Australian network operators are being accused by the solar industry of unfairly targeting Australia’s 2 million solar households to justify changes in tariff that are designed to protect the “gold plating” of the networks over the past decade.
They accuse the network lobby of seeking to use tariffs to justify the doubling of the cost of the grid in anticipation of an increase in demand that never occurred – and they say the networks intend to do this by demonising solar, now recognised as the biggest challenge to incumbents in more than a century.
The Energy Networks Association gained a lot of publicity in mainstream newspapers and on radio on Wednesday for their push to introduce so-called “demand” tariffs, which they said would be more cost reflective for consumers.
That is not at dispute. But what has shocked the solar industry – although not surprised it – is the claim by the ENA that “research” found that non-solar households would pay $655 in annual cross subsidies to solar households – by 2034.
“These are simplistic conclusions from a dodgy report,” said John Grimes, the head of the Australian Solar Council. He, like others in the industry, is concerned that proposed changes by the Australian Market Operator will give the network operators carte-blanche to splice and dice the tariffs.
“It is like putting the fox in charge of the hen house,” Grimes said. “This is a self-serving report aimed at preserving the profits of a few large power companies while pretending to act for consumers.”
The solar industry actually agrees with the concept of demand tariffs – which reflects the maximum usage of a consumer – as long as it is calibrated correctly and fairly. In fact, it is the solar industry which proposed them. But it is appalled with the ENA’s branding of solar as the major problem, and disputes the numbers produced by the lobby group’s document.
The ENA push is typical of what is happening in the industry. AGL Energy has described solar tariffs as “a scam”, Origin Energy describes solar households as “free-riders” on the network. Ironically, both companies are introducing initiatives to install solar, but want to do it under their rules, and not allow new competitors in the market. Tariffs are an important part of that control.
At the same, individual network operators recognise the impact and the benefits that solar will bring. Ergon Energy is now installing unsubsidised battery storage because it is cheaper than poles and wires and helps integrate locally produced solar. It envisages a series of solar-based micro-grids, as do network operators in WA and South Australia. Indeed, South Australia’s network owner has delivered an extraordinary forecast for the uptake of solar and storage.
Still, the network lobby is in for as much as it can get.
The Australian PV Institute (APVI) said it is pleased that the ENA agrees with its recommendations from over a year ago that network pricing should be cost-reflective, and that a tariff with a demand charge component is the best way to do this.
“Tariffs with a demand charge will reward the owners of PV systems for reducing peak demand, and will encourage households to have PV systems that face west and install battery storage to reduce demand peaks even further,” said Rob Passsey of the APVI, which is concluding a three-day conference at the UNSW on solar technologies. Solar’s disruptive influence on the networks was a major theme of the papers presented, and the discussions in the corridors.
“The APVI is concerned however that the ENA is implying that households that install PV systems are imposing costs on other customers,” Passey said.
“The costs the ENA refers to are due to reduced payment of network tariffs by owners of PV systems, but most distribution networks in Australia absorb these costs themselves and cannot pass them onto other customers.
“This higher absorbed cost is presumably why the ENA is targeting PV. Of course, this reduced payment of network tariffs is also caused by any other activity that reduces electricity use, including low flow shower heads, efficient lights and more efficient appliances.”
Passey noted that the ENA states that they want to be able to “assign customers making new connections or upgrading their existing connections to a cost-reflective network tariff”.
He said this meant that any household who installs a PV system will be required to move to such a tariff, however households who install air conditioning systems will not – despite both the ENA and the Productivity Commission identifying air conditioners as the main culprit for increased electricity prices.
Indeed, as we have noted before, the network lobby has not been fussed by cross-subsidies in the past, as long as it resulted in greater demand for electricity, higher peak generation prices, and an OK to build tens of billions of new and upgraded networks – as was the case with air-con.
Muriel Watt, a consultant with ITPower and former head of the APVI, said there were numerous cross subsidies within the grid – from city users to rural users, from daytime users to night-time users – that was the reason why it was built.
“They currently want PV to be doing all the work, and say it is coming in and wrecking the grid,” Watt told RenewEconomy at the conference. “They do not want to change the say they manage the grid, but they have to, because everything that is happening is changing the grid.
“This needs to be a discussion about how tariffs are set, and how the grid is managed. Things have changed. Tariffs have to be set fairly and in a technology-neutral way, so you don’t try and penalise PV.”
The submission by the ENA comes just a day before state energy ministers meet in Canberra as part of the COAG arrangements. Three states – Queensland, NSW and Western Australia own their grids and at last two of them are trying to sell them. So they are keen to protect the value and the investment.
The, of course, raises serious equity issues, and not just between solar and non solar households. The cost of delivery is now half the cost of electricity, and is encouraging the uptake of technologies such as solar and storage. Yet consumers get little say.
“The fact remains that small electricity consumers do not have a seat at the decision making table,” Grimes noted. “They find out about ‘electricity sector reform’ when they open their power bills each quarter. And it is never a pleasant surprise.”