The electricity network is changing fast, here's where we're heading | RenewEconomy

The electricity network is changing fast, here’s where we’re heading

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The gap in electricity costs between households with and without solar will increase dramatically in the coming decades.

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The Conversation


Things are changing extremely fast in the electricity sector. In 2013 the electricity industry and its stakeholders came together in the CSIRO Future Grid Forum to imagine the possibilities for the future of electricity industry to 2050.

Electricity demand was falling, solar panels were being adopted en masse, retail prices were rising, and air conditioner ownership had doubled.

Two years on we’ve updated those scenarios as part of the Electricity Network Transformation Roadmap project with the Energy Networks Association. We expect retail prices to rise further in coming decades, but not as much as we originally thought. Concerningly, we also expect the gap in electricity costs between households with and without solar to increase dramatically.

Four futures

In the 2013 forum we produced four possible future scenarios for Australia’s electricity network:

  • “Set and forget”: widespread adoption of automatic appliances and services to manage peak demand
  • “Rise of the prosumer”: widespread adoption of solar PV but consumers remain connected and sell excess electricity back to the grid
  • “Leaving the grid”: rising electricity costs and falling storage costs lead to many electricity consumers leaving the grid
  • “Renewables thrive”: large fossil fuel power plants are entirely replaced by large-scale renewables.

Exactly which vision of the future, or some combination, will unfold remains uncertain. However most imply massive changes to the electricity sector.

What’s changed?

In 2015 these scenarios appear to have stood the test of time. Some of the most radical scenarios – a third of people leaving the grid, 25-45% of electricity generated on site, and 100% renewables – are still plausible.

A key change is that solar and storage costs have become significantly more competitive since 2013. In 2015, solar panels and battery storage costs are already around 20% cheaper than it was expected in 2013.

Going forward, the updated analysis projects battery storage costs to fall by approximately two-thirds (60%) in the next 10 years, while solar panel costs are expected to fall by around one-third (35%) over the same time frame.

Electricity bills have fallen on average since the 2013 forecast. They are projected to rise again in decades to come as we switch to low emission generation technologies. But retail bill increases will be smaller than previously forecast and are expected to remain the same share of average household income, approximately 2-3 % as they are today.

While falling solar and storage costs help to put downward pressure on the average bill compared to 2013 forecasts, the updated modelling finds that the gap between those owning and not owning solar photovoltaic panels is wider.

By 2030, customers with solar panels are expected to be A$150-210 better off on average each year. By 2050 that balloons to $860-$1140 each year. This is a concern from an equity point of view.

Projected average annual residential electricity bills under volume tariffs, by technology ownership and comparison with the 2013 Future Grid Forum projections

The updated scenario analysis identifies total system expenditure (including capital and operating expenditure) of A$950-$1,140 billion over the next 35 years.

Customers and their agents are expected to spend between A$224-469 billion in onsite or off grid systems such as solar panels and battery storage. The remainder of expenditure is expected to be spent on grid in traditional centralised generation, transmission and distribution. Those traditional sectors are expected to play more diverse roles to address evolving customer needs than they have in the past.

Projected cumulative electricity sector investment and operating expenditure to 2050 (including percentage contribution of each supply chain component), by scenario CSIRO

What’s not changed?

Not everything has advanced faster than expected. As the climate talks in Paris come to their conclusion, it remains clear that the electricity sector will be required to reduce its greenhouse gas emissions over time.

Less clear is what policy will drive that transformation. The reduction in the Large-scale Renewable Energy Target from 41 to 33 terawatt-hours by 2020 and the repeal of the carbon pricing legislation have reduced pressure on the generation sector to change in the short term. The updated scenarios assume a new greenhouse gas emission constraint, of some type, is introduced from 2020.

Another aspect where less progress has occurred than expected has been in electricity pricing reform. In 2013 it seemed obvious that Australia’s current residential and small-commercial customer retail pricing structure, which is over-reliant on volume-based pricing signals, has been out-grown. The lack of progress here remains a significant risk for the sector.

Lower cost solar panels means stronger incentives for adoption. But also creates the potential for increased cross-subsidies among customers if retail pricing structures are not addressed. That is, continued volume-based pricing could mean non-solar owners will pay a greater share of network costs while not necessarily using the network capacity any more than a solar owner.

Falling storage costs help alleviate this problem as it allows solar owners to reduce both their volume and their use of network capacity. Non-solar owners will also be able to use storage to reduce their demand at peak times, alleviating capacity constraints in networks. But the adoption of storage for grid-connected customers requires new incentive structures.

While the falling cost of solar and batteries has decreased the cost of going off-grid, the projected cost of staying on grid has fallen also, and this is partly due to the expected role of batteries in peak demand management.

As a result, while people may choose this option for other reasons, on a purely economic basis, off-grid systems are not expected to be economically viable for existing connected customers until beyond 2030 – the same result as the 2013 modelling.

Source: The Conversation. Reproduced with permission.

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  1. John Herbst 4 years ago

    Readers should keep in mind that the author’s project is funded in part
    by the Electricity Networks Association. This was disclosed in a side
    note on The Conversation website.

    The claim that small customer
    network tariffs are ‘over-reliant on volume-based pricing signals’ does
    not mean that Time of Use or Critical Peak Pricing is not reliable. In
    fact, these are the most efficient solutions but networks refuse to
    implement them in the hopes of pushing through demand-stimulating
    tariffs. Current Time-of-Use tariffs deliberately have too wide a peak
    period and too small a peak surcharge.

    • Chris Fraser 4 years ago

      The wide peak for ToU tariffs is even more pronounced in Victoria where networks are privately owned.

  2. JeffJL 4 years ago

    So in the future people with solar panels will have lower bills than those without panels. Taken on face value this looks inequitable, but in reality those with solar panels have splashed out thousands (well I did) to reduce the bills.

    You can use the same argument to argue that people who have changed all their lighting to LEDs are causing the bills of those who have not to rise. Or people who change to solar hot water or heat pumps cause the bills of those who have not converted to rise.

    I will accept a surcharge on my power bill when the power company also puts a surcharge on all people who have made investments to reduce their power bills.

    • Mike Dill 4 years ago

      I agree with Jeff, as if surcharges need to be implemented, they need put in place for everyone.
      As far as I can tell, the local distribution network in my subdivision has not changed with the addition of solar on about 5% of the houses here. The cost of the local distribution (that has been in place in my subdivision for over twenty years) has been fully amortized.
      My preliminary estimate is that the distributed generation here has not yet gotten to that collective level of ‘100% minimum daytime load’, which is the point where the substation might need to change out some transformers due to net energy being returned to the grid. Until we reach that ‘100%’ level, there should be no surcharge for PV as the network has not put in any new hardware specifically for solar PV producers.
      Now, a few local substations MIGHT be getting close to PV supplying ‘100% minimum daytime load’ (although I have not seen ANY documentation on this except in Hawaii and a few (remote) places in Australia). IF that is happening, then the correct tariffs need to be put in place to reduce the economic incentives for that to happen (during those specific times).
      A broad brush will no longer work for our changing and diverse energy networks.

      • JeffJL 4 years ago

        Perhaps instead of upgrading the substations we could just provide a subsidy for people to run their air conditioners etc during those times of excessive production?

      • Scottish Scientist 4 years ago


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        World’s biggest-ever pumped-storage hydro-scheme, for Scotland?

        I like the idea. What are the ecological repercussions for Scotland as the salt invades the local aquifers? Is there a plan/ cost projection for mitigating this?

        I dread to think of the repercussions not least to my standing with my fellow Scots if my scheme “added salt” to Highland spring water!

        So the reservoir and canal etc will require to be absolutely sealed by a water-proof lining, to keep all the salt water in, as was done for the Okinawa Yanbaru Seawater Pumped Storage Power Station.

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