Rooftop solar suffers another blow as utilities switch tariffs

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Changes in network tariffs are killing rooftop solar as a cost-saving option for businesses, but may accelerate the push to combine solar and battery storage. The networks are being accused of using “cost reflective tariffs” as an excuse for another revenue grab.

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Electricity consumption rates for business users in South Australia have been slashed in a move that will make rooftop solar less attractive to consumers, but could provide added incentive for consumers to adopt both solar plus battery storage, reducing their reliance on the grid.

The decision by SA Power Networks to slash the electricity usage component of its network charges to just 3.3c/kWh, just one-fifth of its previous peak rate, and impose hefty “demand charges” is part of a range of measures taken across the country that the solar industry says disadvantages rooftop solar.

Tindo Solar installation in SA

The moves are part of a massive battle – both in Australia and overseas – between old and new technologies, as incumbents seek to protect the revenues from existing business models and old technology, and continue to resist change to new business models and new technology.

Last month, SAPN sought to impose a special fee on solar households equivalent to $100 a year, although this was rejected by the regulator. Across the country, fixed tariffs are being increased, demand charges introduced, and special metering fees added which increase the cost of solar installations. Elsewhere, the price paid for exports of solar output back to the grid are being slashed – even though the significant value of rooftop solar is being recognised in the US – and in some cases solar systems are not allowed to export into the grid.

The SAPN changes, which come into effect on July 1, introduce a new tariff and metering system for businesses using more than 160MWh a year, although the new tariff design may be progressively introduced to small business users and households.

SAPN says the new tariffs are part of the new “cost reflective” tariffs that are being encouraged by regulators. But the solar industry says that in many cases the notion of “cost reflective” is turning into a meaningless label and is being used simply as a grab for revenue.

SAPN tariffs demandThe SAPN usage charges for its network have been slashed to just 3.3c/kWh, compared to 16.4c/kWh for peak usage under the old tariff.

The new supply charges (see table on the right) translate to a minimum bill of around $4,100 a year, just for connection. That is nearly three times the previous fixed supply fee, according to installers.

“It’s entirely predictable,” said Rob Passey, from the Australian PV Institute, which argues that cost reflective tariffs must be what they are labeled as – truly cost reflective. It argues that these tariffs, proposed by SAPN, are not.

“Their focus has always been more on maximising revenue than on being cost-reflective,” Passey said of utilities in general. “Now that they have been allowed to get away with claiming that tariffs are cost-reflective when clearly they aren’t, their response will be to see how far they can push it.

“Of course, this will backfire on them because the broader they make their demand charge the more likely people are to install PV/batteries and reduce their electricity use.”

That’s exactly what installers are predicting will happen. “Initial feedback from the market is that this will put the brakes on solar-only arrays for the commercial sector,” said Peter Elliott, from Sunstainable. “But those customers are already seeking pricing on battery storage to overcome these changes.”

While solar-only installations may now look much less attractive, solar plus battery storage is starting to look much more interesting, because the solar output can be stored to ensure that the demand benchmarks are not exceeded, although this will depend on the usage patterns of the household or business consumer, and on the set up of their solar and battery storage installations.

This, in turn, would lead to a lot less electricity being drawn from the grid. Which, in turn, potentially leads to what people describe as the “death spiral”. It is exactly what the modern “how to” texts advise not to do.

It’s ironic, because South Australia’s state government and the City of Adelaide are looking to encourage storage in more positive ways, offering limited up-front incentives to homes and businesses looking to install battery storage.

Battery storage – and other forms of storage at grid level – is seen as a key element of integrating renewables and managing peaks in demand.

But network operators and pricing regulators are still struggling to find a formula that encourages installation of storage as an incentive, rather than a penalty, and in a way that can reduce investment in poles and wires and grid upgrades.

The way that demand tariffs work, businesses are charged according to the most amount used in a single 30 minute period during the month. So even a low consumption user that happens to have all its equipment switched on at the same time for one short period will face a significantly higher bill.

There is a vigorous debate about how demand tariffs are structured, centred around the definition of “peak demand”, which can often stretch from 12pm to 9pm for the purposes of billing, but which may actually only occur in the early evening.

Rooftop solar – which accounts for nearly 7 per cent of total demand in South Australia over the year, and has been installed on more than one in four homes – has already pushed peak demand back several hours in the state, from the afternoon to the early evening.

SAPN has even admitted that solar PV has added stability to the grid at peak times. In the US, these factors are taken into consideration to propose a much higher tariff for rooftop solar. In Australia, rooftop solar is rewarded with minimal prices for exports back into the grid.

There is also controversy over the use of declining block component of the demand bill. The highest rates are charged for the first units of consumption, Heavy users actually pay less for the excess capacity.

The APVI has argued strongly that the demand charges should be based on consumption on the “network peak”, rather than individual usage peaks, because they may occur at totally different times.

SAPN, in its explanation to consumers, says that the demand charges are designed to try to reduce the size of the “highway” needed to meet peak demand. It compares the grid to a 10-lane highway built to meet peak demand. Only two lanes may be used for most of the time, but the full 10 lanes for just a few hours on just a few days a year. The network is built – and the costs paid by consumers – on the basis of these few hours.

SAPN says solar PV and battery storage may reduce the level of demand reached at a consumer’s site, but may not be able to be relied upon to consistently lower levels of demand.

“For example, if sunny days line up with peak demand days, then solar panels may enable the actual peak or shoulder demands to be lower in those months. However, in other months, there may be cloud cover on peak demand days resulting in less energy generated by your panels and therefore higher demand on the network.

“Battery storage may enable a more reliable demand reduction, although this will be highly dependent on how your installer configures your system. “

It also warns that consumers making alterations to their site – such as adding solar and storage – may result in a change in their tariffs, and to metering charges, which are also being lifted, as they are in other states.

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34 Comments
  1. Neil Maguire 4 years ago

    We have to get over to Australia ASAP. JuiceBox Energy is coming soon…

    • Craig Allen 4 years ago

      Details, give us details. When, where, what will it cost?

  2. JustThink4Once 4 years ago

    Just wait till people disconnect on mass and the grid charges them just for the privilege of having unused power on the street.

  3. Chris Peters 4 years ago

    Death spiral hear we come. Hear we can see deadly embrace of dumb politicians and even dumber power networks. The advantage is that these greedy troglodytes will disappear more quickly. Good riddance.

    • Maurice Oldis 4 years ago

      “here” even!

    • mick 4 years ago

      come on over since I got out I can read shit like this and laugh quite liberating really

  4. Alen T 4 years ago

    Monthly demand charge for the peak 15/30-min interval, as well as a rolling year capacity charge for one peak event, make the economics for battery storage much more attractive in my opinion. The savings/benefits are much simpler to compute, simpler to understand and therefore a lot easier to get management on board. Demand side management using battery storage should therefore become the key reason for batteries in businesses, benefitting both them and the networks. This may slow uptake of PV systems, but significantly incentivise uptake of batteries. Increase demand leading to hopefully increased supply, and eventually lower battery prices.

    • benn 4 years ago

      I agree, while a charge based on your demand at the time of the network peak (or better still, individual peaks on local feeder, zone substation and transmission network) would be more cost reflective, a demand charge based on your own monthly and/or annual peak demand is more conducive for PV and storage uptake.

    • Ian 4 years ago

      A cheaper option than storage could be petrol or diesel driven generators. If a company had a very occasional demand spike, they could hire or buy a generator to just cover that requirement.

      Also heating and cooling is a large proportion of many companies’ electricity requirement. Hot water storage and ice storage refrigeration should come into their consideration. – load management in other words.

      The demand tariffs may have one unexpected benefit, namely, encouraging companies to seriously look at their energy usage and finding ways to avoid peaks and troughs of demand. As alluded to above, put demand limiters on the demand side of the electricity meter so that a peak demand cannot occur. Have some sort of generator/ storage to supply additional power when peak demand is unavoidable. Store heat and cold and generate this when electricity demand is low. Install solar to match the daytime peak electricity consumption.

      • Peter Grant 4 years ago

        I so agree Ian, this will create a strong incentive for generator plus battery backups perhaps integrated with some battery/solar smart ups arrangement. There are quite a few variables to estimate demand charge profiles but 100kVa demand would not be an unreasonable estimate for a business just above the 160mW threshold – lowering this to 50kVa would save about $6300 pa. Large generators are now going cheap in as they come off mine sites. Moreover a solar/generator supplied reduction in total consumption might drop the business below the 160mWh and so create further incentives for solar installation. At a microeconomic level this kind of strategy has the potential incentivise business choices that reduce economic efficiency – the network may struggle getting it through the regulator.

        • Mark Roest 4 years ago

          Hello Peter and Ian,
          I don’t see mention of battery pricing in Oz, but let’s guess $500+ per kWh for battery only. Against this price I could see generators being competitive in the short run, but consider the possibilities if the batteries cost less than $200 per kWh (US), and your electricity is free after you pay off the financing! Wouldn’t you really feel better in that setup? And while you could buy a Tesla, you could also ask Edison2 to export the battery version of their Very Light Car, and have a fun machine that goes as far as you need to on a tiny amount of battery power. The solution to the utilities’ death wish is to create a community-wide storage system two years from now, after putting solar in now and daring the utilities to mess with you — just show them (and the regulator) the plans for the battery system for the community, and point out that the price per unit, if designed well, could be way lower than it is for individual families.

          • Peter Grant 4 years ago

            Hi Mark

            Yes I agree that battery storage appears to be compelling over the (rapidly shortening) medium term – and is the likely the path of the future. However, using a generator for peak demand in a stand alone system, or (as in this case) to reduce demand charges, is compatible with improving the economics of renewable penetration and grid independent supply options for volumetric supply. High fuel costs make generators an uneconomic alternative for gross volume supply from the grid or solar in a commercial setting. In addition to backup services, a generator may be economic today to extend a battery (or thermal) storage capacity, to shave demand charge penalties, or for intermittent bulk supply – especially at the grid prices given above. I suppose I wanted to posit that there there are economic options available right now for a medium commercial user presented with these charges.

  5. Neil Frost 4 years ago

    The more it costs to be connected to the grid the more incentive to leave the grid. They are only hurting themselves in the long run.

  6. BsrKr11 4 years ago

    You need an intelligent IPS (INTEGRATED POWER MANAGEMENT ) system to be able to program the ability to shave the demand charges. Also to cover those weeks with low solar irradiance from storms etc you can have a generator sitting in the back that the IPS AUTO fires up charges the batteries to ensure the demand bench marks aren’t breached…so you’ll need people who know what they’re doing to set this up correctly and monitoring will become essential

  7. john 4 years ago

    I knew this would happen but 3.3 c KwH is a total joke.
    This of course mated with a huge charge for Demand Power.
    I can see a lot of businesses with good roof spaces utilising it with battery backup and disconnecting. However for the other people with not good solar assets they are going to pay a lot a very poor outcome I feel.

    • Mike Dill 4 years ago

      Total disconnect is not yet economically feasible in most places. Solar plus storage plus a back-up generation system gets you really close, and is reasonable if the wires are not already in place. Getting your average bill down with insulation and efficiency is the first step.

      • john 4 years ago

        I agree on insulation and efficiency as first steps.
        Replacement of high power demand lighting with LED for a start.
        For a business with day only power usage and large roof space the demand charge would be reduced by using solar.
        As to the benefits then this becomes a balance between lowering the demand charge however as a higher scale is used at the lower end a not very easy solution is achievable without battery backup for night security and the minimum power demand for an office not being used.
        Clearly the whole idea of the pricing is to get rid of solar.

        • suthnsun 4 years ago

          3.3c is a total joke, the wholesale price is more than that at most relevant times, how can this tariff structure be construed as cost reflective?

          • john 4 years ago

            The whole idea is to stifle solar and put in a charge system that is like water for instance.
            It may be viewed as a supply charge then for extra a small usage cost.

          • Jonathan Bocking 4 years ago

            The 3.3c/kWh mentioned in the article is a component of the network charge only. The energy charges would be in addition to this (which would be at least the “wholesale” price you are talking about).

          • suthnsun 4 years ago

            So you are saying there is a separate additional metered charge? Do you know what tgat is Jonathan?

  8. David Rossiter 4 years ago

    Time for an independent inquiry into solar feed in tariffs???

  9. lin 4 years ago

    There are enough people in SA with solar panels on their roofs to make this an election-losing issue.

    • Miles Harding 4 years ago

      So the utilities have been careful to only mess with businesses that are too small to interfere politically, this sort of skewed billing will likely be good for wesfarmers’ big retail operations, but bad for the local supermarket or bakery.

    • john 4 years ago

      25% have solar

      • lin 4 years ago

        And when a 5% swing is a landslide, even half of those with solar changing their vote would change the landscape dramatically.

  10. mick 4 years ago

    im doing fine thanks

  11. Miles Harding 4 years ago

    The jerks that run these networks simply have to learn to work with (and for) their customers.

    They exist to serve the needs of their customer.

    • john 4 years ago

      No longer this is not a service it is a commodity
      Welcome to the new age

      • Miles Harding 4 years ago

        I fear you are correct, making the ‘customer’ (or taxpayer, for that matter) a big cash cow that exists to be fed upon by the utility vampires.

        I guess the next step is exsanguination.

  12. john 4 years ago

    Tedious I know
    Charge nothing for usage and charge heaps for connect.
    Make it look good by having a sliding scale for usage against connection so the company can say we are looking after low usage.

  13. lin 4 years ago

    I wonder if this move to entrench the economics of centralised generation has anything to do with the nuclear power royal commission?

    • mick 4 years ago

      I watched the interview when wetheral announced the commission,he was asked why would you do something like that( given that rann went to court to stop sa being the nuke waste dump for Australia and other clients) answer” im worried about climate change”

      • lin 4 years ago

        So worried that he is trying to stop solar installations. Sounds about as reasonable as Abbotoir’s anti-wind whinging.
        Sounds like you can’t get elected in this country unless you are bought, owned or have a closet filled with skeletons.

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