Western Australia’s renewable energy sector faces bigger barriers than uncertainty around the Renewable Energy Target, with a distribution company and retailers whose policies create disincentives for commercial solar installations.
Some in the sector, however, are hoping the government’s review of the electricity market may create a more equitable playing field between fossil fuel generators and low-carbon energy sources.
Managing director of Enigen Dominic Da Cruz told The Fifth Estate the situation was “very frustrating”.
“The goalposts keep changing,” he said.
“The grid operator [Western Power] writes the rules, determines the rules and judges how they will be applied.”
The state’s power market is separate from the National Electricity Market, and is differently regulated to other states. The state’s Economic Regulatory Authority oversees matters like pricing and contracts, but Mr Da Cruz pointed out the organisation is essentially “toothless” as “it can only interpret the rules as Western Power writes them”.
The core problem is that when a commercial electricity customer wants to install solar photovoltaics for generating power onsite and feed in excess to the grid, they first need to obtain permission from their retailer in the form of an Electricity Transfer Access Application. The Clean Energy Council has pointed out that as the retailers are also generators, they are disinclined to grant permission as the solar power is a direct competitor with their own electricity.
Even if the ETAA is forthcoming, Western Power also has to give permission for the installation to go ahead and be grid-connected, and there are also a number of technical and compliance hurdles put in place that act as a disincentive if the system is larger than 30 kilowatts.
“The barriers from Western Power have really stymied a lot of companies,” Mr Da Cruz said.
“People are limited to 30kW; to go beyond that means encountering the heartache and delays and other barriers with Western Power.”
Mr Da Cruz said the disincentive for large systems meant a lot of potential solar capacity was unmet.
Then there’s the cost impost. Mr Da Cruz said many commercial electricity users were on “take-or-pay” contracts, and that two of the retailers were imposing hefty charges on customers who installed solar on the grounds they may fail to meet the take-or-pay minimum – even when the solar PV is carefully sized to ensure this will not occur. Some retailers increase tariffs and supply charges for solar users, charging more per kilowatt hour for electricity that gets fed into the grid than they do for power taken out of it.
“How the government doesn’t see that as anti-competitive is beyond me,” Mr Da Cruz said.
At the same time, suppliers have been reducing their outright supply charges for large users, further undermining the business case and making financing models like Power Purchasing Agreements difficult to justify on a cost-comparison basis.
Despite these barriers, Enigen itself has been experiencing steady but slow growth for the last couple of years, driven largely by projects for off-grid power users and local government. The company provides design, commission and maintain services for solar, geothermal, cogeneration and trigeneration, and also grid connection applications.
“Local government has been a mainstay of our business. They have been early adopters [of renewable energy] and continue to deploy more and more onto their assets,” Mr Da Cruz said.
He said that because local government were a distributed user – with separate contracts for each asset – they paid high prices for power compared to large electricity users. This made the business case stack up better than it would for a major office block or manufacturer.
Mr Da Cruz said not-for-profits, small supermarkets, small shopping centres and smaller industrial sector enterprises were also taking up renewable energy.
Regional projects for remote Aboriginal communities, pastoral and agricultural properties, mining operations and tourism operators were also a solid market, as renewables provided an opportunity to reduce reliance on diesel-fuelled generation in off-grid locations.
Review brings promise of better deal
The Western Australian government is currently reviewing the state’s energy market and supply arrangements.
Adjunct professor at the University of Western Australia Professor Ray Wills told The Fifth Estate the situation around support for renewable energy was likely to change, with WA Energy Minister Dr Mike Nahan stating he would make an announcement on renewable energy later this year, most likely October.
“I hope he will be consulting broadly with industry beforehand,” Professor Wills said.
The evolution of renewable energy technology, growing price parity with traditional fossil fuel-driven technologies and new approaches to distribution were, he said, “the Kodak moment” for the energy industry.
“Kodak still exists, but it’s nothing like what it was, and the energy industry is also going to change.”
The government recently appointed Wills to the board of Horizon Power, a state government-owned corporation responsible for energy services to regional WA, and Wills said this was an indication that a more renewable-friendly energy picture may emerge.
In a media announcement about phase two of the energy market review, Dr Nahan said one of the main reforms would be introducing open competition for supply to small business customers and households. Currently all small users are in the “non-contestable” market, supplied by the state government-owned retailers, Synergy and Horizon Power.
“Subject to adequate consumer protection mechanisms being established, households and small businesses should have the same opportunity for choice and better prices in their purchase of electricity services. It is also expected that Synergy will be free to retail gas to small business and residential consumers once full retail contestability is introduced,” Dr Nahan said.
The government will also transfer regulation of the Western Power electricity network to the Australian Energy Regulator, which regulates electricity networks in all other Australian states and territories. The minister said this would provide the benchmarks and incentives for Western Power to meet national best practice standards in operations, efficiency and cost.
“It will also increase the transparency of Western Power’s technical rules and rule change processes, and include Western Australia in the national discussion around how to respond to the opportunities and other impacts of technological change in the sector,” Dr Nahan said.
Reforms will also be developed to increase transparency and efficiency in WA’s wholesale electricity market, but the government has stated the state will not be joining the National Electricity Market, nor will it be selling off Synergy.
In their submissions to the first round Electricity Market Review discussion paper, the two privately owned retailers, Perth Power and Alinta, both cited solar as one of the causes of rising electricity prices due to it reducing the amount of their own power being sold to customers, and the additional costs imposed on their operations by the RET schemes.
Western Power, however, acknowledged the positive role solar PV and other local generation technologies could have in the future of the energy market.
The Sustainable Energy Association in its submission said the initial EMR Discussion Paper took an “overly conservative, business as usual approach”.
“The EMR DP key assumption appears to be little will change over coming decades and that in that time the only energy option continues to be coal and natural gas, and speculatively raises the possible resource of shale gas and imported coal,” the SEA wrote.
“SEA is disappointed in the DP as it leaves out much recent and widely available evidence of substantive changes in energy markets globally, elsewhere in Australia, and even within the State itself, and leaves many questions in relation to potential low-emissions energy futures unasked and unanswered, failing to account for fundamental market changes resulting from the rapid emergence new clean technologies.”
SEA also pointed out that energy efficiency gains would continue to impact demand profiles and consumption, and would therefore play a part in lowering network and distribution costs. This however, was not addressed in the discussion paper.
“While considerable attention is focused on subsidies in the price of electricity, there is no consideration of the current fossil fuel subsidies embedded within the current energy market. Full lifecycle analysis of our energy sources and the various mechanisms of support need to be fully understood, including the effect of implicit, structural subsidies that currently exist for fossil fuels in energy pricing.”
Mr Da Cruz said the future of renewable energy in the state was far from clear. New technologies such as the Tesla battery may become a game-changer by creating a better return on investment for hybrid systems in on-grid locations, he said, but “it’s too early to tell”.
More cost-effective storage could also see uptake for large users who have entered into peak demand management agreements, where they are paid over $100,000 per avoided megawatt hour to switch off from the grid during peak demand periods and use gensets [diesel or gas generators] or stored power instead.
These agreements, he said, were expected, however, to end in the near future, as the state currently has excess generation capacity.
Similarly, the EMR may shift the rules in a way that is fairer.
Ultimately, forecasting the future of the renewable energy sector in Western Australia “depends on which crystal ball you’re looking in”, Mr Da Cruz said.