Energy industry: Solar households freeloading off the poor

The industry body for the energy supply sector has launched a withering attack on solar, one riddled with myths and short on facts.

The energy supply industry incumbents via their association, the ESAA, have taken aim at solar households, accusing them of freeloading off poor consumers.

In a discussion paper entitled, ‘Who Pays for Solar?’, the ESAA states:

Most solar households end up only paying a fraction of their fair share of the cost of maintaining the network.

The industry body then suggests that it is the poor largely bearing the burden:

The current arrangements are unfair and need to be changed. At the moment, low income households who cannot afford solar, renters and people in apartments pay more to underwrite those customers who can install their own solar system.

At the very end of the discussion paper it makes a suggestion to address this:

One way to make the way we pay for electricity more equitable is to change network tariffs so they better reflect underlying costs. A higher proportion of network charges could consist of costs that are related to peak demand or fixed, and a lower percentage could be paid through simple variable (use) charges (c/kWh).

Is the ESAA right?

This end recommendation is close to correct – we shouldn’t be charging for electricity on the basis of flat tariffs for each kWh, no matter when or where it is consumed. The problem is that ESAA's preceding logic of demonising solar is completely mistaken and riddled with myths.

The reality is that under current tariff structures, any device which acts to shift a customer’s demand such that they consume a lot less electricity during off peak periods is freeloading according to the ESAA’s logic. So if you installed energy efficient lighting and standby power controllers, but the local network peak was during daylight hours, you’d probably be freeloading off the poor. Of course if you installed a great big whopping inefficient electric resistance heater and left it on permanently except over summer, you’d deserve sainthood for helping out the poor.  

In the end what adds to the network cost burden is people’s demand during the localised network peak. Installing solar does not increase the network peak (and in some cases actually reduces it) so demonising solar is a bit like targeting energy-efficient lighting and standby power controllers. The real freeloading villain from fixed tariffs is air conditioning. It’s often used sparingly for much of the year, but then adds a very large amount of demand during the network peak. 

As the Queensland government’s Department of Energy Water Supply noted in advising the Queensland Competition Authority’s against charging solar owners a fixed network charge:

The poor cost reflectivity of general tariffs means that small customers without PV (such as customers with large air conditioner loads) are also contributing disproportionately (less than their fair share) to the costs of their network usage, resulting in cross subsidy. The department questions the appropriateness of recouping these avoided charges from some but not other contributing customers when costs cannot be isolated between categories.

Ultimately it was the growth of air conditioning that was used by network businesses to justify billions of dollars of additional expenditure that have doubled household electricity prices from around 14 cents a kilowatt-hour to 28 cents.

The ESAA’s demonisation of solar is a bit like a guy that just ran over your dog with a semi-trailer truck, who points the finger at the bicycle following afterwards that clipped the dog’s tail before it died.

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