WA energy minister “struggling with phenomena of solar PV”

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Nahan admits governments and utilities struggling with solar PV phenomenon. He says one way to reframe charges is to base them on land values, like sewage.

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The degree to which policy makers and incumbent utilities are struggling to cope with the sudden emergence of solar PV and its impact on traditional electricity systems has been underlined by Dr Mike Nahan, the recently appointed energy minister in Western Australia.

“We are struggling with the new phenomena of solar cells on rooftops – which is changing the world of electricity generation and transmission, and will continue to do so,” Nahan said in an interview with ABC TV’s 7.30 Report in WA.

Nahan’s comments came at the end of a tumultuous week in Perth that saw the government back-flip on a decision to make retrospective cuts to solar feed in tariffs of solar PV.

It had proposed to cut the tariff in half, in order to save just $12 million a year, but changed its decision within just a few days after a furious reaction from many of the 77,000 households affected by the ruling.

Nahan said that governments and utilities were having difficulty coping with the emergence of rooftop solar, which is offering households cheaper access to electricity, but is also reducing the pool of revenue available to networks.

“We are dealing with an important issue. It is not unique to WA, indeed it has affected the entire world,” he said.

Nahan is experiencing a rapid learning curve since taking up his role earlier this year. A former head of the virulently anti-renewable think tank, the Institute of Public Affairs, Nahan insisted that the government would not attempt to make any further changes to the solar  tariffs – “we learned our lesson on this one, we won’t do it again” – but was still deciding what action to take over the long term.

As RenewEconomy pointed out last week, this is the key issue for governments. The adoption of rooftop solar will at least double, and probably rise three or four-fold over the next decade as consumers look to lower their bills by generating some of their own electricity needs.

How governments and utilities respond to that is a subject of intense debate. There has been talk of higher fixed charges, particularly following an interview with Colin Barnett earlier this week, but Nahan canvassed the possibility of adopting a similar mechanism for sewage services, where charges are based on land value.

WA’s problems are compounded by the fact that the state subsidises the cost of its largely fossil fuel generation to consumers. This subsidy, Nahan noted, amounted to around $400 a household – creating an electricity tariff deficit that rivals that of Spain.

“That is a subsidy,” Nahan said. “Our tax receipts are under pressure. My task is to cut costs rather than raise prices. I’m going to look at whole electricity system to see if I can get the subsidy back, without raising prices.” He has commissioned the Economic Regulation Authority to conduct a review of tariff options.

High fixed charges are not favoured because they dissuade consumers from installing solar and being more efficient with their consumption.

Adam McHugh, an energy specialist at Murdoch University, said a type of capacity payment – which reflected the amount of electricity a customer could draw from the grid at peak times – was one option. This has been canvassed elsewhere in the industry and it is thought that South Australia is considering such a measure.

Kirsten Rose, the head of the WA Sustainable Energy Association, said it was households that install solar should not be penalized just because they were using less electricity from the grid.

The solar industry has long argued that some of the benefits of rooftop solar – such as reducing peak demand – should be recognized. Rose said it was clear many other customers were also not paying their way – this included people who installed air conditioning and under-floor heating. That’s because the network had to be upgraded to cater for this extra demand. A basic air conditioner adds around $7,000 in costs to the network.

 

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7 Comments
  1. Alistair Spong 6 years ago

    I keep getting this feeling that ‘user pays ‘ systems aka ‘ the Jeff Kennet model are only ever thought feasible by consevative governments when it doesn’t involve most likely taxing their most affluent constituents …. After all this nonsense about Gillard’s class war , it should be a no brainer to conservative governments to introduce capacity payments , lest the kettle be called black !

  2. Albert Sjoberg 6 years ago

    If the subsidy is the cause of the problem, then the subsidy must be phased out. The subsidy is artificially making the fossil power appear cheaper than it truly is.

    Despite removing Subsidies, the roof-top solar market has continued to flourish. Certainly less protectionism allowing markets to find their correct balance is preferable in the long run.

    The same goes for the motor industry, but that is a whole other discussion.

  3. John P 6 years ago

    Another factor is the intervention by government in the contract between seller and buyer. Governments don’t intervene and set the price of a loaf of bread or a pair of shoes. So why is electricity different.
    Does it mean that governments see a need to protect the profitability of this sector of the economy? The big polluters are clearly on the way out!

  4. bill 6 years ago

    Nowhere in any of this to and fro does anyone in government or the utilities have a word of acknowledgement to solar PV owners. Avoided infrastructure costs – now 300MW? Dealing with a midday peak?
    The business model is now outmoded and electricity is flowing both ways – get used to it.

  5. biroses 6 years ago

    No way should owners pay a higher fixed charge when they provide the grid with cheap peak energy at 9c/kWh.

    Bring in staged charge rates- high peak users pay a higher rate during peak hours – its not rocket science. This could be an interim solution until we all get smart meters.

    State Governments should get their act together and redesign the grids for dispersed renewables. Centralized coal is dying- too dirty, and gas prices are headed one way – set to treble and treble again. A 100% RE system will provide energy at no more cost than replacing existing fossil generation with the same. Why? because although the capital cost is much higher, there is virtually no fuel cost.,

    http://www.greenswa.net.au/assets/greens_energyreport_web.pdf part 3.

  6. wideEyedPupil 6 years ago

    IPA theory struck out in practice on that one. Such a shocking surprise.

  7. b allen 6 years ago

    @JohnP: Governments don’t own the assets producing Shoes and loaves of bread, but are heavily invested in the Electricity industry. The scale of investment required and the essential nature of Electricity in the economy and daily life make it a business that will tend to natural monopoly; as such it must be regulated, whatever your economic persuasion. Governments also have a nasty habit of swinging back and forth between the view of state owned assets as instruments of state policy, and that of income producing assets. The management will differ depending on which approach they take. It is all subsidized, to the tune of billions, and there are crazy legacy issues from the days when the businesses were all vertically integrated state owned Monopolies. Welcome to the jungle:)

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