We all know that the energy market is changing and it's changing quite rapidly thanks to the high penetration of renewable energy from solar and wind predominantly.
The National Energy Market (NEM) which governs much of the Eastern Seaboard; South Australia, Victoria, New South Wales and Queensland, is based on a market where energy is usually traded or designed for large centralised power stations. With the advance of renewables which are decentralised and many of them small, the national energy market is facing some challenges which cross both the energy creation it's used and it's transport.
What Changes Are Occurring?
As we evolve, we're seeing decreased loads because less manufacturing is being done in Australia. We're seeing increased energy generation because so many people have solar on their rooftops and we're seeing a change in behaviour of the coulomb gas fire generators that have traditionally supported our needs.
Taking South Australia as the canary in the coal mine where there is up to 50% renewable energy providing for their energy needs, we can see the effects of what the broader market will experience in the very near future. The energy networks are trying to discourage solar uptake and encourage loads to operate when solar is working at it's best in the middle of the day.
We’re seeing lower prices in the middle of the day and very heavy swinging towards high demand charges which cost businesses already around about 60% of their entire bill. These trends will start filtering through the broader market very shortly. This will be a major shift for how energy is consumed because people will have to start taking notice of how much pressure they put on the grid. The cost will become unbearable for some businesses who have high intensity loads over short periods of time and for these businesses they should be starting to consider alternative forms of generation be it solar and battery only or generator to support their demand.
The proposed shutdown of Liddell Power Station in 2021 will be another interesting influence. We saw what happened when Hazelwood got shut down a couple of years ago and the cost of energy skyrocketed by 40%. This took another 2 or 3 years to wash out and for energy prices to return back to a normal state. If we can mitigate the risk of Liddell shutdown by increased generation then and predominantly mitigating those big ramps from solar daytime usage to night-time coal usage, we would need to be thinking right now about increased storage such as batteries and pumped hydro.
These trends are not going to stop for at least the next 10 years whilst Australia goes through a transition of energy sources. The short-term pain will be a long-term gain because ultimately renewable energy is far cheaper than traditional coal fired Power Station energy. However in the short term, it's going to be a costly transition.
How Will it Affect My Business?
We're going to start seeing energy bills change so daytime energy will get cheaper to compete against rooftop solar. We will also see increased demand charges to compensate the grid for the high ramp rate that will be required between different sources of energy. If your business has high afternoon loads after 3 pm or high night-time loads, you will be experiencing increased costs.
Businesses should consider rooftop solar as it simply makes good sense, regardless of the actual energy price, and I would be also considering either battery depending on your load or a gas fired generator if you have gas. It very much comes back to your low profile and whether or not another form of generation can be a better value than the grid. This analysis is something that Smart Commercial Solar can do for each of its clients, and we get a deep understanding of the best technology to solve this ramping high-cost problem.
What is the Best Strategy Now?
For any business, solar is still cheaper than even your network costs alone and we encourage most businesses to purchase solar through a power purchase agreement (PPA) because it shifts the risk of performance and product and cost on to the PPA provider rather than spending your own capital.
PPA funders are prepared to accept the lower rates of return than what most businesses themselves are prepared to accept, so it's a very low cost of finance with a very low risk of solution.