The growth in behind-the-meter distributed energy resources (BTM DER) has been a key feature of the NEM over recent years. BTM solar has grown from ~1-2% of total energy supplied five years ago to ~6% this year. In fact, looking within the day, the percentage of supply being provided by rooftop solar has been as high as 20-30% in the middle of the day when solar output is at its highest.
Increased rooftop solar penetration has the practical effect of reducing grid level demand or operational demand. This trend underpins the “duck curve” phenomenon most pronounced in South Australia but spreading to other NEM regions.
A couple of weeks ago, on 11 October, South Australia recorded operational demand as low as 300 MW. On this day behind-the-meter solar at its peak contributed 1 GW of output. At the time of writing, there is ~1.4 GW of behind-the-meter solar in South Australia and over 10 GW in the NEM. The growth in DER does not look like letting up any time soon. This is a significant portion of capacity when looked at in aggregate – in all mainland states this is larger than the largest single scheduled unit. DER is non-scheduled and operates on its own terms making it increasingly hard for AEMO to control and manage.
Looking at year-on-year growth, rooftop solar installations are on pace to break last year’s record in commanding fashion (Figure 1). In the year-to-date up to September, 1.5 GW of new small-scale solar capacity has been installed so far, an increase of 22% or ~270 MW compared to the same period last year. To set the new annual record, there needs to be around ~300 MW installed over Q4 2020. Considering that on average around 150-200MW of new solar capacity has been installed per month this year, it is likely that 2020 will set a new record for BTM solar.
Of course, the rate of growth in DER will slowly begin to taper off – whether due to market saturation or network restrictions. However, the rapid increase of DER in the NEM, at both the household and grid scale level, presents a range of challenges and opportunities going forward. Hence, the ESB devoting an entire workstream of their post 2025 market design program to addressing how best to integrate DER and value demand flexibility.
Part of the solution will be the move towards a two-sided market where more consumers are exposed to the wholesale market price. Exposure to the market price should incentivise consumers to optimise their DER assets to extract the most value. To do that, however, will require development of technical and regulatory arrangements to facilitate the participation of DER. There is also a role for distribution network service providers to effectively invest in their distribution networks to allow DER owners to utilise their asset efficiently for the benefit of all customers. Current regulatory processes should lead us closer to integrating and optimising DER and will continue to develop over the coming months.
We will be discussing this and many other topics regarding the transition underway in the NEM on 18 Nov in our webinar: The future of the NEM: rule changes, policy and direction of the NEM. Join us as we unpack the wide range of potential changes the future of the NEM has in store.