How the electricity industry is blocking solar in Australia: Part II

In Part 1 of our story on how utilities are subtly but actively engaged in slowing the uptake of solar, we listed just four of the issues we have found around the country. We've been back on the phone, talking to more installers and customers and here is the second installment.

5. Solar is worse than everything (apparently)

Go to any hardware store, flea market or electronics clearance shop and you can buy a vast array of ultra cheap, horrendously poor quality loads. The utility attitude to these devices at a residential and even some commercial levels is simple – “Go son, go!”  Air conditioners, air compressors, water pumps, electric heaters and all manner of large, highly distorting devices can be connected – as long as you are happy to buy the electricity they so prodigiously consume.

However, solar is apparently worthy of far greater scrutiny. In Western Australia for example, one installer told me about the challenges they have faced since the local utility adopted a new technical rule earlier this year. The new rules set specific limits which prevent the “injection of DC energy into the network from distributed energy systems”.

I am not an electrical engineer and hadn't heard of this issue before so I asked a friend and in a nutshell, a number of devices (e.g. computer power supplies, variable speed drives, inverter air conditioners, etc) can all potentially “leak” a small amount of DC energy into the network. That's not good, apparently, if it happens in sufficient volume.

So, a real technical issue that needs to be dealt with, no doubt. However, it's pretty easy to assume that there about a million times more computer power supplies, variable speed drives and inverter air conditioners than 30kW or larger solar systems are in Western Australia and yet our industry has been slapped with yet another challenge. No problem if it's load, only if it's solar.

In WA this means you are forced to use less efficient, heavier transformer-based inverters and/or to add not one but two protection relays which adds tens of thousands of dollars to the cost of a system. Meanwhile, on the same site you're free to undo all this expensive work by installing a crappy air conditioner in every window with impunity. Oh, and the cost of building the network to supply those air conditioners at peak time will be joyously met by the networks, too – “not a problem!”.

Similar rules also exist for sensitive earth fault protection in Western Australia apparently. If you are connecting to a HV system you are also required to add the additional earth fault detection equipment (even though most good inverters already have their own), and again, at tens of thousands of dollars of cost and requiring weeks of work and delay.

Theoretically, this prevents the export of solar energy in case there is an earth fault on the grid, despite the fact that a myriad of other protection devices are already required in inverters as part of AS4777. It seems in WA the utility simply doesnt trust AS4777 and so requires individual engineering approvals and multiple levels of redundancy on 30kW systems. And you'd never guess what; the sensitive earth fault protection rule only applies to solar, not loads.

What a disingenuous and transparent crock of bull.

6. Look, we are really, really busy alright?

Any solar installer will tell you that delays in approvals can and do happen. Sometimes it's genuine, I have no doubt. However, the fact is that installing solar in a timely manner is just as important to every Australian as getting their electricity bill on time, but we are regularly used as the excuse. “There was a rush on solar” they say.

Businesses can go broke and end up wasting millions of dollars when utilities can't get things done in a reasonable timeframe and there is simply no answer for our industry. One installer I spoke with cited cases where simply getting an acknowledgement of a request to connect could take 30 days, then another 30 days would be required to assess the application, which could come back with specific technical requirements, which then requires you to start the process all over again.

A Victorian installer told me stories about having to pay for an application to connect to be assessed, waiting 30 days, then simply being told: “No, you can't connect 5kW, only 2kW.”

There was also a case I was involved with where a consumer at the end of a line wanted to put on a 5kW system to reduce their network demand. Problem was, they were one of only three homes on the small (10kVa) transformer and one customer already had 2kW of solar. Using their completely arbitrary “30 per cent solar penetration” rule, the utility said “you may connect 1kW only”. Anything above this would require the user to pay for the transformer upgrade. However, if all those three homes added 5kW of air conditioners each and a 2kW air compressor each and a pool with spa running another 5kW of load each, that same utility would have a crew out to upgrade the transformer to cope at no cost at all.

It's time utilities stopped using solar as an excuse for their own inability to provide a reasonable level of service. Now 1.5 million Australians have installed it and it's not really slowing, so the message should be pretty clear now: you need to resource your business adequately and understand we are customers too.

7. Computer says 'no'

This one is an all-time favourite of mine because it's so insanely puerile. Earlier this year, like many other customers of a certain utility, I was advised that although I had been receiving a cheque for my exported energy since 2012, apparently their computer system just can't cope anymore.

They simply advised they would no longer be sending the money that I have earned through my investment in buying solar and through the state government sanctioned feed-in tariff, but instead would now hold my money in trust as a credit and actually getting the cash would require me to write a personal letter and or spend hours on a call centre hotline.

It doesn't take a rocket scientist to realise that they just stuffed their interest bearing bank account with millions and millions of solar owners' dollars and saved some admin along the way too.

Now I don't begrudge a business making an honest dollar, but I checked with my five-year-old and he can make up better stories than “computer says no”. This is an unadulterated profit grab, at my cost and inconvenience; nothing more, nothing less.

Here's a thought – I'm the customer .

8. Don't get clever

Let's go to South Australia for a minute. Hot off the heels of record renewables generation thanks to billions of dollars of private investment in distributed energy, SA has announced an even higher renewable target because they are ahead of schedule, despite the fact that they actually do very little to materially help renewables any more. But I digress.

Many South Australians get legacy FITs which is very nice. However, like a growing number of Aussies, some of them would actually like to install storage too, so they can get even more control over their energy consumption profile and maximise their solar. Hell, they would even spend their own money to do it while it's still expensive (the exact opposite of those who buy air conditioners and are oblivious to the wider network costs imposed).

Clever little sausages.

Bet alas the rapid response to the mere thought of innovation by SA utilities was a lightning fast “cut that out right now smarty pants or there will be hell to pay”. Yep, apparently getting South Australians to invest their own money in storage is such a bad idea that if you dare do it, they'll penalise you by taking away your FIT.

Way to innovate there, SA.

9. No, you can't have choices or price signals

Not to be left alone, Tasmania seems to be having its own little anti-solar policy party lately too.

I spoke to an installer Friday who enlightened me to a number of challenges faced by installers and consumers, way down under.

Firstly it's back to tariffs again; the incumbent utility has dug its heels in lately. Solar owners (and good installers) understand that the name of the game is matching solar to your load and maximising self consumption. Sometime this means switching tariffs or moving loads with timers, for example.

In Tassie, there are two primary tariffs; Tariff 31 (for your lighter loads) and Tariff 41 and 42, designed for hot water and major electrical heating loads. The latter two rates (mostly night time and from hydropower) offer a discounted rate of around 14c per kWh which is good for consumers who want lower costs.

However, you are not allowed to connect solar to this tariff I'm told, so the largest electrical loads in the house are effectively 'protected' from solar and consumers are forced to keep paying. That's right, in Tasmania you are not allowed to offset your largest loads with solar.

The alternative is to switch the big loads to Tariff 31, use timers to match them to solar output and pre-heat; but at 24c/kWh, it's very hard to make the numbers work (with solar) because evening demand can still be significant, particularly in winter.

There is also a 'time of use' tariff in Tasmania, which a number of installers believe would be better for solar owners. However, again solar is excluded – you simply are not allowed to connect to a time of use rate which, as we have discussed previously, is a great way of getting consumers to change their demand patterns.

The reasons provided are to do with the types of meters being employed which, frankly, is doing my head in. In some states smart meters are forced on consumers, but aren't delivering consumer benefits, only utility benefits. In others, they continue to put in antique systems that don't provide any information. And in other cases, we have smart meters but the TOU rates bear little resemblance to real peak constraints, instead being focused on returning peak revenue.

We are swamped in low cost, highly intelligent devices. How is it possible that we can't get a decent level of smart metering and tariff structures in place in this country? How hard can it be?

10. Please stop trying to use your roof as a solar facility

Still in Tasmania, some recent and quite bizarre rules were forced onto local councils by the state government which I can only conclude are designed to slow solar, because they are so out of step with the rest of the country and Tasmanians who want solar.

Recently, councils were advised that whenever solar tilt frames are installed they are required to put the designs through council and get full blown building approvals, typically in excess of a thousand dollars and obviously adding administration and delays. Assuming that the installer and frame designers have done their job, Australian Standards already have this issue under control so it is an unjustified burden that replicates work already done.

I am aware that other states previously had similar rules but the majority have all now been dropped.

They also introduced a rule that specifies the maximum allowable roof space that solar panels can occupy, before a full blown roof engineering assessment from a building surveyor has to be conducted, again at thousands of dollars and again, a replication of what is technically already required under Australian Standards. What's peculiar about Tasmania is that they set the size limit at 32 square meters of solar coverage; roughly equal to 5kW.

What prompted the Tasmanian Government to suddenly decide it had to invent and deploy some of the most draconian regulations in the country and “instruct” councils?

11.The solar glass is half empty

Looking at the national situation for a moment, it is painfully clear that almost everyone in government and the utility sector has a “glass is half empty” view of solar. Again and again and again we hear utter rubbish about how solar only has a cost and how theoretically high the cost is, whilst at the same time conveniently ignoring any of the value and benefits.

Even the the Prime Minister is on this one; calling a review into the cost of the Renewable Energy Target based on the need to reduce energy costs, which (disappointingly for him) actually proved that solar has minimal cost and significant benefits. Embarrassingly for the RET Review panel, the government has now officially distanced itself from the recommendations of its own report, and no doubt poured several million dollars down the drain.

The same issue exists at the utility level where there is constant whining from almost every utility about how solar is a burden, it causes technical problems and inflates electricity prices. Again, they conveniently ignore the fact that wholesale electricity prices have been reduced through solar and other renewables, demand has been reduced on many parts of their network and transmission losses have been avoided. Their language would have the average punter believing that there was absolutely zero benefit to anyone from solar; in fact I've heard utility people say this explicitly.

Simply put, in the last five years or so Australian's have invested around $17 billion dollars of their own money in building 1.3GW of solar capacity around the country, right at the point of demand.

Of course there are benefits, you numbnuts.

12. Profits falling from the sky

A further national issue that has has snuck under the radar for several years is the cost of buying certificates and complying with the Renewable Energy Target, versus the actual cost.

Looking at NSW as an example IPART's 2013 Final Review of Regulated Energy Prices highlights the issue. Since the inception of the RET, utilities in NSW have been allowed to recover the costs associated with the RET by passing through certificates at a cost of $40, despite the fact that prices have (at times) dipped as low as $16 per certificate, representing a massive windfall profit. IPART's report acknowledges this with a table showing the average real certificate cost was almost 7 per cent lower in 2012-13.

“But there are compliance costs, administration costs and the cost of capital!” I hear the utilities say. Yes there are, but IPART also allows them to recover these costs, at quite reasonable rates of return I might add, in addition to the certificate cost. They can also generate their own by selling solar systems, or buying into large scale projects which allows them to hedge on buying prices by smearing the cost across system prices, potentially getting certificates at even lower prices.

Now I do acknowledge that in the latest determination IPART finally adjusted the price down below the $40 price on STCs. However they continue to allow inflated LGC cost pass-through prices; despite the fact that spot market prices have hovered between $22 and $35 in the last six months, NSW utilities are allowed to pass through a cost of $50.75 plus the compliance and administration costs.

As one NSW installer said to me, this is nothing short of an outrageous rort. On the one hand the major utilities all constantly complain about the RET and put the blame on it for raising electricity prices, while at the same time artificially increasing the cost to consumers for their own gain.

13. More profits falling from the sky

Around the country almost without exception now, exported solar energy will be purchased by retailers at between 0c/kWh and 8c/kWh.

In simple terms, this excess energy avoids the need for energy to be generated, transmitted, distributed and delivered to customers. So, if a retailer happens to have a 20 per cent of the customers in a street with excess solar and the balance without solar, the utility doesn't need to buy as much energy through the network. Instead, they get energy from the solar homes at 0c/kWh-8c/kWh and sell it to non-solar homes at full retail price, with big margins.

Now, it has to be acknowledged that the National Energy Market is highly complex and the way that costs and prices are calculated reflect that so measuring these theoretical benefits is difficult (impossible, according to IPART in a 2012 meeting on the issue in NSW). There is a huge amount of necessary averaging, smearing and so on.

Nonetheless, the fact is that 1.3GW of PV is connected so far, another 0.5GW or so will go in each year and around 2 million little generators are out there. A proportion of this will be exported on any given day – and that avoids the need to transport energy in.

The utilities will tell you “it's not material, and costs too much to measure”. I would argue that if it's not material, then pay the money to those who have made the investment; because it sure wasn't the utilities!

14. These FITs are making me thirsty

Here's the other thing that bugs me. Just like the Queensland Premier last week, many state governments bang on about the cost of FITs and use the cost as an excuse to vilify solar owners and blame the costs for rising electricity prices on solar. What this blatant misconception ignores (once again) are the benefits that come to both the owners and other users and, most importantly, that in almost every case around Australia the solar industry argued against excessive FITs in the policy design phase.

But in addition, I really get worked up when they completely overlook that the cost of FITs is not a constant. In Queensland for example around 4-5 per cent of their premium (legacy) FIT customers move home or do something that disqualifies them each year, “flipping” them back to 8c/kWh. This represents a loss of around 8000 FIT customers in South East Queensland alone each year, according to public data. This is a perpetual, predictable and organic decline in the cost of FITs that is overlooked by all but a few utility insiders. In NSW, I formally asked the networks for a response on this same question and got no reply; the government continues to use the original estimate of FIT costs without subtracting the organic attrition rate that in all probability is much the same as Queensland's.

What's my point?

I understand the energy market and regulation development is not simple. I actually commiserate with policy makers trying to navigate these issues.

However, when you look at these issues in aggregate (and I'm sure there are even more) it starts to look like the results of a fantastic night with lots of good red wine at the annual Energy Supply Association conference resulted in a secret strategy.

“How are we going to stop this tidal wave of reduced demand and people taking control of when they use energy and, heaven forbid, generating their own without us?” they (probably) said.  “I've got it!” screeched their marketing consultant late in the evening. “I want each of you to go home and think of two subtle barriers you can put up within the rules we have. They'll take a while to cotton on and we can claim ignorance, by which time it will be next year's conference and we'll swap ideas and go again.” 

None of the real issues are insurmountable. Pretty much all of them can be solved far simpler and cheaper. Provided, of course, the people who make the rules want them to be solved.

*This is the final part of a two-part series. Read the first article here. 

**Thanks to all the customers and installers who shared their time and stories in researching these issues.

Nigel Morris is the director of Solar Business Services.