In response to the growing popularity of rooftop solar, electricity distribution companies have begun re-evaluating pricing changes that typically will discourage consumers from generating their own power. The lines comapny Unison have raised the eyre of solar users and supporters around the country with their 'solar tax', a new tariff on solar users, with over 50,000 people signing petitions in oppositon so far and taking to social media to vent their frustrations. The electricity distribution sector is a monopoly industry, regulated by a regulator who is supposed to provide "the competition" in the long term interests of consumers.
Unison, and others from the distribution sector, justify these changes with a twisted cynical claim based on the costs of delivering electricity being transfered to other non-solar consumers, claiming everyone needs to pay their fair share - a form of cross-subsidisation. Ask a lines company in this space, what "fair share is" and watch their eyes glaze over. And they lead everyone to think they themselves are free of the subsidy world!
What consumers haven't been told are the real reasons they have done this, and the downstream results, exemplified by the internatational actions and trends in many other jurisdictions. In Spain, lines companies tried exactly the same thing early in 2015. The consumer uproar based on lines companies being proven wrong through empirical analysis, meant the government reversed the regulation within 2 months! And the same applied in New York where a new solution, based on a non-protectionist approach and moving forward has been enacted instead, called the NY REV. And it continues in other jurisdictions. There is a clear message and time is on the consumer and prosumers side.
Unison received a slap on the hand from the regulator, the Electricity Authority (EA) after SEANZ lodged an official complaint with a group of prosumers. But the EA upheld Unisons action, setting the path for others to follow suit. The EA claimed it was an easy decision based on a technicality. EA are still in the process of consulting on electricity delivery pricing for kiwis, which is about how lines charges maybe constructed - and their general flavour is termed "service based tariffs" while lines companies refer to it as "cost reflective charges". This process is flawed as a distributor has already taken a step to impose the tariff penalising solar prosumers, and the EA pre-empting necessary action in December last year with public comments about wasted investment in solar PV by consumers. The stuff continues - if you want to understand more read on. Now EA have gone wide consulting on their proposal to remove a distributed generators (DG/PV and others) pricing principles and rights under Part 6 of the Code in the electricity act, providing no recourse for solar users and consumers as well as small hydro and wind farms with lines companies in the event of disputes and non-agreement on related matters! That means lines companies will be empowered to charge erroneous tariffs and fees against solar users! And also charge them for exporting power back to the grid. How not to do it and drive prosumers to either disconnect, abandon the grid (makes it worse for everyone) go off-grid or watch the growth of legal on/off grid solar PV installations without lines companies interference.
The view of Unison and their supporters, that solar and storage has no value to the network and is cross subsidised, fails hugely to acknowledge the benefits to the network such as avoided generation, transmission and distribution costs and capacity, lower wholesale market prices, and increased resilience.
The value of solar PV (& storage) (VOSS analysis) should be addressed through the current regulatory review (as defined in the SEANZ consultation response on this with the EA) which should include avoided cost of transmission (ACOT) and distribution (ACOD), which should be reflected in the rates that consumers and prosumers should be paying for the lines charge component of their electricity bill if and when they buy power off the grid. This means that the cost of generating from rooftop solar saves generators, transpower and lines companies, the costs of generating elsewhere, transmitting the electricity the length of the country and distributing it regionally. That value is the solar (and other distributed generation) proposition - that at this time the current electricity regime does not acknowledge, or want to acknowledge - as many other jurisdictions and countries have and do.
These charges are signals from lines companies and their regulator that should inform consumers when they should buy power from the grid and should acknowledge their contribution to NOT using the lines companies infrastructure, and encourage them to move their power usage/demand to coincide with solar generation. It will shift demand time to reduce dependence on the grid and reduce peak demand use. The more consumers/prosumers that do it, the less demand there is at peak demand times, (called peak shaving) saving the lines companys maintenance and future investment costs. But we don't hear this from the majority of NZ lines companies or their regulators. Their combined perspective is backward looking as opposed to being forward and meaningful for consumers/prosumers and NZ Inc, based on lessons learnt, trends and insightful perspectives from other business models and other industries. The electricity sector thinks it is impervious and insulated from outside world thinking - especially given their dependence on income from a regulated asset base (the more they spend, the greater their return on investment and the more consumers pay). Whether its a tiny or minor amount saved and shaved from peak demand, is irrelevant - its the principle that matters as the enduring growth of solar & DG resouce numbers continues to grow.
Unison's argument is that their poles and wires are built to handle peak demand – so rational logic states that as peak demand reduces from more solar PV prosumers shifting their demand to other times, so to should the price to deliver electricity to everyone. Rather than creating new pricing aimed to maintain the status quo, with high levels of consumption from the grid and no incentive to reduce peak demand, lines cos should be paying prosumers with incentives to reduce peak demand and provide benefits to all grid users.
A report just released by the US solar industry and others identifies these same issues - the challenge of designing policy and regulation which governs the structure of electricity distribution rates in a new landscape of distributed energy resources and battery storage. It highlights that rooftop solar provides a wide range of benefits, including avoided generation, transmission and distribution capacity, lower wholesale market prices, reduced volatility, and avoided pollution. It also offers some ideas around pricing design principles aimed at achieving broad consumer and societal benefits and a series of reforms which the industry could undertake that could better integrate distributed energy resources into the electric grid and maximize their value to consumers.
The contents of this report has a lot in common with the New Zealand experience and is essential reading for anyone interested in understanding the forces that shape our changing electricity network.