UPDATE: AEMC proposes two-way pricing for household solar and battery systems

AEMC, social energy, SA Power Networks, home battery, solar homes

The Australian Energy Market Commission (AEMC) today released a draft determination on how to integrate more small-scale solar – and other new energy technology like batteries – into the electricity grid.

“We can decarbonise the electricity sector faster and cheaper if we connect more small solar customers and make it worthwhile for them to install batteries. But to do that we need to make some changes to the power system,” AEMC chief executive Benn Barr said. 

“Within 10 years, half of all energy users will be using home energy options like solar. We must make sure this seismic shift doesn’t leave anyone behind because every Australian, whether they have solar or not, deserves an affordable, sustainable power system.”

Today’s draft determination addresses the problem of ‘traffic jams’ on the network, which are occurring now and will get worse as more solar connects because the grid infrastructure was built when power only flowed one way. Blocking power exports because the grid is under strain will cost us all more, because it means less renewable, cheaper energy gets into the system. 

The reform package to make room for more solar includes:

  • Changing distribution networks’ existing incentives to provide services that help people send power back into the grid. Gives networks a stronger reason to deliver quality export services that customers value. At the moment, there are no financial penalties for poor network export service and no rewards for good service. We also propose recognising energy export as a service to the power system in the energy rules to give consumers more influence over what export services networks deliver and how efficiently they deliver them.
  • Letting networks offer two-way pricing to better manage the poles and wires. Gives networks pricing options they don’t have now, like rewarding solar and battery owners for sending power to the grid when its needed and charging for sending power when it’s too busy. New incentives will give customers more reason to buy batteries or consume the power they generate at busy times on the grid 
  • Flexible pricing solutions at the network level. Allows each network to design a menu of price options to suit their capability, customer preferences and government policies. Customers could choose things like free export up to a limit or paid premium services that guarantee export during busy times. Networks might offer grandfathering for existing solar owners or choose community batteries.

Extra safeguards proposed for the energy rules will ensure existing and new solar customers – and non-solar customers – are protected. The proposal does not mandate default charges for exporting power. If a network business wanted to introduce export charging, they would need to consult extensively with customers and have a transition plan detailing how this would be done approved by the Australian Energy Regulator. 

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“This is about creating tailored options, not blanket solutions,” Mr Barr said.

“We want to open the solar gateway so more Australians can join the 2.6 million small solar owners who have already led the way. But it’s important to do this fairly. We want to avoid a first-come, best dressed system because that limits the capacity for more solar into the grid.  

“One option to deal with more solar traffic – building more poles and wires – is very expensive and ends up on all our energy bills whether we have solar or not. While the sun may be free, the poles and wires aren’t, so we think the key is to use the power system smarter to avoid costly overinvestment and keep new infrastructure to a minimum.

“Letting networks give customer incentives to use the system better means supply and demand on the grid can be smoothed out over the course of the day. It helps address large amounts of solar being exported in the middle of the day when it benefits the system least.”

The move has been met with some criticism, with Solar Citizens saying it condemns the AEMC decision to allow solar export charges.

“As we transition our energy system and clean up our power supply, we need to be encouraging more rooftop solar – not penalising people for putting panels on their roof,” Solar Citizens national director Ellen Roberts said.

“Rooftop solar benefits all energy consumers by providing cheap power to the grid for everyone to use.

“Big coal and gas generators aren’t charged for exporting their power to the grid, so why should we be slugging Aussie families with panels on their roofs?’

“The Queensland and Victorian Governments have already publicly stated their opposition to the sun tax, but now we urgently need all of our State Energy Ministers to step up and protect solar owners from this discriminatory charge.”

Australian maker of household solar batteries RedEarth Energy Storage echoed these sentiments, stating it would be a devastating blow to the environment, the solar industry and household budgets.

RedEarth Energy Storage chief executive Charlie Walker said the move threatened to rip off Australian families while fattening up big energy companies’ profits.

“The notion that big energy companies will do the right thing by their customers is fanciful,” Mr Walker said.

“The big energy companies simply don’t like that mums and dads can sell excess power back into the grid. Thousands of Australian families have done the right thing by the environment and invested in solar and now they risk being charged for it.

“This sets a dangerous precedent after governments have been encouraging households to turn to solar for decades.

“It shouldn’t be up to mums and dads with solar panels on their roofs to fix the problems of the poles and wires owned by power companies. If there’s a problem with a solar panel, families can’t charge power companies to come and fix it.

“More solar energy is being produced than ever before and energy companies should be investing in their electricity grid to increase capacity for the future instead of blocking households from making a buck through sustainability.

“There needs to be more incentives for Australians to make the switch to solar and battery, but this rule would be a deterrent.

“Stunting the growth of the solar and battery industries is no way to tackle the brutal environmental concerns like climate change.

“It also appears the AEMC has done no economic modelling on the impact this would have on jobs and businesses in the solar and battery industry.”

The Commission says it has already taken on board a wide range of views. It is now asking for feedback on our draft determination, with submissions due by May 13, 2021.

“We know there is a lot of interest in this issue,” Mr Barr said.

“We’ve heard and understood the concern among some solar owners about whether they will be able to realise the value of their investment if the system changes. 

“We want to reassure solar customers that we’re not proposing they should all start paying export charges. We expect networks to deliver pricing proposals in close consultation with consumers, which may include options where they don’t have to pay for exports. 

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The Commission modelled the potential impact on customer bills if networks did introduce export charges. We found that 80 per cent of customers would see their bills drop because they would no longer pay for solar export services they weren’t using. 

For the 20 per cent of customers with solar, there could be a range of export charge impacts, depending on system size. A 4−6kW system would still earn on average $900 – about $70 less than now. But this impact could look very different if they took up options that rewarded them for using the system differently – such as self-consuming power.

Doing nothing is not an option because blocking people’s power exports will cost them now and more in future. While export charges on a 4−6kW system might lead to a marginal drop in solar earnings, owners will face that same drop if they are constrained from exporting energy just 10 per cent of the time. Being constrained 50 per cent of the time would reduce their solar earnings by more than $300 per year.

“We need to think differently about the power system – including its pricing structures,” Mr Barr said.

“We found that buying a battery would allow customers to benefit more and also help the system. 

“We have to start planning for a different future now because there is still a lot of work to do and change will take time. If we start now, with the right caveats and protections in place, we will avoid costly crisis solutions further down the track.”

Where these rule change proposals came from

This package of reforms follows a nine-month process of working with stakeholders as part of ARENA’s Distributed Energy Integration Program. The program was led by a steering group of consumer representatives, industry association and energy market bodies. As a result of that work, South Australian Power Networks, the St Vincent de Paul Society, the Total Environment Centre and the Australian Council of Social Services requested the AEMC change the rules. This draft determination is our response to those requests.