One of the most common arguments “against” rooftop solar PV is that does nothing to reduce peak demand. It is one of the base arguments from regulators and fossil fuel companies against higher tariffs for solar. But a new report from the Australian Energy Market Operator shows it to be complete bunkum.
The detailed annual report into the West Australian electricity market by AEMO – the first since it took over operations of the WA grid from the Independent Market Operator – reveals that rooftop solar PV reduced the highest peak in WA this past year by 195MW.
On February 8, the third of a four-day heat wave of temperatures above 40°C, the state’s 560MW of rooftop solar pushed the peak an hour later into the evening – to between 5.30pm and 6pm – and cut demand significantly.
Without solar PV, AEMO notes the peak would have occurred between 4.30pm and 5pm and would have reached total demand of 4,204MW.
With solar PV, that peak was pushed back an hour and cut to 4,013 – still a record in the WA grid by a considerable margin. (The previous record was 3,857MW in 2012). And that is despite the fact that the rooftop solar was only operating at around one-fifth of its capacity at the time due to the falling afternoon sun.
And it is not a one-off. AEMO predicts that rooftop solar will proliferate in the west. In just the last two years, the price of a 5kW rooftop solar system has halved, and AEMO estimates that within a decade rooftop solar PV will triple and reduce peak demand by up to 650MW. In the last 9 years, solar PV has pushed the peak back by 2.5 hours on average.
Peak demand could be further reduced by the anticipated uptake of battery storage. Right now it has negligible impact, but within a decade it could be knocking a further 62MW off peak demand.
This has important ramifications – not just for the way that solar is treated, but the way the network is managed. Across Australia, networks have been given licence to spend billions preparing for peaks in demand that never materialised, passing on the costs of the infrastructure to consumers on the basis of “reliability.”
In WA, this has added significance. The market includes “capacity” mechanisms which have provided subsidies for more generators to be built to meet those assumed peaks. But many of these plants have never been switched on, because they are not needed. Yet they pocket up to $12 million each a year.
Indeed, another WA incentive, demand response mechanism, reduced peak by just 72MW on the day that rooftop solar cut it by nearly 200MW. Yet the demand response initiative has paid out $400 million and has been used on just eight occasions.
WA is not the only market to experience a reduction in peak demand from rooftop solar PV. South Australia has also experienced significant reductions in peak demand due to solar, and so have Queensland and NSW.
The WA report – like the national report also released today – shows that although consumers are using more electrical appliances, growth in energy delivered from the electricity network has softened, due to decreases in average consumption per connection. This is due to solar and more energy efficient appliances.
The adoption of energy management systems and battery storage is expected to continue this trend by enabling households to have greater control over when and how much electricity they consume.
AEMO expects the strong growth of rooftop PV capacity in the SWIS (The WA grid) to continue. It cites declining system costs – down half in less than four years for 5kW systems – rising grid tariffs, and changes to consumer attitudes and behaviour. Solar PV output is forecast to triple to more than 2,500GWh within a decade.
“Electricity consumers are becoming more aware of existing and emerging technologies such as rooftop PV and battery storage, and are considering ways to optimise their electricity consumption behaviour,” it says.
AEMO expects the demand peak to shift a further one hour back to between 6.30pm and 7pm, particularly as more west facing panels are installed. By 7pm, the average system is only producing around 4.7 per cent of its rated output due to the setting sun.
The peak could be further delayed, and reduced, by the anticipated rapid uptake of battery storage, with AEMO predicting it could reduce peak demand by more than 60MW within a decade.
But as solar and storage increase their influence, the remaining fleet is posing headaches for the grid operators and policy makers. Nearly half of the peaking generation is less than 10 years old, but obviously not needed. Around 60 per cent of coal-fired capacity is more than 35 years old.
WA is now facing a significant surplus of capacity, which is one reason why energy minister Mike Nahan has ordered the closure of 380MW of capacity, which should lead to the closure of the state’s oldest coal generators.
He has also announced reforms designed to address the huge amounts of money given away in the capacity markets and demand response markets.
Indeed, Nahan has talked of a future dominated by solar and storage, and the state-owned network operator Western Power is also considering a future where its business model is fundamentally changed and it focuses more on micro-grids and “thin connections” rather than a one-sized-fits-all network.
Giles Parkinson is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.