The electricity “death spiral” has, for a long time, been a key risk facing electricity generators/distributors globally.
The “death spiral” arises when demand for power declines, due in part to customers taking up solar, leading to higher prices to cover fixed network costs. That is, the more people that take-up solar power, the faster decline in electricity demand, and the more fixed costs must be spread over a smaller volume of electricity, raising costs for everyone else.
As reported on ABC’s 7.30 Report last night, the death spiral has drawn further into view with an Adelaide company, Zen Energy, today launching the country’s first 100% per cent renewable energy utility company that will use a combination of solar energy, battery storage and off-grid living to deliver what it claims will be lower prices.
Already, Australia has the highest levels of rooftop solar power (PV) in the world. But to date, solar power has suffered from one major drawback, namely that there is now way to store surplus electricity during daylight hours for use during the evening.
In Australia, electricity suppliers offer solar users a “feed-in tariff” for surplus electricity fed back into the grid, but these are typically one-third to a quarter the amount charged for electricity off the grid.
Some utility providers, such as in Queensland, have also reduced the per unit charge for electricity, while raising fixed network charges, thereby making switching to solar even less financially beneficial.
As such, solar power doesn’t yet make financial sense for most people in Australia, in particular those that are usually away from home during the day (e.g. CBD workers).
All this is changing, however. Electric car maker, Tesla, will soon to launch a battery pack for people’s homes – something that would enable solar users to store surplus electricity during the day for use at night, and enable them to disconnect from the grid entirely.
And Zen Energy plans to take energy storage to whole new level:
RICHARD TURNER, CEO, ZEN ENERGY: It’s the full end-to-end service that we’re able to provide everything from the generation of power to building power networks and working with the incumbent utilities to build and operate those power networks through to retailing power into those communities.
ALEX MANN: For years, Zen Energy has been putting these battery units in people’s homes. Now Richard Turner plans to take entire communities off the grid, from social housing stock to apartment buildings in regional communities. He says he’ll generate the power and sell it back to users at a fraction of the current costs.
RICHARD TURNER: We’re looking at a spot in the market very soon where we’re gonna be almost half the cost of the grid…
ALEX MANN: In councils across Australia from Byron Bay to Western Australia, local governments are looking to ditch their dependence on the expensive old grid and generate, store and use their own renewable energy. But there’s a catch. When the wind stops blowing or cloud cover lasts for weeks, all of these communities will need a back-up option, and for most of them, that means at least one connection back to the grid.
Zen Energy’s business model has existing energy retailers worried about the ‘death spiral’:
MATTHEW WARREN, ENERGY SUPPLIERS ASSOC. OF AUST.: If we can get cost-effective storage, it changes the game….
It’s no good saying, “I only use the network some of the time. I should pay less,” because everyone’s gonna make that claim eventually…
Disruption’s gonna keep occurring. We don’t want to stop especially those disruptions that improve the efficiency of the system and decarbonise the system. We’ve just gotta make sure when we do have this disruption, it doesn’t occur at the benefit of some and at the cost of others unfairly…
ALEX MANN: And that could mean electricity consumers end up paying higher tariffs.
While the emergence of home battery storage and alternative energy sources is great news, it does raise a big dilemma for regulators and social equity. That is, the wealthy are most likely to install solar and battery storage, since they can afford the large upfront costs. This leaves poorer households and renters facing potentially huge rises in their power bills as fixed network costs are spread across a diminishing pool of customers.
Even so, Australia cannot escape the fact that revolutionary technological change is coming to the electricity sector, offering significant efficiency benefits but also a huge conundrum for power suppliers and regulators alike.
