Ed Chan

Director

 

Breaking down barriers to the integration of “behind the meter” technologies will help the grid of the future and benefit consumers.

Many in the electricity sector are concerned that distribution network congestion may increasingly prevent consumers with rooftop solar systems who generate more energy than they use from exporting their surplus electricity into the grid. Not only does this act as a handbrake on the decarbonisation potential of cleaner energy technologies that generate locally, it also impedes the lower cost solar energy being injected into the grid instead of more costly grid-scale conventional generators.

The AEMC is now consulting on proposed reforms to provide more flexibility in the way that rapidly-growing distributed energy resources (DER) – including energy storage such as batteries and other smart appliances, as well as solar – can become an integrated part of the grid.  Our work in this area is part of our vision for the future customer-centric power system.

These rule change requests are the result of an extensive industry discussion over the past 18 months.

In 2019, our annual Economic regulatory framework review called for reforms to support the move to a fully integrated system that seizes the opportunities presented by the renewables revolution. It found that consumers would bear the cost if no action is taken to better integrate ‘behind the meter’ technologies into the system: solar generation that has no marginal cost when the sun is shining could be constrained; prices could become more volatile; and the nascent market for electric vehicles could exacerbate demand peaks rather than ease them. That report found that pricing, too, is part of the picture.

Issues such as pricing and grid access arrangements are complex and require cross sector collaboration to resolve. For the past 12 months, we worked closely with stakeholders through Australian Renewable Energy Agency’s Distributed Energy Integration Program to gain a common understanding  on the issues and identify potential reform options. The process involved consultation with more than 120 stakeholders, including consumer groups, industry associations and market bodies.

The three rule changes that we have now received from SA Power Networks (SAPN), the St Vincent de Paul Society Victoria and Total Environment Centre (TEC) together with the Australian Council of Social Services (ACOSS), are a continuation of this earlier work. The proposed changes are aimed at updating the regulatory framework to reflect community expectations that distribution networks will need to facilitate the two-way trade of electricity that would allow consumers with devices like solar panels and batteries to inject surplus electricity back into the grid. This should drive down costs across the entire system, meaning all Australians will benefit, even if they don’t have access to solar panels.

The proposals cover three broad areas:

1. Explicit recognition of export services

The rise of technologies such as storage, electric vehicles and PV panels has increasingly required distribution networks to manage the emergence of consumers who want to export the electricity they generate. But the existing regulatory framework is not explicit about how the provision of export related network services should be treated.

SA Power Networks and the Total Environment Centre and Australian Council of Social Service (TEC/ACOSS) proposals call for rule changes to ensure that such services are recognised in the regulatory framework. SAPN argues that without a clearer mandate about export services, distribution businesses may under-invest in network infrastructure to meet customer appetite to export power, which would over time further erode the ability of customers to export to the grid.

The joint TEC/ACOSS proposal recommends imposing new obligations on distributors. These would include new obligations to consider network planning solutions in relation to integrating DER, such as extra capacity to host it. 

2. Incentives for making it easier to export to the grid

Create an incentive to encourage distributors to invest in export capacity that is in line with what the community expects.

SAPN’s proposed mechanism is to integrate this into the Australian Energy Regulator (AER) - administered service target performance incentive scheme that gives networks a monetary reward for improvements in service performance and penalises them when it slides. 

Other ways of boosting incentives are examined in a report the AEMC commissioned from economic consultancy CEPA to inform stakeholder views for this issue.

3. Enabling export charges

Increased penetration of DER is expected to spur different needs to invest in poles and wires.

However, while retail consumers can be charged a one-off connection charge under the existing rules, export charges are banned.

This is a contentious area. Some stakeholders have indicated they are concerned that export charges could undermine environmental policy objectives and investments that households have made in DER. But others are concerned that the existing practice of recouping network costs from tariffs on energy consumed from the grid will lead to cross-subsidies from people who don’t have access to DER, including disadvantaged customers.

How you can provide input to our rule change process

There are a few ways for interested parties to provide input to our rule change process. We have set up a technical working group to stress test the AEMC’s thinking.

Stakeholders can also attend public workshops. We held our first virtual forum on August 13 and will hold a further workshop on the draft determination as well. We will also be calling for written submissions in November when we publish our draft determination.

Collaboration with other market bodies.

Rolling out reforms to better integrate distributed energy resources into the grid will require collaboration across the sector. The Energy Security Board has formed a steering committee to co-ordinate DER integration that also includes the AEMC, Australian Energy Market Operator (AEMO) and the AER.