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The rule-maker … the AEMC’s Ben Barr adds consumers to the mix

Australian Energy Market Commission CEO Ben Barr knows you can’t please all the people all the time – but someone has to write the rule book.

In case you haven’t noticed, the transition of the grid to greater reliance on renewable sources of energy is a huge and extremely complex problem to solve. It also doesn’t help that people like to fight about it and accuse each other of being stuck in the past, ideologically corrupted or following a fanciful dream. Meanwhile, the participants in the energy system – which includes everyone from operators of coal stations to investors in wind farms to the neighbourhood posse of solar-owners – follow a natural tendency to be somewhat biased. We are human, after all.

Stuck in the middle, attempting to match hopeful consumer expectations with dull economic forces, is the Australian Energy Market Commission. The AEMC’s role is to write the rules that bound the electricity, gas and energy retail markets. As the old one-way electricity system is replaced by a dynamic mix of unpredictable solar and wind, the rules must change.

This year, the AEMC has been toiling over changes to the rules it hopes will acknowledge the rapid growth of rooftop solar, and in particular the effects of midday PV exports that are pushing demand to such low levels that some networks are experiencing or anticipating instability.

Reforms proposed by the AEMC have included the possibility of solar export charges, which some in the PV industry interpreted as a dark cloud on the horizon.

EcoGeneration spoke to AEMC chief executive Ben Barr to get an idea of what it means to call the shots in a churning sea of change.

The AEMC wants “what’s best for consumers and the energy system”, and here we are in a world where people are being told they can bypass the energy system if they buy solar. How do you see it?

When we look into the future, that role of consumers is absolutely going to be at the heart of the new energy system – and so it should be. The transition underway in Australia is happening at the large end of town but the revolution at the household end is just as important. The way we see the system evolving is this new technology that Australians love so much – whether it’s solar PV, batteries or eventually electric vehicles – if you integrate that into the existing poles and wires system, you get the benefits of the existing electricity system for yourself but also everybody else who connects. That is where we see it going.

Do you have any general comments on the uptake of rooftop solar – could it have been better managed?

The thing that has happened over the course of that time, over the past 10-15 years, is the price of solar panels has come down so significantly that customers have got larger and larger systems. We now have about 20% of households with rooftop systems, which is a massive boom from 0.2% in 2007, and we don’t see it slowing down. People have constantly underestimated the uptake of solar over that period. It’s here, customers love it, and we want to make sure they get their preferences but integrate it in the right way.

That’s why we’re looking at not just today’s issues with the integration of distributed energy resources, whether it’s solar or batteries, but what’s going to happen over the next 10 to 20 years. We’re going to have a system where it will be more likely than not that customers will have solar on their roof and along with that will come batteries on wheels – EVs – and you want to be able to integrate it in a way that the system will cope.

We were in a place where it didn’t really matter; the grid could cope with large [PV] systems depending on where you were. It was in customers’ interests to take up PV. But we are reaching that tipping point where we have 20% of customers and we need to look forward and get the rules right so everyone benefits.

The draft rule change suggesting solar export charges got a reaction from the solar industry. Do you think they were genuinely surprised?

The reaction was focused on one part of the rule change. The thing that’s missing when I’m talking to the solar industry is the really profound change, which is for the first time ever recognising export as a service for poles and wires or network businesses. That is a profound change.

At the moment, you get connected and you can get exports away if there is capacity in the system. Those network businesses are designed and the regulatory framework is set up for them to get electricity to your house, not from your house. This profound change means that those network businesses have to design their network to get exports from your house into the grid in the most effective and cost-effective way. That will mean they’ll start investing more and more in the technology that can do that. Up until now there hasn’t been an incentive or an obligation for them to do that.

Export pricing, or two-way pricing, is not a new idea, and it’s only one part of the reforms. It’s come through ARENA’s distributed energy integration program process and come to the commission from the Total Environment Centre, the Australian Council for Social Services, the St Vincent de Paul Society and the South Australian Power Network. I think that’s really interesting; you’ve got people who are concerned about consumers, people who are concerned about the environment and a poles and wires network business who is concerned about the lights coming on. They’re the sorts of things the commission grapples with – how do we get the best for those interests.

The reforms we announced in the draft are about setting us up for the long term, not just for solar but for batteries and EVs, putting that obligation on network businesses for the first time. They’re going to have to think about designing the network [to manage] exports from houses into the grid in the most efficient way, and then giving them some of the tools to do that, which is the two-way pricing. That also can provide an incentive for batteries and EVs to get their exports back in and get rewarded for it at the times of the day the grid needs it.

How varied are the networks in their preparedness for change and in their technical sophistication?

They are varied. SA Power Networks, who are dealing with the highest level of solar PV, are more progressed. Different networks, no matter where they are, are all grappling with this issue. The rule change recognises that, because it comes into effect when the next period for that particular network takes effect. There is going to be a couple of years of consultation with consumers before any of these changes actually impact on them.

Do the networks talk to each other or keep to themselves?

They do, absolutely. They get together through Energy Networks Australia, the peak body, to talk about policy issues and learn from each other. It’s not that they are not sharing their approaches but more that those on the pointy end – South Australia and to a lesser extend Queensland and Victoria – are grappling with it earlier than other states and territories.

How can consumers understand that they can become more active in their energy use and less passive?

I think solar customers are the most informed. In my experience in dealing with solar customers, because they have made that decision to invest they are the most informed and engaged of most consumers about electricity and what it can do. They are investing in it; they want to understand what their investment can return for them and they generally are fairly well informed.

What would make consumers engage with energy efficiency and understand pricing signals? Are we ready to change our behaviour?

The good thing is that the technology is coming along to make it easier for customers. These rule changes aren’t all down to consumers changing their behaviour; they are actually about poles and wires and network businesses changing the way they operate and making sure they have the technology that has better flexibility – where solar or batteries are on the network and how they can manage it to get more exports on. You’re seeing other technologies come in which allow customers to set and forget rather than having to actively manage their electricity system. I don’t really want to actively manage my electricity system either.

What would you like the rooftop solar industry to understand about the AEMC’s role?

Our role at the commission is to be the rule-maker for the national electricity system. We are keen to talk to the industry and we do speak to the industry. Really importantly, these rule changes are about getting more solar into the grid. More distributed energy, whether it’s batteries or EVs integrating in a way where everyone can benefit. We don’t want people being told they are getting a zero export limit because there is congestion in the grid.

Do you have any feelings about subsidies that support rooftop solar?

Governments rightly have recognised the clout of solar in decarbonising the sector and that is, generally speaking, why those subsidies are recognising the benefits they provide in carbon reduction, so I think that’s a totally appropriate thing for governments to do.

How about the level of subsidies to support storage?

That’s an issue for governments who want to see a technology come in. Different governments have different programs around storage. The commission’s rule change around two-way pricing is an incentive for storage. It’s a different revenue stream for home batteries, where you make sure you charge it in the middle of the day from your solar system and get back into the grid to get paid when it’s needed.

Are you nervous that EVs will come along and push up peak demand as owners charge without consideration for the grid?

I’m not nervous but I definitely want to look forward and ask, how do we get that right? That will be a key driver for this change: how do we get that right, how do we make sure network businesses are thinking about the integration of EVs in a way that doesn’t stuff it up. And also, that they have the tools to send out incentives for when is the best time for people to charge. You’ve got to work through that issue because there is also a convenience factor for customers with EVs. It’s important they consult with customers around what suite of those charging options are going to work with people.

Are you secretly or not-so-secretly hopeful networks will invest in community batteries or be involved in trials of virtual power plants?

What we are really keen for them to do is invest in the technology or make the cheapest most efficient changes to the network to integrate DER [distributed energy resources]. We’re not going to sit here and say what that is, because we don’t run the networks, but whether it’s changing the voltage control or putting in the Google Nest for the network, whatever that is, we want to give them the tools to do it and then hold them to account for that.

How have previous roles set you up for this one?

I’ve worked for a very long time in energy and climate policy in Australia – 17 years in Queensland and for the Commonwealth. Working for consumers in government at the front end gives me a good sense of what’s important to residential households but also of the importance of really thinking through the long-term implications, and that’s what the commission’s all about. So I’m really happy to be here.

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