Almost everywhere, and from nearly every corner, we hear a common refrain: The solar revolution is coming and it is unstoppable. Most analysts, researchers, market pundits—and the industry itself—agree that energy markets are being transformed, and that half our power needs will be self-generated within a few decades.
In Australia, for instance, even the owner of the country’s biggest coal-fired generator concedes this point, acknowledging further that renewable energy in Australia will come mostly from solar panels on rooftops and through battery storage. The big “gentailers”—those companies that both generate power and sell it directly to customers—are busily revising their business models to make sure they are not left behind. This is true not just in Australia but in energy markets elsewhere.
Unstoppable though the transition to renewables may be, it can certainly be slowed.
Here in Australia, the solar industry has a major battle on its hands already as pricing regulators and utilities move to protect their revenues and make rooftop solar less appealing for consumers.
Some examples:
- The grid operator in South Australia wants to slap solar households with higher charges, and West Australia’s state-owned utilities have been considering a similar measure.
- In Victoria and Queensland, tariffs paid on excess solar power back into the grid are being slashed to protect utility revenues and reduce the incentive to install solar.
- In Queensland, fixed tariffs have been jacked up, removing the incentive for consumers to use less electricity or to install solar, an especially harsh blow to low-energy users, particularly pensioners for whom half their utility bill is now unavoidable.
- In New South Wales, something called a “declining block” tariff is about to be introduced, discouraging energy efficiency by charging customers less when they use more. In the meantime, government-owned operators are appealing a recent regulatory ruling that would reduce the amount of costs that they can re-coup from consumers—a move that would effectively lift prices— and revenues.
- Elsewhere, metering charges are being jacked up through “cost-reflective” tariffs that make it more expensive for households to install solar.
- Solar installers are being squeezed by big energy players like Origin Energy and AGL, which are now offering rooftop solar for free in exchange for the right to to sell the output back to the consumer (Origin even got a $100 million subsidy from the government-supported Clean Energy Finance Corporation to expand such activities).
As one analyst put it recently to RenewEconomy, a “confusion is profit” mentality rules at the moment while a behind-the-scenes fight is occurring between network operators and retailers over who will capture the “value” offered by the big shift to solar and storage.
Further in the background, policy and pricing regulators are ducking for cover. The Australian Energy Market Commission has set out a vague framework of rules that only ostensibly address the new energy economy. The Australian Energy Regulator is behaving similarly.
“No one wants to make a decision,” our analyst explained. “The networks are throwing up anything to see what sticks, and the retailers are just passing on the costs.”
Fast-moving policies—and the huge variations between states and distribution areas—make it hard for consumers to judge the value of installing solar or investing in battery storage.
In the face of all this consumer hostility, it was promising recently to see Paula Conboy—the new head of the Australian Energy Regulator (who last year noted the rise of the “prosumer” and the growing demand for policies that benefit consumers rather than just the incumbent network operators)—foreshadow plans to get at least some long-term visibility in tariff structures.
Rather than a piecemeal, year-by-year approach, Conboy seems to want to build in tariff structures that will be binding for a regulatory control period, typically five years, requiring that any changes meet regulatory approval.
This could be good for consumers, and might help them make informed decisions about whether solar and storage is a good deal, but it bears watching, too, because it brings risks of locking in poor outcomes.
Vigilance is required everywhere as the switch to renewable energy unfolds.
Giles Parkinson is founder and editor of RenewEconomy.com. This commentary is condensed from the original.
