The Victoria energy and pricing regulator has proposed a peak period tariff of 29c/kWh for rooftop solar exports back into the grid, in a ground-breaking recommendation that could help change the way consumers think about their solar assets, and encourage battery storage.
The recommendation from Victoria’s Essential Services Commission recognises the value of encouraging rooftop solar to be fed into the grid at times of peak demand, and is part of a wholesale rethink about the structure of solar tariffs in the state.
Last year the ESC, under instructions from the Victoria Labor government, factored in a 2.5c/kWh social cost of carbon, effectively a $25/MWh carbon price, into the state’s solar feed in tariffs – the first time the “benefits” of rooftop solar had been valued in an Australian tariff.
It was also asked to value the network benefits of rooftop solar, but this work is still ongoing because of the complexity of the task, and the geographical variation, and it was asked to value the “environmental” benefits of solar, but also found that too hard to quantify.
The introduction of a peak tariff for rooftop solar is a huge development, given that all solar tariffs up till now had been structured on a flat rate.
It will come into effect for the hours of 3pm to 9pm each weak day. The “shoulder” tariff – from 7am to 3pm, and from 9pm to 10pm, – will be 10.3c/kWh, while the off-peak tariff- from 8pm to 7am – will be 7.2c/kWh.
The ESC expects that the offering of a “time-of-use” solar tariff will become compulsory over time, but there will be a transition period where retailers can offer a “single rate” FiT of 9.9c/kWh.
Both the single rate and shoulder tariffs are well below the 11.3c/kWh tariff currently in place, but the ESC says modelling provided by ACIL Allen argues that day-time wholesale electricity prices will fall in coming years, due to the increase in solar projects.
This includes the continued addition of rooftop solar at record rates, the construction of the state’s first large scale solar farms (at least 190MW in coming years), and new large scale solar projects (2,400MW) in states like Queensland, South Australia and Victoria.
This will reshape wholesale prices in the state – and this graph above shows just how dramatic it might be, with ACIL Allen saying the exit of Hazelwood, and the addition of solar, will push down prices during the day, but result in significantly higher prices in the evening.
Hence the recommendation of a time of use tariff. The ESC expects this could encourage households to shift demand, use appliances like pool pumps, earlier in the day, be more efficient in the evenings, and possibly to encourage battery storage.
James Clinch, manager of regulatory reform at the ESC, said a “critical peak” price for solar exports was also considered, but not included due to uncertainty over the impact on retailer contracting practices.
Critical peak tariffs, which would provide payments well in excess of 29c/kWh to reflect the jump in critical peak pricing, when prices can soar to $14,000MWh, of 1,400c/kWh.
Clinch noted that the growing impact of solar – both rooftop and large scale – will have an impact on wholesale markets, and for the first time the forecast weighted average wholesale price when solar is generating (6.8/kWh) is lower than the forecast average wholesale price for 2018-19 (9.1c/kWh).
“What customers do in reponse is matter for customers,” Clinch told One Step Off the Grid in an interview. “Our enquiries show that one outcome is that customers will have an incentive to export more at peak periods and that has overall efficiency benefits.
“Essentially, they are making more efficient use of their solar assets and supplying energy at time of high demand.”
He said the opportunities for the consumers were to load shift, to orientate their panels to the west, rather than the north (to produce more later in the day), to change demand patterns, or to install battery storage.
Darren Gladman, the director of energy independence for the Clean Energy Council, said the shift to time varying FiTs would improve the business case for batteries without the need for any subsidies, and said other states should follow.
“Time-varying feed-in tariffs will provide an incentive for investment in batteries, leading to a reduction in electricity costs to other consumers,” Gladden said in a statement.
“By paying the fair value of electricity fed into the grid at peak times, households and businesses will have the incentive to invest and will support the system by providing power when the system needs it most.
Gladman noted a previous Productivity Commission report that estimated peak demand in NSW lasted for just 40 hours per year (or less than 1 per cent of the time) but accounted for around 25 per cent of retail electricity bills.
“By providing an incentive to households and businesses to generate at peak demand periods, the electricity bills of all customers will be reduced. Other states should follow the Victorian Government’s lead and pay battery owners a fair value for the electricity they feed into the grid at peak periods.
“Time-varying feed-in tariffs enable households and businesses to compete to supply power at peak times. Electricity in Victoria will be cheaper and more reliable as a result of these sensible feed-in tariff reforms.”
Giles Parkinson is founder and editor of One Step Off The Grid, and also edits and founded Renew Economy and The Driven. He has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.
This post was published on December 19, 2017 12:02 pm
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View Comments
At 29c/kWh I would turn all my panels to the west. In mid summer the sun doesn't set until 8pm DST.
Which is exactly when the grid needs it. Hot, long summer afternoons. These common sense changes are the first good thing for consumers that I have heard enabled by the Victorian smart meter roll out.
It still rankles me that you need $1000 worth of Reposit hardware to get 'some' of the generator price benefit of the 'critical peaks'. I'm certain the quickest way bring down power prices would be to eliminate the super peak ($14k / MWh) and increase access to those prices.
This is something Telstra Energy with their large network of generators and batteries should be looking very closely at.
G'Day Guy. Do you actually have a Reposit ?
Nope, I can't see how I would ever make my money back with the upfront costs. My grid connected battery is also only tiny (2.5kWh). I think they also need a smart meter and I am very happy not paying an extra daily fee for one of those.
I like having the grid, but I am not going to be a martyr to their old fashioned business case. I will continue to use it to generate cash from export, provide cheap off peak (midnight to 5am) power, and supply big surge loads.
I've been advocating Western PV for ages but this seems a very simple solution that will encourage that and storage. I hope it gets up and spreads to other States.
Great idea....
Time of Use solar export tariffs sounds reasonable. We are all limited by the orientation of our homes and having fixed install of rooftop solar. Just dreaming with the thought of Heliostats on rooftops, now that would be some idea.
Yeah, there is a cool idea and also shortens the payback period of an off the shelf Battery.
I have just bought a new North facing house (with no shadowing) for the sole purpose of generating maximum power. Now it seems I should have bought West facing :-( I just can't win.
Greg, don't be too disheartened. Proposals aren't policy / implementation. If it does come in perhaps your Western rooftop could take some solar panels?
G'Day Joe. New house is North and South facing only. No East or West capability at all. Roof has a single ridge line running from East to West. It is also physically attached to the unit on the west side as well. The roof orientation was the primary reason I just bought this place :-(
I estimate I can fit 3 rows of 15 panels. Now have to figure out how to get around the 5kW export limit posed by the distributor...
Hello again Greg. There is always someone wanting to hobble a good idea and with home solar this idea of distributors bringing in an 'export limit' is the lastest. A little while ago it was 'Standards Australia' wanting 'Bunkers / Cages' to be built to enclose home battery installations but thankfully that proposal now seems to have been killed off. With 'export limit' I guess installing home battery will be much more attractive proposition than it already is.
Just what I've been saying for years now, TOU rates for solar FIT.
Another case of I told you so, that needed to happen.
The State reduced the FIT because ACIL Allen predicts that Solar value will diminish in the future, because it's so valuable that everyone will install it. What a spin job.
Wait, doesen't this discourage the use of home batteries? You now get more value from your solar panel output during peak hours, so the payback for batteries takes longer?
This should make the decision to install batteries more compelling. You store it during the day - and have items such as washers and dryers on timers so they run at peak solar time - and store the rest. When the peak pricing kicks in you discharge the batteries at the peak FiT rate.
This means the batteries earn you 29c instead of 11c as it is now. More revenue = shorter payback period.
There is also a big 'negative' to this story too... Assuming you have a big PV array, and a decent battery you can export at 29c, you still have the 'warranty' issue that most if not all battery suppliers deem on their customers (a 'limit' on the amount of times you can drain the battery). Combine that with the ever increasing RRP of electricity, and it may be more beneficial to store and use your own power than to export any at all, which in turn screws up the Vic Govts 29c idea. You also have to worry about the Liberal Govt getting into power and dismantling the whole scheme.
Wut? A warranty isn't a 'limit'. What on Earth are you on about.
My Oath, there is indeed a warranty limit in most cases, and it (the warranty) expires when you exceed the number of battery 'fills' and 'drains' (cycles) that the manufacturer specifies (i.e. the 'limit'). e.g. the Tesla PowerWall 2 limit is one complete cycle per day for 10 years (3,650 cycles). If you allow a power company to have control of your battery, they may exceed the once a day cycle, thereby shortening your battery warranty. I'm not sure I'd be too keen on allowing anyone other than me the ability to control the export of electrons at the times I choose from my battery...
Its the power company's battery. They bought it. If they don't use it in accordance with the specifics of the warranty agreement, the warranty is void. But it still isn't a 'limit'. The battery doesn't suddenly switch off when the warranty expires.
TOU tariffs are a great idea, rewarding producer-consumers for supplying electricity when needed, the opposite of electricity generated from outdated coal fired power plants. What great thinking from Victoria. Will the Federal LNP now threaten Victoria again with reduced GST share for such forward thinking energy policies?! The LNP will do anything for their fossil fool mates, but like trying to hold back the tide - an absolute waste of time. Another great story thanks Giles.