There has been a lot of discussion recently about the poor rate paid for exported energy from a solar PV system, either at state government regulated rates, or voluntary offers by energy retailers.
In NSW there are energy retailers that fail to offer any credit for exported energy despite the fact that IPART has concluded a benefit to retailers of 6.6 to 11.2c/kWh. If retailers are not paying anything for that energy, it is a windfall profit.
There is clearly a failed market in distributed energy.
As an example, I know a commercial solar PV system owner who is prepared to switch off his 75kWp system on weekends, rather than “let the energy company get it for nothing”.
The penalties for breaking his current supply contract exceed the predicted value for exports at the rate offered by other energy retailers. He would love to sell his excess energy to the electricity users down the street and across the town, but there is no mechanism to do it, despite the fact that the electrons already flow to those locations.
The success of solar PV owes a great deal to people’s embrace of the democratisation of energy – becoming empowered by generating your own energy. We are missing a truly competitive market for excess energy.
With storage, defection from the grid is a reality not too far around the corner. We are all familiar with the possible death spiral of traditional centralised energy generation, with articles reaching fever pitch in recent weeks on the basis of the European experience and predictions for the US market.
Here in Australia, a great deal up public money has been sunk into the grid; there must be a way to utilise it effectively through the transition to a grid focussed on distributed generation.
Peer to Peer
Imagine a system where one customer could sell energy to another customer, via the Distribution Network Service Provider (DNSP) who “clips the ticket” for transferring the energy – Peer to Peer Energy Trading.
Anyone with a smart meter could join the market as a buyer or seller. Customers could set their buy and sell rates for energy for distributed energy via an online portal. At any moment a smart meter knows how much energy is being imported or exported, with a data system connecting the 2 or more peers at appropriate intervals, logging the traded energy, and registering a fee for the transportation of that energy.
If that sounds difficult to do, remember this is an IT and accounting exercise (the physics is sorted already) and think about Peer to Peer file sharing with such protocols as BitTorrent file sharing, with hundreds of peers connected to each other in any one file sharing exercise. It would be a piece of cake for a handful of the right IT boffins.
The DNSPs would still be making money charging for network access to the traditional centralised generation market; people will still pay their fixed charges for connection to the grid on their traditional electricity bills.
But here’s where the utility could get smart; with detailed network maps, the distance between any two registered smart meters could be known, and the rate charged could be proportional to the distance and networks assets between the two points.
Perhaps a rate for kWh.km ? This may have to be a regulated schedule, given the effective monopoly at play. Already there would be a financial incentive for buyers and sellers to be as close to each other as possible, to minimise the cost of the energy transaction, but it would also acknowledge the physical losses that occur as the distances increase.
The key point here is that the DNSPs get a chance to make some money out of distributed energy, on top of their usual income stream, at the same time opening up the market for distributed energy to customers currently hamstrung by a handful of poor offerings for their excess energy.
The NSW case
In September 2013, I attended the NSW Energy Security Summit, hosted by the NSW government. The first half of the day was all about CSG development and the apparent scarcity of a commodity that from what I read is going to get more expensive quickly.
I’m not quite sure about the logic of trying to overcome the rising international gas price by extracting as much as possible as quickly as possible, but I’ll leave that to the gas experts.
The afternoon sessions were much more interesting, one of which involved the future of the energy grid, and the best ways to utilise it, chaired by Rob Stokes MP, a politician clearly across the issues at play. There were representatives from energy generators, retailers, distribution & transmission networks, their associated bodies, academics and a couple of PV minded folks such as myself.
After some intense discussions, it was apparent that everyone agreed that all technologies should be able to access the grid and compete to deliver energy at lowest cost. It was also agreed that the regulatory framework should allow for market investment & innovation.
The three DNSPs in NSW, Essential Energy, Ausgrid & Endeavour Energy are all now merged under the umbrella of Networks NSW, still owned by the NSW government.
There are currently about 220,000 PV customers in NSW with 143,000 of them gross metered under the NSW Solar Bonus Scheme. Most of those customers are heading for a rude awakening in December 2016 – only two and a half years away, when the Solar Bonus Scheme ends & they will suddenly receive a dramatic increase in their electricity bill.
They are all, at the same time, going to want a decent Feed in Tariff, or a new NET meter installed, to get full retail value for self-consumed energy.
Perhaps they would pay to have a smart meter installed, to get access to a realistic market for excess energy?
Peer to Peer energy trading: It’s an IT & accounting exercise, with some regulatory hurdles thrown in for good measure.
Who will be the first DNSP to unlock the distributed energy market and profit at the same time?
Here’s an opportunity for Networks NSW – could they be the first?
Geoff Bragg is chairman of the Solar Energy Industries Association, NSW, and a director at the Australian Solar Council.