Australia’s energy industry is venturing significant disruptions and transformations as it transitions from a substantial reliance on traditional fossil fuel sources to a new energy environment. Wholesale electricity prices have risen dramatically across most regions and markets due to the significant increase of summer electricity supply demand for January 2019 start date.
Impact of Rooftop Solar on Demand:
Australia leads the world with small-scale solar installations (rooftop solar) on a per capita basis. Across the country, almost 20% of households have a rooftop solar system installed. The vast uptake of these systems since 2009 was initially driven by significant subsidies from Government, both in terms of savings related to upfront costs for installation through renewable certificates and premium feed in tariffs for energy exported to the grid.
However, even with the closure of most solar incentive schemes, the total amount of rooftop solar installed is still increasing, due largely to the decreasing cost of panels and the increased desire by households to offset some of their energy costs. Despite peaks in installations to maximize the benefit of incentive schemes that were closing, installations have continued at a regular rate in recent times.
The trend is likely to continue for some time. According to a 2018 report from AEMO, by 2038 the total capacity of PV systems is likely to be close to 20,000MW, which could be over a quarter of total NEM capacity.
For an individual customer, rooftop solar can help to offset electricity usage during the day, or, when the electricity use is small, energy can be exported to the grid at the rate of the customer’s feed in tariff.
In aggregate, the impact of rooftop solar is significant in reducing the need for other generation during the day. However, rooftop solar has done little to reduce peak system demand, which in most Australian regions occurs at times when solar generation is minimal. With a hot summer climate, Australia’s peak electricity demand occurs on hot summer evenings - when temperatures are at their highest and people are at home using their air-conditioner and other appliances.
Within a few years, the increase of rooftop solar will have even more dramatic impact, as some states within the NEM are forecast to become net exporters of energy during the middle of the day. This means that rooftop solar and other renewables will meet the generation needs of an entire region.
In its most recent report on future demand, AEMO forecasts negative minimum demand for South Australia under certain conditions in the 2020s. For some low-demand days (such as a sunny weekend day in the winter), rooftop solar will meet 100% of generation needs during the day, but again, will do little to assist in lowering the evening peak.
Financing electricity infrastructure such as poles, wires, and generation facilities that can meet peak demand in the context of declining overall volumes and negative demand periods is problematic under the current design of the electricity market.
Electricity generators operate in an ‘energy-only market’, and so must be efficiently utilized and regularly dispatched to recover their costs. Similarly, the network prices and retail products in Australia are generally based on volumetric (the total amount used) rather than demand characteristics (the maximum amount used at the peak), which means that network costs must be increased per unit of electricity to be recovered through less volume.
The continued growth in rooftop solar and the consequential shift in load shape is therefore likely to have significant implications for customers who do not have access to solar.
Other Changes to Consider:
The inability of rooftop solar to help address evening peak demand is an ongoing concern, and changes to the way electricity is priced may help address this issue. However, one of the more obvious ways of directly addressing the issue is through utilizing electricity storage and small scale batteries.
As well as residential and commercial battery uptake storage systems, substantial increases in the uptake of electricity vehicles (EVs) are also forecast. EVs plugged into the grid operate effectively like portable batteries, interacting with the electricity grid to provide services at the right location and time.
Automation and the ability to integrate rooftop solar, batteries, and EVs into the grid will enable further opportunities to solve the problems associated with the broad uptake of solar.
This transition will require long-term vision - with careful consideration and design of our regulatory environment by policy makers, ensuring consumers are happy and above all, the delivery of affordable, safe, reliable energy and we transition towards a decarbonised future.