The network value of solar isn’t that valuable says Victoria regulator

In the second phase of a report commissioned by the state Labor government, Victoria’s pricing regulator has concluded that the value to the network of rooftop solar is not as much as many might expect – and even then is subject to time and location.

The 176-page report released by the Essential Services Commission on Tuesday puts the network value of the near 1 gigawatt of rooftop solar in Victoria at just $3 million.

That equates to about $3 per every kilowatt of solar PV capacity in the state. Based on the amount of solar exported to the grid, that represents a fraction of a cent per kilowatt hour.

It is so little, and so variable, that the ESC does not recommend adding any further to the state’s feed-in tariff, which currently pays around 5c/kWh for excess solar to the grid, but will rise to between 6.5c/kWh and 7c/kWh after the state government incorporated its recommendations on the climate and environmental benefits of the technology.

A further peak rate, pushing the tariff up to around 8c/kWh or even as much as 30c/kWh in “critical peaks”, may also be added. But this reflects the cost of wholesale electricity in peak times, not the network value.

Indeed, the ESC says some of the solar sitting on around 300,000 rooftops in the state has no network value at all, because it is either located in the part of the grid that does not need replacement assets, or does not need upgrades because it is not congested.

The ESC does, however, see that the network value of solar could rise 20-fold if the solar installations are paired with other technologies – such as battery storage, smart inverters and energy management systems – that can make it “firm” and can add to network security.

But even then the ESC says adding battery storage in some areas will provide no further value to the grid – because of the reasons above. And where it does bring value, it is only at certain times. And to recognise the value that it does bring to areas that are congested or in need of an upgrade will need a new suite of market reforms and signals.

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© 2016 Solar Choice Pty Ltd 

Giles Parkinson