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Published on May 10th, 2014 | by Giles Parkinson

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Consumers To Take Control Of Solar Energy Supply, Usage, Storage, & Costs

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May 10th, 2014 by
 

Originally published on RenewEconomy.

Last week we wrote that some utilities in Australia – particularly those in regional areas – accepted that the future would bring big changes to the way energy was produced and delivered, and that communities would use local renewable energy sources and storage to look after their own needs.

But what if that change came quicker than even these utilities expected? And if that extended into big towns and the suburbs of major cities? And what if it resulted in a reduction in electricity prices for nearly all consumers?

That is the scenario being painted to network operators and the utilities industry by global consulting firm PwC, which says the sector is about to go an unprecedented and rapid transition as dramatic as that which affected other industries.

Electricity utilities, it says, are about to face their “Kodak moment” and the key is the emergence of rooftop solar, and its ability provide a cheap source of electricity, as well as other “enabling” technologies such as storage and smart software.

This, says Mark Coughlin, the power utilities leader for PwC, will fundamentally change the nature of the relationship between utility and the consumer. It will effectively shift the power from the utility to the customer, be they households or businesses, and will challenge the very “right to survive” of the traditional utility.

“This traditional utility model where the company controls the ‘electrons’ and the consumer has little choice is on its last legs – this model is struggling to meet customer needs,” Coughlin says.

“Once a household or a business has a solar panel on the roof or some other power source they are no longer a passive consumer.”

solar-house

The solar-charged suburban home – new competitor to the traditional utility.

He says that customers are now emerging as competitors to the the utilities. “In as little as the next five years consumers will exert unprecedented control over energy supply, usage, service standards and costs,” Coughlin told the Energy Networks Association conference last week.

Coughlin’s comments, and those of many at the conference, reflect the fact that despite the common view that Australia has cheap energy sources, it does not have a cheap form of delivery of that energy from the centralized power generators to the consumer power sockets.

Hence the emergence of rooftop solar, which is already cheaper than socket-power because it has no delivery costs, and which is starting to challenge some fossil fuel generation, such as rising gas costs, on generation price.

This, coupled with the emergence of battery and other storage technologies, smart meters, and other software that allows energy to be stored and delivered at lower cost on a smaller network, is challenging the traditional business model of the industry.

“Smart grids, smart meters and customer energy management ‘gadgets’are only the beginning of what is possible,” PwC says in a new report Utility of the Future. Already we can control our home electronics and entertainment via our smart phones and tablets – why not our energy usage on a minute-by-minute basis?”

Coughlin says that these technologies – and new financing structures – will open the door to a flood of new entrants to the industry, be they telco, technology providers, financiers and systems managers, and existing utilities will also rush to form new alliances and joint ventures.

In data, this will include the likes of Google and Apple, in finance it will range from huge investors such as Warren Buffett and Macquarie Group. But PwC says it will also come from local sources. “We expect to see small crowd-funded energy companies emerge in Australia within the next three years,” it predicts.

“Customer energy contracts will greatly favour the customer – suppliers will have little choice in the matter!” the PwC report says, noting that changes to the way services are offered are likely to occur within three years.

“This will mark a major, transformational shift for both the utility sector and customers. “ And it will drive benefits to consumers. “In some cases this will see customers paying more for certainty of supply. In other cases we see the distinct possibility that costs will reduce for customers.”

PwC says the biggest challenge will affect the large energy retail businesses, the major brand names which in Australia include Origin Energy, AGL Energy and EnergyAustralia. “The existing shape of the energy retail business will not survive in its current state, given the atrophy of retail growth in traditional markets,” it says.

PwC predicts that the retail market will turn into a “channel fight” focused on costs and choice. The retail sector could be subsumed into other large scale “retail engines” such as data providers and telcos, and other in house service providers. And there is likely to be a big turf war with the network distributor companies over who owns those assets.

“The key will be who has ownership and operational control of distributed generation assets – these will be the swing factor in who can provide the most innovative services for customers.”

Generators will struggle because of the combined impact of falling demand, and rival energy sources, such as rooftop solar. In Europe, nearly $500 billion has been wiped from the value of utility assets – primarily generators – as a result of the impact of new technologies.

PwC says Australian generators are facing the same headwinds – as can be indicated already by the lack of profitsthe write-downs, and the closures and the reassignments in the coal and gas industry. This underpins the reasons for the incumbent industry to try and have mechanisms such as the renewable energy target stopped in their tracks.

“Contracting for long-term demand will become increasingly difficult as time passes given viable alternative sources of supply will almost certainly become available within 10 years,” PwC writes.

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About the Author

is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.



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  • JamesWimberley

    Can the grid go bankrupt? That’s the way structurally unprofitable but useful assets get repriced, as with Eurotunnel. There may no longer be a sustainable model for the overbuilt Aussie grid to cover the costs of its operations and of its historic capital. Attempts do so will drive many householders to invest in inefficient house storage. The only answer may be nationalization and a massive writedown.

    • Ronald Brakels

      Well, yeah, the grid can sorta kinda go bankrupt. The exact details are very complex. It may be possible that some entities owned by the Chinese and Singaporean governments would go bankrupt, since they are ones who own various networks. Yeah, that’s right. Australian governments privatise stuff which then gets bought by other governments. A sizable portion of Brisbane airport is owned by the Dutch government. So it’s not exactly privatisation since a lot of the assets are still in government hands, it’s more a way of putting assets into the hands of governments that Australians don’t vote for, and have not control over, and which have no responsibility for Australian well being. Note that I am not saying is a worse situation than if the assets were in entirely private hands. Governments usually at least have a small particle of shame that somethimes bothers them. While with private corporations, particularly ones that are hived off shells designed to compartmentalise shame, this isn’t always the case.

      Anyway, since large portions of the electricity sector are no longer being run in the Australian national interest, I suspect that the current system will simply be run into the ground as certain actors attempt to extract as much profit as possible before things fall apart and we will continue to have the highest after tax electricity prices in the world, the lowest solar feed in tariffs for a developed country, the Australian carbon price will soon be murdered, and the Renewable Energy Target (RET) will soon be gutted. The only thing confusing them on killing the RET is some vested interests stand to lose money if it’s just slain, so they’ve got to think up something that will keep their most favored vested interests happy. Eventually the wheels will fall off the system with thousands of households deserting the grid, conservative politicians calling for grid reconnections at gunpoint, and any private legal liabilities all hived off into worthless shell companies and the profits long since gone and invested elsewhere. Possibly into UK solar leasing. That’s where a surprisingly large amount of Australian money is going at the moment. Not into the country that actually has sunshine, mind you. With our current coal huffing government that would be crazy. Can’t go wasting investors’ money installing solar in Australia. That’s just nuts.

      Or we could actually do something sensible and start to fix the current system starting right now. Or more likely starting right now after we get a more sensible goverment. After all, we have done sensible things in the past. We’re even doing one or two sensible things at the moment, although admittedly sensible things are becoming rather thin on the ground. I’m actually quite optimistic… that the Crows will win the championship.

      • Thinktank

        I see my posted comment removed? I will move on then, where grass is much greener on the other side road.

      • Ronald Brakels

        For those not familiar with Australia I will point out that my previous comment contains hyperbole. No one will be forced to connect to the grid at gunpoint. At worst, if you don’t connect to the grid a trained attack emu will be sent to kick down your dunny door.

        • A Real Libertarian

          At worst, if you don’t connect to the grid a trained attack emu will be sent to kick down your dunny door.

          What? Not a Cassowary?

          Or is that for the people who don’t take the hint the first time?

          https://en.wikipedia.org/wiki/Cassowary

          • Ronald Brakels

            The cassowary: It has an axe on its head and a dagger on each foot. Known to run through rainforest at high speed and smash through small trees that get in its way and bounce off large ones. You’d better hope they send an emu. After all, the chances of an emu remembering what it is supposed to do are almost nil. On hot days they walk around with their beaks open and you can see there’s no room inside there for a brain.

            But if by sheer chance you do happen to get an emu that randomly decides to kick down your dunny door like it’s supposed to, you’re going to have a hard time stopping it. Emus defeated the Australian army in the Emu War in Western Australia. If they’d been smart enough to realize they were under attack and fought back Australia would now be known as The Murder Bird Continent. To quote Major G.P.W. Meredith of the Seventh Heavy Battery of the Royal Australian Artillery: “If we had a military division with the bullet-carrying capacity of these
            birds it would face any army in the world…They can face machine guns
            with the invulnerability of tanks.”

  • Thinktank

    If the prediction is correct Australian in the next 4-6 years power provider may loses customer to storage cost-competitive to go off-grid by 2018-2020.
    Interesting how solar have two effect on the Australian market solar lowering demand and a push to move off the grid at the same time.
    Not sure how to do the calculation but If battery last say 7 years maybe more at $250 pc .
    Say rated at 6v 220amps/hour = 1320 watts .

    If you buy 40 pc x 1320 watts = 52,800 watts at a cost of $10,000 I think that cheap for stored energy?
    $10,000 / 7 years = $1428 per year, that work out cheaper then most qtr Australian bills pay.

    Solar panels sell for $1 watt 5kw (DIY) system cost $5000, inverter and fitting etc say $5000 total cost of $20,000 gone of the grid.

    Not sure how convert to cent per kw over the life of battery, but sound ok to me. someone will correct me if i’m wrong.

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