Too much solar? Too much for whom, exactly?

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Are we on the verge of too much solar? Probably, yes, if you’re the existing owner of an electricity generator. But probably not for everyone else. And certainly not if you are concerned about global warming.

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Anarchy – it’s a strong word. When used to describe the conditions surrounding an electricity system, as it was by the Energy Security Board Chair Kerry Schott, it is especially worrying. I reckon anarchy is something you really can’t afford to have when it comes to the power system.

If the power system isn’t kept in control then people can die, lots of expensive equipment could be damaged, the economy could come to a grinding halt and God forbid we might even be unable to watch Netflix and have to talk to our loved ones.

According to media reports, Kerry Schott used the word anarchy in describing the rapid uptake that has been occurring with rooftop solar in this country.

She’s not the only one complaining of there being far too much solar energy coming into the system.

Over the last few weeks there have been number of reports in the media that grid is on the verge of hitting too much solar energy.

The Age reported on concerns by electricity retailer-generators where they were predicting Australia, “could become the first country in the world where the grid cannot handle the excess level of distributed electricity generated”.

According to these electricity industry executives we are on the verge of a “solar peak” – a point at which “there is no point in putting any more solar power into the system” because it will just be spilled and wasted.

Worse it might even cause blackouts.

Andrew Dillion, head of the Energy Networks Association told the ABC’s 7.30 report:

“If there is too much energy coming back up the system in the middle of the day it can cause either frequency, voltage disturbances in the system which will lead to transformers and other equipment tripping off to protect themselves from being damaged and that will cause localised blackouts.”

This is all coming within the context of a furious battle over a recommendation by the Australian Competition and Consumer Commission that in 2021 the Federal Government should remove the rebate provided to solar systems under the Small Scale Renewable Energy Scheme.

So, are we faced with a serious problem of there being too much solar and does that mean we should scrap the rebate?

This comes down to really two separate issues I’ll examine in this article:

  1. Macro-level: Are we at risk of generating more solar than we have demand for at an overall wholesale market generation level?
  2. Micro-level: Are we at risk of overloading the distribution network down at the local distribution transformer level where the systems are installed on homes and businesses?

Then there’s also an issue about do we care about the dangers to our children and others around the world from global warming, and is this solar rebate a worthwhile expenditure to address these dangers?

Before getting into the detail over whether or not we’re on the verge of too much solar we should quickly cover off on this issue over whether the SRES rebate is worthwhile expenditure in terms of carbon abatement.

It turns out that the recently awarded Nobel Prize for Economics went to a person who could shed light on this topic – Professor William Nordhaus.

I happen to think his work involved a range of flaws which meant his economic analysis tended to seriously underestimate or ignore substantial risks associated with global warming, but let’s put that aside for one moment.

According to Nordhaus’s 2017 paper published in the Proceedings of the National Academy of Sciencesin 2020 the economic benefit from avoiding a tonne of CO2 being emitted to the atmosphere was about $58.  By comparison the SRES solar rebate would deliver this abatement at a cost of $26 in 2021 – the date it was recommended to be abolished by the ACCC.

For those who point to carbon trading as a potentially more efficient mechanism, yes I agree with you. But firstly, you might like to get such a measure implemented before you scrap existing policy mechanisms that deliver abatement at lower cost than the economic benefits they provide.

Are we at risk of generating more solar than we have demand for at an overall wholesale market generation level?

Well, certainly not today. Solar reached its peak level of penetration or market share in December last year. The chart below illustrates the sources of power generation across the National Electricity Market across the whole of December.

The troughs are generally about 2am to 4am, while the peaks tend to be between 12 noon and 4pm (all in NEM time which is eastern standard time without daylight savings).

It shows pretty clearly that we were in no danger whatsoever of solar generating more electricity than we can consume. Solar – shown in yellow – is simply knocking off the top of the peaks in demand that would otherwise be serviced by what has become quite expensive, and hard to secure gas.

Generation over time by fuel type across the December 2017 period

Source: Green Energy Markets analysis based on NEM Review data

So let’s zoom forward to 2021 when the ACCC recommended that the solar SRES rebate should be abolished.

Firstly, there’s going to be a lot more large scale solar farms in place, not just rooftop solar. According to Green Energy Market’s power plant database, projects under construction or contracted will lift large scale solar capacity to more than 5000MW. These will generate around 12,000GWh per year.

We’ve allocated that generation across 30 minute time intervals according to the 2017-18 generation patterns of a combination of Nyngan, Broken Hill, Moree and Royalla.

Given these projects are all in NSW it won’t be a perfect representation of the far broader geographical distribution of Australia’s solar farms but should give us a reasonable idea.

In terms of rooftop solar, according to the Australian Energy Market Operator these solar systems are projected to generate 13,419 gigawatt-hours of electricity in 2020-21. That’s up on 2017-18 levels by 85%.

So as an approximation let’s lift the NEM’s rooftop solar’s output by 85% across each 30 minute timeframe.

The chart below details how December 2017 would have looked with this extra solar assuming that it displaces gas in the first instance (because it is an expensive fuel) and then black coal.

Generation over time overlaying 2021 levels of solar on December 2017 demand and solar conditions.

Source: Green Energy Markets analysis based on NEM Review data

We can see that solar is now one of the largest sources of power during daylight periods.  Between 9am and 5pm solar represents a quarter of the NEM’s power supply during this December period, and it peaks as high as 43%.

But we are a very long way from having so much solar that it exceeds available demand.

Instead, what it is doing is driving black coal down to similar levels which it regularly reaches during night time periods.

If we extend our gaze to look at the impact of the extra solar over average patterns seen across each quarter of last financial year we can see more clearly that what solar will do is create a second off-peak period for the wholesale electricity market.

2017-18 National Electricity Market generation by time of day and fuel type after superimposing 2021 levels of solar capacity

Essentially, between 10am and 2pm solar will carve out a remaining amount of demand for other generators down to levels typically seen over 2am to 4am at night.

Now, it just happens that this probably won’t be much fun for those owners of electricity generators who seem to be complaining about too much solar. This is because historically between 2am to 4am at night power prices dip down dramatically, as we can see very clearly in the chart below.

Average wholesale spot market prices by state by time of day 2015-2018

Green Energy Markets
Source: Green Energy Markets analysis based on NEM Review data

It’s worth noting this also happens to be bad news for all those householders that have been rushing out to install solar systems. This is because the average solar system being installed on residential rooftops these days has become quite large.

A system of 6.6 kilowatts has become the defacto standard and such a system could be expected to export about 70-90% of its output. Those exports can only be expected to receive the average going wholesale market price of electricity.

But, contrary to the suggestions of some, such as the Grattan Institute, this certainly isn’t a problem for electricity consumers more generally. In fact, it’s great news for them. Especially those that may be likely to occupy their home over daytime periods such as pensioners, the unemployed and those with young children – but only if they take advantage of time of use tariffs.

Are we at risk of overloading the distribution network down at the local distribution transformer level leading to blackouts?

The computer says no.

That would be the computer in your solar inverter.

Now, it is true that solar systems, by injecting power into the network do act to lift voltages in the local area in which they are installed. But you needn’t worry about it overloading local distribution transformers, causing them to trip-off and cause blackouts.

The output of solar systems are controlled by an inverter which continuously monitors the voltage of the network. In circumstances where the voltage is getting close to levels that networks deem too high, the solar system will either cycle its output or shut it off completely to prevent driving up voltage any further.

But there’s something else you should be aware of: voltages on our electricity networks are being run at levels far above where they should be, which is 230 volts.

University of NSW researchers, using 2000 Solar Analytics devices that monitor voltage in households across the states of SA, Victoria, NSW and Queensland found that the typical voltage on the network tends to be close to 245 Volts whether its day or night-time. They are only operating close to the standard of 230 volts for less than 1% of the time.

This might be understandable in Queensland, which has only just recently adjusted its standard down to 230 volts, but for the other states this standard has been in place for a long time. In fact Standards Australia agreed a plan to move Australia from 240 Volts to 230 Volts back in 1983.

If the networks adjusted the voltage settings of their transformers to the standard they are supposed to be adhering to, then we should be able to absorb substantially greater amounts of solar capacity in the network without voltages exceeding levels we’ve found to be perfectly acceptable to power our appliances for decades.

Below I’ve provided a chart from the UNSW research on duration of different voltages they found on Victorian distribution networks for daylight and non daylight hours. The first thing to note is that the median for voltage lies substantially above 230 volts and it is incredibly rare that voltages are close to 230 volts.

The second thing that’s very interesting is that voltages during night time are actually higher than they are during daytime when solar is generating. This is because voltage is also influenced by how much electricity demand is on the network (higher demand generally leads to lower voltage) and demand is generally lower over the non-daylight periods.

Victorian voltage distribution – daylight and non-daylight periods

Source: Stringer, Bruce and MacGill (2017)

Now in the case of South Australia which has substantially greater solar penetration, voltages are skewed to be slightly higher during daylight hours rather than night time.

However, you can also see that if we shifted the base settings toward 230 Volts then the highest voltages would be closer to where the median is at present, while the distribution would still rarely fall below 220 volts – which is what appliances across many parts of Europe regularly operate at without problems.

South Australian voltage distribution

Source: Stringer, Bruce and MacGill (2017)

So are we on the verge of too much solar?

Probably, yes, if you’re the existing owner of an electricity generator. But probably not for everyone else. And certainly not if you happen to be concerned about global warming.

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