There are now more than 2.6 million households and small businesses with solar PV on their roofs, and the forecasts are that by 2030, some 6 million households – 50 per cent of us – will be using a distributed energy resource such as solar PV, batteries or electric cars to power our lives.
This is a fast, exciting and challenging pace of change when you consider that it took 20 years for Netflix to replace Blockbuster, and about 10 years for Spotify to dethrone iTunes as the music player of choice.
The trouble is that – unlike Netflix or Spotify – energy travels along real-life poles and wires, and not the virtual superhighway. And right now, it’s starting to look like peak hour.
The heart of the problem is that the power system was built in a different era. It was set up to get power to your home, not for your home to send power back the other way. Now that power is increasingly flowing both ways, we’re seeing new challenges emerge.
If we don’t act to address them, households that want to export power to the network via their solar panels potentially face the “closed” sign in the future because the existing networks will simply be full.
This will be an issue for existing solar owners – the pioneers – and an even bigger problem for newcomers who want to get on to that solar highway. In the next decade, that’s about another 3 million households which will want to earn a return from new solar panels.
Imagine you want to join the solar revolution and your power network says go right ahead and connect to the grid, but the amount of energy you can send back is a fraction of your capacity or nothing at all – because your neighbours got in first and your local poles and wires are at capacity.
That’s a problem now and it will only get worse. We’ve seen recent reports of Victorian solar owners being unable to send power back to the grid and in NSW distribution networks have solar export limits too. Just last week, in South Australia, there was near-record minimum demand, requiring the market operator to remotely switch off thousands of panels to stabilise the network.
The obvious solution is to build more poles and wires to accommodate everyone. But as anyone who lives in or visits an Australian city with toll roads knows, we will all pay for those new infrastructure networks either directly through tolls, or indirectly through our taxes. Big infrastructure costs money.
If our collective goal is to give everyone who wants solar the ability to earn a return and access the poles and wires, it’s clear the existing situation doesn’t work. First, all of our energy bills will rise if we limit the amount of cheaper renewable energy coming into the system – which would slow the decarbonisation of the sector too.
Second, spending up big on expanding the network will let more solar in, but there are issues of affordability, who pays, and what happens to those who can’t access or afford panels? Allowing some to use the solar highway while stopping others, even though everyone is paying for its construction, isn’t equitable.
The Australian Energy Market Commission believes the answer lies in thinking differently about the problem and using the power system in smarter ways. Today, we’ve released a draft package of reforms to address these “traffic jams” on the network.
We are seeking feedback on new measures that give power networks more incentive to offer export services that meet the needs of customers. Success would look like this: more people sending more power to the grid more often.
We’re also proposing that networks be allowed to develop two-way pricing schemes. What this might do is reward you for sending power to the grid when it’s most needed and charge you for sending power when it’s not. This helps ease congestion by spreading power usage out across the day. It makes better use of the highway and minimises the need to build more.
Each network would come up with its own pricing plan specific to its own circumstances and customers. It would probably look like a menu of options that customers can choose from. So, you would be able to decide what you value as a customer. You could choose to use the energy you generate to power your air-conditioning on a hot day, or you could trade it for additional income.
Some people fear this will mean they have to pay every time they export power. That’s not what this reform package is about. Depending on how solar owners respond to those incentives, many could actually earn more money. Networks could also choose not to charge for exporting power.
It will need safeguards in place to protect consumers. Networks will be required to listen to their customers and work together on pricing solutions that meet a network’s physical needs, customer preferences and government policies, because these can differ a lot. There will be “tariff trials” so the options networks agree on with their customers can be tested before anything is rolled out more broadly.
That’s why we haven’t mandated anything on prices. We want to allow flexibility. Any new plans the networks develop will have to be approved by the Australian Energy Regulator to ensure they are delivering for consumers.
More solar, batteries and electric vehicles are a good thing if we get the settings right. They can help us all decarbonise faster.
It will all take time – that’s why we have to start now. We can’t hold back the tide of change confronting the energy market, and we certainty can’t pretend it’s not happening.
Benn Barr is chief executive of the Australian Energy Market Commission.