The AEMC today published a final determination on the rule change request from Western Power on using off-grid systems in place of grid-supplied energy in remote areas. The AEMC supports enabling off-grid electricity supply and recommends a broad package of changes to laws, rules and other instruments to protect consumers in off-grid arrangements.

Off-grid systems typically include solar panels, batteries and a diesel generator.

Installing off-grid systems in locations where it would be cheaper than maintaining the grid connection can reduce network costs for all consumers.

However, consumers should not be expected to move off-grid to reduce costs for other consumers unless off-grid supply is offered to them at a price, and with protections, similar to those for grid-supplied electricity.

To provide these off-grid consumers with appropriate protections, the AEMC’s final determination recommends changes to state and territory laws and licences, and potentially also the National Energy Retail Law and Rules in relation to reliability standards, consent requirements and, if necessary, price controls.

We also recommend the COAG Energy Council amends the National Electricity Law (NEL) to allow network businesses to receive regulated returns for off-grid services they provide to consumers who transition off the grid as an alternative to network replacement. Under the current NEL, a change to the National Electricity Rules to allow off-grid supply to be a regulated service would lead to inconsistencies with the law and make the proposed rule change invalid.

The Commission is currently participating in working groups established by the COAG Energy Council to progress the necessary mechanisms and consumer protections to enable consumers to transition to off-grid supply.

In addition, in 2018 we will undertake a review of the regulation of off-grid systems, as recommended by the Finkel Panel. As part of this work, we will advise on the details of the law and rule changes needed to implement the recommendations in our final determination.

Media: Bronwyn Rosser, Communications Specialist, 0423 280 341 or DL (02) 8296 7847.

Explainer

Off-grid supply includes individual power systems, which supply electricity to one customer, and microgrids, which supply electricity to more than one customer, where there is no physical connection to the national grid. Off-grid systems typically include solar panels, batteries and a diesel generator.

The cost of providing off-grid supply has recently dropped significantly, as the costs of solar PV and batteries decline. In some cases, it may be cheaper to provide off-grid supply than to maintain and replace long power lines linking remote customers to the national grid. Moving to off-grid supply could potentially offer additional benefits such as improved reliability for remote customers and reduced bushfire risks.

Customers can choose to move off-grid now. However, few grid-connected remote customers have financial incentives to do so, even where the total costs would be cheaper than maintaining the grid connection, because the tariffs they pay do not reflect the high costs of supplying them. Instead, tariffs tend to reflect the average cost of supplying power to all customers in the distributor’s area.