Technologies like household solar PV and storage are set to become the new normal for our energy mix. With more power than ever before in the hands of consumers, Australia’s electricity regulatory frameworks may require rethinking and adaption.

The challenge

While the uptake of small-scale solar and storage is driven by many influences, the interaction between these technologies and network investment is largely missed by our regulatory frameworks. The increasing contribution from these new devices can provide new benefits and costs to networks, but calculating these outcomes is challenging and must capture numerous technical influences.

The response

For this work the Clean Energy Council engaged EY to examine international examples and look at the real-world application of methodologies to calculate the value of the contribution of household solar and storage to distribution networks. The various approaches that could be taken remain open to debate. However, this critical analysis identifies a workable solution that deals with diversity across distribution networks, demand and generation characteristics.

While much more work will be required to fully implement the preferred methodology identified in the report, it provides a good platform to examine new approaches to network planning and pricing with an aim to help regulation catch up to new consumer demands.

Stakeholder workshops

Workshops were held in Perth, Brisbane and Melbourne during August 2015 to discuss this task with interested stakeholders. These discussions were informative and provided stakeholders with a deeper understanding of the opportunities to apply and further understand the methodology.

Outcomes for various industry stakeholders

A significant amount of work remains necessary to explore the implementation of this framework, and the opportunities for others. However, the increasing importance of small-scale technologies like solar and storage to electricity supply should not be underestimated and this work should be viewed as an essential part of the ongoing electricity market reform. Electricity industry stakeholders should consider the following outcomes.

  • Small-scale energy technologies are playing a rapidly growing role in our electricity supply system. However, the evolution of regulatory frameworks to meet changing consumer expectations will take much time and effort. EY’s work has identified that on a technical level the true value of technologies like solar and storage will be revealed in the services they can provide to electricity networks.

    Importantly, many of the technologies which are being deployed already can now provide these services. Although the demand for them is currently low it is important not to lose sight of the fact that they are likely to be considered essential to future electricity network design and regulation.

  • The proposed methodology provides one possible option to evaluate the contribution of distributed energy resources to networks, and DNSPs should consider the utility of this approach. In particular the methodology would be best considered in future analysis of constrained distribution feeders to build experience and highlight major hurdles to its implementation more broadly.

    DNSPs would have a large role to play in the design and implementation of any methodology for evaluating the contribution from small-scale resources to networks. The design and associated reforms would need more comprehensive engagement, consultation and input. DNSPs are urged to continue to participate in these discussions.

  • Governments must continue to assess the suitability of regulatory frameworks under increasing penetrations of solar and storage, as well as alternative approaches and methods of evaluating the contribution of these technologies to networks.

    In order to more fully understand the opportunities for implementing a valuation framework, governments should pursue and support further work to assess and document other alternative approaches to a similar level of detail to the feeder-by-feeder methodology described here. The ways in which benefits identified by such a methodology should be apportioned to the various contributors also needs to be explored, along with costs that could be apportioned outside of the current ‘last-mover’ approach.

The role of this study in the FPDI program

This task fits within the FPDI project’s “Regulatory and Economic Frameworks” work stream which aims to draw together the perspectives of industry stakeholders to provide an accurate assessment of the regulatory challenges facing distributed generation or storage, and how current incentives and business models could be structured to achieve efficient deployment of the technologies.

It assesses a range of alternative options for evaluating the value of the contribution of small-scale distributed energy resources to networks and has identified a methodology which could be implemented in Australian conditions. This task complements work currently underway in Task 2D which looks at the interaction between larger distributed energy resources and networks.