Why networks need a thin pipe to keep solar guerrillas at bay

About half way through a presentation last week at the All Energy conference in Melbourne, it seemed that the end had come for one of Australia’s biggest network operators.

Barbara Elliston, from the Australian Solar Council, was explaining her concept of “guerrilla solar” and the business model of her company.

Essentially, this is an idea that households would install rooftop solar PV to satisfy the needs of their greatest single energy demand – hot water. The panels, rather than being connected to the grid, would be used to heat the water. Elliston says there was nothing the grid operator could do prevent the installation. Indeed wouldn’t even know, apart from wondering what had caused a sudden reduction in demand.

At around this point, Mike Swanston, the head of customer advocacy at Energex, and one of the country’s most incisive speakers about the challenge of rooftop solar and battery storage, and its impacts on networks, threw himself to the floor. “What are you trying to do to us,” he seemed to be saying. Swanston survived the experience, but there is no telling that networks will.

Concepts such a guerrilla solar exist because there is a mutual suspicion between network operators and the rising prosumer, a natural product of a rivalry that seems to pitch a centralised business model and the arrival of technology that is delivering the so-called “democratisation” of energy.

Solar consumers worry that network operators are going to find some way of loading up costs on consumers to recover their investment in the networks. It’s a suspicion reciprocated by many network operators, who fear that solar exists only to destroy their business.

Australia wide, nearly $50 billion will be spent on network upgrades and extension in the current five year regulatory period, and the networks want their money back. How exactly they do so in a world of reduced demand – thanks to the increased self consumption of solar households and increased energy efficiency – is one of the great debates of the electricity industry, both here and overseas.

In Germany, as we mentioned yesterday, consumers are responding by seeking to buy back the grid. It is happening in thousands of towns and villages, and even in major cities such as Hamburg and Berlin. Similar moves are being made in the US.

In Australia, there is no mechanism for that to happen. Quite how the networks get their money back – and keep their customers and avoid the prospect of stranded assets – is a mystery to all.

As Swanston said in his own presentation in that same session, the arrival of solar, and the imminent arrival of solar storage, is creating a “new normal” for distribution networks. “The paradigms that worked for last few decades are starting to fail us,” he said.

And he mentioned in a previous speech that we reported on, this is less a technical challenge than it is an community and social one – and for the network operators, a business one.

Energex has one of the highest penetrations of rooftop solar in Australia. In its corner of the world, in south-east Queensland, one-quarter of all houses have solar on the roof, or 232,000 homes. Even after the removal of the generous feed-in tariffs, new customers keep coming.

That is having a major impact on how Energex deals with its customers and operates its network. In many feeders, demand is disappearing during the mid-day hours as empty houses export electricity back into the grid. This graph below gives just one example. It shows successive years of demand on one feeder over the past four years, as solar PV has grown. The red line is from just last week.

The problem with responding to these issues by imposing high fixed charges for all – the favoured means of most network operators to date – is that it penalises those who don’t consumer much, including those where that is caused by energy poverty, and it removes the signal for households to be energy efficient. And it provides an incentive to those who don’t like it will simply leave the grid, leaving the network with the increased danger of stranded assets.

Swanston says one idea might be one that is gaining currency in energy debates around the world – to charge people based on the capacity of the wire that links the grid with their home.

He calls this the “thin pipe” model. It basically puts an upper limit on consumption, and caps the connection charges for the customer. And it allows the network operator to make plans, knowing what the maximum demand can be. Network operators say population and the economy will grow, so aggregate demand will increase.

Having thin pipes means that new demand can be used to fill in the gaps, rather than having to build new network. Swanston says it is all about optimising the use of the grid.

And the thin pipe models means that those who use the grid less, or consume little energy, are not penalised. Those who want to run six air conditioners and half a dozen plasma TVs can do so, but they get to pay their fair share. He used this image with water to illustrate it. Water is drawn through the day to be stored at time of maximum use.

Swanston admits that the modeling is yet to be done. It could be that the “thin pipe” concept need only apply in certain hours of the day – say between 3pm and 10pm – or it could be 24 hours. Those who wish to export large amounts back to the grid will also have to pay for a larger pipe.

As the illustration suggests, the “thin pipe” model lends itself to exploit storage, but Swanston also wants the storage debate to move beyond batteries.

Swanston notes there is potentially 1,000MW storage in the form of stored thermal energy– where the energy is stored in the hot water tanks or by pre-cooling air-conditioned spaces – that can be exploited if the incentives are right. Ditto for “chemical” storage – timing the chlorination of pools and the use of pumps outside traditional hours.  He says until the market can get the right incentives for customers to continue storing residential hot water, then it will be difficult to get batteries right either.

The big problem for the networks, though, is that much of the costs they have already made, and are committed to, are built into the system. Energex customers could face another 10 per cent rise in distribution costs in the next decade – offsetting any gains delivered if the carbon price is repealed in time.

Ultimately, as RenewEconomy has said previously, the networks will probably have to take a writedown. But as much as many people would like to go off-grid, and self-serve much of their energy needs, the network will have to exist in some form. A thin pipe sounds like the best answer put forward so far. And it already has support from some sectors of the solar industry, including those involved in storage, as Dane Muldoon wrote for us a few months ago.

Note: We will have more on the solar guerrillas concept sometime soon.