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Gas Networks Are Now Threatened By Solar

Originally published on RenewEconomy.

Australia’s energy utilities have added a new element to their push for solar incentive schemes to be removed, arguing that gas networks now face the same threat as the nation’s network of poles and wires – a “death spiral” scenario where rising costs push consumers to consider other technologies.

The Energy Network Association – which represents the distribution and transmission networks in the electricity and gas markets – has called on the federal government to remove the small-scale renewable energy scheme, which provides certificates for rooftop solar PV, and solar hot water systems, as well as heat pumps.

“To reduce pressure on electricity prices, we should stop subsidising technologies that don’t need it,” ENA CEO John Bradley said in a media statement accompanying its submission to the Energy White Paper. “Solar PV technology is now well established and is forecast to undergo significant growth without further subsidies.”

Bradley also said gas hot water systems – which provide significant emission reductions compared to the 4 million electric water heaters still in the market – are competing against subsidised heat pumps and solar hot water systems in distorted appliance markets.

The push to remove subsidies for solar comes as the ENA takes stock of the potential impact of the soaring gas prices that will be caused by the coal seam gas and LNG booms in eastern Australia.

It warns that the cost of wholesale gas supply will likely “significantly affect” residential customers through higher retail gas prices. But, if customers reduce gas consumption by looking at other technologies, then this could force even greater rises in gas prices because “infrastructure costs would have to be recouped over a smaller customer base.”

shutter gas

In effect, the gas industry is facing the same problem as the electricity industry, where rising prices are causing consumers to look at other options, forcing networks to try to recoup the cost of investment from falling volumes.

The ENA wants the Small-scale Renewable Energy Scheme (SRES) – which provides certificates for solar hot water and solar PV modules – removed. And it says the Million Solar Roofs program could increase those market distortions. As RenewEcoomy reported last year, there is considerable doubt about how the Solar Roofs program will be implemented, or what funding will finally be allocated.

If the solar schemes are not removed, then the ENA wants the SRES and other schemes extended to gas appliances, as well as solar hot water and heat pumps.

The submission comes as the gas industry grapples with rising fuel costs that is pushing generation out of the market, and flowing through to consumer bills. Last week, Stanwell Corp said it would close its biggest gas generator, Swanbank, because it was now too expensive to operate, and instead sell gas to the LNG producers.

Stanwell has blamed rooftop solar for rendering its 4,000MW of coal and gas-fired generators profitless in the last financial year. Meanwhile, the Queensland Competition Authority has flagged the first price rises from the gas boom, predicting it would be the biggest single factor in rising electricity bills in 2014/15.

The ENA is calling for the government to “intervene” and ensure that there are no blockages to gas supply in an effort to keep a lid on costs.

Network operators are caught between protecting their investment and coping with changes to fuel and delivery costs, and new technologies. The ENA recognises that the industry is going through fundamental change.

It was interesting, however, to note how the ENA responded to the CSIRO’s fascinating Future Grid report, which canvassed four scenarios for networks and consumers into the future.

One of them was ‘set and forget”, or business as usual, which can be discarded because it is improbable. Another was the “high renewables” scenario, which might be attractive but unlikely with the current government in place.

The other two scenarios predicted massive change, particularly through on-site generation and distributed energy. If the networks failed to embrace this, up to one-third of consumers may leave the grid in frustration. If the networks did respond, and embraced new technologies and business models, then “prosumers” could be providing nearly half of all generation on-site. Either scenario has major implications for incumbent industries.

ENA, however, dismissed the off the grid scenario because of the higher capital cost over business as usual. But it missed the point – the CSIRO modelling suggested that despite the higher upfront costs, the bills to consumers in this scenario would be cheaper, which is what will motivate them to take action in the first place. That is what is motivating households to spend money on rooftop solar, because ultimately it will deliver cheaper electricity. If the ENA can succeed in removing the remaining incentives, then the payback for such investment lengthens, making the investment less attractive.

The ENA describes the pro-sumer scenario, where nearly half of all generation is supplied on-site, on rooftops and at business sites, as “irrational”.

 
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Written By

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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