If networks could charge for localised use of their service, all customers in areas with high PV and community-scale batteries would pay lower bills … with no cost to the network, research shows.

Is rooftop solar a problem in the suburbs? Apparently so, with rising PV exports prompting falls in feed-in tariffs, plans for export charges in Adelaide and deployment of community-scale batteries in many cities.

As the grid transitions away from coal, it seems as though rooftop solar is part of the solution and part of the problem at the same time. Is there a simple solution that could see all that excess solar energy shared equitably and leave customers better off?

Yes, there is. Or there could be, if networks were allowed more flexibility in how they charge for their services.

Network charges are allocated by distribution networks to retailers, who then decide how to pass them on to consumers. Household and business electricity bills show a fixed daily cost and a charge per kilowatt-hour of energy consumed, which combines spot electricity prices and network charges.

Research from Australian National University looks through the current distribution network tariffs regime and imagines the option of “local use of service” charges, an idea proposed by researchers from the Institute of Sustainable Futures in a report for the City of Sydney in 2014.

Local supply

The local-use-of-service model was seen as a better way to value local generation and consumption, thanks to the rise of rooftop PV. If electrons have a shorter trip from a PV household to a solar-less neighbour than from a transmission connection, that suburban consumer should pay less for supply, right?

The model never made it, however, after the Australian Energy Market Commission declined the City of Sydney’s request for it to be adopted.

“The contention is that, if you make supply cheaper for some [being the households receiving solar energy from nearby solar-owners], the network has to make its revenue up – to pay to maintain the network – from others [being the households using only grid energy],” says Dr Bjorn Sturmberg, research leader at the ANU’s Battery Storage and Grid Integration Program. “That makes it in my mind a bit of a zero-sum game.”

If local-use-of-service charges (LUOS in the chart) are less than half the current rate set by distribution networks (labelled DUOS), all households will benefit from lower costs and networks will be no worse off.

Still, who’s to say local-use-of-service isn’t a great idea in a parallel universe? Say, one where community batteries are on duty across the suburbs? These powerful storage assets have started to pop up around the country, solving problems for distribution networks by charging up on solar exports and sending it back into the grid during the evening peak.

Neighbourhood-scale batteries also have to pay network charges, which makes the economics of owning one “quite challenging”, Sturmberg says. That is unless local-use-of-service network charges applied. If they did, the higher number of transactions on the network as the community battery charged and discharged – to provide its regular service as a solar sponge and peak provider or jump in to support the grid – would see a redistribution of network costs.

“Anything it does adds to the utilisation of the distribution network and increases the number of transactions,” he says. It’s simple maths: when the denominator rises but the numerator is unchanged, the solution – the network charge per kilowatt-hour – falls.

“In effect, the battery is taking over some of the cost of maintaining the network and lightening the burden on customers,” says Sturmberg, who co-authored the ANU paper with six colleagues.

Busy batteries

As customers pay less for the network services itemised in their bills, the owner of the community battery will pay more. But that’s OK, because they are earning revenue. Because the local-use-of-service model only applies to local flows, community battery-owners will program their asset to soak up local solar and supply local demand. “Which is the intuitive behaviour you want from a community battery; it ties the behaviour of the community battery to the local network in a way that also reduces its overall cost burden from network charges and therefore makes it more viable,” Sturmberg says.

It would also differentiate neighbourhood-scale batteries from enormous forms of storage such as the Hornsdale Power Reserve, which exists to turn a profit from arbitraging the wholesale market, providing frequency control ancillary services or doing anything else to make money. (And has been taken to court by the Australian Energy Regulator for, the AER alleges, failing to provide services it was paid to perform.)

Solar exports put to work

The ANU research describes a positive feedback loop, to use trendy vernacular, where solar exports are put to good use without stressing the grid and everyone’s power bills are lowered. “The lower the local network tariff, the more transactions become profitable for the battery – as it has a lower cost of charging and discharging – which increases the positive sequence of impacts.”

OK, but what about the possibility of export charges? The researchers considered that scenario and found the same result: with the introduction of local-use-of-service charging and connection of neighbourhood-scale storage, all customers would benefit even if export charges applied.

“The impact of charging for exports is that you redistribute the proportional cost between solar- and non-solar-owning customers,” he says. “But we find that it’s a relatively small distribution and all customers still end up being better off.” In its analysis the team used the 13.2c/kWh import and 2c/kWh export charge proposed by SA Power Networks.

The mutual benefit found in the research exists when the charge for local-use-of-service is set at less than half the conventional distribution network tariff levels, because the neighbourhood-scale battery will be optimised to reduce costs for the entire community. “If it were programmed for private profit, that would not be the result.”