Shift to renewables will lower prices, and households can lead the charge

Last weekend I spent my time at the excellent Byron Bay Writers Festival, and climate change was a significant topic. Julie Gillard talked of the gross tactical error in allowing the Labor-Green carbon price to be portrayed as a tax, and numerous guests – Wayne Swan, Clive Hamilton, Carmen Lawrence and others – talked of the difficulties of introducing policies designed to lower emissions and promote clean energy.
But there was one thing missing from the debate. A common question from the audience was what voters and consumers could do about it. Write a letter to the local member, it was suggested. But there is a much more powerful and decisive action they can take that will also save them money – install rooftop solar, and may be even battery storage.
The scare campaigns tell us that high renewable energy targets and emission reduction targets are a form of massive “electricity tax”. Yet the modelling shows otherwise. The incentives required to support the up-front cost of building wind farms and solar farms is more than offset over time because these installations run at an operating cost of virtually zero (the fuel is free), bringing down the wholesale component of consumer energy bills.
There are two primary reasons why Australia needs a renewable energy target at all. The first is help them force their entry into a market that has a chronic over-supply of ageing and dirty coal fired generators whose owners are reluctant to close because of massive remediation costs. It’s cheaper to shovel brown dirt into a boiler than face up to their clean-up bill.
The RET – with policy certainty – should also establish a local supply chain and financing arrangements that bring down the cost of renewables. This is critical to bring wind and solar costs down to the point it has already reached in the US, India and China. If Australia was in a position – like Latin America, the Middle East and many parts of Asia – where there was a shortage of power and new capacity was required, then renewables could likely compete against new build coal and gas with little or no subsidy.
The economics at the consumer level are even more powerful. Rooftop solar is now delivering electricity to consumers in Australia at a cost of 10c-13c/kWh. That is little more than one third of the cost of grid-based power, and for those on time of use metering in the afternoon and evenings, it is around one fifth of the cost.
Battery storage is also falling down the cost curve. Already, according to Bloomberg New Energy Finance and other analysts, adding battery storage devices to home solar arrays is already cheaper than grid based power. Within a few years, it will deliver the sort of returns that will make it a mass market.
Households should have no doubt about the impact that this has on incumbent generators. The more solar (and other renewables) that is put into the market at one end, the more fossil fuel generation is rendered uneconomic at the other end.
Within a few decades, it is estimated that half of all electricity demand will be provided by the households and businesses and local communities that use them. That will mostly be solar in the form of rooftop arrays or community-scaled projects with the addition of battery storage.
This turns the energy system upside down. Already, the big utilities in Europe are jettisoning their centralised (coal, nuclear and gas) generators and focusing on what they call “distributed generation”, solar, storage and mini grids, along with electric vehicles.
The new mantra is to try and get into the household and business to provide a service based around those technologies, and using the grid as a back-up. If these massive utilities don’t act now, then the new technology developers will do it instead.
This trend is being followed in the US, and in Australia, which already has the highest grid costs in the world but because of that – and its excellent solar resources – has highest level of rooftop solar ownership in the world too – 1.4 million houses with a combined power plant of 4.2GW.
Imagine if that was combined and used as a combined power plant. New technologies allow for that: Ergon Energy is teaming up with SunPower and Sunverge to install solar and storage in 33 big homes in Queensland to test that technology, creating a “virtual power plant” that if replicated across the network will reduce the need for expensive peaking power plants (the ones that respond to surges in demand), and network upgrades.
That’s because the power can be pooled to respond to network issues, and in a matter of seconds. The grid operators will never have had such powerful tools.
That’s the attraction of rooftop solar and battery storage. It is shifting power, quite literally, to the people. It will accelerate a massive transition that is hailed by the likes of Jeremy Rifkin as a new industrial revolution. Smart software and appliances will mean consumers use less power, and cleaner power.
Environment minister Greg Hunt appears to recognise this. The Coalition is keeping its policy options close to its chest, but one thing mentioned this week was the influence of rooftop solar and batteries storage to cut emissions. He noted that much of the planned emission cuts would come from as yet unspecified “technology improvements and other sources of abatement”, which he said could include “battery storage for solar-generated power.”
To be sure, there are barriers to be overcome. The utilities – at risk of seeing their business models emasculated – are throwing up all sorts of changes to try and slow down the uptake of rooftop solar – ratcheting up the level of fixed prices, cutting the amount paid for exports back to the grid, hitting solar households with additional connection and metering fees.
The networks lobby is even threatening to impose unavoidable grid connection fees unless they are given a massive accounting favour by the regulators and allowed to charge for their network investment “up front”, and send consumers the bill.
But in the end, nothing can stop the march of technology. The more barriers that are thrown up, the smarter the solutions. Regulators originally demanded that the first motor cars be preceded by horses, nothing could stop the revolution in digital photography. More recently, the mobile phone revolution and the decline of fixed line telephony give a guide as to where the energy business is heading.
Households should take heart from this. There is a lot more to be done that writing letters to MPs. They can take action to accelerate that transition and save money, and new business models will bring this opportunity to renters, apartment dwellers and lower income households.
Despite the appalling state of the political debate, voters and consumers are being presented with a pretty exciting option.