The AEMC today published a draft 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.

Installing off-grid systems, which typically include solar panels, batteries and a diesel generator, 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 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 draft 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, so the businesses can offer remote consumers alternatives to network replacement at a price similar to the price they pay for grid supply. 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.

To progress the recommendations, the AEMC encourages the COAG Energy Council's Energy Market Transformation Team to expedite its work on regulatory issues relating to off-grid systems, including by publishing proposed action items with indicative timeframes. The AEMC remains ready to provide assistance when required. 

Submissions on the draft determination are due by 8 November 2017.

Media: Prudence Anderson, Communications Director, 0404 821 935 or DL (02) 8296 7817

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.