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Why your bank should offer to buy your solar output

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There are currently two things missing from the Australian solar market right now – a fair price for electricity exported from rooftop panels back into the grid, and a corporate customer base that could support large scale solar.

solar moneySo, may be it’s time for your bank to step in to the market – offering a fair price for rooftop solar, and writing off-take agreements that could kick-start the utility-scale solar market in Australia.

Here’s how it might work.

The first issue about a fair price for solar has been a blight on solar markets in this country, that we have discussed at length, and here and here and here. A recent story about tariffs paid and received by a solar household sparked a huge response from readers.

Basically, because pricing regulators in Australia cannot bring themselves to recognize the environmental, grid and other benefits of rooftop solar, they only require retailers in Australia to pay around 6c/kWh – if anything – for electricity exported back into the grid. And for most households, that can be more than half their output.

The retailer will then sell those very same electrons –probably to your neighbour – for whatever the prevailing retail price is – mostly likely at least 30c/kWh but possibly more than 50c/kWh for those on peak tariffs.

That’s a handsome profit for the retailers, even with various “unavoidable” grid charges. And, of course, it doesn’t make for retailers winning any popularity contests among existing solar households, who now make up more than one fifth of all customers.

It is more likely to be self-defeating, creating an incentive for more people to install battery storage, and in some cases to leave the grid altogether – with all the issues about over-capitalisation and social equity that would entail.

And to get an idea about what the retailers really think about the “fair” value of solar, they are about to launch solar products, where they will sell households the solar electricity from solar systems on their rooftops, probably for around 25c/kWh. The only difference being that the retailer will own the system, rather than the household.

So, why not sell your excess solar output to your bank. Well, you can’t right now.

But as the banks have made clear in recent months, they are rolling in money and craving to be loved by their customers.

Buying solar directly from customers a large scale solar farm could save them money. They could offer to buy the output for between 12c-15c/kWh, package up the output through an intermediary, and boost their green credentials and probably cut their electricity bill at the same time.

Not only would it deliver economic savings, it would be a massive reputational boost for the banks too. And it could help lock in brand and customer loyalty.

Some in the solar market say the incumbent utilities are working on the assumption that it can’t be done, but they say that the utilities simply don’t understand the ability to aggregate customers and output. New technologies are making this easier.

It’s not just households that like having solar on the roof. Businesses are becoming increasingly interested, and around 20 per cent of new installations are going on the roofs of commercial and industrial properties.

What is not happening much in Australia yet is the large-scale solar arrays that could offset much of the electricity demand. It is happening at smaller scale – particularly with wineries and food manufacturers, and other businesses with large daytime consumption. IKEA, for instance, has signed up for more than 1MW of rooftop solar, and Woolworths and Coles are believed to be looking at it.

But where are the Apple’s of Australia. Last week, the corporate giant signed to take most of the output from a new solar farm in California, and was followed a few days later by Google, who signed up for a new wind farm.

In Australia, large scale power purchase agreements have been limited to installations such as desalination plants, which have helped fund and take output from wind farms in Victoria, and the Greenough River solar plant in W.A.

Miners are starting to get in to the act. Rio Tinto and Sandfire Resources are both installing solar plus storage arrays, and many more are looking at the possibility.

Councils are too. The Sunshine Coast council is looking at a 10-15MW solar farm, and Fremantle Council, as we report today, is looking at a 10MW solar farm.

But where are the other big corporate customers. Big power developers are hopeful that they are now emerging from the shadows.

Power hungry data centres are one obvious target. But here, again, in an opportunity for the banks. If, for instance, a major bank was to sign up to take an off-take agreement from a major solar farm – say for 15c/kWh – that would probably be enough to get it going.

Once again, they would likely save on electricity bills, and generate a huge reputational boost. They could even provide the finance!

Solar developers say they are starting to see a bit of interest for large-scale off-take agreements, although it is early in the piece. The uncertainty over the renewable energy target, and what would happen with renewable energy certificates, is a key component.

“We are starting to get some interest in direct procurement in projects off-site,” says one. The question for many corporate customers is what sort of tariffs they are seeking to offset. And what sort of deal the incumbents would be prepared to offer if they see that such customers would choose to go solar instead.  

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  • Johan Karlsson

    Hi Giles,

    I work for one of the smaller, clean electricity retailers in the market, but I still think that it’s important that these matters are clearly outlined in the media.

    Surely you would be well aware that all electricity that utilises network infrastructure currently attracts network charges and that electricity retailers aren’t selling electricity fed back into the grid for “handsome profits”?

    It’s not a matter of retailers applying a markup of 15-25c per kWh when that electricity is resold, it’s merely an obligation on us to include the network charges as these are imposed on all electricity flowing through the meter.

    So I think that there needs to be more blame (and accountability) put on regulators and network operators in order to minimise network charges to electricity that is being sent back to the local grid. This would allow for a more fair and equitable rate being paid for solar.

    Believe me, as a small retailer we want to provide as much value as possible to our customers, but the fact is that paying more for solar than the numbers you quoted would make it a loss-making deal for us. Network charges is the main culprit.

    Sincerely,

    Johan Karlsson

    • Catprog

      Is this in addition to the fixed charges charged to consumers?

    • wideEyedPupil

      Thanks for your engagement on this issue. Could you outline exactly how those network charges you are ‘just passing on’ are actually measured/metered and calculated please, Johan? Aren’t you able to disaggregate the total charges when a meter is spinning backwards?

      Is it a purely regulatory thing? Where are the industry spokespeople on this if it is purely regulatory issue that results in the unfair distribution of costs? Mostly what we see is the retailers, the larger ones especially like AGL and Origin taking a very aggressive position against solarPV and RE in general since AGL embraced their destiny on the dark side with the Emperor.

      • Johan Karlsson

        All energy that is currently being consumed by a market-facing meter attracts a network cost. The network (which owns the meter and the data) records the consumption and charges the FRMP (financially responsible market participant – electricity retailer) for the network usage charges as well as forwards the data. This charge is unfortunately non-negotiable in the current market. Network schedules can be found here: https://www.citipower.com.au/about-us/electricity-networks/network-tariffs-and-charges/

        So for retailers we take the cost of generating energy (driven by the spot price, or rather the hedged cost against expected spot price movements across contract term) add the network costs as set by the networks and then apply a retail margin, based on costs associated with servicing and adding value for the customer.

        Personally, I think this article sums up the core problem really well:
        http://www.themonthly.com.au/issue/2014/july/1404136800/jess-hill/power-corrupts?__federated=1

        Title: ‘How network companies lined their pockets and drove electricity prices through the roof’

        I hope that clarifies things a bit.

        • wideEyedPupil

          Yes I recall reading the top of that article back in June and I finished it now, thx for linking. I was aware of ‘gold plating’ issues around fictional demand and peak demand scenarios but that article has great detail.

          Still don’t see why retailers are not arguing the case that networks should not be so heavily on the take for SolarPV going into the grid. Arguable that’s it’s providing a network service of load balancing, certain it’s killed the midday peaks. If networks took less for meters spinning backwards i.e. subtracted from their use charging calculations by others the extra money could go to the solar generators. This situation certainly needs wisdom applied or the networks and big Gentailers will be dust and that would be a big waste of investments in the case of the networks.

          • Johan Karlsson

            The strict separation of generators, distributors/networks and retailers means that there’s not a lot of communication between the three (besides of course generators and retailers when a Gentailer model exists) but DBs are generally a very separate part of the whole chain.

            Networks/Distributor are the issue and the ones that needs to keep them accountable are the states and regulators that set their rules. We can argue all we like with them, but they will only listen to the states and regulators at the end of the day.

            I agree that we need big change though and we need to create a space by which locally generated electricity is valued equitably.

  • wideEyedPupil

    Good idea Giles. Keep them coming. I suspect with the Big Four totally unmoved on divestment this will also be a push but what a great concept!

  • Rob G

    With questions being asked about the nature of our banks investments e.g. Coal, gas … And whether profits can overrule environmental obligations, this ‘buy our solar power’ idea can be a great step in reshaping the publics declining view of many banks. Banks need to decide whose side they are really on, the public or the polluters. They can’t serve both any longer as there is a conflict of interest ( profit from companies that bring risk to the public) Superannuation defection alone will cripple banks. People will shortly realise that fossil fuel investments risk their retirement funds. Unlike other businesses, when banks lose customers they almost never come back! It’s a well known phenomenon in bank marketing land.