Energy Spectrum Australia

Energy Spectrum Australia | Issue 19

Welcome to the nineteenth edition of Energy Spectrum Australia.

The below extract has been taken from our nineteenth edition, and if you have enjoyed reading this article and want to read more about the latest developments in the Australian energy market, please contact Franklin Liu, f.liu@cornwall-insight.com.au for more information.

AEMC’s draft rule allows distribution network to charge for grid export  

On 25th March, the AEMC published a draft determination which officially clarifies grid export is part of distribution network services and allows distribution network service providers (DNSP) to charge for export to the grid (including from rooftop PV).

The AEMC made the draft rule after consoliating three related rule changes from SA Power Networks (SAPN), The St Vincent de Paul Society Victoria (SVDP) and Total Enviroment Center (TEC)/Australian Council of Social Service (ACOSS). The rule change proponents argued that the inability of DNSPs to charge for export (mostly from rooftop solar) has led to a range of problems including:

  • Lack of clear basis for DNSP to make investment decisions related to hosting Distributed Energy Resources (DER),
  • Poor performance of customers’ DER systems as the network reaches its limits,
  • The cost of managing export-related issues is unequally shared by customers without rooftop PV.

The AEMC’s draft rule first clarified that distribution network services are two-way. In other words, just like drawing electricity from the grid, sending spare energy to the grid will also be a network service. This has a profound implication on the future of distribution network design and regulation. Because export is now formally a service, it is subject to regulation by the Australian Energy Regulator (AER) and DNSPs will be required (and incentivised) to deliver improved export services to consumers. Under the proposed rule, the AER will review the service target performance incentive scheme (STPIS) with the view to extend it to export services, and also develop a methodology to calculate customer export curtailment values (CECV). These will guide network planning and investment decisions for export services and reward (resp. penalise) DNSPs for providing high (resp. low) quality of service.

The second implication of recognising the two-way nature of network services is that DNSPs will be allowed to charge for grid export as part of their distribution network tariffs. However, the rule only enables rather than requires DNSPs to set export charges. Whether and how networks charge for export will vary by DNSP, who must undertake extensive consultation, consider consumer preferences and government policies, and be regulated by the AER. The AEMC’s modelling shows that if introduced, export charges will likely lead to a small impact on customer’s earning from their rooftop PV systems. For example, customers with typical systems (2-4 kW) currently earn approximately $645 a year and will likely see a small reduction by about $30 a year with export charges. On the other hand, the AEMC estimates that under the “do nothing” scenario, there will be increased instances of export constraints. The same 2-4 kW device would lose approximately $80 a year if its export is restricted for 25% of the time.

“Due to the rapid uptake of rooftop PV, networks are under increasing constraints when they are flooded by PV export during mid-day. Some DNSPs already have imposed export limits to maintain network security. For example, SAPN has a 5 kW per phase limit on export in its distribution area. A blanket limit, however, means everyone will be constrained regardless of their individual preferences. As the AEMC’s analysis shows, relying on capping export instead of export charge could lead to greater cost to consumers. As electrical vehicles (EV) are expected to enter the market and become another source of grid export soon, rationing network export capacity might become even more challenging.

Export pricing offers an alternative. It signals to consumers the value of network constraints and allows them to make an informed choice based on how much they value their export at the time. It could also lead to better integration and utilization of batteries and EVs, which allows consumers to store their excess energy when the export price is high and send the stored energy back to the grid when there is no congestion.

The draft rule also addresses an important equity issue. Currently the cost spent by DNSPs to address export related issues are paid by all consumers, including those without rooftop PV. The draft rule removes such cross-subsidy and reduces bills for consumers who do contribute to export constraints.”