Many of the 2.2 million households with rooftop solar panels may need to brace for bill shock as negative or zero wholesale prices slash their payments for the surplus electricity fed into the grid.
Until now, the impact of low daytime wholesale electricity prices thanks to growing wind and solar power has been felt on those large-scale generators that are exposed to spot prices.
But households in states that don’t have regulated solar feed-in tariffs are also likely to be affected as electricity retailers reduce the price they offer to households for power pumped into the grid, according to advisor Energy Edge.
The impact is particularly marked on sunny days of subdued demand in Queensland, for example, where retailers set the feed-in tariff they offer to customers, all of whom would only be generating excess power between the same hours of about 10am to 3pm, said Energy Edge’s Josh Stabler.
“That power has become less valuable, especially during winter months,” Mr Stabler said. “The fundamentals of what retailers are buying have to be valued at the market.”
Queensland is leading the country in the uptake of rooftop solar as households resort to generating their own power as a way to reduce their energy bills.
The “sunshine state”, which has a target for 1 million solar rooftops by 2020, has 25 suburbs or towns with over 50 per cent solar penetration, including one with more than 70 per cent.
According to Energy Edge, rooftop solar reached a new peak on September 8, supplying 30 per cent of Queensland’s demand at one stage.
The proliferation of rooftop panels is creating security issues for electricity distribution networks and points to the need to integrate panels and batteries better into the grid to utilise the resources more efficiently, Energy Security Board chairman Kerry Schott told The Australian Financial Review National Energy Summit earlier this month.
Over the past two years the declines in wholesale prices during winter have become more marked, cutting the value of power injected into the grid by households during the sunniest hours, says Energy Edge.
It predicts an “inevitable” fall in feed-in tariffs towards little more than zero as rooftop solar “cannibalises” its own income stream, continuing to pump out excess solar that further depresses prices.
The Australian Energy Council, which represents suppliers, agreed: “Solar is being adopted at an exceptional rate in both small and large-scale, and as a result is creating surplus electricity during daytime hours which is reflected in the wholesale price,” a spokesman said.
“Feed-in tariffs in Queensland are set by retailers, and generally reflect the average wholesale price during the sunlight hours.”
Still, others such as St Vincent de Paul policy manager Gavin Dufty, who closely watches retail tariffs, sees it differently. He said the growth in rooftop solar generation will force out “dispatchable” plants that can be switched off during the sunniest hours, maintaining a value for solar generated on rooftops.
More interconnection in the power grid will also help, said Mr Dufty. “I don’t think we will see a time when there will be zero feed-in tariffs in the market,” he added.
Solar feed-in tariffs for households in south-east Queensland ranged from 4¢ a kilowatt-hour to 10¢/kWh last year, according to the Australian Energy Market Commission, although it noted that many other solar products are on offer, some of which have no explicit price for exports. That compares with the 44¢/kWh fixed tariff that the first solar households were able to lock in from the government and which lasts until 2028.
Both AEC and Energy Edge said the expected decline in solar tariffs should encourage households to buy batteries.
For large-scale solar projects operating in the merchant market, the reduction in average spot prices due to negative prices has combined with the decline in the price of large-scale renewable energy certificates and grid bottlenecks to slash annual income.
Energy Edge calculates that a hypothetical 100 MW solar farm in Queensland reliant on the spot market would have seen annual revenues drop 43.8 per cent since 2017, only partly offset by declining project construction costs.
While the rate of new wind and solar project development has slowed, fresh figures released on Tuesday by Rystad Energy still found that 2019 has set a new record already for utility-scale solar, wind and storage project proposals, with 133 gigawatts in the pipeline, up from 94 GW at the start of the year.
Rystad said that coal power generation “could be extinct by 2040” in Australia as coal generators struggle to remain economic amid a growth in storage and growing consumer sentiment for clear fuel.