Analysis of whether Australian market frameworks efficiently support the connection of embedded generation has repeatedly identified issues with inconsistent technical standards for grid connection. This is a major concern raised by industry stakeholders, including Clean Energy Council members, in numerous reports and reviews.

Until now no study has identified the costs and benefits of doing so and the preferred framework for such a guideline to be developed and implemented.

The challenge

Australians are rapidly deploying 'embedded' generators such as solar PV and storage. Commercial-scale capacities (30 kW to 5 MW) are seen as a new frontier for these technologies. Market objectives expect that the connection of these systems occurs efficiently while retaining power supply system safety and reliability.

As with any new connection to an existing electricity grid these systems are required to meet certain standards and requirements in order to connect to the grid. Current differences in these standards have led to high compliance costs for generator proponents and high assessment efforts for distribution networks. Both parties see inefficiencies and opportunity costs that are inconsistent with market objectives.

The response

The Clean Energy Council engaged Energeia to scope all aspects of technical standards/guidelines for the connection of medium-scale embedded generation systems to distribution networks in order to provide a clear path to develop and implement such standards/guidelines.

Compliance costs could be reduced through a national embedded generation grid connection guideline. While the current approach is already processing connections, a nationally consistent guideline for the connection of mid-scale embedded generation is expected to make a significant advancement to addressing inefficiencies. Energeia’s research found that a nationally consistent approach could produce a net present value saving of $189 – $210 million over ten years for the industry.

Energeia consulted broadly with industry and recommended that, if successful, an industry-led approach to the development of these guidelines would be the most cost-effective and timely means to deliver them. 

Outcomes for various industry stakeholders

This study identified that the development of a national guideline could bring significant savings for both electricity Distribution Network Service Providers and generator. The work’s recommendations and work plan should be considered in light of these shared benefits and how they translate to efficient outcomes for electricity consumers generally.

Its findings and recommendations relate to a range of stakeholders in the following ways.

  • While high volumes of systems have been connected to the grid under the current system, the current approach to connection standards is self-regulated, and involves many different electricity industry standards and guidelines. It has resulted in connection guidelines that can differ in detail and in some cases are not clearly accessible or interpretable.

    This situation creates both compliance costs and uncertainty in expectations for connection applications, resulting in frequent rejection of connection applications and delays and uncertainty in connection approvals.

    High risks and costs result from this uncertainty and the report’s recommendations are a clear starting point to addressing this. Doing so will lead to more efficient business operations and increased client satisfaction, ultimately removing barriers to growth of commercial-scale solar and storage and enabling resources to be diverted to more productive activities.

    The work is far from finished. The development of the guidelines will require a concerted effort from generation proponents alongside Distribution Network Service Providers. The Clean Energy Council encourages participation in these processes as this work moves forward.

  • A national guideline would benefit Distribution Network Service Providers. The assessment of new connections is viewed as a necessary aspect of operating a network, but there are clearly costs that arise when these processes are inefficient.

    As network service providers are the final approver of connections, the risks are not as great as those for generator proponents. However, guidance of generator proponents through connection requirements and rejection of connection applications contributes to an inefficient approvals process imposing costs on network operators.

    The proposed guideline will seek to address these inefficiencies by clarifying requirements in a nationally consistent framework, while allowing for unique requirements that may be necessary for particular circumstances. Importantly, there are existing precedents that could be transferred to the Australian context. The report’s recommendations draw on the framework established in the US and under development in Europe.

    The work is far from finished. The development of the guidelines will require a concerted effort from Distribution Network Service Providers alongside generator proponents. The Clean Energy Council encourages participation in these processes as this work moves forward.

  • The current framework for setting grid connection standards has led to inconsistencies in standards, high compliance costs for generator proponents, and high assessment efforts for distribution networks. Both parties see inefficiencies and opportunity costs that are inconsistent with market objectives.

    Three related outcomes should be considered by policy makers: First, governments should be aware that the potential benefits of developing this guideline are large and exceed those that underpin other significant electricity industry reforms. Second, most of the generator connections considered under this assessment would be delivered under the legislated renewable energy target. The savings identified here should be considered costs of meeting the target that can be avoided. Third, the opportunity costs created by the current framework (in the form of delays and high regulatory compliance costs) mean that generator proponents are missing an opportunity to divert resources to more productive and innovative customer solutions that in turn would enable further consumer benefits and efficiencies across the Australian economy.

    As a result of these outcomes governments should take an active role in working with industry to develop and implement the guideline.

  • Consumers benefit from an electricity industry that operates efficiently. The compliance burden and inefficiency created by the current grid-connections framework is preventing electricity customers from realising this benefit. The result is a deadweight loss that increases the costs of supply and reduces volumes that the embedded generation market can supply.

    Consumers are facing increasing pressures to purchase electricity from renewable sources and increasing exposure to demand-based power pricing. These factors increase the attractiveness of  commercial-scale embedded generation and storage solutions. Electricity customer needs differ substantially and innovation is fundamental to being able to tailor services to their needs. Reducing the deadweight loss through these guidelines would make significant progress towards increasing innovation across the industry. New opportunities for commercial and industrial electricity customers to reduce operating costs would open up and efficiency gains across the Australian economy would result.

The role of this study in the FPDI program

This scoping study fits within the FPDI project’s ‘Technical Challenges and Best Practice’ work stream which has the objective of understanding the interface and technical solutions to deliver network outcomes efficiently, and develop a whole-of-industry roadmap to addressing technical challenges for the ongoing integration of generation and storage technologies.

This work complements previous FPDI reports in this work steam, including the Technology Testing Survey and Priorities for Standards Development reports and is seeking to advance the development of national standards for the connection of embedded generation to Australian distribution networks. Its contribution to this goal is to scope the development of a national guideline for this purpose.