25
May
2015

Here comes the solar power revolution

by David Blowers


Published by The Age, Monday 25 May

An energy revolution is coming, and it is contained in an appliance about a metre high and a metre wide – the home battery. The first home batteries are expected to be on sale in Australia next year.

At first they will be too expensive for most homes, but an analysis by Citibank suggests that within five years the price will have almost halved, to about $3700. The change will begin to transform the electricity system. After many false starts, Australians will finally have the opportunity to get solar power right.

From Melbourne to Mandurah, Port Arthur to Port Douglas, Australians love their solar panels. Just a decade ago, about a thousand home owners had a solar photovoltaic (PV) system on their roofs. Today the figure is more than 1.4 million – one in six households, the highest proportion of any country.

It would be nice to be able to say that this huge uptake has been a huge success, a singular contribution to tackling climate change. Certainly the politics of solar PV programs have been highly effective. But as policy, the programs are a failure.

From 2008, state governments began introducing feed-in tariff schemes that paid owners of solar PV a premium for the excess electricity they sold back to the grid. In Victoria, the premium was at least 60¢ for every unit of electricity they sold until 2024, compared to a 2009 grid price of about 15¢. The NSW scheme was even more generous, though it ended more quickly.

No doubt state governments had good intentions. The mood of the day was to act vigorously against climate change. And consumers were right to take advantage of these offers. But so many took them up that governments were caught out. They had set rates too high. In desperation, they wound back the schemes, but it was too late.

Feed-in tariffs had to be paid for. The businesses that run the networks were allowed to pass on these costs to other electricity consumers through their energy bills. Essentially, governments arranged it so that money went from people without solar to people with solar.

By the time premium feed-in tariffs end – Queensland’s scheme runs until 2028 – Australians without solar will have paid about $5 billion extra on their electricity bills. They have paid a further $5 billion as a result of federal government subsidies to solar from the Renewable Energy Target. Add a third subsidy that is embedded in the structure of network tariffs, and people without solar PV have spent $14 billion subsidising those who have.

Many in the first group are renters, apartment dwellers and low-income people who could never afford the high capital costs of installing panels.

And while the schemes have reduced carbon emissions, they did so at a very high price per tonne. There would have been far more environmentally effective ways to spend the money.

Yet change is on the way and if it is managed properly, solar PV will finally become a major player in Australia’s power system. In concert with home batteries, solar panels will change people’s relationship with the grid, giving them the ability to store and manage the electricity their solar panels produce, and reducing their electricity costs.

These changes will benefit not only solar PV owners but everyone. Battery owners will use the grid less at peak times, placing less strain on the network and reducing the need for costly investment in new infrastructure. Reducing network costs will push down electricity prices.

But one urban myth is unlikely to become reality. There will not be a flight of city dwellers from the grid, as some analysts have predicted. They would lose the capacity to sell power from their solar panels into the grid, and the size of the solar PV system they would need to ensure a reliable power flow would be too large for the roofs of all but the largest mansions.

The picture is different for those who live in rural and remote areas. Even now, when batteries are relatively expensive, some people would do better to go off-grid in areas where the cost of supplying electricity through poles and wires is very high. Eventually, entire communities will be able to disconnect from the grid, becoming self-sufficient in using their own, low-emissions electricity.

Big challenges lie ahead, especially for electricity businesses. They will have to adapt to the coming revolution if they are to prosper. For governments, initiating electricity tariff reform is vital if everyone is to benefit from battery storage.

In some ways we have come back to the future. The federal government seemed slow to act on climate change 8 years ago, but state governments were keen to act and a new technology was at hand that promised to change the way consumers used electricity.

State governments got it wrong that time, and need to learn from their mistakes. If they do, solar PV and battery storage can become a central part of the electricity system, save consumers money and make a big contribution to reducing emissions without costing the earth.