Rooftop solar is a clean energy solution that Australians clearly love. In fact, data from the Australian PV Institute now shows that almost four gigawatts (GW) of solar will have been installed by the end of the year — as much as a number of expensive peaking gas power plants or a very big polluting coal-fired one.
While many had thought that the reduction of state-based subsidies for residential solar would slow or stop this rapid uptake, this simply hasn’t been the case. As figures released recently by Queensland grid operator Energex clearly show, even after the state feed-in tariff (FIT) program expired in the state, Queenslanders have gone on to install some 63 megawatts (MW) of solar PV.
Partly because of solar’s spread, as Australia’s population has continued to grow, fewer fossil fuels now need to be burned to keep the lights and air conditioners on. This is bad news for electricity utilities and grid operators — the businesses that generate, distribute and act as retailer for the power consumed at the meter box.
These companies, some of which are state-government owned, have been betting on rising electricity consumption and have made investments accordingly. They now appear to be on the wrong side of history as literally tens of thousands of solar panels make their way onto roofs around the country each month.
Recent research from the University of Western Australia took a look at what this could mean for the state utility Synergy. Adjunct Professor Bill Grace carried out the research, building a model that investigated how solar will grow in WA. The results were startling.
UWA’s Professor Grace found that the numbers of homes and businesses installing solar would continue to grow at a steady rate, out to 2035. He adds to his model that as battery costs fall, battery packs will begin to be added to these solar systems — what he calls solar and storage.
This adoption of solar and storage has serious implications for utilities right around Australia, and in Professor Grace’s modelling, particularly for WA’s utility Synergy. The model forecasts that by 2035, as people in Perth and its surrounds use solar energy harnessed on their roof and stored in batteries, there will be long periods when no electricity at all will be required from the grid.
If only solar is installed, without storage systems, Grace finds that between 10am and 4pm electricity demand will equal zero. Quite literally, solar PV will provide 100% of the electricity required by WA businesses and homes in the populous southwest of the state.
When storage systems are added to the equation, some of the electricity produced on the roof will be stored in the battery banks, meaning that there will be some electricity required from the grid up until 12:30pm. However, from that point until 4pm, grid electricity demand will equal zero. Households will then draw some of that stored electricity as they return home from work, meaning the “peak demand” in the evening is reduced – a better result for the utility. But neither forecast looks good for Synergy.
The burning question Professor Grace’s model begs, is how will Synergy base a business around supplying electricity essentially only when the sun doesn’t shine? How could the owner of a power plant afford to pay for the plant’s financing and upkeep if it is only required to fire up for a few hours a day? Even as it stands today, Synergy itself is not in robust financial health, requiring subsidies from WA taxpayers to the tune of $500 million per year.
This problem is not just limited to WA. Data collected by the Australian PV Institute shows that up to a quarter of South Australia’s electricity demand is supplied by solar PV — taking a big chunk out of electricity demand and utility revenues.
These realities and models of the future electricity market point to a situation where utilities will not sit idly by while their business case disintegrates. It is in fact highly likely that conversations are occurring now in utility boardrooms as to how they can change their strategies to either slow down solar’s growth or change the way they do business.
A report released this week by management consultants Accenture found that while in 2013 only 43% of utility executives right around the world thought their revenues would decline as the result of the growth of “distributed generation” like solar, that number has increased to 61% this year.
Utility executives know that their business is changing and solar is leading the disruptive charge.
Utilities right around the country are already trying to make it more difficult for large consumers, usually businesses, to obtain the permits required to connect a solar system to the grid. In the future, utilities could also change the way electricity is billed, by increasing fixed charges while also decreasing the amount they charge per-unit-of-electricity: in effect making installing solar far less profitable for the household.
Utilities could also start to bundle other services, like the provision of sewage services or natural gas in with a household’s electricity — again making it much less attractive to turn to the sun for electricity.
To be sure, these trends are already emerging. Just last week, one of Europe’s largest utilities — Germany’s E.ON — announced that it would spin off its fossil fuel business into a different company, allowing it to concentrate on renewable energy and providing services to retail customers. What is clear is that right now the general rule is that a rooftop solar system is still an extremely attractive proposition for most Australian homes and many businesses. The question is, how long before the utilities attempt to drastically change the game?