AEMC: Making Room for More Solar and New Energy Tech

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On 25 March 2021, the Australian Energy Market Commission released to draft determination that aims to assist with the integration of more small scale-solar and other energy technologies, such as batteries into the electricity grid. Commenting on the draft determination, AEMC Chief Executive Benn Barr said, “Within 10 years, half of all energy users will be using home energy options like solar. We must make sure this seismic shift doesn’t leave anyone behind because every Australian, whether they have solar or not, deserves an affordable, sustainable power system.”

The draft determination aims to address the problem of ‘traffic jams’ on the electricity network which are occurring now. Those traffic jams are expected (by some) to get worse as more solar is connected to the grid. Blocking power exports because the grid is under strain is anticipated to cost consumers more because it will mean less renewable, cheaper energy is able to get into the system. So in response the AEMC is proposing new pricing and incentive mechanisms to reward exports at times when export is required and to charge when it is not.

The draft determination has the renewable energy industry split in its views. Many say that there is simply insufficient evidence that the ‘traffic jam’ is or will be a problem nor that the AEMC’s determination is the answer. When considered against the total costs and investments made by network companies, the potential charges are insignificant yet may result in a disincentive for those looking to install solar.

In summary, the AEMC draft determination proposes to change the incentive scheme for distribution networks to provide incentives for people sending power back into the grid. This is aimed at giving networks a stronger reason to deliver quality export services to customers. As it currently stands, there are no financial penalties for poor network export service and no rewards for good service. The AEMC is proposing to recognize energy export as a service to the power system in the energy rules. The draft determination also aims to allow networks to offer two-way pricing to better manage the distribution system. The determination aims to provide networks with pricing options that are not currently available, allowing solar and battery owners to be rewarded for sending power to the grid when it is needed and allowing them to be charged when it is too busy.

Finally, the draft determination aims to provide flexible pricing solutions at the network level. The AEMC described this as allowing network providers to design a ‘menu of pricing options’ to suit their capability, customer preferences, and government policies. The AEMC anticipates that customers will be able to choose free export to a limit or a paid premium service to guarantee export during busy times. The AEMC anticipates that networks may offer grandfathering for existing solar owners or community batteries.

The AEMC draft determination does not mandate default charges for exporting electricity. If a network business wants to introduce export charging, they would need to follow the process that currently applies including consultation with customers, a transition plan, and approval from the Australian Energy Regulator. Mr. Barr further comments, “Letting networks give customer incentives to use the system better means supply and demand on the grid can be smoothed out over the course of the day. It helps address large amounts of solar being exported in the middle of the day when it benefits the system least.”

The AEMC is asking for feedback on the draft determination by submissions on or prior to 13 May, 2021. Read more here.

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