AEMC smart solar reforms are designed to get more small scale solar into the grid and support the growth of batteries and electric vehicles.
Here is what they will mean for different groups.
Getting more distributed energy into the system benefits everyone. Having more, low-cost energy in the system when it is needed can drive down wholesale energy costs and help us decarbonise the energy sector faster.
These essential reforms provide a framework for network businesses to efficiently support distributed energy resource integration by avoiding expensive additional poles and wire investment in their networks. Network costs represent about 50% of the average electricity bill and while new technology is expensive, it’s considerably cheaper than building and maintaining more infrastructure which is ultimately paid for by everyone, regardless of whether you have solar or not. The difference between smart solutions and “building out” the problem is the difference between spending tens of millions compared to hundreds of millions.
Most households don’t yet have solar. Under these reforms, the four out of every five customers who do not have solar will likely see their household bills drop because they will no longer pay for solar export services they are not using.
The solar pioneers who led the way with Australia’s transition to renewable energy will have a choice of how they want to maximise their solar investment once these reforms take effect from July 2025.
Networks will decide whether to develop their own export pricing plans. These will have to include a basic free option for customers who don’t want to pay. It might limit what they export back to the grid. Beyond that, paid plans could see people earning more for export at times energy is needed and less for export at times it is not. But they could minimise any lower earnings if they changed the pattern of their energy consumption to use more of what they generate themselves. For example by using timers on their washing machine or air conditioner. Smart energy systems can help them do this.
Others might decide to store excess energy in a battery (or perhaps even their electric car, which can be used as a battery on wheels). They could use it later themselves or send it to the grid when demand is high so they can earn more.
Some may decide to simply not export at all, and opt for a smaller system which best matches their own energy profile at home and still offers considerable energy bill savings.
Solar owners will likely have different types of solar export services to choose from. There won’t be a one-size fits all solution because each network will design its own pricing structures for approval by the Energy Regulator. That’s because there are different levels of solar uptake across networks, different customer profiles and different levels of solar capacity in each network.
AEMC modelling shows even under a worst-case cost scenario, solar owners choosing paid plans would still earn at least 90% of what they do now – and that’s before taking any action to change their energy behaviours. This compares favourably with lost income from being blocked from exporting energy.
A paid plan also doesn’t mean that a customer would receive a bill for what they export. Any package would be built into whatever retail deal someone chooses.
Under these reforms, solar owners will be more likely to be able to export their energy to the grid because networks will no longer be able to put blanket bans on people sending solar back to the grid.
A system that serves customers on a first-come, first-served basis is inequitable and ultimately would cost everyone more. However, the smart solar reforms ensure that by using the grid in a smarter way we can keep costs down and protect the value of household solar investments.
Making these changes means future solar panel owners won’t be locked out of the system. This is how we will make room for more solar on the grid.
Solar energy is and will continue to be a good investment, both for those who have it and for those now considering it in the future. The key benefit of investing in solar panels, as recently identified by the New South Wales Independent Pricing and Regulatory Tribunal (IPART), is that regardless of feed-in tariffs “customers will continue to make savings on their bills by using the electricity that they generate.”
IPART has found that if a typical customer consumes 50% of their solar generated electricity, instead of the usual 30%, they would reduce their bills by a further $300 beyond the savings they already get. Overall, this customer would reduce their annual bill by around $1,000 per year compared to if they did not have solar panels. This reduces the payback period for their solar panels to just over 4 years.
Whether you currently have solar or not, the smart solar reforms provide even further incentives to invest in storage such as batteries. There are now more than 100,000 solar storage systems in homes across the country. Around a third of these batteries came online in 2020 as more and more Australians eagerly adopted this innovative technology.
Those with both solar and storage could gain the most from these reforms by supplying energy to the grid when demand and feed-in tariffs are highest during the evening peak (peak demand period) and avoiding exports in the middle of the day (peak supply period) when the grid is most congested. The cost of batteries has declined 88 per cent during the past decade. Like rooftop solar systems, it is likely that the cost of batteries will come down even further in the future.
AEMC obligation to consumers
The AEMC is bound by law to make decisions that serve the long-term interests of consumers in terms of price, quality, safety, reliability and security of electricity supply as well as the reliability, safety and security of the national electricity system. We also must take consumer protections into account. In seeking stakeholder views on these proposals, we will weigh up the evidence provided to us with those legal obligations in mind.
Australia’s strong solar uptake created issues for the grid, with solar at times generating so much surplus energy that demand falls near zero, destabilising the power system. At the same time, distribution networks had no financial penalties for poor network export services and no rewards for good service. These reforms oblige networks to invest in services that help send power back to the grid where there is customer demand for it.
Networks won’t be able to make more money from these reforms but will instead offer different prices for solar exports at separate times so supply and demand on the grid can be smoothed out during the course of the day. It helps address substantial amounts of solar being exported in the middle of the day when it benefits the system least.
Congestion on the grid and the need for new investment is not just an issue for households with solar PV. It is also an issue for large-scale commercial renewable generators now trying to access the grid.
Wind and solar is being built so fast, in so many places, that networks are overloaded, slowing down the grid and stopping new energy technologies reaching consumers.
Looking at how these new large-scale generators can export to the grid while avoiding the need for consumers to pay for augmentation of the grid is a key part of the work happening more broadly on renewable energy zone arrangements and long-term access reforms.
This is not an instant change. If adopted, implementation would require power networks to consult with their customers about what they want, and the Australian Energy Regulator would consult further to assess any network proposals and sign off on plans. New safeguards will ensure consumers and jurisdictions have a strong say in how distributed energy should be integrated into the energy system and priced.