CORENA normally leaves it up to advocacy and campaigning groups to run petitions on climate issues, but we are now facing proposed changes in network tariffs that we cannot ignore. The proposed demand tariff structures would not only affect how much Quick Win projects can reduce carbon emissions, they would affect how much all householders and businesses can reduce their carbon footprint as well.
Solar PV and energy efficiency are key paths to lowering carbon emissions for the sake of a safe climate and the common good. Anything that makes these less cost-effective is therefore a climate issue.
To see and sign the petition, click the button. To see background information on this issue, read on.
The grid – Let’s not shoot the messenger!
From a purely climate perspective the grid would be a wonderful thing if it were delivering 100% renewable energy to our houses and businesses. It’s a bit like shooting the messenger to blame grid electricity for carbon emissions. The REAL solution to the network ‘death spiral’ is to replace coal- and gas-fired power plants with renewable energy generation. Still, while the electricity delivered by the grid continues to be predominantly sourced from fossil fuels, reducing use of grid electricity is one of the best ways we can reduce carbon emissions.
This makes the price signals in the demand tariff structures proposed by network operators a powerful force that can either help or hinder efforts to mitigate climate change.
Network operators in SA and Victoria are seeking approval from the Australian Energy Regulator (AER) to transition all customers to demand tariffs, and other networks are likely to follow suit if these tariffs are approved. These tariffs feature high semi-fixed charges at times of peak demand and low usage charges, meaning there would be much less financial incentive to reduce consumption of grid electricity than there is under current tariffs.
The jury is still out on whether or not these tariffs would be effective at flattening out demand peaks and reducing the amount networks spend on ‘gold-plating’, and debates rage over which customers would be subsidising which other customers and whether these tariffs are fair. However, the big loser is likely to be climate.
Under current tariffs, installing solar PV can ‘pay for itself’ in 5 years or so (depending on what usage charges apply locally), and some energy efficiency measures have even quicker payback times. Under the proposed demand tariffs, the demand charges are high and the usage charges would be around 10 cents/kWh less than at present, making solar and energy efficiency much less cost effective. According to modelling by SA Power Networks, the uptake of solar PV would be halved if demand tariffs are introduced for all customers.
With our current tariff structures it is quite easy to calculate the cost-effectiveness and payback time of solar PV and energy efficiency since these are primarily governed by the usage charge for grid electricity. If customers are paying 10c/kWh less for grid electricity, then the savings from reducing consumption will obviously be much smaller. It can be argued that some customers may also be able to reduce their demand peaks and demand charges by behavioural change and some energy efficiency measures, but that is much harder to calculate with any certainty.
A high demand for just one half-hour period in the month will set a high demand charge for the entire month. The peak demand times proposed by Victorian networks are from 3:00 to 9:00pm, so installing solar PV will have limited ability to reduce demand peaks in many cases since solar generation declines long before 9:00pm, and may decline much earlier in the day if there is a cloudy period.
What has happened so far in SA?
The AER recently rejected a proposal by SA Power Networks to place all customers on demand tariffs, but they did receive approval to force any small businesses with a multi-phase supply (most businesses and non-profit organisations) onto a demand tariff if they need a new meter. This means that installing solar PV would result in being placed on a demand tariff, potentially making the solar installation a lot less cost-effective than under current tariffs. Installing solar PV may not reduce power bills very much at all, and in extreme cases, power bills may even increase. Who would want to take the risk?
What has happened so far in Victoria?
Victorian network operators have submitted proposals to the AER that include transitioning all customers to demand tariffs. Peak demand charges would apply from 3:00 to 9:00pm during summer months, and usage charges at all times would be around 10c/kWh lower than current tariffs. Customers would be encouraged to voluntarily switch to demand tariffs, but installing solar PV (needing a new meter) would force customers onto a demand tariff immediately.
The proposals submitted by Victorian network operators are at:
Jemena – http://www.aer.gov.au/system/files/Jemena%20Tariff%20Structure%20Statement%20proposal%20-%2025%20September%202015.pdf
AusNet – http://www.aer.gov.au/system/files/AusNet%20Services%20Tariff%20Structure%20Statement%20proposal%20-%2026%20October%202015_0.pdf
United Energy – http://www.aer.gov.au/system/files/United%20Eenergy%20Tariff%20Structure%20Statement%20proposal%20-%2025%20September%202015.pdf
Powercor – http://www.aer.gov.au/system/files/Powercor%20Tariff%20Structure%20Statement%20proposal%20-%2025%20September%202015.pdf
CitiPower – http://www.aer.gov.au/system/files/CitiPower%20Tariff%20Structure%20Statement%20proposal%20-%2025%20September%202015.pdf
Demand tariff modelling performed by SA Power Networks
SA Power Networks fact sheet on demand tariffs for small businesses: http://www.sapowernetworks.com.au/public/download.jsp?id=50866
The above is Figure 5, Page 12, of the following report.
SA Power Networks report, including modelling of demand tariff impacts – http://talkingpower.com.au/wordpress/wp-content/uploads/Electricity-Tariff-Reform_Screen-FINAL.pdf