What’s the problem with the electricity grid?
The electricity grid in Australia was originally built with the expectation that electricity went in one direction only: from power stations to homes and businesses. It wasn’t designed to also allow for solar-generated power to flow back the other way. While that’s been possible to a reasonable extent so far, the grid is starting to hit the limits of how much electricity it can handle from domestic rooftop solar.
The grid needs a lot of work to update it to become flexible enough to take full advantage of renewable energy sources, including domestic solar feed-in, but also to allow flexibility for all consumers. This work has to be paid for somehow. Currently, some consumers (renters, apartment owners, low-income households) have little access to the benefits of solar power but must still pay for electricity, and to some extent they subsidise the benefits that solar owners obtain.
Solar owners are also disadvantaged by the lack of flexibility and modernisation of the grid, in that in some areas, there’s already limited or zero feed-in due to capacity constraints on the local grid. This means that some solar owners get limited or no feed-in tariff income, and their excess solar-generated electricity may be wasted.
What’s the solution?
The Australian Energy Market Commission (AEMC) has proposed several changes to how the market and the grid operate to allow more flexibility in how power is bought and sold, and to better accommodate domestic solar, batteries and electric cars in future.
- New electricity infrastructure (‘poles and wires’) will still be needed, but we also need to use the electricity supply in a much smarter way – and rebuilding the grid so that it properly accommodates solar-generated electricity from homes is part of the solution.
- The proposal includes the option of a surcharge to solar PV system owners who export power to the grid (the so-called ‘solar tax’).
- The AEMC expects that the proposed surcharge for solar owners will only have a small effect on their overall return from feed-in tariffs (FiTs). For example, a consumer with a 6-8kW solar panel system is expected to see their typical return from FiTs drop at worst by $106, from $1284 per year to $1178 per year. For most solar owners the impact will be less than that, and possibly even a net increase in returns if they’re able to time their solar export to deliver excess energy when the grid needs it, such as late afternoon or evening (when energy retailers are likely to offer a better FiT to attract more exported power). The AEMC has published an explanation of the proposals and modelling.
- This situation may also make storage batteries more economically attractive. If FiTs end up as low as a few cents per kWh during the middle of the day, but increase to much better rates in the late afternoon and early evening when demand on the grid is highest, it may make sense to store your excess power in a battery and sell it back to the energy retailer in the evening.
- It will also make sense (even more than it does now) to use as much of your own solar power as possible, as that will reduce any surcharge for exporting power to the grid.
When is all this going to happen?
The roll-out of the new charges and rewards is at this stage still a proposal and won’t take effect for a few years, and there will be trial programs and consultations along the way. This is not to say all will be perfect – we need to keep watch and make sure the new system truly is fair and reasonable.
But in short, there’s no need to panic, and it still makes sense to consider investing in solar power for your home right now.