Aussie homes might be leading the uptake in rooftop solar, but commercial and industrial businesses are the “missing middle” between residential and utility-scale solar and storage, according to a new report from the Institute of Energy Economics and Financial Analysis (IEEFA).
“The power-generating capacity installed on household roofs in Australia is roughly equal to that of the coal plants in our grids,” says co-author Johanna Bowyer, lead analyst Australian electricity at IEEFA.
“However, we have not seen the same scale of action within Australia’s commercial and industrial buildings even though they consume substantially more electricity than the household sector.”
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To date, only 5.6GW of business rooftop solar capacity has been installed across Australia’s main grids, far behind households (~22GW). This includes capacity installed at sites such as factories, retail stores, supermarkets, farms, schools and hospitals.
The forecast capacity of business solar in 2050 has been placed at 17–32GW, and the technical rooftop potential could be even higher. C&I storage installations are also well behind households, although demand is increasing quickly. The report identifies four key structural barriers to C&I rooftop solar and storage uptake:
- Distorted business-level investment barriers: Businesses often rent their premises, making investment in long-lived assets more complex, and businesses often have many competing priorities in terms of capital allocation. Solar and storage projects in businesses are often too big to qualify for residential incentives and too small to qualify for utility-scale incentives.
- Patchwork network tariffs: Complex and inconsistent network tariff structures make it difficult for businesses to model investment returns, develop software and control systems to manage batteries, and scale up business models.
- Grid connection issues and delays: A fragmented, slow and unpredictable grid connection process adds to costs and delays for solar and storage projects in businesses, which can take anywhere from a few months to a year or more with numerous studies and revisions.
- Uneven playing field for network services: Regulatory processes hinder business solar and storage providers from competing with networks to help address identified network needs.
“Left unaddressed, these barriers will continue to constrain investment, slow down uptake and leave the full potential of C&I solar and storage unrealised,” Bowyer says.
The report recommends a set of solutions to help overcome these barriers and unlock the potential of C&I solar and storage.
“Governments need to develop a more comprehensive, long-term policy framework to drive decarbonisation of the electricity sector,” co-author Tristan Edis says.
“In absence of this or as an interim step, incentives for the business sector should be considered to help the ‘missing middle’ overcome sub-optimal levels of investment by businesses in non-core energy projects.”
Demand charges, which comprise up to 40% of business’s electricity bills, are complex and inconsistent across networks, depending on the timing, duration and definition of peak periods.
“This creates significant complexity and cost for C&I solar and storage providers and makes it difficult for C&I solar and storage providers to optimise battery control models,” Bowyer says.
“Network tariffs should be reviewed and standardised.”
The report also recommends the grid connection process be streamlined.
“To streamline the grid connection process, technical requirements could be harmonised across Australia, and a fast-track pathway for C&I projects that fit within a standard architecture should be introduced—alongside other measures,” Bowyer says.
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“Finally, the network economic regulation regime was designed a long time ago, before it was clear that batteries, demand management and other such non-network solutions could support the network. A first-principles review of electricity network economic regulation should be undertaken, with explicit consideration of non-network solutions and their ability to deliver network services.
“These recommendations offer a set of solutions to enable the C&I sector to be scaled up at pace, helping serve demand as coal exits, and supporting Australia in attaining its emissions reduction goals while reducing energy costs for businesses.”
