Too much solar? Not now, not a problem

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The Grattan Institute’s Energy Program Director Tony Wood has warned of solar power flooding electricity markets during the day, depressing prices and causing grid problems. Speaking to the Guardian Australia and the ABC, Wood warned that it would result in FITs being reduced and make a case for the Small-scale Renewable Energy Scheme to be scrapped.

“We’re getting to the point where the amount of solar power being produced in the middle of the day is so much that it can start to have an impact on the stability of the grid,” Wood told the ABC.

Speaking to the Guardian Australia Wood expanded his message, noting that midday solar output could be produced at such levels that it would prove inefficient for rooftop PV to receive subsidies, as the power it produces would be “essentially worthless” at some times of the day.

Wood’s comments came off the back of the Clean Energy Regulator’s confirmation that 2017 was a record year for small-scale solar in Australia, with over 1.07 GW being installed.

Responding to Wood, Green Energy Markets’ Tristan Edis says that while the underlying issue is legitimate and worthy of consideration “sometime within the next decade”, that “we can monitor and grapple with it.”

“The questions are, how big a problem is it, when will is occur, and what are our options for managing it? I think you’ll find the solutions are relatively straightforward and cheap.”

What appears true is that as small-scale solar installations remain strong, the C&I segment accelerates, and utility-scale PV development brings significant capacity online, particularly in Queensland in the short term, that wholesale electricity prices are likely to fall. In turn, this will exert downward pressure on solar FITs received by households, undermining the economics of installed systems.

At present, FITs stand at $14 cents/kWh in South Australia, $11.3 cents in Victoria, $10.9 cents in New South Wales and $9.5 cents in Queensland.

However, Edis, a former Grattan Fellow, argues that even if these do decline by a few cents as wholesale prices fall that rooftop PV will still remain an attractive investment for households – particularly if systems are paid for in cash or by drawing down on a home mortgage.

“There are miles to go before those people are under water because of their solar investment,” says Edis.

In terms of grid stability, there are simple solutions available for grid operators, Edis continues. In particular, shifting electric storage hot water loads to the middle of the day when PV output is at its peak could result in hundreds of MW of demand – essentially mopping up any ‘excess’ solar production. In Queensland, around 80% of hot water systems are of the type suitable for this to happen.

Battery electrical storage is also another obvious method by which midday production can be utilized, rather than wasted. Edis notes that by the time solar generation becomes genuinely challenging for grid operators, the chances are good that storage prices will have fallen sufficiently, making them “reasonably affordable and an attractive investment to soak up that generation.”

While falling PV FITs won’t be welcomed by solar households, declining wholesale prices are clearly a positive for all electricity consumers and for the Australian economy more widely. And as aging coal-generator continue to be closed in the near future, there will be further generation gaps left be filled by clean electricity sources at all times of the day.

“Prices are going to go down,” Edis concludes, “this is something to celebrate, not a problem.”