Solar export management and the future of the grid
The Australian energy industry has been fighting a battle on two fronts. Between the impact from managing a high penetration of rooftop solar to the grid to keeping wholesale energy market spot prices balanced, there hasn’t been an easy solution that will make everyone happy.
AEMC’s draft determination to integrate more rooftop solar and energy storage to the grid was unfortunately met with a consumer media backlash with news headlines around a proposed ‘solar tax’ to control the amount of rooftop solar that was getting connected to the grid.
While there was a sensational volume of news around the potential penalty it would place on households with solar PV systems, only a few media outlets picked up on the positive outcome this could bring – and that is this will allow more Australians to join the rooftop solar and home battery revolution by making the cost of maintaining the electricity grid more equitable for all energy consumers.
The question of whether to refuse connection, limit export, or actively manage
In parts of Victoria, it was recently reported that one in three applications from households to connect new rooftop solar systems have been rejected as local parts of the grid reach solar saturation points. With the high penetration of solar PV in some areas, it is hard to create an equitable solar incentive or interest-free loan scheme to increase the uptake of solar for households. For example, in New South Wales and Victoria, applications for subsidies or interest-free loans for home batteries have been restricted to households in specific postcodes rather than making this freely available to everyone.
There are many reasons why solar export control will benefit solar system owners. Besides allowing households the opportunity to connect new solar PV systems to the grid, Australia as a whole can reduce its reliance on fossil fuel electricity generation by being more strategic about soaking up on solar generated by households when it’s available and cheap.
To make it equitable for everyone, we need new thinking and new technology
Yet Australia’s transition towards greater energy independence comes at a price.
It’s sometimes debated as an issue of equity whether households should both a) benefit both from having access to a feed-in tariff for excess solar energy and b) be allowed to be a beneficiary from a network upgrade that is being funded by all energy consumers to accommodate new solar PV connections. For energy retailers or generators, it is the cost towards maintaining a baseload generation capacity to connect to the National Electricity Market.
With the higher penetration of renewables, wholesale electricity spot market pricing has become more unpredictable. As this happens, both retailers and generators have had to shoulder the cost burden to provide electricity when there isn’t a demand for it. In fact, negative prices mean there is a clear disincentive for generating electricity, and a positive incentive to consume it. On the other hand, residential solar system owners are insulated from this volatility and instead generally receive a set feed-in tariff from their retailer resulting in misaligned incentives.
The shape of tomorrow’s grid is already beginning to emerge
This new dynamic is a challenge and an opportunity that SwitchDin is helping to find a way forward on. We have partnered with SA Power Networks and Ausnet Services for a trial that will put some flexibility back to the grid and hopefully rebalance some of the equity issues Australia is currently facing as end customers, energy retailers, network service providers or energy generators trying to work out their roles in an ever changing grid.
Working together with equipment manufacturers, the Flexible Exports trial looks at how we can provide participating SA Power Networks and Ausnet Services customers the flexibility to export their excess solar to the grid in a time-sensitive way that supports local network requirements.
By facilitating the remote management of their solar systems, we can either reduce or increase the amount of solar power exported to the grid. This allows DNSPs the opportunity to connect more new solar PV systems instead of refusing or limiting new connection requests.
It also provides for dynamic export limits to be introduced for new installations rather than static ones. This would help to allow electricity retailers to offer a more equitable feed-in-tariff to compensate customers for their excess solar energy.
South Australia in focus
View slides from our presentation at Solar & Storage Digicon
In SA, we’re seeing how the challenge with the high penetration of solar PV is being addressed head on through the Smarter Homes initiative. One in four homes in SA already have rooftop solar. What is unique about SA is the appetite for rooftop solar and about 30,000 new rooftop solar systems were installed last year.
More than any other state, SA is exposed to spot market price fluctuations. This unique environment gives us the perfect testing ground as we move towards a grid that is increasingly powered by renewables.
The ARENA-backed Flexible Exports trial will demonstrate that there is a smarter, more nuanced approach to connecting more solar to the grid than the blunt approach of static export limits currently being deployed in some parts of Australia.
By enabling more PV systems to be connected with communications capabilities and flexibility, we will show how technology can help reduce the need for costly network infrastructure upgrades. With the right partnerships between electricity retailers and their customers, this can help everyone get more out of solar.
Based on a modelling scenario where SwitchDin used a zero export limit for new solar homes with a 6kW capacity, each new solar home in SA could stand to lose 7MWh of exported solar per year. That is the equivalent of 200GWh a year - roughly two percent of SA’s annual electricity demand. Not only does this represent a drastic ‘waste’ of clean energy that could be used to support the grid, it also means lost opportunities for households who could be rewarded through a feed-in tariff.
SwitchDin’s presentation at Solar & Storage Digicon
Using the scenario where we imposed a dynamic export limit where an average home in SA could export excess energy to the grid, they would only lose $200 a year in feed-in tariffs versus $800 a year if we imposed a zero/static export limit. (See the full slides here and video of the presentation here.)
For generators, the oversupply of electricity can suppress prices on the wholesale electricity spot market and shift this more frequently towards the negative territory. There have been incidents where negative spot market pricing has lasted 15 hours in SA. Last spring, SA faced the equivalent of 28 full days of negative pricing, mostly as a result of low loads coupled with high PV generation.
Not only does this scenario potentially distort wholesale pricing, it also discourages generators from investing in generation capacity which could potentially impact on future energy consumers. What we’re seeing is SA is the scenario where potential conflicts can happen between network constraints and wholesale market price fluctuations.
A look at the implications of negative wholesale prices
A negative spot price on electricity also impacts on energy retailers, who effectively take a double hit. During negative pricing events, retailers have liabilities on two fronts: the feed-in tariffs they pay their customers, and the wholesale market exposure associated with pumping electricity into the grid.
The Flexible Export trial demonstrates how we can deliver value for both energy retailers and energy consumers by finding value in solar energy instead of financially penalising all parties.
SwitchDin’s modelling for an average household in SA 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. What this looks like in reality is paying customers to temporarily shut off or turn down their solar. This flexibility could also be highly rewarding for customers who are exposed to wholesale electricity prices with disruptive retailers like Amber Electric or PowerClub or for larger C&I entities with wholesale market exposure.
Over time and with more data from the trial, we will establish how effectively solar system owners and energy retailers can respond to negative pricing events as they happen.
As an industry, this trial shows how we can create new business models to evolve with the growth of solar PV. These learnings will help us demonstrate how new loads - for example the uptake of EVs - can reduce the incidents of negative spot market pricing.
Imposing zero/static export limits or shutting off solar PV systems isn’t the solution. The concept of a ‘solar tax’ that is being perpetuated only creates uncertainty around households choosing to invest in rooftop solar PV and batteries.
Fear is the last thing we need when we’ve seen significant progress in households coming together to build something better for the future.