We must look for innovative ways to meet the demands that accompany the necessary growth of our country while minimising the impact on our environment.
This has never been more important than in our use of energy. As we move towards a net zero emissions target in 2050, the built environment must increasingly become more efficient and more sustainable, finding new ways to generate, transfer and use energy.
But we cannot innovate and build better models for generating and using energy without government and the private sector working together – only a partnership, collaboration, will achieve real change.
The Property Council, in partnership with the City of Sydney and the Total Environment Centre, last week restated our case for innovation to improve the status quo in a new submission to the Australian Energy Market Commission (AEMC) on better valuing local energy sharing.
This comes after the AEMC rejected our early submission in September, which argued for an evolution of the current network rules. The AEMC issued a draft determination that struck out any chance of a rule change designed to embrace innovation.
Our position is simple – buildings that generate their own energy should receive a credit from network providers when they transfer surplus energy they don’t use to surrounding buildings and businesses. This model seeks to reduce costs by mitigating the requirement for costly network upgrades by reducing stress on network infrastructure.
The credits, called Local Generated Network Credits (LGNCs), would be calculated from the estimated long-term cost savings achieved through reducing or deferring costly network upgrades, and would be set at zero where there was no benefit for consumers.
By supplying locally generated energy to surrounding businesses, these buildings reduce costs, increase clean energy generation and provide an additional way to make green development more affordable.
Currently, some incentives do exist for local generation, including network support payments under the Regulatory Investment Tests, yet they are not as effective as they could be.
The current incentives either do not provide adequate recognition of the benefits that local generation can provide and/or they are not accessible to small-scale local generators.
Under the current system, the high transaction and administrative costs of the bespoke arrangements generally required for network support payments and avoided Transmission Use of System costs will often exceed the benefits these arrangements could provide to small and mid-scale local generators. This reduces the likelihood of their adoption and provides a disincentive for adopting green energy approaches.
The proposed rule change would address the current gap where many local generators who export to the grid are unable to fully leverage their contribution in reducing the demand on network infrastructure and generating low-carbon, green electricity. It would also serve to defer or avoid costly grid augmentation by advancing cost-reflectivity signals for exported energy.
Our LGNC model is fully supported by research from the Institute of Sustainable Futures (ISF) at the University of Technology.
And yet to date the status quo has triumphed and the opportunity to innovate is being lost. The AEMC has been reluctant to embrace LGNCs largely due to the cost of change.
The research commissioned by the AEMC to underpin its position disregarded several key aspects of the ISF research and many of the outcomes of the stakeholder consultation. For example, the Institute of Sustainable Futures recommended a lower limit on generators of 10 kilowatts as well as potentially excluding existing generators from the payments. Yet the AEMC ignored these limits in its determination.
The AEMC also failed to include any other form of clean energy generation aside from solar in their modelling. The ISF’s modelling included photovoltaics, wind power, cogeneration, hydro and bioenergy – all of which would enhance the impact of LGNCs.
The AEMC suggests instead a “preferred rule” which requires Distribution Network Service Providers to publish a system limitation report on an annual basis.
This information is already largely available through the network opportunity maps and mandating its release by network providers will do little more than increase their reporting burden and potential cost.
Our suggested model of LGNCs ensures that energy is effectively generated and transferred, investment capital is effectively employed and, inevitably, costs will be reduced for the consumer. These are the benefits of innovation.
The current model without the utilisation of LGNCs provides costly and burdensome alternatives, rejects change through flawed modelling and ultimately wastes an opportunity to prepare for the future. These are the costs of the status quo.
We can only hope that following our most recent approach we can work constructively together to build a better model for business, the environment, energy providers and consumers.
Jane Fitzgerald is NSW executive director of the Property Council of Australia.