What's putting the slows on commercial solar?

Network demand charges are replacing energy charges at a prolific rate and this unfairly diminishes the ability of solar PV to provide value, particularly in the commercial sector. The chance to defend ourselves against profiteering is diminishing.

Across the PV industry, one of the most commonly requested bits of intelligence I get asked for is a data base of commercial electricity prices. Everyone wants to know where to find a best case scenario of high electricity prices because that’s where PV will provide the biggest bang for your buck.

My response is to use the punch line of one of our whitegoods retailers; the database would be valueless because ‘everything’s negotiable’ – the Bing Lee factor.

All around the industry I hear stories about commercial electricity prices being increasingly negotiable and staggeringly disparate and last week Big Switch Projects released an analysis that puts some hard facts behind the confounding conundrum we face.

The team at Big Switch Projects conducted a detailed analysis of 66 businesses around Australia; 20 in NSW, 18 in Victoria, 20 in Queensland, six in South Australia and one each in the ACT and Northern Territory. A pretty good little snapshot.

What they found confirmed two key things the PV industry and consumer advocates have been saying for some time.

Firstly, that network demand charges are replacing energy charges at a prolific rate and this unfairly diminishes the ability of PV to provide value. The study revealed that during the study period, network demand charges rose by up to 75 per cent and an average of 30 per cent. Now to be clear, I’m a huge advocate of time of use charges and agree that opportunities exist for reductions in network costs through demand side management, pricing being one of the methods that can be used.

However, I am unaware of a single piece of data that suggests that peak demand has increased by 75 per cent. I also see little evidence of network companies (or retailers) getting out there and practically helping customers to address these issues; to the contrary, we have actually seen some incentives and support mechanisms wound back or ‘paused’ (the AusIndustry Cleantech Investment Grants, for example). Simply whacking up the price is both lazy and a transparent profit grab by the people who own most of the network companies. That’s right, your elected officials – the state government.

So now we have the evidence; network and demand charges are increasing disproportionately to real demand and in doing so, diminishing the ability of the PV industry to help commercial building owners offset their demand. Why? Because there’s a bucket load of money involved in ‘network demand’ charges, and revenue from electricity sales is under threat.

I can see the marketing promo at the electricity industry annual conference – ‘Can’t get enough revenue from electricity sales? Change your thinking – don’t charge for energy – it’s too easily reduced – charge for something that can’t easily be effected and maximise profits for your shareholders!!’ Trying to debate the validity of the charges is highly complex and companies just give up because it’s too hard or expensive.

In this study, these charges represented as much as 20 per cent of the total bill. I had previously looked at a similar issue at a residential level, coming to similar conclusions. In our study we sampled average electricity prices from around Australia and found that ‘fixed daily charges’ now represent an average of 16 per cent of the average residential bill. The highest proportion was 28 per cent of the typical bill and lowest was 7 per cent.

Energy price was also considered in the study, finding that there is a massive variation in the price per kWh being paid by this group of similar commercial-sized customers. The average price increased by 18.6 per cent during the study period, with a range of prices between $0.136 and $0.314 kWh.

So what have we learned?

Well, the opportunity for profiteering – and chance to defend ourselves – continues, and it seems there is a good sample here of companies who are being unjustifiably charged massive increases. Secondly, that in doing so, the network companies and state governments who reap the profits are doing a great job of allowing the electricity industry to slow down the uptake of PV, particularly in the commercial market.

Related Articles