The following article was selected as the winner of the 2019 Gill Owen Essay Prize, which honours the memory of Dr Gill Owen, who was a tireless campaigner in the fields of energy efficiency and social equity. Read more about DR Owen below.
To Pro-sume or not to Pro=sume
A decade ago, less than 100,000 rooftop solar systems had been installed in Australia. Today, there are over 2 million systems, and a host of other small-scale, modular devices for storing and managing energy used by Australian households.
If the last 10 years have demonstrated anything, it is that the transformation of our energy system from a highly centralised model to a decentralised model will be swift.
Much of the focus of our energy transformation has been on technology. Distributed energy resources (DERs) like rooftop solar have enabled just about anyone to generate electricity, rendering the grid a plug and play platform for users to configure.
Getting new technologies to work with the existing system and keep the network operating is an engineering feat that needs critical attention. However, an equally important consideration in discussions about our changing energy system is the changing relationship between service provider and consumer, and the implication this has for social equity.
Dr Gill Owen recognised that energy policy is social policy and that the application of new technologies in the energy market had implications for fairness. Her thought leadership on the adoption of smart meters speaks to this. Owen outlined how smart meters and dynamic pricing could benefit consumers and reduce peak demand, but could also disadvantage lower-income households.
She knew that a one-size-fits-all approach to energy policy was unjust, and advocated for targeted policy responses that accounted for social differences.
A lot could be gained today by applying Owen’s insights to the rapid growth of DERs and the rise of ‘prosumers’. Prosumers are a new actor that both produce and consume their own energy, and they are most clearly represented in Australia by households that generate electricity from rooftop solar panels.
A staggering 20 per cent of households in Australia are prosumers, using locally generated electricity in their homes and feeding excess energy into the grid.
For the most part, prosumers and their uptake of DERs are positive developments that are supporting our transition to a low-carbon energy system, reducing the cost of electricity for many households, and demonstrating opportunities to curb peak demand.
By generating and using energy locally during peak periods, costly grid upgrades can also be avoided.
However, when we look closely at who prosumers are and who they aren’t, and their distribution across the network, there are some emerging inequalities that need to be addressed as the transformation of our energy system scales up.
Solar haves and have nots
Overwhelmingly, households with rooftop solar are made up of people that own and live in a detached or semidetached house.
Statistical analyses by Newton and Newman (2013) and Sommerfield et al (2017) in Australia both found that dwelling type and tenure significantly affected prosumer activity, with home ownership and living in a stand-alone house positively influencing the take-up of rooftop solar.
In contrast, places with high concentrations of people who rent and live in apartments were found to have lower rates of solar installations.
The inequitable rates of participation in prosumer activities like installing rooftop solar were noted in the Australian government’s 2017 Finkel Review, which stated:
“[Some] consumers have limited opportunities because they rent or occupy high-density buildings. It is important that these consumers are not excluded from the possible benefits of the energy transition.”
Renters and apartment dwellers haven’t been intentionally excluded from prosumer opportunities. In principle, these groups could have applied for rebates and taken advantage of the generous feed in tariffs that stimulated and supported the growth of small-scale solar.
However, in practice, people that rent and live in apartments aren’t on an even footing with owner occupiers of houses. They face a range of regulatory and market constraints from bureaucratic strata committees to information asymmetries.
While government does fund innovation projects and trial programs to support the development of new business models, these rarely scale up as a result of the prevailing constraints. An example of this is the uneven power dynamics between landlords and tenants in the rental market.
Enterprises like SunTenants have been set up to address the split incentives issue and make the monetary value of a rooftop solar system explicit to both tenant and landlord.
However, without market pressure through mechanisms like a disclosure scheme, action will only be taken if a landlord is personally motivated to install. Broader reform is often needed to translate pilots to practice and, in turn, facilitate prosumer opportunities for people who rent or live in apartments.
Generating inequality, producing inefficiency
Perhaps the undemocratic nature of prosumer incentives and activities could be overlooked if their overall impact had resulted in a cleaner, cheaper and more efficient energy system for all.
Rooftop solar is certainly contributing to a cleaner energy system, meeting a quarter of the National Electricity Market’s net demand in optimal conditions.
Unfortunately, many of the efficiencies of decentralised energy production are being undermined from a mismatch of where energy is generated and where energy is consumed.
By and large, rooftop solar is concentrated in outer suburbs where there are far more detached houses are far fewer apartments and renters.
Mapping the Clean Energy Regulator’s postcode data for solar ‘small generator units’ in Sydney (below), we can see that postcodes with the largest generating capacity (those dark blue and light blue areas, which represent the top two quartiles) are largely in the outer suburbs.
Moreover, if we combine this with census data and weight generating capacity by population, the spatial pattern of rooftop solar is strengthened – nearly all areas west of Parramatta are in the highest two quartiles of generating capacity, and most inner and middle suburbs make up the lowest two quartiles.
While it’s great to see such strong uptake of rooftop solar in the outer suburbs, this pattern means there is typically more energy generated where there are less people to use it – particularly during the sunniest parts of the day when the bulk of the population is concentrated in jobs hubs like Parramatta, Chatswood and the CBD for work.
As a result of the mismatch, ‘solar spill’ events can occur, where too much energy is generated in a local area and it floods the grid.
There are emerging opportunities to trade this energy between households. However, it needs to be transported to the right parts of the grid.
The network benefits of DERs come from when energy is generated and consumed within a local area. If energy needs to be transmitted to other side of the city, it’s got to be transformed from low to high voltage and this puts a strain on the network.
As a result, in solar saturated areas, systems can be switched off when there is too much energy being produced, and longer term, costs are incurred by the need to upgrade the network.
All the while, renters and apartment dwellers are supporting these activities through paying taxes and energy bills, but are not necessarily recouping proportionate benefits.
Of course, batteries are presenting opportunities to store excess energy and trade it locally when there is demand. Many government initiatives are now supporting the uptake of household batteries, such as in NSW where no-interest loans are being offered.
However, the equity lens is again missing in the policy approach to adopting this new technology. While a household battery may provide opportunities for an individual prosumer to store and use energy later, it has little benefit for the broader network.
Put simply, distributors can’t depend on household actors ‘behind the meter’ to trade their stored energy rationally and provide supply when needed.
Furthermore, without considered planning, the location of these batteries will likely be ad hoc and result in an uneven geography, much like rooftop solar.
Planning for prosumers
Looking forward, we need to recognise that prosumer activities inherently have a spatial impact as they decentralise the production of energy. At the same time, population trends have a spatial relationship, and so naturally energy and social issues intersect.
To address inequality and emerging imperfections among prosumers and their use of DERs, we need to draw on the some of the lessons that Dr Gill Owen championed.
As a starting point, we should identify barriers that inhibit participation in prosumer markets, and advocate for differential policy responses; improving minimum energy performance standards, establishing a national residential disclosure scheme, and introducing incentives that target renters and apartment buildings would be good first steps.
We should also plan for and support an approach to using batteries to increases the flexibility of the grid rather than the individual household.
This could be achieved through community and district storage solutions that enable prosumers to feed excess electricity into the communal network and have that managed in a local area for the benefit of all.
And, if we’re going to get really radical, we could integrate social and environmental policies with local network planning. The UK’s Energy Systems Catapult’s recent pilots in ‘Local Area Energy Planning’ provide a good blueprint to build on.
Elise Wood is senior adviser, priority precincts, precinct and suburbs policy Department of Jobs, Precincts and Regions, for the Victoria government.
This article was selected as the winner of the 2019 Gill Owen Essay Prize, which honours the memory of Dr Gill Owen, who was a tireless campaigner in the fields of energy efficiency and social equity. See more below.
Dr Owen was also one of the first women to bring the voices of the consumer and the disadvantaged to the boards of the UK’s and Australia’s competition and economic regulators.
The competition was sponsored by AGL Energy, the Institute for Sustainable Futures at UTS, the Association for Environmental and Energy Equity, Uniting Communities and RenewEconomy. You can read the finalists’ essays on Renew Economy sister site One Step Off The Grid (see individual story links below).