Clean Power

Published on August 18th, 2014 | by Giles Parkinson


Shifty Service Charge Introduced To Kill Solar

August 18th, 2014 by  


Queensland businesses are being hit with daily service charges of more than $500 a day on their electricity bills, in a move the solar industry says is designed to kill the roll-out of commercial-scale rooftop solar across the state.

The charges were quietly unveiled by the Queensland Competition Authority and the state government in July. But their implications are only now being absorbed as business operators do the numbers on proposed solar installations.

The new tariffs affect a range of businesses, but the worst hit are those that use more than 100MWh of electricity a year, and are deemed to be “large energy” users.

qca tariff 46In tariff 46, for instance, those daily charges for “service” – originally a charge for reading the meter – have jumped to $488 a day from $42 a day. The “energy” price on consumption is dropped to 10.4c/kWh from 11.6c/kWh. (See right, does not include GST)).

The fixed service charge replaces a “demand charge”, which could vary according to consumption. There is still a demand charge, but only if a customer uses more than a 400kW threshold in any 30 minute interval.

This is how Ergon Energy has structured its tariff 46. With GST, the service charge rises to $537 a day.

ergon tariff

The changes have horrified members of the solar industry, businesses looking to install solar, and those who have invested tens of thousands of dollar in energy efficiency measures such as LEDs or upgraded machinery.

That’s because, according to Steve Madson, director of Country Solar, one of the country’s largest installers of commercial-scale solar, the new tariffs reduce any incentive for businesses to lower consumption from the grid, either by installing solar panels for their own use, or by investing in more efficiency machinery and lighting.

Madson says the charges appear designed to stop the rollout of commercial-scale solar in Queensland.

“The changes are clever in their design,” Madson told RenewEconomy. “They do not actually result in an increase in total electricity costs, and in some cases they actually cause a fall. But they kill the possibility of reducing the bills by installing solar.

”How can they charge $500 a day to read the meter, that is what the daily service charge is after all.”

The QCA, and the state government has long been accused of acting only to protect the interests of the network operators and retailers, and to boost the dividends paid to the government.

Last year, as RenewEconomy reported, QCA came out in favour of special tariffs on residential solar customers, even though it admitted that they would be more costly, ineffective, unfair and possibly illegal. But they favoured the move because it would protect network revenues.

The raising of fixed charges has been a common response among utilities fearing the impact of rooftop solar and a “death spiral” of falling revenues on a fixed asset base.

Analysts such as Morgan Stanley have ridiculed the practice of imposing high fixed charges, saying it was ultimately self-defeating and could simply accelerate that death spiral, and encourage people to go off-grid, particularly when battery storage became commercially viable.

“There may be a ‘tipping point’ that causes customers to seek an off-grid approach — higher fixed charges to distributed generation customers are likely to drive more battery purchases and exits from the grid,” the Morgan Stanley researchers wrote.

Madson agrees: “In three years’ time (when battery storage improves), this will also be enough for a mass exodus from the grid altogether.”

It is not the first move by Queensland authorities against rooftop solar. In June, as RenewEconomy revealed at the time, new rules were imposed that allow the network operators to stop businesses and homes from exporting excess electricity from rooftop solar systems back into the grid.

Ergon Energy, which operates in the regional areas that cover 97 per cent of the grid, has admitted that the move could encourage more battery storage – and ultimately consumers to leave the grid, which would not be the most efficient social outcome.

John Grimes, from the Australian Solar Council, says the QCA ruling is discriminatory, and aimed squarely at shutting down solar PV in Queensland.

“It is also really dumb,” Grimes told RenewEconomy. “Commercial and industrial solar is exactly where we should be supporting solar, not locking it out.

“That is because when the sun shines, business is hard at work. Solar is feeding electricity into businesses at exactly the right time, when
the machines spin and the computers run. There is a direct correlation between the production and demand curves for electricity in this sector. “In turn, this reduces peak demand, bringing wholesale prices down, and delaying or eliminating the need for expensive infrastructure upgrades. Queenslanders are already playing a heavy price for past unneeded infrastructure spending. Now a shortsighted government wants to double up and compound the problem further.” Madson has crunched the numbers for a number of clients in Queensland on various tariff structures, and how they will be impacted by the changes.

For those transitioning from tariff 20, and using 300kWh a day, the new structure and fixed service fee means the benefits of cutting consumption by one-third will narrow from a 30 per cent reduction in the annual electricity bill to just a 10 per cent reduction. To those using more energy, the benefits of reducing consumption by one-third will fall to just a 4 reduction in the bill.

These will affect businesses such as motel owners, and any other business with large amounts of air conditioning or refrigeration needs.

“This is a blatant cash grab by the Newman Government,” Madson said.

“The Queensland government is in such a financial mess because of coal, and the forecasted royalties from coal in particular that never eventuated.

”Small and medium business employee the majority of people in our state and yet small and medium businesses are the one constantly being slammed to provide for the short falls in coal revenue. Electricity prices have doubled in 5 years, gas prices are set to triple.

“We have been successful in reducing peak demand which was the all evil 10 years ago causing rolling blackouts all over the state. “With Battery storage coming online in multiple forms we have the opportunity to level our demand which means that no capital will need to be spent on upgrading our network until our population doubles in 140 years!!! This is evident by the huge surge in profits by the networks.

“By preventing businesses investing in renewables and energy efficiency, this government are killing Queensland.”

“These businesses are spending their money in improving the state-owned assets, creating jobs, improving the environment and upgrading in efficient infrastructure.

“We see that renewables are the push to teach these people that there are better ways and these are measurable, once a business sees the results of going solar they soon reinvest their savings into extra measures to get further reductions which creates more jobs.”

Source: RenewEconomy. Reproduced with permission.

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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.

  • JamesWimberley

    It’s a very peculiar strategy for a conservative government (Newman’s) to kick small and mid-sized businesses in the teeth to protect a few large mining and electricity corporations. In Spain, the government at least had the excuse of austerity diktats from Brussels, Frankfurt and Berlin. This will cause a considerable mess, but any half-way competent opposition party could turn it into an electoral rout.

    • Ronald Brakels

      The state government also owns the fossil fuel generating capacity in Queensland. And in Australia privatisation is how governments, state and federal, strip assets from the people and use the short term gains for election sweeteners to get reelected. It’s been done to varying extents with electricity generation and distribution already in Australia and this is why we now have the highest pre-tax electricity prices in the world. It’s a form of tax farming where governments allow corporations to gouge citzens for decades in return for some short term support. The plan of the Newman government apparently is to sell the generating capacity. This plan is laughable because who would buy that old tat when grid demand is falling and electricity prices are so low? So, to boost the sale value of the fossil fuel assets they have to destroy reneables. There is practically no wind power capacity in Queensland, they’ve been able to keep that out, but solar must be killed, or failing that, wounded as much as much as possible. I don’t think they’re onto a winning strategy here, but I guess they don’t agree with me on that assessment.

      • Bob_Wallace

        Who, in their right mind, would purchase fossil fuel plants when the market is clearly collapsing? Unless the Australian government was willing to make owning solar panels and batteries illegal there’s no future for very expensive grid power.

        It seems to me that Australian voters need to have a serious discussion with themselves, and without the present politicians involved. You’re in a hole. Quit digging. Figure out a way to cover the cost of closing unneeded state owned fossil fuel plants. Accept the fact that a big mistake was made by spending a lot of money on poles and wire. Spread the cost over a reasonable period of time with bonds or some other financial tool.

        Take your hit. Move on.

        • Ronald Brakels

          Who would buy the aging coal plants and the gas plants that are now too expense to run except as peak plants? No one, unless they were given legal protection that would allow them to gouge the peasents. And part of that means keeping wind out and doing as much damage as they can to solar. And there’s no financial trickery which can change the fact that billions of dollars need to be written off. However, that’s not going to get done any time soon because it is pretty clear that some powerful actors in the game are commited to making as much money from the defective system as they can before it all falls apart. Including parasitic management in electricity distribution. They know the end game is not going to be new coal plant construction in Australia and fossil fuels forever. Or at least the smarter ones know that. No, it will be business as usual until it all falls apart and people start defecting from the grid in droves or there is political rebellion. But the only difference between our two main political parties when it comes to fossil fuel companies is that one doesn’t swallow. All their lies. No, they will continue charging 30+ cents a kilowatt-hour and have $500 a day supply charges until the system collapses and then they’ll scream for compensation. Just wait and see.

          • eveee

            A government can decree anything it wants. Like Robin Hood and the King, when the King wants to steal, he sends the tax man. When the government owns old dirty FF plants, it sends out someone to kill the competition. Ironic then, that as we ponder residential off grid solar and batteries, that businesses that primarily need energy during the day will quietly slip into that role.

          • Ronald Brakels

            Wel, no, not exactly. If they just sent to tax collector to gather revenue we wouldn’t have this problem. But in Australia Liberal governments, which means conservative governments, which mostly now means dangerous radicals, have made a particular fetish of reducing taxes and balancing budgets. Or at least claiming to. And so they do the dirty on the Australian public through loss making to the Australian people privatizations.

          • Macki

            “Who would buy the aging coal plants and the gas plants”

            I can answer that AGL did buy up aging coal fired powered plants the biggest power generator in the country in NSW over solar.

          • Ronald Brakels

            Yep. At an extremely low price, mind you. EnergyAustralia, one of the big three electricity retailers like AGL, bought the 1,000 MW Wallerawang Power Station in New South Wales (don’t you just love Australian names) and then shut it down less than 12 months later. The company bought a total of 2.4 gigawatts of coal power for $160 million. If that capacity was built new, going by the “new” eight year old Kogan Creek coal Power Station, it would cost $3.84 billion and probably much more if built today.

  • Oldschoolyard

    I don’t find any issue with the charges, no one gets a free ride on toll roads, we got to consider the share holder of the transmission line running cost no free lunch.
    Toll charge is nothing new cost go up over time with inflation, 1500 w tied solar system should pay a toll charge of $5.00 a day & 10 kw toll rate should be $40.00 a day to enter the toll way lines. Those that Whingeing about cost should setup their own transmission line and not free loading other share holders that invested in transmission lines to make profits not losses for the solar industries.

    • Ronald Brakels

      Grid Defection Rising
      Creedence Clearwater Revival not

      I smell a diesel gen-set running,
      I see grid defection on the way,
      Power’n refrigeration ‘n lighting,
      It’s cheaper than on the grid to stay,

      Rip the cord tonight,
      For gen-set provided light,
      There’s grid defection on the rise.

      They want to take your forty dollars,
      Not each month but every day,
      Cheaper to use gosh-darn diesel,
      Who’d be stupid enough to pay?

      Rip the cord tonight,
      For gen-set provided light,
      There’s grid defection on the rise.

    • dgaetano

      “no one gets a free ride on toll roads”

      I don’t know where you live, but in the US almost no roads are toll roads. Roads are community owned, since they cost a ton to build but their existence enriches everybody (even if you don’t use them, those who provide you services do).

      So yeah, you’re accidentally correct, the grid should probably be community owned as well.

  • Steve Grinwis

    This effectively means high fixed costs if you’re connected to the grid. And solar alone won’t be sufficient to reduce your peak, because your peak just gets pushed into the morning or evening, depending on your particular insolation curve.

    Lets say you work in an IT office like mine. Everyone wanders in between 8-9. Lots of things start happening. Hundreds of screens get flipped on, coffee makers start churning out their endless pots, software build servers get woken up, come online, and start cranking out their builds, various test equipment gets turned on. And boom. Right there? That’s the energy consumption that you’re holding, more or less all day. And solar really isn’t doing a lot for you at 8:00 yet. And if you’re going to get hit with this large, fixed charge, even if you trim your demand during the afternoon actual peak, there’s less incentive to go solar.

    You could do it by buying large amounts of batteries, but now you have to hold over many hours of the morning, switch to charging in the afternoon sun, then use it to trim your evening peak. And all that is for naught on the first day it’s cloudy, and you can’t effectively trim your afternoon peak, because you didn’t have enough sun.

    You’d be better off buying lots and lots of batteries, charging them at night, and using them to level your peaks out.

    This is truly an insidious move…

  • Vensonata

    It’s like these utilities are incentivizing pv and off grid storage by being so heavy handed. Creative business people lie awake at night figuring out how to get out from under the arbitrary fluctuations of price. Remember the OPEC shock in the 70’s? It started a solar house movement. It dribbled away when prices came down but shock price changes sometimes are the tipping point for complete shifts to alternative models. So, anyway guys, keep up with the arbitrary shock billings, you are creating a whole new way of life for us.

  • Mint

    This seems to be more demand related than solar related, and could well encourage battery+solar.

    Here’s what I see in the document regarding the service fee:
    >100MWh/yr and 100MWh/yr and 100MWh/yr and <400kW peak "Demand large" – $537/day

    There's clearly a VERY large reward for reducing peak demand.

    If solar matches up with your demand, you'd not only save on consumption, but could drop into a lower demand bracket. If not, batteries could do the same thing. This is the sort of thing JB Straubel highlighted in his talk a couple months ago.

    A 300 kW, 600 kWh battery (maybe $200k) could take over peaks and save you $130k per year by bringing you from the "large" to "medium" tariff. And once storage is there, going off grid starts sounding more compelling. But $130k/yr is a big incentive for even a 300kW solar array (<$1M?) if demand lines up.

    So I don't think this is gonna kill solar.

    • Matt

      Yes wouldn’t it make me want to install a lot of solar and some batteries to move into a lower yearly and 30min peak rate?

    • Offgridman

      Perhaps I am reading the original document incorrectly, but the problem is that this meter reading fee doesn’t just apply to the spike days but also gets applied to every day of the year. So it is going to do a lot of harm to the smaller midsized businesses. For example the hotels and food providers in the supply chain.
      The hotel that is lucky enough to have a full house during the hot season for a few days or few weeks is going to have a massive spike in their AC requirement during that time but then not have the occupancy to cover the higher reading charge for the rest of the year.
      And with a food service delivery company there will be very high refrigeration demands for a few times a year when specialty items come through in season, but then the high meter reading costs will apply throughout the year even when their refrigeration units are are only using a half or a quarter of that spike period.
      And these are companies that might invest in solar to help cover those spike periods, but with the meter surcharge for the rest of the year it will make the investment impossible..
      As it is said in the article these charges are aimed at small to mid sized businesses that rely on a surge of business from one to a few times a year to make their profits. But if the profit from those times gets burned up by extra utility charges then it isn’t going to be possible to get the financing to get solar to cover those surge periods

  • GCO

    price on consumption is dropped to 10.4c/kWh from 11.6c/kWh

    Could that ~10% difference really be enough to “kill solar”?

    If it was economical to install PV last year with the grid at 11.6c/kW⋅h, with prices on modules dropping steadily, isn’t it just as interesting to do so today or tomorrow despite the slightly lower grid pricing?

    I agree that the per-day “meter charge” seems massively exaggerated, but it applies to every customer, so how is it by itself anti-solar?
    If anything, it’s creating a massive incentive for businesses to try and drop to lower tariffs, and possibly eventually take some or all their activities off-grid, both of which are likely to call for lots of PV…

    • Ronald Brakels

      Without the increase in the supply charge or “service” charge there would have been a jump in the cost of electricity per kilowatt-hour due to the rising price of natural gas in Australia. The jump would have been enough to get many businesses thinking about installing solar.

      • Ronald Brakels

        And then there would be a drop in the per kilowatt-hour charge caused by the destruction of our carbon price which I presume would be in addition to the prices given in the article. While it will only cut my electricity bill by about 2% it is more significant for larger businesses as they pay much less per kilowatt-hour than households and Queensland is a lot heavier on on coal than my state.

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