Billions of savings to be made by plugging in household energy resources

Urgent, courageous action is needed to better integrate consumer energy assets if we want to underpin Australia’s future economic prosperity with lower electricity and transport costs, and eliminate our dependency on gas.

Household rooftop solar, electric vehicles, batteries, hot water systems, and air conditioners could save Australians a massive $19 billion in energy costs by 2040.

That’s the figure identified in a new report by the Institute for Energy Economics and Financial Analysis (IEEFA) which has for the first time analysed the full range of benefits that flow from householders and businesses installing consumer energy resources, also called distributed energy resources (DER).

These resources are becoming a much larger part of the energy system and as they grow they’re completely changing the nature of our electricity system.

“Rooftop solar came out of nowhere, and people didn't expect it to become so popular and so pervasive, and we're still playing catch up,” Dr Gabrielle Kuiper, a specialist in distributed energy and author of the IEEFA report, told the SwitchedOn podcast.

“We're moving away from a situation where all the generation was in large coal or gas fired generators, to a significant proportion of energy actually being where people are using it in their homes and businesses.”

Over a third of Australian households now have solar on their rooftops - more than any other country in the world on a per capita basis.  And since the 1950s we've had controllable hot water in the form of hot water storage.

Kuiper says these distributed energy resources are going to get much bigger. She estimates at least 40% of our future energy will be supplied by households and businesses – up from the current 20% - and the vast majority of the storage - up to 82% - will come from houses and businesses. Most of that will be in electric vehicles.

Integration

But to realise these massive economic benefits the IEEFA report argues “we need significant, courageous action on DER integration as soon as possible if we want to underpin Australia’s future economic prosperity with lower electricity and transport costs, and electrification to eliminate dependency on gas.”

“There’s a whole lot of value being left on the table,” says Kuiper. “There's still a very long way to go to give the focus and the policy and regulatory support and empowerment around distributed energy resources that we need.”

The IEEFA report argues that we have to see distributed energy assets on equal terms to other forms of electricity generation. “DER must not come second in policy, planning and regulation to transmission and large-scale generation.”

Kuiper says we urgently need further technical standards for these assets, and we need a body that's responsibility for them. Until those technical standards are in place, people with distributed resources can’t fully maximise their value and potential.

For instance, most households with solar are currently limited to exporting only five kilowatts of power into the grid, whereas the average solar system now being installed is over nine kilowatts.

South Australian Power Networks have already increased that limit from five to 10 kilowatts, and their modelling predicts they will be able to give households double the amount of export capacity 98% of the time.

Technical scare-mongering

And whilst the role of distributed energy in our future energy system has constantly been  underestimated, the technical issues that arise from integrating rooftop solar into the grid have been overstated.

“We had a lot of what I call technical scare mongering about how rooftop solar was going to break the grid, but every single problem that was identified either turned out to be not a problem, or we found quite simple ways to address it.”

It turns out that huge amounts of rooftop solar can be incorporated into the grid. Already in some parts of Queensland and South Australia, there are suburbs where more than 60% of homes have solar and the grid hasn't broken.

The ‘Swiss army knife’ of the grid

The IEEFA report concluded that distributed energy resources don’t only provide electricity, they “can provide almost any service the grid needs,” and referred to DER as the ‘Swiss Army knife’ of energy technologies, able to provide electricity, storage, emergency power supplies, frequency control and ancillary services to keep the grid stable.

Kuiper says that if DER was used in this way we would spend $11 billion less building more distribution and transmission networks by 2040.

“We're planning for a lot of new expensive transmission,” says Kuiper. “But we haven't done what economists would call the counterfactual in terms of what would happen if we invested more in integrating DER.”

Less super profits for generators - more savings for consumers

A significant figure highlighted by the IEEFA report was the potential $10 billion fall in generator super profits if distributed energy resources are integrated into the energy system.

These are the profits generators make by charging everyone higher prices for using electricity at peak times, primarily in the evening from 4 to 8 pm. Other peaks occur in summer when prices can jump to over $16,000 a megawatt hour.

“The coal and gas fired generators that we've had, but also renewable generators, until recently, have earned all their profits in those peak times,” says Kuiper.

Modelling shows that with more householders using their own generated supplies, and feeding their excess into the grid, those peaks will flatten out, and the super profits will disappear. This will mean huge savings for consumers and everyone's electricity bills will fall significantly.

“When we get them at scale with storage and with flexible demand, we'll see billions of dollars of economic benefits for everyone,” says Kuiper. “That's helping the electricity system as a whole and lowering everyone's bills.”

The future of retailers and generators

Kuiper believes the only way retailers will continue to make significant profits when the energy system is dominated by DER is if they also get on board and support customers to invest in distributed energy resources.

“The retailers who traditionally have owned the coal and gas fired generators, but are now owning the renewables, and are also seeking to have access to people's solar and other distributed energy resources behind the meter, I think are the ones that will be the most profitable.”

“[The CEO of Origin recently said] in presentations to shareholders that they could basically set up these virtual power plants [of distributed energy resources] for next to nothing,” says Kuiper. “Compare that with what it takes to build large scale wind and solar farms.”

Benefits for everyone

But to ensure everyone benefits from the full economic potential of DER, we need to scale up our household solar. Kuiper argues governments need to expand the subsidies for solar installations on some properties.

“Not everyone can afford to put solar on the roof, and lots of people are renting, particularly people in social and affordable housing, don't have access to that kind of capital.”

But Kuiper argues the most significant contribution government could make to energy equity, and lowering the electricity bills for people who can least afford to pay, is a housing policy.

“The thing that would make the biggest difference to energy equity, energy poverty in Australia, is having minimum rental housing performance standards, and mandatory disclosure [of energy standards] at the point of sale or point of lease.”

The ACT is currently the only state or territory with these standards, which are designed to help improve energy performance, increase thermal comfort, reduce greenhouse gas emissions, and contribute to climate change resilience.

Optimistic

Despite the immediate challenges Kuiper is optimistic that the full potential of our consumer energy resources can be fully realised.

“The good news on all of these things, is it's not like world peace. We do know how to do all the things that we need to do.”

“We now just need to speed up the pace of change and get a lot more resources and smart people working on the integration of distributed energy resources.”

You can hear the full interview with Gabrielle Kuiper on the SwitchedOn podcast here.

Author
Anne Delaney
SwitchedOn Editor
April 21, 2024
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