Australia tackles its solar traffic jam

With its dry climate and ample sunshine, Australia has embraced solar energy and in two decades, solar power generation has grown into a multi-billion dollar industry. But an excess of solar energy is now threatening to overwhelm the country’s energy infrastructure.

Do Asian consumers care how clean energy is - as long as its cheap?
Existing grid and pricing infrastructures are suppressing consumer demand for clean energy, but change is well on its way. Image: xshot via shutterstock , CC BY-NC-ND 2.0

Australia’s uptake of rooftop solar panels has soared in the past decade with around 20,000 households generating their own solar energy in 2010, increasing to 2.8 million households in 2021. Fuelled by installation rebates and ongoing payments for power pumped back into the grid, the Australian government is now finding there is more solar energy than it, and the grid, can cope with.

As a result, the body that helps regulate the country’s electricity market, the Australian Energy Market Commission (AEMC), wants to change the rooftop solar power generation rules. Instead of paying households to export surplus electricity, the regulator wants to start charging households that plough excess electricity into the grid at off-peak times.

Costly incentives

The growth of solar power has been largely fuelled by rebates and the chance to turn rooftop solar panels into a money-spinner. In 2000, the Australian government introduced Renewable Energy Targets (RET) to increase electricity generation from renewable energy and drive down Australia’s greenhouse gas emissions.

In a bid to hit the targets, it offered AU$8,000 (US$6,000) rebates to encourage Australian households to install rooftop solar panels. In addition, electricity retailers paid households a feed-in tariff for the excess electricity each household produced that fed into the national electricity grid. 

Depending on where the house is located and what electricity retailer is used, households can receive up to AU29¢ (US22¢) per kilowatt exported into the grid. This is in the form of a rebate on the household’s electricity bill, or, when electricity exports exceed consumption, a credit.

The rebate scheme has been a success in encouraging Australian households to supplement their power needs with renewable energy. The current rooftop solar capacity in Australia is around 21,352,211 kW, representing 4 per cent of Australia’s total electricity production. In 2001, rooftop solar installations in Australia had a capacity of approximately 422 kW.

“Australians love solar on their roofs. We’ve got 20 per cent of customers with it now, and we’re going to see that double over the next ten years,” says Ben Barr, chief executive of the AEMC.

Solar bottleneck

While the stimulus regime has proved successful in converting households to solar energy, the excess electricity produced by households is threatening to overload the electricity grid, potentially causing outages and blackouts. 

“The grid was set up to get power to your house, not power from your house. What we want to do is to reduce what we call solar traffic jams or traffic jams on the network,” Barr said.

The AEMC says the current network gridlock will worsen unless addressed and wants to reform the pricing mechanisms for solar electricity generation to deter excess power from overloading the grid. The federal government is also gradually winding down its installation rebates, with a 2030 end date

Instead of paying a fixed price to households for solar generated electricity, the electricity commission wants to introduce variable pricing paying more for excess power when the grid needs additional electricity and less when demand is lower. At certain times, when supply exceeds demand, the AEMC proposes charging households to export electricity into the grid.

“Letting networks give customers incentives to use the system better means supply and demand on the grid can be smoothed out over the course of the day. It helps address large amounts of solar being exported in the middle of the day when it benefits the system least,” Barr said.

The proposal to charge households for exporting electricity is welcomed by most of Australia’s big electricity retailers. “We support reforms that allow customers to continue to benefit from small scale renewables while balancing the needs of the system,” a spokesperson for Origin Energy said.

Modelling by AEMC that was published in a draft determination in May suggests that 80 per cent of households using rooftop solar will not see any increases in their electricity bill under the reforms. But the rest of the country’s households could. 

Those who have recently installed solar panels or plan to in the future are unlikely to enjoy the same long term financial benefits compared to those households who signed long term supply contracts in the past, if AEMC pushes its changes through.

Doing nothing is not an option, Barr said. He sees solar power playing a big role in Australia’s renewable energy future. But that future needs to be better managed.

Getting the price right 

A spokesperson for Australia’s Department of Industry, Science, Energy and Resources said the government is committed to ensuring Australia’s energy system remains reliable and affordable.

“Getting the balance right in the system is how Australia will get emissions down in sensible, pragmatic ways which are consistent with bringing down energy costs and strengthening the economy,” they told Eco-Business.

The proposed reforms will also attempt to address equity issues. The current household solar panel schemes benefit people who already own their own homes. Renters, low-income earners, and new homeowners are unable to benefit from the same financial incentives. 

The Australian Council of Social Services (ACOSS), a national advocate supporting people affected by disadvantage, argues that the status quo risks creating a two-tier system where one group of people (homeowners with existing solar panel households) receives all the benefits. If Australia is to reach its carbon reduction goals, the benefits should reach everyone.

“To ensure people on low incomes are not left behind the energy transition, we also need governments to tackle the deep divide emerging between people who can access energy technologies and those who cannot, including people on low incomes and renters generally,” an ACOSS spokesperson said.

A new report published in June has challenged the notion that rooftop solar is just for the wealthy, in a bid to skewer one of the key arguments used to push for households to be charged for exporting solar to the grid. The report argues that there is a failure to account for true barriers to solar adoption. 

“It would be correct to observe that across all homes, solar uptake is lower in the lowest wealth deciles than in the higher,” the report says. “But this fails to account for the fact although households that rent are generally much less wealthy than households that own their own homes, renters do not install solar, (not) because they lack the wealth to do so, but because property rights, transaction costs and building form typically make it difficult or impossible,” write Bruce Mountain and Kelly Burns.

Australia may have to think differently about the future and how it manages its electricity network in order to hit its Renewable Energy Targets, according to Barr. “We want to provide the most efficient way of integrating solar power, so everybody benefits, and we can decarbonise the sector as quickly as possible,” Barr said.

Most popular

Featured Events

Publish your event
leaf background pattern

Transforming Innovation for Sustainability Join the Ecosystem →