Time to get facts right on solar, and reap the benefits | RenewEconomy

Time to get facts right on solar, and reap the benefits

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Conservative governments and energy incumbent are quick to blame solar for rising costs. But a new report suggests solar is bringing major benefits to the grid and properly constructed tariffs could deliver those benefits to consumers and even network operators. It warns against a wholesale rush into time-of-use tariffs.

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When the Queensland government fed news of the latest rises in electricity bills to their favourite media outlets on Wednesday, it  was quick to lay the blame for the rises on two culprits – the carbon price and solar. Even though two of the biggest single culprits were soaring gas and network costs.

It is part of a long campaign by the Campbell Newman government to demonize rooftop PV and other renewables. The irony is that at least part of the problem is Newman’s own mismanagement of the solar bonus scheme, but the anti-solar stance is also framed to protect the interests of state-based generators and network operators, both of which are having their business models challenged by the arrival of a new disruptive technology and delivery system.

The danger of this tainting of solar PV, however, is that it is spreading through policy-makers, regulators and public perception. Because of this, bad decisions could be made about the structure of future electricity tariffs – at the expense of consumers and even network operators. The solar industry is concerned that poor policy making shouldn’t stand in the way of change that is inevitable, necessary and popular.

To promote this, the Centre for Policy Development is about to release a report researched by the Australian Photovoltaic Institute (APVI) – Getting the Facts Right on Solar – which seeks to point out that solar PV is bringing a clear benefit to the network, particularly in offsetting the impact of air-conditioning, and the report is challenging the favoured solution on electricity tariffs, time of use pricing.

The first point the report makes is that solar is having an impact by reducing the level of peak demand, which has been the network’s biggest challenge. Critics like to republish this “duck chart” from Energex, which shows an October Tuesday over the last few years. It appears to suggest solar has reduced demand during the day, but not at the critical point in the evening.

energex feeder1

Actually, in presenting this graph, Energex executives say that the evening peak would have been far greater without solar, given that so much air-conditioning has been added in the past few years. But others say that using  a single feeder for a single day is potentially misleading. It’s more constructive to look at the annual peak (which is what determines the size of the network), and this generally occurs around 5 to 5.30pm, which is well before the average (and smaller) peak, and is in summer when PV is still producing around 20% of it’s rated output. This graph below from the APVI illustrates that point.

apviThe next question is how to structure tariffs to reflect this benefit. The favoured response in recent years has been time of use tariffs. These are already being introduced in many regions – with people paying around 50c/kWh during “on-peak” and 11c/kWh in off-peak – and the push for such tariffs to be introduced more widely is reaching a crescendo.

Much of this is coming from electricity retailers, who stand to benefit most from such a structure – but the APVI research warns that it could disadvantage electricity consumers, particularly solar households, and it could also penalise distribution networks as well.

It says this could actually result in an increase on the cost impact of air-conditioning for households that don’t own air conditioners, limit solar’s ability to reduce this impact, and accelerate the so-called ‘death spiral’ for networks worse by reducing their revenue, or increasing household bills.

The APVI research argues that for a tariff to be truly cost reflective, it should be a combination of time of use (when you use the electricity), and a capacity or demand charge (how much you can use at any particular point of time).

It is important to note that a capacity component is different to the “fixed” network charges, which governments are busily raising to recoup lost revenue (these charges were lifted by more than 60% in Queensland’s draft ruling). Higher fixed charges provide no incentive to moderate demand or change behaviour. Time of use can, but demand charges are seen as a critical component because they require heavy users to pay a higher fee, and moderate users to benefit from reduced costs.

Laura Eadie, from the Centre of Policy Development, who edited the report, says a demand charge should be a critical component within network pricing. “If you are a customer that puts a lot of demand on the network when it is congested, then you should pay a higher capacity charge.”

In effect, she argues, such consumers should pay for the size of the “electricity pipe”. It is similar to how broadband works, and it is also getting some support from distribution networks.

Among the key findings of the report:

·       Under a demand charge tariff, if 20 per cent more customers installed air-conditioning this would add around $37 per year to other households’ bills, compared to $80 per year or higher on a standard or TOU tariff.

·       A demand charge is more likely to encourage all consumers to smooth annual peak demand, make more effective use of existing infrastructure, and deferring new network capital investment. By comparison, a TOU broadly targets daily peaks in demand, rather than annual peaks. A standard tariff targets neither.

·       ·  A demand charge caters for the full range of emerging distributed energy technologies which are popular with consumers and may prove to collectively provide the most cost-efficient electricity supply and delivery options, as decisions about network capital replacement are made.

·       A demand charge can be designed to reduce the impact on low-income households and low- energy using households of recent investment in network upgrades, or falling demand, or both. They can do this by reducing their costs directly (where households make smaller contributions to peak demand), and by deriving more of the required network revenue from other households with large and peaky loads.

This graph below illustrates how the combination of demand charges and solar PV can actually reduce the impact on bills on “other consumers” – challenging the current “received wisdom” that solar is simply passing costs from one household to another that doesn’t have solar arrays.

Screen Shot 2013-12-12 at 11.06.17 am

Eadie says that the importance of solar, and ultimately battery storage, on the network is that these can help reduce the capacity required by households at critical points during the day. This benefit should be reflected in revenues for networks, and it should be reflected in reduced costs for those households.

“Because of the politics of solar, and the complexity of regulation, there is a risk that if we don’t get this right, then solar consumers could be hit with higher charges than they deserve. And this would be a backward step.

(Note: Please also read Alan Pears, who touches on the subject of capacity charges in his piece today).


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  1. JohnRD 6 years ago

    The reality is that people will run their air conditioners very hard on the hottest days of the year even if the power price is 10 times the average. So arguing that time of day or other smart pricing systems will make a difference seems to be based on questionable ideas of how much discomfort people will put up with for the sake of a few dollars saved on those hottest days.
    The other reality is that air conditioner power draw depends on the square of the difference in temperature between inside and outside the house. (i.e., it takes 4 times as much power to maintain a 20 deg difference compared to a 10 deg difference – As fig 12 in the article shows, the peak day peak is a massive 2.5 times the average summer peak as a result of air conditioning demand!
    It would help if all air conditioner compressors were on a controlled power source that allowed the power supply system to shut off compressors for a short amount of time instead of crashing the system or force power companies to pay outrageous peak power prices.
    It would also help to do the opposite of what Newman is doing and encourage the growth of roof top solar. Encouraging more west facing panels would also make sense as away of increasing the solar PV output late in the day.

    • suthnsun 6 years ago

      1 hour of daylight saving looks like it would lop that peak right off. Add a west facing panels subtle incentive and problem very nearly extinguished.

      • David Osmond 6 years ago

        excellent points suthnsun. Also having a couple of hours of battery storage with new PV systems would also help.

        • suthnsun 6 years ago

          Just so, David O , a little network -subsidised package of 1.5kWh storage with control could be the ‘incentive’, low cost and both parties win.

          • JonathanMaddox 6 years ago

            Since we’re talking about indoor climate control, I think battery storage is a pretty expensive way to address the real demand here. Air conditioners which *incorporate* some lower-cost thermal storage of the temperature differential they create may be far more cost-effective.


  2. RobS 6 years ago

    My west facing panels produce their peat output at ~1630 in summer. Combine west facing solar with pricing signals to encourage people to give utility control over A?C systems. That way the utility can cycle off A/C’s sequentially or even cycle them on for longer periods before the peak driving down the temperature when solar is producing at it’s peak and then letting the thermal mass of the house maintain the temperature during what would have been peak demand. This combination of intermittent but predictable output plus smart control over some large discretionary demand will go a huge way to solving the problem.

  3. Bob_Wallace 6 years ago

    An off-topic question:

    Foreign car manufacturers are closing plants in Australia. Is this due to high electricity prices or other factors?

    • Chris Marshalk 6 years ago

      Car manufactures still think they can continue to be greedy and price gouge extort Aussie consumers.

    • JonathanMaddox 6 years ago

      It’s largely due to the high Australian dollar, which has done much the same to the rest of our manufacturing industry already. There are plenty of people who would say it’s also due to high wages, but we can point out several countries in Europe and Asia which pay manufacturing workers better than Australia does, and have not suffered similar closures.

      Foreign investment into, and export revenues from, the mining sector keep the dollar high, so other exporting sectors, particularly those with expensive inputs such as Australian labour, suffer.

      Car manufacturers in particular have always had generous support from State and Commonwealth governments, but the level of subsidy has not been enough to compensate for the “Dutch disease” which has crept in over the last decade as resource prices have soared.

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