Published on April 15th, 2014 | by Giles Parkinson


Australian Network Operators Likely To Drop Remote Regions

April 15th, 2014 by  

Originally published on Renew Economy.

Network operators in at least two Australian states are likely to ditch parts of their extensive poles and wire networks in regional areas as they realise that the costs of delivering centralised generation to remote areas is no longer economically feasible.

The decisions are likely to be a foretaste of a sweeping change across electricity markets in Australia, and overseas, as generation moves increasingly to a decentralised model – including rooftops, community and small local generation and storage – instead of the long-standing centralised, hub and spoke model.

The falling cost of solar, and the anticipated falls in the cost of storage is making this possible. Australia is expected to be at the forefront because of the huge geographic areas covered by its networks, its sky-high electricity prices, and its excellent solar resources. The question for many is how far this new model will extend into cities and other heavily populated areas.

John Bradley, the head of the Energy Networks Association – the industry group that represents the distribution and transmission network operators across the country – says network operators in at least two states, Queensland and Western Australia, are likely to shrink their asset base to allow new competitors in the market.

“Some businesses will welcome the opportunities for other commercial players to come in and take their business off them,” he said at a conference last week. “Those businesses are looking basically to see their asset base shrink, and I am expecting that they will.”

Indeed, the two biggest operators in regional Queensland and WA have already conceded that new technologies such as solar and storage – and the emergence of mini and micro-grids – make the traditional form of delivery more or less redundant in some areas. Their services are already heavily subsidised by cash-strapped state governments, to the tune of $500 million in WA and more than $600 million in Queensland. Both governments have indicated this is unsustainable.

Last year, Ergon Energy, which covers more than 90 per cent of the state, said it was likely that its customers would find it cheaper to go offgrid – with renewables such as solar plus storage – than to remain connected to the network.

Horizon Energy, which services regional areas in WA, in March tendered for operators to supply large battery storage and solar systems for some towns as it contemplated whether centralised generation had any future in regional areas.

“Our traditional energy business may be very different and very small (in the future),” managing director Frank Tudor said last month, adding that the cost of solar plus storage was already a fraction of the cost of delivery of centralised generation through the networks to some remote towns.

Dramatic changes in the nature of electricity generation is forecast across the world. David Crane, the head of NRG, an energy giant in the US, said recently that building an electricity system in the 21st century based around millions of poles and wires is “shockingly stupid.”

The Rocky Mountain Institute recently released a report suggesting that solar plus storage could be economically viable for households in New York and Los Angeles within a decade. Investment bank Morgan Stanley said in a report earlier last month that solar plus storage would soon create a “tipping point” that causes customers to seek an off-grid approach.

It makes sense that it should happen in Australia – it’s the advanced economy with the highest retail prices, the biggest cost of delivery (thanks to the huge geography), and the best solar resources.

As Muriel Watt, from the Australian Photovoltaic Association, pointed out in a presentation last week, stringing up poles and wires in regional areas doesn’t make a lot of sense.

As this table shows, in Ergon’s area – which accounts for more than 90 per cent of Queensland – the average customer density is just 4.3 per kilometre of wires. It’s a legacy of the “rural electrification” dream of the 1950s and 1960s, but given today’s technology choices and the offerings of mini grids and micro grids, it is actually quite absurd.

apvi grid dnsity

The question for many is how far this phenomenon – of replacing centralised generation with distributed energy – reaches into the cities. CSIRO last year suggested in its future grid report that nearly one half of generation could come from the users themselves – such as rooftop solar on households and businesses. But it also warned that one third of customers could take themselves off the grid if the utilities did not respond adequately and merely tried to shift the cost elsewhere.

This growth in self-generation, or the rise of the pro-sumer, is challenging network operators, generators and retailers like no other. A recent study published by Energy for the People and the Alternative Technology Association suggested the shift away from a centralised NEM to stand-alone community power solutions could be “quick and dramatic”, with most Australian regional towns and new housing estates expected to be able to function viably and economically off the electricity grid by as early as 2020.

Exactly how that is managed will be the big test – for consumers and for the incumbent industry. Watt accused the industry of resisting change and doing everything it could do slow down or prevent the rollout of distributed generation.

Bradley said that some form of centralised generation was essential, and the key was cost-reflective tariffs. Chris Dunstan, from the Institute for Sustainable Futures, said he was concerned that many customers would leave the grid, causing assets to become stranded and remaining customers paying more. For that reason, he said, there needed to be a much greater focus on energy efficiency and peak demand, to reduce the costs of delivery to all customers.

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About the Author

is the founding editor of, 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.

  • mds

    “Chris Dunstan, from the Institute for Sustainable Futures, said he was concerned that many customers would leave the grid, causing assets to become stranded and remaining customers paying more. For that reason, he said, there needed to be a much greater focus on energy efficiency and peak demand, to reduce the costs of delivery to all customers.”
    Gee, a utility that exists to provide services to people and is actually interested in doing a better and more cost effective job of it? What a novel concept!
    I for one vote to terminate utilities and politicians who do not follow this ethic.

  • Will E

    the utilities still do not see what is going to be.
    also centralised power will come from solar.
    and base load wind Power.
    Solar is now so cheap.
    it will be a profit for all in short time.

  • JamesWimberley

    The problem is very Australian. Most of the world’s population, in rich and poor countries alike, lives at much higher densities. The rich can afford universal grids and have built them.

    Most of the cost of grids is sunk capital. I suppose the large subsidies paid by Australian states basically cover the corresponding borrowing costs. In Capitalism 101, the operators, having made a bad investment, go bankrupt and the debt is wiped out. A public bailout recognizes that these assets are a public good and their investors had an implied governmeny guarantee. It would be cheaper and more logical to take them fully into public ownership.

    • driveby

      Hey, there are still people with bumper stickers around here that essentially read: “don’t sell our power plants/poles”, should have done that 2 years ago as the stuff was still worth some money.

      I really wonder what happens when the tipping point is reached and the remaining grid-connected can’t sustain the grid anymore. Who is going to pay for all the stand-alone systems then and how long will it take to get them installed?
      To me this sounds like the goldrush that was when rooftop solar was heavily subsidized and they got installed like there is no tomorrow..

    • mds

      “The problem is very Australian. Most of the world’s population, in rich and poor countries alike, lives at much higher densities.”
      Yes, agreed, but we also have rural electrification in the US and that can now be done with storage and renewables instead of a lot of expensive copper …that needs maintaining. Same for Canada, Mexico, Chile, etc.
      “The rich can afford universal grids and have built them.”
      Rich vs poor is not the issue here. People, even rich ones, will chose the approach that makes the best economic sense. In some cases, e.g. Bob Wallace residence, that means going off grid.
      Yes, a public bailout is in all of our futures. Drives me nuts. Every time I here one of these old dogs of the power industry, some of their CEOs included, talking about something like “renewable taking a back seat to coal”, I just think: “great we’ll be spending even more to bail you out later”.
      Make into public assets? Sure, but it will still make sense to sever the grid connection to remote areas with enough solar, wind, hydro, or geothermal resources to go it alone …unless you can make an economic case for keeping the wire connection up. It would have to be more for power export, because it won’t make economic sense for them otherwise. We’re not going to pay extra for no good reason.

      • Bob_Wallace

        I have a hard time believing that we will take the grid away from anyone in the US. That might happen in Australia, I don’t know how local politics work there, but here we’ll force the utility to keep the wire up as far into the future as I can see.

        BTW, some (a lot?) of the rural electrification was done with public money, not utility money. Just 15 years or so a federal grant wired part of our county – brought power to a few houses that were built in a remote area.

        • driveby

          Well, we got some federal roads here (rural) that don’t have a black top. Local politics demands them done, but federal peeps don’t see the point. 😉

          So yeah, I really wonder what happens once the bill for the grid comes due too big for the means and when it’s simply cheaper to finance local generation/storage.

          • Bob_Wallace

            We have gravel roads as well. In fact, our county has decided to return some previously paved roads to gravel. But electricity in the US is almost a holy thing.

            Perhaps it comes from the Rural Electrification Act that Franklin Roosevelt signed into law in 1935. The federal government sent teams of workers throughout the country and extended the grid to reach most Americans. Since then we seem to have developed an attitude that we have a right to a functioning grid.

            As best as I can tell we don’t require utility companies to extend the grid to newly built structures that are off the grid. When I built my present house I would have had to pay $16/foot to install poles and wire. ($300,000, which made going off the grid very attractive.) But had I paid for the connection I don’t think there is any way the utility company could have decided that it was too expensive to continue to serve me and pulled down the wires.

          • mds

            If it costs less to serve you without the wires, then it won’t matter if they are already installed. Company might even want to sell the copper in them. Funny how even solar proponents can get caught up in the old grid paradigm. A grid will just be an unnecessary extra cost in many situations in the future. The Australian situation here is a harbinger.

          • Bob_Wallace

            ​If the AU grid rips down your wire will they replace it with a solar system and backup generation? Will they furnish maintenance, battery replacement and generator fuel for what you are now paying for electricity?
            (Some solar proponents have first hand experience with being off the grid. It isn’t as simple, or cheap, as just slapping panels on the roof and buying some batteries.)​

        • mds

          “here we’ll force the utility to keep the wire up as far into the future as I can see”
          I disagree. The technology to server customers, or for customers to serve themselves, in remote areas is changing. Why should anyone pay to install phone wires, when we can install a microwave link and cell phone tower, or just a hub, at lower cost? Same thing. Just a matter of degree of economic advantage now. If it costs less, then that is how is will be done.

          • Bob_Wallace

            I didn’t say we’d force utilities or telephone companies to string wire. That is now (I think) done at the buyer’s expense, sometime with government assistance. But I suspect we will require utilities and telephone companies to maintain them and not tear them down.

  • Mahdi

    That Lovins guy is a genius. He saw that happen more than 10 years ago. (2002 – Small is profitable). The only thing he didn´t hit was the fuel cell. This technology is still waiting for its chance.

    • driveby

      If he’s a genius he probably also saw that the fuel cell will wait for it’s chance like forever… industry had huge amounts of capital and support to get it going and still, here we are with a technology that’s not as hyped and had less support but working and being implemented: batteries.

      • Mahdi

        Agreed. Who cares with cheap Li-ion batteries and half dozen of others fighting for their chance.

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