Highlights the principle of you get the answer you specify. If you limit the scope of the investigation, you get the answer you want. Defining the value narrowly, limits the value ascribed.

    • phred01 3 years ago

      never have an inquiry unless you already know the answer

  3. Kenshō 3 years ago

    Comparing Victoria with other areas of the country, if we look at a Peak Sun Hour (PSH) map of solar harvest for July and January:
    Cairns = 5 and 6
    Brisbane = 4 and 6.5
    Sydney = 3 and 6.5
    Melbourne = 2 and 6.5
    Hobart = 2 and 6
    eg. in Melbourne each 1kW of solar panels gives 2kWh of power in July and 6.5kWh of power in January. As solar panels are so cheap, many installers suggest oversizing for summer to cope with winter, especially in southern states.
    To me the report means:
    a) FIT’s are so small, they are a small factor in designing for a payback,
    b) a PV system that can easily integrate a battery now or later is a big advantage (only exception is those using power primarily during the daytime),
    c) a fast payback is easier to achieve for those with a home office or the retired, as more power is consumed during the day compared to the night, only needing a smaller battery. A system that can have its PV and/or battery size expanded later for changes in power usage is an advantage,
    d) people vulnerable to long runs of poles and wires, may wish to have a solar system that can supply the basics in a power outage such as lights, refrigeration and communications, plus one other high power appliance at a time ( eg. kettle, toaster, hotplate or microwave). With energy efficient appliances, this means budgeting for an inverter/battery that can supply 2kW continuous output or higher, otherwise the inverter will light a high temperature LED and then if people persist, power down until it cools off. If people want to run all the small loads and two or more high power appliances in an outage, they need 4 to 5kW continuous power from the battery/inverter. When the grid is working, inverters normally back up their peak power output from the grid, so a larger inverter performs better in an outage though it may lengthen the system payback time.

  4. Math Geurts 3 years ago

    For those who believe they are better of leaving the grid: leave the grid. Stop complaining. Kensho’s data prove that the value of solar for the grid is indeed very low in Victoria.

    • Kenshō 3 years ago

      For those of us living a simple eco-friendly life, having lots of LED’s and graphs to look at is a wondrous thing.

      • Math Geurts 3 years ago

        Sure, but the issue is the value of solar for the network That value is indeed very low in Victoria.

        • Kenshō 3 years ago

          Responsible persons who can raise the cash can’t stay on the grid because it hasn’t been decarbonised. It says in the article that’s what distributed generation is for.

          • Math Geurts 3 years ago

            Whatever your reason is: stop complaining and just leave the grid.

          • Kenshō 3 years ago

            I never complained. You complained about grid complainers. Bit of a double standard. If people like the grid, I support and encourage people to lobby for it to be a green grid. If people want their own little piece of green power generation, I support and encourage that. Apart from being green, I’m not biased against anything because that would produce negative feelings and disharmony.

          • Math Geurts 3 years ago

            You are right. You did not complain. Giles Parkinson complains. About treatment of rooftop solar. On average once a week. At least.

          • nakedChimp 3 years ago

            So what?
            Are you from the complaint police?

          • Math Geurts 3 years ago

            Anyway you recognize that this complaining is the bottom line of most of Giles’ articles. Some readers enjoy it.

          • Kenshō 3 years ago

            What if we viewed the articles as constructive criticism? Do you agree a future grid is more likely to need small and medium sized generators dispersed throughout the country rather than just a large one near each capital city?

          • Math Geurts 3 years ago

            For future grids I would agree that small and medium sized dispersed generators will be better. However I agree with regulators conclusion that the network value of solar in Victoria is not much.

          • Kenshō 3 years ago

            Perhaps so. I’m further up the coast, though the value of solar to me means increased power consumption today. My inverter isn’t setup to export. The household had excess so struggled to use some of it. A roast chicken and vegetables was ready for dinner. I was on the lithium tools allot of the day. Couldn’t really think of how else to use the rest. The same with water. Got a 22kL tank sitting there full and having to let it go on the lawn, rather than letting it run out the gutter next it rains again, as it floods the guys garage down the road.

          • Chris 3 years ago

            Agree with you! I check this site regularly and there’s at least one article a week…

  5. MaxG 3 years ago

    I am glad I installed our pretty-much-off-grid system, because I knew this charging nonsense would get worse by the year. What we will make sure of, is that we cut the chord before someone gets the idea to ‘forbid’ disconnection, or force connection because the wires run along the property.
    I just replied to an e-mail from Origin [offering all of a sudden significant discounts on fixed charges, including paying the penalty if I’d break the contract with the new provider], which I got after they got the change notification from Urth Energy we went with the other day; here how I felt about this:

    Thank you for your phone call and the information provided in an e-mail
    to [my wife].

    In short: it is a little too late for keeping a long-standing
    customer.

    We have decided to leave Origin, and this is what we have done, and
    will stick with it; even if the charges would drop to zero, or if we
    were pay more elsewhere. We are at a point of no return. As such,
    irrespective of what you offer, we are not coming back.

    No need to call us back or even reply.

    Thanks and regards, Max

    • Brian Tehan 3 years ago

      Yes, I sent a similar message to OriginOrigin for gas recently and electricity a couple of years ago – I only have a small pv system but low usage. I don’t understand the business model that loses long term customers by overcharging them, instead of offering long term customers a lower rate to keep them.

  6. Malcolm Scott 3 years ago

    I’ll bang on again about EVs and going off the grid. Going off the grid and then using your petrol and diesel vehicles is a self defeating strategy. All you are doing is lifting the middle finger to your electricity retailer and distribution company, but you are indentured to the oil companies.

    A 2x EV home means something like another 20 kWh per day (still vastly more energy efficient, lower cost, and less climate emissions polluting than petrol or diesel).

    Home plus 2 x EVs means the grid is your friend, even if you have home storage to avoid peak tariffs.

    Just get off gas, petrol and diesel and make the all electric home work to your best advantage

  7. Chris Fraser 3 years ago

    They’ll never pay on wholesale value … harvest and consume your own. If they want distributed batteries and inverters in my urban house for their buffering and FCAS purposes, they can pay me … a lot.

  8. stucrmnx120fshwf 3 years ago

    This is because solar has been so successful, in the old days, we had a problem, that the grid would be under strain, on a hot day, due to air conditioning systems, drawing too much power. Now it’s exactly the opposite, on a hot day so much solar power, is being fed into the grid, there’s an oversupply, so the feed in tariff, is becoming very little. Hence the popularity of household power storage, the original Powerwall sold more than they could manufacture, Powerwall 2 at twice the kWh per dollar, will sell like hot cakes. Then there’s liquid silicon, with heat photovoltaic systems, to convert the heat back to electricity, also electric vehicles need 1/10 th of the maintenance and fueling costs, as they approach the cost of a normal vehicle, they’re going to out compete explosion based transport. There’s a fraction of the parts, in an electric vehicle, as battery cost per kWh goes down, with economies of scale, it’s hard for the smog based vehicle, to stay competitive. At 1/5 th of the energy efficiency, the CO2 vehicle, can’t succeed medium term, Tesla will increase battery production from 1 GW per year, to 10 GW per year, before even the roaring twenties begin. The gigafactory doubled world battery production, when it went into operations.

    Bye bye soot, we won’t miss you, with cancer the no 1 killer, at 2,500 times our energy use, 25% of Australia’s deserts, can make a trillion tons of liquid hydrogen, waste product oxygen. High rise agriculture, waste product oxygen, extracts carbon dioxide, so no CO2, O2 waste from LH2 production, vertical farming waste O2, extracts CO2, that’s XCO2+O2+O2, XCO2, less soot and smog. Even simpler cheap solar means 2O2-2CO2, breathe easy once grimmy city, even on a hot windless humid day, in a mall, with a car park next to it. Welcome to the 3rd industrial revolution, around a century after the 2nd IR, with it’s Model T, electricity, defeating infectious disease, with sewerage treatment works, clean water, garbage disposal, ice boxes, refrigerated warehouses. Now we clean up the air, last time, we cleaned up the water and food, last time infectious, now cancerous diseases, drastically reduced, 2nd+3rd IR’s, little more than a century apart. Once again we tackle the no 1 killer, in the cities, where most people live now and the quality of life, standard of living soars.

    • Kenshō 3 years ago

      Sounds good, though what leads to your confidence batteries, EV’s and a renewed focus on agriculture are solving our problems, when we appear to be running out of biodiversity? Is this trajectory based upon theory or what we’re currently doing in our capacity building? Are you suggesting there’s going to be a roaring 20’s, meaning 2020 to 2030? Sounds like an energy utopia.

      • stucrmnx120fshwf 3 years ago

        Well if the current trend, established for roughly a century, continues, it’s inevitable, simple math, as for high rise agriculture, cheap solar, gives us the power, to desalinate Ocean water. We add some largely recycled nutrients, with the largely recycled water, in an aerophonic spray solution under the plants roots, provide the plants with exactly the spectrum of light, they thrive on. They suck CO2 out of the atmosphere and provide the cheap food; if food, transport, and electricity get cheaper, the middle class have more disposable income and retake the media and politics.

        Every industrial revolution, solves the main problems, of their society, coal stops the forests from being striped, oil and electricity, free the city air from steam trains and gas lighting. As to biodiversity, the need to strip the Amazon, to provide hamburgers, going away, because of cheaper food, preserves the current biodiversity. Freeing the land from monoculture cropping, allows the forests of Africa, even Asia, certainly Latin America, to keep; even resume their biodiversity, including on the grazing plains.

        If we look at say science fiction, roaring twenties 2020, Grand Depression 2030, WW3 2039, but the way to circumvent the cycle, is to reinitate the age of exploration. Fortunately many of the 3rd industrial revolution powerful, are the same people who are big on space, no cloudy days in space, no night, excellent for smelting, building accommodation. Freight moves with less gravity, no advanced civilization, ought to live on a planetary surface, a million asteroids, a billion comets, 36 moons, 8 to nine planets. Biodiversity is secure, in a third industrial revolution, not in a continuation of the second, where’s our high rise Parks, without normal, inevitable change.

        • Kenshō 3 years ago

          Allot of great ideas here and I feel it’s important to allow action to emerge out of our current capacities and strengths – to be in the “present moment”. Do you meditate? Your mind is over cranking without being in touch with toes on the earth. Being in touch with the earth, being sensory, is a powerful way to bring stability and sharpness to the mind.
          So I’ve just purchased a new lithium battery pack and a line trimmer/brush cutter that can fit 2x 5Ah batteries. Very powerful. Does a 1000m2 property. I’ve also got a new lithium angle grinder and I can sharpen my mower blades to make the grass offcuts like dust, conditioning the soil, readying it for future gardens. One day were hoping to largely replace grass with an urban permaculture food forest. On the negative side, I got in trouble for moving a tomato plant in a pot without noticing it was tied to a stake, and got accused of being too goal focused and insensitive like Trump. So the planet will have bumps along the road.

        • Kenshō 3 years ago

          Sorry about my previous comment. I didn’t see your profile. I’m a welfare worker.

          • stucrmnx120fshwf 3 years ago

            Well life goes on, I’ve just spent the last 6 months, about 1% of my life, cleaning up a park, that’s a short walk from my place, so I have actually done something worthwhile, with a part of my life. Before I came to the retirement village, in NW Tasmania, which has lovely Ocean Views, I used to cycle along the lake from Tuggerah to the Entrance, from my locker at the station. I had some nice spots, along the way, that I also used to clean up, as well as at Budgewoi, on the Central Coast of NSW, just got myself a Nexus 6 phablet. I’ve had a Nexus 9 tablet for 18 months, since I retired, I’ve found the mobile devices less work, but I have internet catch up TV, as well, (Roku, Telstra TV,) I keep on falling asleep, when my favorite shows are on.

            Very good energy efficiency here, my last bill was $120 in credit, it’s the renovated seals, insulated curtains, roof insulation, it’s not a big place, I use microwave, LED screens and bulbs. I’m only going to put in $8.50 a week for the next 9 months, that last bill, was the winter bill, down here that’s usually the worst. Indoor, outdoor, reverse cycle air conditioning, works really well, they call it a heat pump here, interesting as a welfare worker, you use the grim reaper, the lord death, as your icon, lol.

            Holiday in sydney soon, only for a week, had a lovely river cruise recently, good to see all that light rail and Australia’s biggest public transport project, the NW Metro, going on in Sydney. Love seeing all those high speed Bullet train tracks, going in Globally, Japan has started construction, of its magnetic levitation tunnel network, China is testing on a 5 km track.

            Check out Tony Seba’s Clean energy Disruption, start with YouTube, then move on to his ebook, I’m not the only one, who see’s the potential. Trump won’t stop the 3rd IR, but with the Presidency, Senate, House of Representatives and the Supreme Court, he’ll give it a big try.

          • Kenshō 3 years ago

            Thanks for all your work with the parks. Much appreciated. Tuggerah and the Entrance is a very beautiful area. I was originally trained as an elect tech in the army, so we’ve got a little overlap in careers. I went away from tech stuff so much so, I only recently updated updated from a computer running windows xp. I retrained in social work, psychotherapy, meditation. My energy efficiency is good with appliances though poor with the old house, though its had the easy retrofits. Despite the 1.5kW PV/storage, my last bill was $290 for three people, mainly due to the reverse cycle air con. All the buildings here are small and modest and people live simply, so that’s the main reason the bill is modest. Like yourself we’ve got laptops. It’s a bit difficult explaining why I use the grim reaper although those around me think it suits. It’s symbolic. Death is important to me in terms of cycles of endings and beginnings, and perhaps like yourself, there’s been many endings in my life. I wouldn’t have wished some of the changes though in hindsight they led my awareness into new territory. I notice you’ve mentioned the Hindu culture. I have a brass Shiva on my shelf. I like the symbolism. Circle of life in a ring of fire. Sense of seperate self conquered. A dance of ecstasy. Very powerful religious symbol. Ok thanks will check out Seba’s work. I’m not concerned about Trump at this stage. I’ve given a view of his character here
            https://reneweconomy.com.au/trump-ugly-for-world-ugly-for-climate-ugly-for-clean-energy-37088/
            and here
            https://reneweconomy.com.au/coal-up-renewables-down-as-markets-weigh-trump-win-86393/
            I’m more interested in how he responds with his new experience over time and how he develops his perspective, guessing he will be thinking on his feet as information comes in. I remain modestly optimistic. What you reckon? https://uploads.disquscdn.com/images/237b7b8999306d3be6a29733cc9abdf0be68edd812fca34dfc3f85ca9b3e15bf.jpg

          • stucrmnx120fshwf 3 years ago

            Ah, a Chola Bronze reproduction, of Lord Shiva, creator and destroyer. I’m actually a Shivite myself, used to have one myself, I should get another one, one of these days. Beautiful work and symbolism.

  9. aussiearnie 3 years ago

    So the premise of the ESC report is that since there is excess capacity in the networks the value of solar to the networks is low, taking the sunk (over) investment in the networks as a starting point. What if we turn that on its head and start evaluating the value of the networks, taking the sunk investment in solar generation as a starting point?

  10. DJR96 3 years ago

    Hmmm. So the premise here is that if an area of the grid is up to date and able to provide all the power required, there is NO value in adding renewable generation or even storage to that area. There is only a little value in renewables IF there is grid constraints in supply.
    Talk about short term narrow thinking.

    The distribution grid needs to be thought of as a means of “re-distributing” energy from any generation source to any customer. Not just a means of getting energy from a central generator to customers.
    Until the industry acknowledges that we’re going no where. (except off-grid perhaps)

    The irony is that the grid is quite capable of doing this already. There are some whole suburbs (feeder lines) that actually feed excess energy back to sub-stations already on good solar days. No problem. It gets used on other feeders. A whole sub-station could potentially feed energy back into the transmission lines, still no problem despite what we’re told otherwise.

  11. Adam 3 years ago

    My experience with energy companies was dishevelled a long time ago, after two actions required by the Victorian ombudsman. The energy company lost both times. While I can’t go off-grid in a city like Melbourne, I am certainly looking forward to shafting off the gas connection within the next couple of months.

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