Solar export tax: An unhelpful “solution” to a problem that’s already been solved

A milestone decision announced this week will require electricity distribution networks (local poles and wires companies) to support energy exports from household rooftop solar systems, batteries, electric vehicles and other consumer energy devices.

IEEFA notes the Australian Energy Market Commission’s (AEMC) new rules are two steps forward, one leap backwards for electricity consumers.

AEMC has made it clear that export services are part of the core services to be provided by distribution networks and that revenue determinations should reward and penalise network companies for how well they do this.

IEEFA does not, however, support the introduction of charging consumers for exports to the network as there are technical solutions which are already being put in place.

In addition, quantitative evidence to make the case for this change is absent, and the nature of future markets for distributed energy resources (DER) has yet to be revealed.

It’s vital that distribution network companies support the two-way flow of electricity.

However, the AEMC has created conditions for solar households and people wanting to export from their EVs or batteries to be charged unnecessarily for this flow.

The rule maker has endorsed an unhelpful solution to a future technical issue that has already been solved by network engineers.

At very low cost (less than 1% of its regulated revenue – $32m out of a total $3.9b), SA Power Networks have developed dynamic operating envelopes to ensure that exports into the grid from solar, EVs or other devices will not breach any network capacity limits.

Dynamic operating envelopes (or ‘flexible exports’) adjust the export or import of electricity from each consumer’s premises on a 1 or 5-minute basis so that there is no strain on the grid.

What’s more, comparable software and systems for dynamic operating envelopes are currently being trialled in South Australia, Queensland and New South Wales.

The AEMC claims ‘pricing can enhance’ this technical solution, but it’s an absolute solution for compliance with network technical limits.

Most importantly, given the need for evidence-based rule-making in the National Electricity Market (NEM), the AEMC has failed to cite any quantitative evidence for its claim that ‘network capacity is being exhausted’.

All we have is the AEMC’s statement that:

‘Those who own the solar panels are being stopped from exporting – depending on how crowded their part of the network is. This has already happened in South Australia and in some parts of Victoria.’

There are no numbers and therefore no clarity on the nature of the problem.

Distribution networks are currently solving any rooftop solar issues with just a small proportion of their revenue. This indicates that the actual cost of incorporating rooftop solar into the grid is low, and raises questions around the need to add solar export charges onto consumer bills.

AEMC’s pricing reform is premature because we don’t know what future markets will look like, especially in terms of how aggregated distributed energy resources (DER) will be able to participate (or not).

The AEMC’s rule brings in a network charge before the potential revenue opportunities are known.

Even as a starting point, the Energy Security Board’s post-2025 reforms, which includes a workstream on DER and two-sided markets, haven’t been finalised and agreed to by Ministers yet.

Energy planners need to encourage households to export from their solar, batteries and EVs at certain times of the day to optimise the value of DER for all electricity system users.

Slapping a charge on households is counter-productive.

It’s time to focus on the opportunities these consumer devices provide, rather than seeing problems, particularly when there is not quantitative evidence available to support that perspective.

Author: Dr Gabrielle Kuiper, DER Specialist and IEEFA Guest Contributor.