The “solar tax”: Why should households be charged to generate power?

The Australian solar industry awoke with a surprise when AEMC announced a draft determination that on one hand seeks to ensure the right for solar system owners to export their energy into the grid, while at the same time, proposing charges for the right to do this.

For an average 5 kilowatt (kW) solar system, the AEMC’s modelling estimates that the proposed changes would reduce savings for many solar households by up to $100 annually, with the impact potentially rising with system size.

Fortunately, the economics of solar in Australia wouldn’t make the solar investment case any less compelling for homes or businesses.

Given the fact that solar brings significant benefits to the electricity grid and supports many households around Australia, why should they be charged to generate power?

This ‘solar tax’ concept has been around for some time. It is a contribution cost from solar system owners to network operators that aims to address the costs of maintaining grid infrastructure.

The AEMC’s renewed attempt to bring this back to the table is evidence of accelerating growth in rooftop solar penetration in Australia.

At the end of the day, the grid was not built as a two-way street and the industry needs a solution to effectively integrate the growing amount of distributed energy resources (DER).

The proposed solar export charge is the AEMC’s way of trying to disincentivise ‘too much’ solar going into the grid at the ‘wrong time’.

This is not necessarily a problem as long as there is dynamism in how we determine what is ‘too much’ and when is the ‘wrong time’ instead of a blunt, ‘dumb’ approach.

If this is the road we’re going down, let’s make sure it allows for flexibility in connection and tariff options for solar system owners as well as the networks.

It’s important to highlight the difference between what’s happening on the level of our physical network infrastructure – the poles and wires operated by Distribution Network Service Providers (DNSPs) – and the wholesale electricity spot market prices on the National Electricity Market (NEM). AEMC’s draft determination addresses the infrastructure concerns.

With the rapid growth of rooftop solar, what we are also seeing is the impact of negative spot prices becoming a routine occurrence in a growing number of states such as in South Australia, which had approximately one aggregate month in the negative territory in the last year.

This creates a high level of uncertainty over how households could be impacted should rising electricity costs eventually be passed to them.

It also shines a negative spotlight on the growth of renewables and the risk of continuing to invest in baseload fossil fuel generators to balance wholesale market prices.

The problem of congestion and fairness over who gets access to send their electricity out over the wires without having to pay a ‘toll’ is a problem for DNSPs. For electricity retailers and other players dealing with the volatility of the spot market, the issue is about avoiding adverse pricing events (e.g. having to pay to generate electricity).

You could argue there is an incentive to curtail the amount of solar being produced. But until we make PV export management a business-as-usual part of a DNSP’s job, there is a risk of resources being misallocated.

Australia has the infrastructure, tools and knowhow to build out the grid in a way that a) maximises the amount of solar being produced, and b) is flexible enough to do more than just switch off solar.

For example, have we examined the least cost approach such as investing in grid augmentation before going full steam towards curtailing rooftop solar systems especially considering what a powerhouse rooftop solar uptake has been in Australia.

Reducing congestion on the grid to allow more rooftop solar into our energy system requires a future, distributed grid that SwitchDin is helping to build right now that we believe three elements are essential to make this happen.

  1. Promoting interoperability to make it easier to connect and manage rooftop solar systems

Standards are one element of a solution to the interoperability challenges we face in the solar industry.

However, whilst adoption of key standards is important, standards developed for generic markets around the world will not solve all the problems we face here in Australia.

Too much reliance on standards risks stifling innovation.

The industry should be driven by a strong commitment to interoperability through a platform approach which supports many different standards and architectures to work together.

Australia is a small market and it will have trouble getting alignment from all the different brands of inverters, batteries and energy management technology companies if it doesn’t get this balance right.

Getting this correct means the players can work together for a smarter solar that responsibly interacts with the grid and ‘knows’ when export is okay and beneficial.

This is part of the reason why major inverter manufacturers have chosen to make their equipment compatible with SwitchDin’s platform as we continue to work with more DNSPs and energy retailers to address the challenge of network congestion while enhancing value for solar owners.

  1. Distributed assets like solar will need to be flexible for the network and the market’s needs

In October 2020, SwitchDin commenced a trial with SA Power Networks and AusNet Services together with inverter manufacturers, SMA, Fronius and SolarEdge to provide solar customers with the flexibility to export to the grid depending on how much electricity is needed on the distribution network.

This trial is with selected customers in South Australia and Victoria where their rooftop PV systems are remotely controlled with the goal to either reduce or increase the amount of solar power exported to the grid.

The Flexible Exports trial demonstrates we can connect more new solar PV systems to the grid universally instead of the DNSP having to limit new connection requests or slapping static export limits on new installations.

By enabling more PV systems to be connected with communications capabilities and flexibility, we have helped reduce the need for costly network infrastructure upgrades.

This is done in such a way as to help solar system owners and their retailers respond to negative pricing events as they happen.

SwitchDin’s modelling data for an average household in South Australia has shown that an energy retailer could save an average of $112 per year with flexible exports by reducing the exposure to negative spot pricing and the cost of feed-in tariffs.

This flexibility could also be highly rewarding for customers who are exposed to wholesale electricity prices.

  1. Inverters, batteries and other assets will be better connected

There is no mandatory national protocol or standard dictating that inverters and other DER equipment like batteries must have a two-way connection with DNSPs or energy retailers.

Outside of the SA Smarter Homes initiative for the Remote Disconnection, Reconnection requirement and Dynamic Exports, the decision of when and how to connect is largely up to the equipment manufacturers.

The same goes with incentive programs like the SA Home Battery Scheme that have a ‘VPP-ready’ requirement.

Otherwise such requirements are sporadic and implemented separately, under different industry bodies and this reduces the visibility of DER on the grid

As possibly the first example of DER being deployed as ‘business as usual’ in Australia, SwitchDin has worked with Horizon Power for the Onslow DER Project in WA to advance renewables and to support their customers desires to have more rooftop solar.

Horizon Power provided an incentive for homeowners and businesses to purchase solar PV panels and batteries that they could remotely manage.

Residents in Onslow were aware that having too much solar energy flowing back into the grid could destabilise their energy supply. Instead of imposing zero export limits and PV system size constraints, Horizon Power worked with SwitchDin to deploy Droplet controllers.

These controllers monitored and securely issued control commands to household solar and storage systems from a range of different manufacturer inverter and storage brands so that Horizon Power could implement feed-in management, demand management, reactive power management and battery management.

SwitchDin’s work with Horizon Power has shown how the line between customers investing and utilities investing in energy infrastructure is fast blurring.

Through this, we are demonstrating how utilities and customers can work together to share the costs of energy infrastructure and provide mutual benefit.

Households and businesses need to invest in smart PV hardware and technology to help Australia transition towards a future grid that rewards all solar PV owners.

It will take a delicate balance between investment, collaboration and managing the expectations of households and businesses who want rooftop solar PV to get Australia through an energy transition.

Let’s try to make sure we get it right – and fair – as we roll these changes out.

Andrew Mears is CEO and founder of SwitchDin.

Source : Renew Economy

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