The decision about whether to invest in solar or another distributed energy resource is an individual one. The prices for solar, batteries, and other devices, are falling rapidly and the pay-back period (the amount of time it takes for the savings to exceed the cost of the initial benefit) changes often because of prices, government subsidies, energy demand, other generation, and so on.

The best way to decide whether the costs outweigh the benefits is to understand how and when you use power and talk to local suppliers and a range of energy retailers to see what offers are available for you. The Energy Made Easy website is a good place to start.

Aside from the individual benefits and costs, there are also benefits and costs of distributed energy resources for the broader community.

The two clear benefits are reduced emissions and new, clean, and cheaper ways to generate electricity, while the costs are about increased network traffic, affordability, reliability and security of our energy supply.

As more and more consumers install technology that enables them to access this cheap and clean energy, managing the electricity grid is becoming more complex. This complexity will involve extra costs. We must determine how those costs are spread across those who use the system. This is one part of the smart energy reforms developed by the Australian Energy Market Commission.

What more distributed energy resources means for electricity bills

There is good news and bad news. For while the sun and wind are free, there are costs involved in getting that power to where and when its needed, and in ensuring our electricity supply is not disrupted when the energy produced varies with the weather. Disruptions can happen when the sun isn’t shining and the wind doesn’t blow and even a lot of sun and wind can create challenges too.

On the plus side, those who are able to invest in distributed energy resources can save money on their bills by using the energy they generate and/or store, and programming smart appliances to turn on when energy is cheapest. There is a substantial up-front cost but the savings over time will likely more than cover the initial investment.

On the negative side, more distributed energy resources in the community could put additional costs on the system, such as:

  • Investment in new poles and wires and other network infrastructure upgrades to allow energy to flow both to and from your house or business (instead of traditionally flowing just one way). This allows consumers with distributed energy resources (including battery storage capacity) to send excess energy back to the grid for use elsewhere. It is important to note the costs of new network infrastructure, which represents an average of 50% of your bill, is paid for by all energy consumers, whether or not you have a distributed energy resource such as solar PV.
  • The cost associated with the market operator’s ability to balance more variable supply in real time.
  • Deploying advanced, often costly, network-ready software to manage energy flows and technical considerations around how distributed energy systems dovetail with the system.

Yes, such changes cost millions. But these are changes that need to happen if we are to maintain uninterrupted supply across the grid and maximise the value of our electricity supply.

The smart solar reforms developed by the AEMC will help keep these costs as low as possible and reduce solar waste by better aligning solar supply with electricity demand.

What more distributed energy resources means for the supply of reliable and secure electricity

The increase of intermittent generation such as distributed energy resources has a big impact on both the reliability and the security of our electricity supply because the times of peak demand and peak supply don’t match.

Solar photovoltaic generation (PV) and wind power both produce intermittent generation that is cheaper to produce and reduces carbon emissions but can be unpredictable in certain conditions. That’s why you will hear the term ‘variable renewable energy’.

Because this variable renewable energy is cheaper to supply at certain times of the day – generally between 11am and 3pm during the milder months of the year - the demand for electricity that would historically have been drawn from the grid is no longer needed at different times.

When that happens, the supply of electricity exceeds the demand and the prices generators can earn can fall to zero or less. Known as ‘minimum demand’, this situation means it is uneconomic for thermal plants to continue operating.

This ‘minimum demand’ is already happening in some parts of Australia, and it is expected to be a problem across all regions by 2025. But we still need the technical stability thermal plants provide to the system to keep things operating smoothly.

Our system can’t cope with different types of energy at different times of day without creating stability issues for voltage and frequency on the grid – unless we have back-up sources of energy that can swing into action at short notice to keep things on an even keel. Without any form of energy storage during times of high solar generation, other forms of generation must rapidly increase their output around sunset to compensate for the loss of solar generation. This is what’s known as a high ‘ramp rate’ and it produces what the industry calls the duck curve. Coined in California in 2012, this duck curve refers to the imbalance in timing between peak demand for energy and when renewable energy is actually produced.

Projected changes in operational demand in South Australia

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Source: AEMO