Feb 6, 2014

David and Goliath battle over solar: why they want you on the grid

Australian households are flocking to solar, screwing up the business models of the nation's state-owned electricity generators. Politicians have yet to come to grips with the situation.

The Australian solar industry is preparing for what it calls a "David and Goliath" battle against the country’s biggest generators and network operators. The outcome will likely decide the immediate fate of rooftop solar in Australia, and the pace of the so-called "democratisation of energy" -- a contest that pitches households and their solar modules against the centralised utilities that have dominated the industry for a century or more. The Australian Solar Council’s launch on Wednesday of its "Save Solar" campaign -- it wants to raise the modest sum of $25,000 to help defend the Renewable Energy Target -- came as the first of the large state-owned generators renewed its attack on renewables and called for the Renewable Energy Target to be removed. About 1.4 million Australian households have rooftop solar systems, and the combined capacity of more than 3.1 gigawatts is having a dramatic impact on the way the nation’s electricity market is structured, and on the business models of incumbent generators. It is shifting peaks, and reducing the amount of electricity needed during the day. Queensland’s Stanwell Corp is closing its 385MW gas-fired Swanbank plant because it is being priced out of the market, although it is going to re-open 700MW of capacity at its Tarong coal-fired generators once the carbon price is removed in what it hopes will be that start a "coal revival" in the Sunshine State. Stanwell has also signalled its total opposition to the RET -- a position that it, and its political masters in the Newman government, have argued before. It says that the RET and other clean energy measures are "distorting" the market. More critically, it is making its operations unprofitable. Stanwell’s position typifies the dilemma facing incumbent generators and network operators in Australia -- and other international markets where solar and other renewables are making big inroads. CEO Richard van Breda complains about the cost of electricity in Australia. But his biggest problem right now is that the wholesale cost of electricity has never been lower since the launch of the National Electricity Market more than 15 years ago. The low price forced his company to close half of its Tarong power plant in late 2012, and to report a loss from its portfolio of more than 4000MW of coal and gas-fired generation in 2012/13 -- a situation that it blamed almost entirely on rooftop solar, which is not only stealing demand, but with other renewables is causing wholesale prices to fall. In the meantime, gas prices are surging as the massive LNG plants near completion. Queensland households, for instance, will be slugged an extra $68 a year next year as the gas price rises start to bite. Ironically, the cost of green schemes is predicted to fall. The three-year closure of Swanbank highlights how gas fired generators are being priced out of the market, although it enables Stanwell to sell its gas to other customers rather than burn it to generate electricity. That is exactly what Stanwell did with its excess coal after closing down the Tarong units. The fact that Tarong is to be re-opened later this year should not surprise. The carbon price will have gone, and Stanwell said last year it hopes that the extra electricity demand from the new LNG plants will spark Queensland "coal revival". The only thing that can spoil that renaissance, it appears, is rooftop solar and other renewables.
"The plunging cost of solar has taken industry by surprise, and politicians are yet to come to grips."
Much is made in the industry about "cheap coal", but it means little to end-use customers in a country where the cost of delivery is so high. Australians pay more than any other country for network costs and retailers take a hefty margin (in New South Wales and Queensland, for instance, households are slugged  between $100 and $150 a year just so the electricity retailers have a big enough kitty to offer discounts to other customers). Households, on the other hand, are discovering rooftop solar can generate and deliver electricity for around half the price of grid electricity. The move to time-of-use pricing, higher connection prices and other tariff changes in the pipeline is simply providing an additional economic incentive to install more solar, and to consider the addition battery storage. "Can I get off the grid" is becoming a much more common question of solar installers. The options for the incumbent utilities are limited. Network operators could adapt to new technologies -- a recent CSIRO report suggested that if they didn’t, one-third of  households in Australia could leave the grid by 2050. The generators simply face a loss of revenue and their assets being squeezed out of the market. They could, as utilities in Europe are starting to do, embrace more renewable energy but, like Kodak with digital technology, the upper echelons of executive power appear frozen in time. So their principal strategy for the moment is simply to try and stop rooftop solar in its tracks. Which is why they are pushing so hard against the RET. The state-owned generators have, of course, the ear of state governments who not only own the assets, but regulate and set prices for electricity. Enormous pressure is coming from these and privately-owned utilities such as Origin Energy and Energy Australia to have the RET removed entirely, or severely diluted. The Solar Council fears that the remaining incentives for rooftop solar -- which consists of a renewable energy certificate for every megawatt hour of electricity the systems are deemed to produce -- could be removed entirely. This, it says, would push out the return on investment in rooftop solar beyond the interest of most households, slow down adoption, and put many of the industry’s 15,000 solar jobs at risk. "We know another 3.5 million Australians are planning to put solar on their homes over the next five years, but those families will have a big rethink if the Renewable Energy Target is scrapped or weakened," Solar Council CEO John Grimes said. "The best thing you can do to reduce your power bill is to go solar, so you would think the Government would be encouraging investment in renewable energy." This is where the politics get interesting. The plunging cost of solar has taken industry by surprise, and politicians are yet to come to grips. The first government that will have to do this will be Western Australia, which is struggling with credit downgrades but which must fork out $500 million each year to subsidise the cost of grid-based electricity. If those subsidies were removed, the case for solar and distributed generation would become even more of a "no-brainer" than it is now. The ideological hard-heads in the Coalition, and those that seek to advise them, refuse to accept the new technology and describe the CSIRO’s scenarios as “science fiction”. Australian households, however, have a different perspective *This article was originally published at RenewEconomy

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21 thoughts on “David and Goliath battle over solar: why they want you on the grid

  1. Merve

    Boggled. The support for the coal industry and the political power it weilds is staggering.

  2. Chris Hartwell

    Why do conservative governments – and indeed, conservatives in general – appear to be allergic to evidence and facts? Ever decrying it as bias or spin-doctored. The consies protesteth too much, methinks.

  3. Khupert the Runt

    Let me get this right. Incentives have made it possible for many more people to install PV solar. So the prices have come down as well as producing less C02 from coal generation.

    Instead of continuing to support PV solar so that costs can come down further and we meet our international reduction targets, governments are trying to increase support for coal. We must truly have rocks in our heads.

  4. JamesH

    What is the source of the “science fiction” quote in the last para?

  5. graybul

    If, for no other reason at all, the Australian electorate must place the Federal Govt. and politicians at large on notice . . support and prioritize renewable energy OR ELSE!!
    Solar roof-top generation is a no-brainer. It works, does not pollute, is increasingly more efficient, and delivers at a lower capital cost with each technological advance. Solar just goes on giving, and giving. It will continue to do so until a “Black Hole” swallows our Sun! Fossil fuel energy polluters . . . and lick-spittle politicians your time has come . . . and gone. All it takes folks’ . . is a vote!

  6. Geoff Russell

    1. Giles, please, do you have any evidence at all that solar panels are “shifting peaks” as you claim in your article? Without storage, how is peak solar generation during the middle of the day going to shift the summer peak when people get home from work and hit the air con?

    2. Correct me please, but isn’t the purpose of clean energy to reduce carbon emissions sufficient to avoid dangerous climate change? If so then how exactly does roof top solar help? Household electricity is about a quarter of electricity and electricity is about a quarter of the energy generated from fossil fuels (though a bigger fraction of the fossil fuel emissions). These numbers imply obviously, that even if every house in Australia had rooftop solar, we’d still be way, way, way above the kinds of emission levels required to be “doing our bit”. So what exactly is the function of roof top solar?

    To make the kind of dent in emissions that will constitue “doing our bit” (i.e., dropping per capita emissions down to about 5% of current levels) will require a massive investment in real clean energy, and changes in diet, not rooftop symbolism. But if you spend buckets of money subsidising rooftop toys (or coal), then there will be less money to do the stuff that CAN make difference.

  7. Peter Hannigan

    I suspect that unless people are actually penalised for putting on solar – and that is a real possibility with fixed network access charges – then people will continue to install without incentives. The rapidly rising cost of electricity, environmental concerns and lingering questions about the reliability of network delivery will all continue as drivers. Even refusing to pay for solar generated power – which would be a very hard position to sell – would not necessarily stop takeup, just slow it down.

    A change in household energy usage patterns can get the best out of solar and change the peaks. For example, here in Queensland even if you are out of the home all day you can have the airconditioning cooling the house powered by solar. This either avoids or minimises the need for cooling in the evening.

    The electricity distribution companies need to rethink what business they are in. Is it energy distribution from a centralised generator, or energy management from multiple sources.

  8. Jimmy

    Geoff – “Without storage, how is peak solar generation during the middle of the day going to shift the summer peak when people get home from work and hit the air con?” Sorry does the sun set at 5pm in summer where you live?

    “Household electricity is about a quarter of electricity and electricity is about a quarter of the energy generated from fossil fuel””So what exactly is the function of roof top solar?” According to you householed electrictiy makes up 6.25% of our total emmissions – if just 1/3 of that can be provided by rooftop solar we would be almost half way to your 5%.

  9. Stephen

    I wouldn’t say politicians have “yet to come to grips”.

    Around the country, they’ve smartly reduced home solar rebates, doing exactly what Big Power tells them. In ACT, rebates have dropped from 46 c/kWh to 8 inside three years.

    When vested interests diverge from community interests, you should always back the former.

  10. Carbon Footprint

    So that’s a new twist on energy conservation- taxpayers subsidising CO2 emissions.

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