The Australian Energy Market Commission says it will make a final determination on the introduction of rooftop solar export charges as early as next month, as it weighs the “range” of views put forward on its draft determination, after submissions were closed on May 27.
The submissions range from the outright hostile, such as the Victoria state government and solar advocacy groups, to predictable support from networks. But even some proponents of the scheme are not happy with the draft design, fearing too much power will be left in the hands of the network operators.
Tesla and Enphase, the international vendors of battery storage technologies that the rules are designed to encourage, are also skeptical, saying that technology progress will make the rules redundant, and they may impede the progress of virtual power plants. (See more details below).
In a statement on Tuesday, the AEMC said analysis of stakeholder feedback was underway to inform its final determination on how to make room on the grid for more solar and pave the way for new technologies like home batteries and electric vehicles.
“The reality is that customers overall are not getting the most from the solar we have in the system from homes and small businesses,” added AEMC chair Anna Collyer.
“We need to design a solution that works for the 2.7 million homes and businesses who have solar – as well as the 10 million who don’t. … We can deliver major benefits for all customers if the right incentives are in place.”
To recap, the proposed rule changes were originally requested by St Vincent de Paul Society Victoria, the Total Environment Centre jointly with the Australian Council of Social Services (ACOSS), and SA Power Networks.
In its update this week, the AEMC stressed that the proposed reforms would offer “one (but not the only) option” for networks to better match supply and demand using an increasingly vast distributed solar resource.
The AEMC also noted that under the proposed reforms, distribution networks would be held more accountable for delivering energy exports like solar and stored battery energy more often and through a variety of means, including investing in new technology.
But the sticking point for many in the proposed reforms comes down to the option it gives networks to offer two-way pricing to reward owners of distributed energy resources (DER) for exporting to the grid when it is needed and charging them when it is not.
Under the proposals, the AEMC has said, a network wishing to introduce export charging would need to consult extensively with customers and have a transition plan, approved by the Australian Energy Regulator, detailing how this would be done.
“There is no proposal on the table to mandate export charging or introduce blanket fees. Different networks would likely take different approaches because they currently have different levels of solar penetration, different technical needs and different customer mixes,” the AEMC said.
So, how will the stakeholder feedback inform the AEMC’s final determination? With just weeks until the answer to this question is known, RenewEconomy has selected a range of views expressed in the submissions – which the AEMC made public this week.
A critical reform, but with room for improvement: Total Environment Centre and ACOSS
As one of the organisations behind the original rule proposal, the TEC’s submission reiterated the need for the reform package and declared its overall support of the intent – and most of the elements – of the AEMC’s draft determination… But not all of them:
“It is critical that the shift from a one way to a two-way, zero net energy system is accompanied by regulatory reforms which increase user choice and control while increasing the opportunities for users without active DER to participate and benefit, and avoiding cross subsidies from financially disadvantaged households,” the TEC submission said.
“We also consider that there is room for improvement. In particular, the draft determination gives a great deal of discretion to network businesses and the energy regulator in determining a range of important outcomes such as minimum static export limits, the fair allocation of existing network capacity, and above all, the suite of tariffs and rewards available to consumers.”
The TEC goes on to suggest that solar owners should have the option of whether to take up an export tariff, noting that if they choose not to, they may be subject to static export limits, as at present. This “flexible exports” model is more or less what on track to be introduced in South Australia, by SAPN.
Networks, meanwhile, “should be explicitly prevented from banning exports (i.e., imposing zero kW static export limits) in connection agreements,” and the rules around network funding for consumer engagement in tariff structure processes “should be considerably strengthened.”
The case for implementing solar export charging has not been made: Victorian government
In a submission from its Department of Environment, Land, Water and Planning, Victoria’s Labor state government comes in firmly against the introduction of a solar export charge, as the AEMC currently proposes it.
In particular, it takes this view in light of its $1.3 billion Solar Homes policy, that offers homes and businesses heavily discounted rooftop solar – and other low-emissions energy technologies, including battery storage and most recently electric vehicles.
So, while it supports the first two elements of the proposed reforms, it says the case for implementing distribution export charging has not been made, and the risk of unintended consequences remains high, particularly under the current proposed regulatory framework.
“The draft rule delegates fundamental decisions, including whether to apply export charges; all the detail on how the potential charges would be structured; and what percentage of distribution revenues would be recovered from exports, to future decisions by monopoly distribution businesses, bounded by AER guidelines that have yet to be developed,” the DELWP submission says.
“This makes it difficult to fully consider or understand the potential impacts of this change on consumers and the energy transformation. This is exacerbated by the lack of any cost-benefit analysis of the potential impacts of introducing distribution export charges relative to the other options to facilitate cost effective DER enablement.”
The Victorian government also requests the AEMC to include a requirement in its final determination for state and territory governments to consent before export pricing can be introduced in their jurisdictions.
Not all bad, but ultimately a solution to yesterday’s challenge: Institute of Energy Economics and Financial Analysis (IEEFA)
IEEFA, whose submission is noted for its late arrival on May 31, “strongly supports” both the proposal to introduce obligations for network companies to provide export services, and the proposal to require the development of export service performance standards.
But it argues that the case for charging for solar exports does not stack up and, in fact, addresses “yesterday’s challenge.”
“While IEEFA appreciates that the AEMC is seeking to provide DNSPs with options as to how they recover costs for new services, the case has not been made for the third proposed change, that is to: Enable networks businesses to develop two-way pricing on both consumption and export services,” the submission says.
“As is often the case with new technology, rooftop solar has been characterised as a risk to the grid, but SA Power Networks is managing 40% rooftop penetration with less than 1% of its regulated network revenue.
“In IEEFA’s view it is unfortunate that stakeholders have devoted so much time on a quantifiably insignificant issue and one that could be seen as yesterday’s challenge given the flow of consumer investment coming into small-scale batteries and electric vehicles. With greater on-site or mobile storage, exports from rooftop solar will significantly reduce.”
Let’s not demonise zero-export limits: Energy Networks Australia
Energy Networks Australia’s detailed 15-page submission “strongly supports” almost all aspects of the AEMC’s draft determination, with the allowance that some amendments may be necessary to “ensure that drafting gives effect to the policy intent, and to mitigate potential unintended consequences.”
The submission says: “Export pricing will address equity concerns and be key to ensuring that DNSPs and customers make best use of infrastructure at the lowest cost for all consumers.
“Future proofing the regulatory framework now will avoid the need for unnecessary expensive solutions in the future.”
Notably, the ENA also supports the AEMC’s draft determination not to introduce a minimum level of export capacity to DER customers, the very basis that underlined the proposal.
“Prohibiting DNSP from being able to set zero export limits under any circumstance would limit the tools available to DNSPs to manage their networks,” the submission says.
“Under some very specific circumstances where it would otherwise be cost prohibitive, it may be efficient for DNSPs to be able to use zero export limits. Without this option, customers would face higher than efficient charges.”
Too much uncertainty and power in the wrong hands: Solar Analytics
A submission from rooftop solar industry veteran Solar Analytics says it agrees with the argument that business-as-usual won’t cut it as solar uptake continues to boom, but has some concerns with the AEMC’s proposed approach. In particular, it is critical of the shadow of uncertainty that the proposal has cast over the distributed PV industry.
“Leaving many aspects of this rule change open, with detail to be provided in the future by the AER, may lead to a theoretically more optimal system. However, the uncertainty that this approach brings can outweigh the benefits,” it says.
“The determination notes the possibility of interim incentives including ‘reputational incentives and benchmarking.’ We are not aware of any compelling evidence that reputational incentives are effective for monopoly network service providers and are not satisfied that this will have a tangible impact,” the submission says.
What about VPPs? And wouldn’t it be better for networks to install community batteries? Tesla
The US battery and EV maverick says its main concern around the proposed rule changes is the impact they might have on emerging DER integration technologies and solutions, including community battery storage and virtual power plants – both of which Tesla has been active in rolling out in Australia.
“Our position is that export charges must only be permitted on an opt-in basis for assets installed ahead of the next round of Tariff Structure Statements (TSSs), with no mandatory re-assignment of existing assets such as virtual power plants (VPPs) and community batteries,” Tesla’s submission says.
“It is in the interests of all network service providers to allow existing flexible assets connected to distribution networks to continue providing network support,” it says.
“Additionally, it is critical that export pricing does not apply to DER provision of non-energy services to avoid introducing additional disincentives to the supply of critical system security measures.
“For example, export charges must not apply to voltage support, FCAS, fast frequency response and virtual inertia services – all of which VPPs such as Tesla’s South Australia Virtual Power Plant (SAVPP) project are currently supplying or capable of doing so. We encourage the AEMC to work with industry to devise a pragmatic solution that maintains these price signals for active DER.”
Tesla also politely suggests that there might be better – and cheaper – ways for networks to manage concerns around rooftop solar “congestion” on grids and any associated voltage control issues.
“We recommend the AEMC leverage this Rule Change to introduce pricing reform specifically aimed at community storage through more equitable Local Use of System charges. The cost of delivering energy locally, such between an energy exporter and a nearby community battery is significantly cheaper compared to transport on the wider distribution network,” it says.
Smart inverters can already do what the rule change hopes to achieve: Enphase Energy
Global inverter and battery maker, Enphase Energy, is in the “technology can do it better” camp on this issue, although with the acknowledgment that there will be a need for regulations to guild and encourage this.
“Enphase believes the future of DER lies in integrating PV generation through the incorporation of smart technology, which is fundamental to the future of DER integration,” its submission says, adding that “the provision of power export limiting has been a capability of Enphase Energy systems for some time.
“The approach taken should be technology agnostic until the release of IEEE 2030.5 or another relevant standard is implemented – as undertaken in South Australia and accepted by manufacturers.”
Enphase also points out that the sort of voltage issues that the networks blamed on too much rooftop solar and have used as a key argument for export charges are also an issue long after the sun goes down.
“We regularly see that the voltage set point on the NEM and other marginal grids within Australia are consistently around the 240 Vac rather than the proposed 230 Vac supply that Australian standards require,” Enphase says.
“Voltages over 240 Vac are often present in the middle of the night with no PV generation. Therefore the higher voltage range cannot be because of high solar PV patriation alone. With some locations experiencing the lowest voltage of around 240 Vac, many customers experience loss of production due to high voltage grid conditions when this voltage is increased during the daytime.
“We are actively working with several DNSPs, e.g.,SAPN, Western Power,and AusGrid, to identify areas with high PV penetration and voltage issues. This is something that the AEMC should consider in this reform as it affects all consumers of electricity in Australia.”