Rooftop solar drives out coal, wind and grid-scale solar

Australia’s 3.5 million rooftop solar installations are pumping out so much energy on sunny days that they’re sending wholesale electricity prices into negative territory, forcing large-scale wind and solar farms, as well as coal plants, to reduce generation.

Over the past 30 days, rooftops contributed 14.6 per cent to the grid. Bundled together with other renewables such as solar farms, wind and hydro, they generated 42 per cent of the country’s energy over the same period, according to OpenNEM.org.au.

Australia could do more to capitalise on rooftop solar, experts say.

In South Australia’s electricity market last year, 24 per cent of all five-minute spot-price trading intervals had negative prices, energy economics consultant and Victorian Energy Policy Centre director Bruce Mountain said.

On the last day of the year in Victoria, electricity spot prices between 6.20am and 5.35pm were less than minus $50 per megawatt hour. Wind and grid-scale solar scaled back in response.

“It’s just one of many typical days,” Mountain said, adding in a blog post: “Rooftop solar is king but it is subjugating not just coal but also wind and solar.”

Big power generators are frequently switching off supply on clear, sunny days as unrestrained output from household solar panels forces wholesale prices down to zero or below.

“What we are seeing now in South Australia and Victoria, and elsewhere, is rooftop solar becoming the dominant energy source during the middle of the day, and having quite a big effect … driving off production, not just from coal, but also large-scale wind and solar,” Mountain said.

Grid-scale wind and solar comes back online once demand and prices recover, but coal generators must maintain a minimum operating level and cannot as effectively wind back their exposure to negative prices, bringing forward plans for their early closure as they become less financially viable.

Deeply negative prices for long periods of time are not sustainable. Only a huge expansion of storage will change the market’s dynamics, he said.

The need to firm up the power grid as ageing coal plants retire and hasten the rollout of renewables prompted Climate Change and Energy Minister Chris Bowen last year to significantly expand the government’s capacity investment scheme and underwrite 32 gigawatts of new renewable energy and storage.

The taxpayer-backed intervention is needed to meet the country’s objective of renewables supplying 82 per cent of power by 2030.

Opposition Leader Peter Dutton and Nationals leader David Littleproud are backing small modular nuclear reactions to stabilise the grid, urging the government to overturn the nation’s two-decade ban on nuclear energy. The only company with a small modular plant approved in the US recently cancelled the project citing rising costs.

Australia’s energy regulators are instead championing household solar and batteries as the unsung heroes of the energy transition, able to provide 20 per cent of the country’s energy solution and save taxpayers $6.3 billion in transmission costs.

Australian Energy Market Commission chair Anna Collyer, who spoke about the issue in October, said, “consumers are the heroes on the road to net zero,” but they aren’t getting the attention they deserve. “That has to change,” Collyer said at the time.

The more ubiquitous small-scale solar, batteries, EVs, water heat pumps and other consumer energy resources (CER) become, “the more confident we can be about supply, and the less back-up infrastructure we need to build at utility scale,” Collyer said.

The commission is recommending smart meters, which are ubiquitous in Victoria, get an accelerated rollout across the rest of the country by 2030. Smart meters can track the inflow and output of electricity from a household’s solar panels and batteries, share the data with retailers and generators, and potentially be used to aggregate the energy and direct it more effectively, creating “virtual power plants” while at the same time rewarding the households producing the power.

The National Electricity Market Operator’s latest 2024 Draft Integrated System Plan warns the country will lose the benefits of the huge uplift in energy from household solar generators unless two things happen.

“First, that consumer-owned assets are grouped together and co-ordinated as virtual power plants (VPPs) to respond to market or network signals. Then, that the VPPs are appropriately integrated into the national electricity market (NEM) to help support power system reliability and security,” the system plan states.

Collyer said high-end estimates suggest a CER-supported power system could save Australians as much as $6.3 billion.

But Mountain said bundling households’ solar installations together to form virtual power plants was an “amorphous catch-all phrase.” Research suggests virtual power plants won’t necessarily deliver “huge gains” because the system’s commercial operation would more or less mirror how households use their solar power now, he said.

“Many customers don’t like VPPs because [they see] it as a long arm of government and industry extending onto their premises and controlling their devices. They are rightfully reticent about a large industry controlling something in some way that’s not immediately visible to them,” he said.

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