Australian Networks Concede One Third Of Consumers Could Go Off Grid

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Originally published on RenewEconomy.
By Sophie Vorrath

In 2013, a report produced by the CSIRO-led Future Grid Forum made the eye-catching observation that by 2030, one-third of Australian electricity consumers – weary of rising retail prices and spurred on by increasingly cheap solar and storage technology – could, conceivably, choose to go off grid.

Two years later, the CSIRO and the Energy Networks Association have released a comprehensive update on that and three other future grid scenarios, as part of the Electricity Network Transformation Roadmap project – the final Roadmap recommendations are due late 2016.

As in 2013, the study models four different electricity market scenarios: one where consumers “set and forget” their energy use; another distinguished by the rise of the “prosumer”; another where people leave the grid altogether; and one with a market of 100 per cent renewables.

And while some key projections have changed – including current solar and battery storage costs being around 20 per cent cheaper than they were forecast to be in 2013 – the “Leaving the grid” scenario” works out roughly the same, as you can see in the table below.


In an article summarising the project’s key findings, CSIRO chief economist and a lead author of the report, Paul Graham, concedes as much.

“In 2015 these scenarios appear to have stood the test of time. Some of the most radical scenarios – a third of people leaving the grid, 25-45 per cent of electricity generated on site, and 100 per cent renewables – are still plausible.”

But what does that really mean? And if solar and storage prices are falling so much faster than predicted in 2013, shouldn’t this be reflected in larger numbers heading off the grid come 2030?

Graham goes some way to explaining this here: “While the falling cost of solar and batteries has decreased the cost of going off-grid, the projected cost of staying on grid has fallen also, and this is partly due to the expected role of batteries in peak demand management.”

But in an interview with Graham on Thursday, the CSIRO economist told RenewEconomy that it’s a bit more complicated than that.

“We don’t really know how many people will feel comfortable going off the grid,” Graham told RE. “We just wanted to explore a scenario where a lot of people went off grid,” and did so because it was a mainstream option.


“We didn’t want to hide from (that possibility),” he said.

And when you look at the report’s projections on battery costs, you can see why. It predicts that battery storage costs will fall by approximately 60 per cent in the next 10 years, while solar panel costs fall by around 35 per cent.

According to these projections, said Graham, by 2030 battery storage systems would have reduced in cost enough to provide a 10-year pay-back period, which, when you look at the solar model, was when rooftop solar uptake really took off.

But the real message of the report, says Graham, is that “solar is here to stay, and its only going to get bigger.” And the main aim of the CSIRO’s project with the ENA is to work out how to manage this new reality in a way that works for both consumers and the networks – and, presumably, the climate.

According to the report, all four scenarios see significant network expenditure, between $954 billion and $1,136 billion, whether by large utilities or small customers and their agents.


And the scale of this expenditure, the report says, “highlights the benefits of incentives for efficient investment by all market participants, assistance for customers and robust policy and regulatory frameworks.”

One of the key concerns, for example – and a point that will no doubt be seized upon by certain media outlets – is that a “rise of the prosumer” scenario, where a majority of consumers install solar but remain connected to the grid, could widen the disparity between the electricity bills of customers with and without rooftop solar.

Of course, it makes perfect sense that consumers who invest in solar panels, and generate a big chunk of their electricity free from the sun, are going to pay less for their electricity bills than those who do not – and often cannot – invest in solar.

According to the CSIRO modelling, by 2030, customers with solar panels are expected to be$150-210 better off on average each year. By 2050 that increases to $860-$1140, which – as Graham points out on The Conversation, “is a concern from an equity point of view.”


But how do you address this gap without penalising customers who have invested in the sort of clean energy technology our grids are going to need if we are to get anywhere near our Paris pledges for emissions reduction?

The tendency is to blame this bill gap on a solar “cross subsidy” – that is, people without solar carrying the more of the burden of paying for the grid than those with solar, even though those with solar could be using the grid just as much.

But in his interview with RE, Graham said researchers really didn’t know what that level of cross-subsidisation was, and conceded it was possible solar households were, in fact, using the grid less, and perhaps even boosting grid efficiency by reducing peak demand.

Again, said Graham, “it’s an incredibly complex issue.” But it could have a rather easy solution. The use of demand tariffs, he said, “would almost completely eliminate” any solar cross-subsidy issues. But as the table below illustrates, this will require fairly major reform.


And what about the issue of network gold plating: the idea that Australian electricity consumers – solar and non-solar – are paying a huge chunk of their electricity bill to cover the overspending of networks on infrastructure and peak capacity that isn’t being used, thanks to decreasing demand?

RE asked Graham if the Future Grid study had considered factoring in a scenario where network assets were written down.

“I absolutely believe that you should write down assets you’re not using,” Graham said. “But it’s not the case that we’re not using the asset,” he added, “we’re just using it less.”

“This industry absolutely accepts that the change is coming,” said Graham. “There is no point trying to wind back the clock.”

“What we are trying to work out is how do we manage this? We need to make sure we don’t build any more network than we need. We need to give people incentives to manage peak demand.”

So far, you could argue that the networks haven’t done so well on either of those counts. But as Graham notes, it’s not all down to the networks.

“This is a shared responsibility,” he told RE. “The whole sector needs to create some value for customers to manage demand. They need to think, what benefit do they actually get for that?

At the same time, Graham notes, the path future consumers take will not be all about rate of return and cost benefit, but more about keeping up with the Joneses.

“The electricity industry is moving into a sort of consumer goods space. Price matters a bit, but it’s not necessarily the main driver.”

“You have a spectrum of customers, ranging from the vulnerable – those who struggle to pay the bill each quarter, to the tech savvy, who want to be in complete control of how they consume electricity.

“It’s not a matter of one size fits all.”


Reprinted with permission.

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