The tale of two households: Behind the new grid charges for excess solar

Nic Seton lives in one of the 3.8 million Australian households with solar panels, while Peter Horsley’s household is one of 250,000 with home batteries.

This week’s news that energy networks plan to charge households to export excess solar energy to the grid in the middle of the day will affect the two men in very different ways.

In a dynamic mirrored by the nation at large, Horsley is likely to benefit from the new order, while Seton is likely to lose out. Meanwhile, the distributors and the likes of St Vincent de Paul Society say the move protects renters and low-income households without solar.

Sydneysider Nic Seton has solar panels on his roof and is worried about Ausgrid’s new network charge.Credit: Louie Douvis

It was enabled by a national rule change in August 2021. Australian Energy Market Commission chair Anna Collyer, whose organisation made the decision, says it allows distributors to recoup the cost of paying for upgrades to the grid to remove bottlenecks and allow more solar to be exported.

“A ‘do nothing’ approach would have led to a worse outcome for all,” Collyer says. “There would have been increasing instances where customers are limited in their level of exports or not allowed to export at all.”

Australia leads the world in rooftop solar: the Clean Energy Council estimates it represents 11.2 per cent of the national energy supply.

It’s a great success story that opens up myriad opportunities for the transition to a decarbonised economy, but experts say it also brings challenges with managing grid stability and who should pay for that.

At the heart of the problem is a demand curve that looks like a duck, even if it doesn’t walk and quack like one. Figures from the Australian Energy Market Operator show energy demand starts off neutral in the early morning, plummets during the middle of the day when consumers are either not at home or using their own solar, and then peaks in the evening when people get home and turn on their devices and lights.

Grattan’s director of the energy program, Tony Wood, says: “The dramatic growth in solar PV is breaking the electricity duck’s back. Flattening the load is likely to restore it to good health.”

This is at the heart of the changes announced this week by the three NSW energy distributors – Ausgrid, Essential Energy and Endeavour Energy. The NSW pricing structure was approved by the Australian Energy Regulator last month, and all three companies said it was done after extensive consultation with customers.

Rob Amphlett Lewis, group executive distributed services at Sydney’s main distributor Ausgrid, says: “We want to move as much of our energy [usage] into the middle of the day when we’ve got all of this generation happening, and that effectively squashes the duck.”

The solar duck is a national problem, and NSW is merely at the vanguard of a shift that is likely to come to other states as well. SA Power Networks was one of the proponents of the national rule change in 2021 necessary to bring in the charges and will be able to introduce them in the next AER pricing review in 2025, along with Queensland. Victoria’s next AER cycle is in 2026.

The effect is that the distribution networks, which own the poles and wires but are separate entities from the electricity retailers, will allow a threshold of free exports during the day and charge a penalty beyond that while also providing a reward for energy exports in the evening. The distributors, which have geographic monopolies, have different pricing structures, and the retailers can choose how to package it to customers.

Solar households will still enjoy reduced bills from using their own energy and will still be paid feed-in tariffs from retailers based on wholesale electricity prices. The overall cost is expected to be low for the average customer.

Seton has a modest 4.5-kilowatt battery on the roof of his townhouse in the inner-city Sydney suburb of Newtown, where he lives with his partner and two children. About six years ago, the family paid about $6000 after rebates and has enjoyed large savings on their electricity bills.

He has no control over the fact that the solar panels only work when the sun is shining, cannot justify the cost of a home battery at upwards of $9000, and has already tried to shift his energy usage to the middle of the day as much as possible.

Peter Horsley has spent tens of thousands on solar panels, batteries and electric vehicles.Credit: Oscar Colman

Meanwhile, at the seven-person Horsley household in leafy Wahroonga on the north shore, there is a possibility the family can make money from the situation.

Peter Horsley has spent tens of thousands of dollars on 17 kilowatts of solar panels and three batteries, not including the cost of two electric cars.

He can charge his batteries during the day from the solar panels and then sell electricity back at higher prices in the evening. With his set-up (Tesla battery and an app from his retailer Amber Electric), Horsley has set this up as a default and can also manually override it when needed, for example, if there is a blackout.

He can even charge his batteries from the grid rather than his solar panels. “The prices can go negative during the day as well, so there have even been cases where we’ve been paid to fill up our batteries and take energy off the grid,” Horsley says.

He has already participated in an Ausgrid trial for two-way pricing, which offered generous evening feed-in tariffs but is not sure what the net effect will be in the future. Despite this, he is confident he won’t be worse off and adds that he does not support the changes, mainly because he believes in solar as a climate change solution and is worried it will slow uptake.

Energy distributors, backed by advocates such as the St Vincent de Paul Society, the Australian Council of Social Service and the Public Interest Advocacy Centre, say that it is about equity: the networks need to find the money to upgrade the grid to absorb the new solar energy being generated, and they don’t want the poorer non-solar households to bear the entire cost.

Seton, who runs Parents for Climate, says it’s pitting homes without solar and their interests against homes with solar. The better way to address equity is to help low-income households and renters get solar and to help solar households buy batteries.

He is frustrated there is a mandatory levy, however small, on solar households who have tried to contribute to the renewable energy transition.

“At the end of the day for some people, it’s still one more brick in the wall in that cost-of-living crisis,” Seton says.

Campaign groups such as Solar Citizens have described the new charge as a “sun tax” and warned it could put people off buying solar panels, while Rewiring Australia says it’s about the large-scale incumbents “defending their turf” against households getting in on the game.

There are also market analysts, such as Tristan Edis, a green energy and carbon markets economist with Green Energy Markets, who say it is the wrong approach.

Edis says bluntly that “the rule change was bullshit” and the regulators were “snowed” by the energy distributors. “They’ve just given them the keys to a new revenue stream through this rule change, even though there’s not proper evidence here.”

He points to UNSW research from 2020 that suggests so-called solar traffic jams are largely the result of distributors failing to manage voltage, a problem that occurs during the evening peak as well as by day.

Distributors do not effectively measure voltage spikes from solar households anywhere except Victoria, Edis says, so they had not proven the case that solar households were causing the problem.

In Victoria, the government had regulated the distributors to lower voltage, and this had occurred despite high solar penetration. As a result, he predicts that Victorian distributors will not need to introduce two-way pricing in their next AER round in 2026.

But Amphlett Lewis says the UNSW research shows the various ways to manage voltage, and the extensive consultation that Ausgrid and the other distributors carried out, determined that two-way pricing was the best model.

Rewiring Australia chief executive Saul Griffith says there is a bigger picture being lost. “A lot of people are not at home during the day when their house is generating the most electricity,” Griffith says. “In the best of all worlds, the excess electricity they’re making will charge the electric vehicles that are going to be prolific in this country … and the biggest battery in Australia will be our cars.”

The networks are keen on the vehicle-to-grid charging that Griffith is advocating. Essential Energy chief operating officer Luke Jenner says the network “is optimistic about the opportunities electric vehicle charging and vehicle-to-grid charging can offer consumers” and, while it already offers two-way charging for electric vehicles, it is currently testing and developing infrastructure to develop it further.

Home batteries cost from $9000 to $15,000 and the federal budget did not provide any funding to help households buy batteries. Some schemes exist in Victoria and Queensland, while the NSW government will have more to say on this in its consumer energy strategy due in the coming months.

Community batteries are another solution, often touted by the networks themselves, as they can build and own them, often with government subsidies. Ausgrid has five across Sydney and the Central Coast, Endeavour Energy has partnered with Origin Energy for community batteries in western Sydney and Shell Cove in the Illawarra, and Essential Energy says it owns and is developing several energy storage solutions.

Ausgrid’s Amphlett Lewis says both household and community batteries have their place, but “shared batteries will have a big role to play because they’re more cost-effective than behind-the-meter batteries”.

Tristan Edis disputes this, though, saying it’s better to support individual households in getting their own batteries because distributors have a profit motive and a monopoly business structure. That means they are wasteful and do not act in the best interests of consumers, while the locations of community batteries are often chosen “based on where politicians want to cut a ribbon.”

St Vincent de Paul Society’s executive manager of policy and research, Gavin Dufty, says batteries are expensive, but he advocates helping households to shift their usage of appliances, such as increased use of timers so loads of dishes and laundry can be done during the day even if no one is home.

He supports the policy: “It’s putting in the right foundations if we’re going to electrify everything and get to net zero, which we want.“

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