Do you have solar panels?

[Smurf1976]

No one seems to think the power companies that got their forecasts so wrong should have to write down some of the unused assets so the fixed charges wont need to increase so much?

The issue relates to net energy delivered to consumers from centralised sources rather than the required capacity of the network itself since network capacity (as distinct from the minimum requirement to have a physical connection available) isn't as expensive as most seem to think.

It's akin to driving a normal sized bus around a suburban route then into the city centre in order to provide a transport service. It doesn't really matter how many passengers actually get on the bus or how long they stay on it assuming the bus is never actually full. The cost of fuel won't change much (minor difference due to weight), the driver's wages will be exactly the same, the cost of buying the bus in the first place is exactly the same and so on. And, as with electricity, these "fixed" costs of providing the service at a given capacity level are recovered via volume usage (ie passengers paying to get on the bus). If the number of passengers drops by 20% then either the operator takes a hit financially or raises fares to maintain revenue, the latter likely to prompt a further reduction in passenger numbers.

In principle I'm in favour of solar, we just can't keep using fossil fuels or uranium forever, but the financial saving is pretty small to the power industry unless we get to the point of being able to physically remove (or abandon in place) the distribution grid. Just like the saving to the bus company by you not getting on the bus is minor unless it gets to the point where buses are no longer required at all or at least not as frequently. Just taking a bit of load off the system, or a few passengers off the bus, doesn't actually save much money.

Part of the problem politically is the general message that has been sent to the public in recent years. It goes along the lines that the network had to be upgraded due to growth in demand, and that this is the reason for rising electricity prices. That is partly true, although there are other factors at work. That electricity moved from non-profit to a profit making industry is the biggest one at the fundamental level.

Competition policy and industry fragmentation is another - entire new pieces of major infrastructure had to be built just to keep the economists and regulators happy and there has also been an introduced forced (no alternative under the rules) bias toward network solutions rather than other options which would be cheaper.

Another one is the separation of retail from owning the network and generation, which has brought about silly tariff structures designed to increase cost of supply rather than reduce it.

Regulation is a massive cost increase driver in itself. In short, if you've got a guaranteed profit on investment then you'll find every excuse possible to get that investment approved. Add in regulators with knowledge of economics more than engineering and it's not hard to fool them at the technical level.

Add up the above 3 paragraphs and, in layman's terms, it leads to what is termed "gold plating". There's no actual gold, but there's a few electricity companies who could certainly afford to buy some these days.

Market gaming in the generation side is another factor, although that has had only a minor impact at the household level in a strict sense (but is used widely by retailers to justify huge increases to the public). Basically, there's money to be made by mothballing cheap means of production to a certain extent, thus forcing the use of less efficient plants and thus a rise in prices. Within the industry, it's no secret that some companies take this to extremes, others try to outsmart them on a constant basis (ie take the money their competitors were hoping to get) and others just carry on business as usual and watch the money roll in.

 

[pilots]

It seems Synergy has sent this letter to everyone on the 40 cent feed in tariff,



That's what the letter I got says, word for word.

It could also have federal political implications,



Troy Buswell could well end up fighting the battle on this on more than one front. His timing could not have been worse in relation to the federal election campaign.


This is not correct. NSW also announced similar changes and then reversed course.

http://www.abc.net.au/news/2013-08-09/solar-panel-feature/4877136?section=wa

My bolds.

Your letter about the 40c guarantee was sent to a top legal firm in Perth by 6PR, they said you don't have a leg to stand on, the Govement had it coved in the fine print.

 

[sydboy007]

It's akin to driving a normal sized bus around a suburban route then into the city centre in order to provide a transport service. It doesn't really matter how many passengers actually get on the bus or how long they stay on it assuming the bus is never actually full. The cost of fuel won't change much (minor difference due to weight), the driver's wages will be exactly the same, the cost of buying the bus in the first place is exactly the same and so on. And, as with electricity, these "fixed" costs of providing the service at a given capacity level are recovered via volume usage (ie passengers paying to get on the bus). If the number of passengers drops by 20% then either the operator takes a hit financially or raises fares to maintain revenue, the latter likely to prompt a further reduction in passenger numbers.

I'm thinking more along the lines that the bus company predicted a rising peak so had to buy a second bus that is used for 10% of the time as the 1st bus. Due to Govt legislation the bus company is provided a full cost recovery of the second bus. Now it turns out the bus company actually didn't need to buy the second bus, but can still make passengers continue to pay for their mistakes.

The way the system is set up the energy companies can come back to the regulator at a later time and show that certain costs increased more than projected, and they get to increase charges to take account of them. If the forecast increase in demand doesn't eventuate and a lot of the capex they have spent is not really used, there's no penalty.

It's like the old wool floor price. Guarantee and above market return on a product and you will get over production / investment in it.

The owners of this unused capex need to take a financial hit as well as consumers otherwise they will continue to over invest for demand that's not there and may never be there as solar and efficiency gains limit or reduce electricity consumption.

 

[sptrawler]

I'm thinking more along the lines that the bus company predicted a rising peak so had to buy a second bus that is used for 10% of the time as the 1st bus. Due to Govt legislation the bus company is provided a full cost recovery of the second bus. Now it turns out the bus company actually didn't need to buy the second bus, but can still make passengers continue to pay for their mistakes.

The way the system is set up the energy companies can come back to the regulator at a later time and show that certain costs increased more than projected, and they get to increase charges to take account of them. If the forecast increase in demand doesn't eventuate and a lot of the capex they have spent is not really used, there's no penalty.

It's like the old wool floor price. Guarantee and above market return on a product and you will get over production / investment in it.

The owners of this unused capex need to take a financial hit as well as consumers otherwise they will continue to over invest for demand that's not there and may never be there as solar and efficiency gains limit or reduce electricity consumption.

What if the projected demand did eventuate, but the generation and distribution infrastructure wasn't there to supply it?
In a first world country, people expect to have a reliable power supply, therefore capacity is installed on projections.
If you are going to run an electrical network on a reactive basis, where capacity isn't increased untill demand exceeds supply, blackouts become common.

A bit like your bus example, where the company waits untill the first bus was full all the time, before ordering the second bus.
If demand increased passengers would have to be prepared to sit on the roof of the first bus untill the second bus arrived.
Then if you have one bus at 100% and the second at 20%, what happens if one of the buses breaks down?
It isn't a problem if people are prepared to accept a substandard service, but most aren't.

That is why as Smurph says, some things are best done by the government, where any profit goes to consolidated revenue.
Also extra plant and equipment can be installed for system security and integrity, not just to return a profit on investment.
That's what used to be called government services, in the 'old days'.

 

[drsmith]

Your letter about the 40c guarantee was sent to a top legal firm in Perth by 6PR, they said you don't have a leg to stand on, the Govement had it coved in the fine print.

It would be interesting to know what the NSW government had in the fine print and why they subsequently backed down from a similar change.

Some legal commentary from the West Australian,

James Higgins - a Melbourne-based specialist in class actions for law firm Slater & Gordon - said it was doubtful the Government would have cut the tariff unless it had clear legal grounds to do so.

However, Mr Higgins said it was possible the Government could have misrepresented its position by signing customers up to a scheme under which they would be paid a certain amount, only to change it later.

He said in that case it would be up to a judge to determine whether the decision had left affected customers materially worse off than they would have been otherwise.

http://au.news.yahoo.com/thewest/business/a/-/wa/18437211/states-faces-solar-lawsuits/

 

[Calliope]

The feed-in tariff in Qld dropping from 44c to 8c for new customers in July last year, hasn't affected demand very much.

AGL is actually paying me 52c and the weather has been gloriously sunny recently. "My Momma told me there'd be days like this".

QUEENSLANDERS are still signing up for solar despite the Newman Government's decision to slash the feed-in tariff from 44 cents to 8 cents for new customers, new figures show.

Figures provided by Energex show by the end of this financial year about 230,000 households in southeast Queensland will have solar panels installed with about 20,000 of those at the lower feed-in rate.

The number of households installing panels at the 8 cent rate has outstripped those installing at the higher rate for the last three months.

Across Queensland about 300,000 households are expected to have solar installed by the end of June.

http://www.couriermail.com.au/news/...for-solar-panels/story-fnihsrf2-1226667994534

 

[sydboy007]

What if the projected demand did eventuate, but the generation and distribution infrastructure wasn't there to supply it?
In a first world country, people expect to have a reliable power supply, therefore capacity is installed on projections.
If you are going to run an electrical network on a reactive basis, where capacity isn't increased untill demand exceeds supply, blackouts become common.

A bit like your bus example, where the company waits untill the first bus was full all the time, before ordering the second bus.
If demand increased passengers would have to be prepared to sit on the roof of the first bus untill the second bus arrived.
Then if you have one bus at 100% and the second at 20%, what happens if one of the buses breaks down?
It isn't a problem if people are prepared to accept a substandard service, but most aren't.

That is why as Smurph says, some things are best done by the government, where any profit goes to consolidated revenue.
Also extra plant and equipment can be installed for system security and integrity, not just to return a profit on investment.
That's what used to be called government services, in the 'old days'.

The current system encourages the electricity networks to over invest. Why project electricity consumption up 5% when you can say 15% and make a legislated 7+% return on all your spending. No one else in the economy gets such a sweet heart deal.

Fully agree some things should be Government owned. Corporatisation of GBEs seems to have worked fairly well. Certainly improved their efficiency.

The rules of the whole electricity market need to be changed so their a less built in gain for companies getting their forecasts so wrong. At the moment it's the energy users paying for it, which leaves less $$ for people to spend on other things and burdens business with higher costs making them less competitive against off shore competitors.

For our bus company example if they had a surplus bus that's probably not going to be used in the next few years they would probably sell it at a loss to the purchase price and write off the difference. The electricity supply companies don't have to do that. There's no financial penalty for them making a mistake. It's heads i win tails you lose.

 

[Smurf1976]

I'm thinking more along the lines that the bus company predicted a rising peak so had to buy a second bus that is used for 10% of the time as the 1st bus. Due to Govt legislation the bus company is provided a full cost recovery of the second bus. Now it turns out the bus company actually didn't need to buy the second bus, but can still make passengers continue to pay for their mistakes.

A more accurate statement would be:

The bus company cannot refuse allowing anyone onto the bus. If they do, they will be fined each and every time this occurs and directed to allow people onto the bus.

If, after being directed to allow people onto the bus, they are found to have overcrowded the bus they will be fined for doing so. In addition, they will be fully liable for any consequential injuries etc in the event of an accident.

In the event that they are fined for overcrowding, they must not force any passenger off the bus. If the bus remains overcrowded however, they will be fined again. Rinse and repeat.

The bus company cannot cancel a service due to a breakdown. If they do then they must hand each person who ever catches the bus, whether or not they would have used it at the time, $80.

The bus company cannot offer inducements to modify the customers' behaviour, since all bus tickets must be sold by an independent party other than the bus company. Anyone attempting to board without a ticket, will be directed to one of the many competing ticket sellers, each with their own "plans" and pricing structure, and cannot buy a ticket from the bus driver.

Most of the ticket sellers have decided that the best way to maximise profit is to encourage bus travel at the times when buses are already most heavily used. This is done by aggressively targeting the commuter market for 9 - 5 workers.

Faced with all that, the only rational response from the bus company is to either (1) go out of business altogether or (2) ensure you have an abundance of buses and drivers so that you are never faced with a full bus or a cancelled service.

Now add in a guaranteed return on investment which exceeds the cost of capital, versus a high probability of being fined if you do not invest and it becomes a very simple business decision. Invest as much as possible, add your guaranteed return on investment and pass the cost onto retailers (who then pass it onto consumers).

It would be almost amusing if it wasn't ruining Australian business through ever increasing prices. You won't find many engineers, tradesmen, operators or other practical people who ever thought the whole thing was a good idea. The "micro-economic reform" types love it though - it's created another paperwork industry and another market to trade so they're happy.

 

[Julia]

Fully agree some things should be Government owned.

Being government owned is no guarantee of fairness. Regional Qld is obliged to use the sole provider, the government owned Ergon. The escalation of prices has been every bit as much or more as where there's private ownership. Not even the element of competition to ameliorate the view of "we'll charge you because we can and we know there's nothing you can do about it".

 

[pixel]

The feed-in tariff in Qld dropping from 44c to 8c for new customers in July last year, hasn't affected demand very much.

AGL is actually paying me 52c and the weather has been gloriously sunny recently. "My Momma told me there'd be days like this".

I don't have a problem with dropping the FIT for new customers to wholesale levels.
It's the early adopters that did their sums on the basis of a ten-year supply contract and thereby helped the industry attain critical mass, for whom I am infuriated. Being one of them, I was even invited to (and attended) an awards presentation, which provided the Liberal MLA Peter Abetz with an opportunity to be photographed with proactive energy-conscious citizens.

Without the FIT contract, I would have waited a couple of years, until the cost per Watt had come from $6 at the time down to $1 or less - which is the price point just about now.
It's really back-of-business card Maths:
A 1KW installation will produce about 4.5KWh per day; applying a retail price of a little over 20c gets you a Dollar a day. 1000 days, 3 years, worth of saved power costs make up for $1,000 original investment. Multiplied by 6, however, the payback time blows out to 18 years, which is longer than I'm likely to live - at least at this address.

 

[Smurf1976]

I don't have a problem with dropping the FIT for new customers to wholesale levels.
It's the early adopters that did their sums on the basis of a ten-year supply contract and thereby helped the industry attain critical mass, for whom I am infuriated.

A contract is a contract in my opinion and government shouldn't be relying on "fine print" to avoid the spirit of it especially where ordinary members of the public are involved.

If it says 50c, 40c or whatever then that's what they should pay for the duration.

Here in Tasmania much the same is about to happen. I don't know what the new FIT rate is going to be, but with Aurora about to disappear as a retailer after 31 December and claims that tenders have been received from prospective buyers of the retail customers, they can't delay an announcement on the FIT too much longer.

At a guess, if it's a big reduction, they might be waiting until the Monday after the Federal election - that way it won't influence any votes and the media won't be paying much attention either. Sure, solar is a state issue not a federal one, but it's still not smart politically what the WA government has done.

From a practical perspective, solar can still be worthwhile financially if you go about it the right way. The aim in a low-FIT environment is to produce power when you will use it yourself rather than exporting it to the grid. So instead of facing the panels North and getting peak output in the middle of the day, it's generally a better idea now to have half facing East and half facing West, thus giving about half as much peak output but maintaining it at that rate almost constantly through the day. The total electricity generated, will only be about 12% less than if the panels all face North, but it will be worth more financially since you'll be powering your own appliances rather than selling it to the grid for peanuts.

Obviously if you lifestyle is such that you use a lot of electricity in the morning, then face the panels East. And if you use lots in the afternoon then face them West. But for a generic installation, half E and half W makes a lot of sense these days.

 

[drsmith]

Your letter about the 40c guarantee was sent to a top legal firm in Perth by 6PR, they said you don't have a leg to stand on, the Govement had it coved in the fine print.

Did you listen to this live or from a link on 6PR's website ?

I'm interested in listening to the full segment.

 

[sydboy007]

From a practical perspective, solar can still be worthwhile financially if you go about it the right way. The aim in a low-FIT environment is to produce power when you will use it yourself rather than exporting it to the grid. So instead of facing the panels North and getting peak output in the middle of the day, it's generally a better idea now to have half facing East and half facing West, thus giving about half as much peak output but maintaining it at that rate almost constantly through the day. The total electricity generated, will only be about 12% less than if the panels all face North, but it will be worth more financially since you'll be powering your own appliances rather than selling it to the grid for peanuts.

There must be different ways that these schemes work.

My Dad got PV late last year and basically he gets around 8c kWh for all the electricity he produces and charged the standard ~28c kWh for what he uses.

Under this scenario he's better off producing as much electricity as he can.

These schemes need to be better designed so they do provide some incentive to produce more electricity into the late afternoon peak if possible, but then you get into all the pros and cons of ToU charging.

We need a lot better peak demand management here. If the various state Govts had actually thought about ways to smooth out peak demand a lot of the CAPEX and massive increases in fixed charges we've had could probably been avoided, or at least the cost of the increases could have been more passed onto those causing it.

 

[pilots]

Did you listen to this live or from a link on 6PR's website ?

I'm interested in listening to the full segment.

I was listing to it all day, people here in WA are not happy

 

[sptrawler]

A
From a practical perspective, solar can still be worthwhile financially if you go about it the right way. The aim in a low-FIT environment is to produce power when you will use it yourself rather than exporting it to the grid. So instead of facing the panels North and getting peak output in the middle of the day, it's generally a better idea now to have half facing East and half facing West, thus giving about half as much peak output but maintaining it at that rate almost constantly through the day. The total electricity generated, will only be about 12% less than if the panels all face North, but it will be worth more financially since you'll be powering your own appliances rather than selling it to the grid for peanuts.

Obviously if you lifestyle is such that you use a lot of electricity in the morning, then face the panels East. And if you use lots in the afternoon then face them West. But for a generic installation, half E and half W makes a lot of sense these days.

It won't be long before it is worth changing all your lighting to LED, buying a 40" LED TV, 12/240v waeco upright compressor fridge freezer. Then chucking 400A/H of deep cycle batteries in the shed and charging them from the solar through a battery charger.
During the milder months you would need very little mains power, especialy if you had solar HWS and gas cooking.

 

[Smurf1976]

My Dad got PV late last year and basically he gets around 8c kWh for all the electricity he produces and charged the standard ~28c kWh for what he uses.

Under this scenario he's better off producing as much electricity as he can.

The best thing to do, from a financial perspective, is to use solar to avoid buying power from the grid at 28c.

Suppose that you have 500 Watts load in the house during the day and install a 2 kW solar system. If all the panels face north in order to generate maximum output, you'll be exporting anything over 0.5 kW into the grid and getting paid 8c for it. In the middle of the day you'll be exporting plenty at 8c but in the morning and evening when output is low (and for most households load will be higher) you'll be generating very little and buying from the grid at 28c.

You'd be better off spitting the panels E - W which will give a lower peak output (a bit over 1kW) but will sustain it through most of the day thus supplying your household consumption. Rather than getting paid 8c to export, you're saving 28c import cost in the morning and late afternoon.

I have two systems installed presently. Once facing N and the other split E - W. At 8am in the morning at this time of year, the E - W one is producing decent output whereas the N facing one is virtually idle. Much the same at 4pm.

We need a lot better peak demand management here. If the various state Govts had actually thought about ways to smooth out peak demand a lot of the CAPEX and massive increases in fixed charges we've had could probably been avoided, or at least the cost of the increases could have been more passed onto those causing it.

The former state electricity authorities were all pretty keen on demand management, some of them quite aggressively so, since it has always been the key to keeping costs down.

The crux of the problem is that industry reform has removed any real link between power generation and consumers. These days you don't hear the owner of a power station advocating load shifting, since they are too far removed from customers to be able to do so effectively. For starters, you need a monopoly on centralised generation to make it doable, and it helps if you directly set the retail prices too. Without that, there's no real means to do it even if they wanted to.

Tasmania is perhaps the best case in point. I won't reveal specifics, but around half the average system load is under some form of active demand management. The vast majority of that is direct deals between Hydro and large customers who don't go via a retailer. So that's direct bulk sales from the generator to customer.

So far as all other customers, those who buy via retailers, are concerned it's pretty much dead. The retailer does nothing to promote the demand management options available, to the point that even many electricians think they no longer exist since there is not a word said about them. Some time ago the retailer was actually doing the exact opposite, encouraging consumption shift from off-peak times to the peak load times. Meanwhile on King Island, where the generator and the retailer are the same company (albeit under different trading names), an actual "smart grid" is underway right now. Enough said really about the problem with splitting things up and it's the same in other states.

 

[sydboy007]

The best thing to do, from a financial perspective, is to use solar to avoid buying power from the grid at 28c.

Suppose that you have 500 Watts load in the house during the day and install a 2 kW solar system. If all the panels face north in order to generate maximum output, you'll be exporting anything over 0.5 kW into the grid and getting paid 8c for it. In the middle of the day you'll be exporting plenty at 8c but in the morning and evening when output is low (and for most households load will be higher) you'll be generating very little and buying from the grid at 28c.

You'd be better off spitting the panels E - W which will give a lower peak output (a bit over 1kW) but will sustain it through most of the day thus supplying your household consumption. Rather than getting paid 8c to export, you're saving 28c import cost in the morning and late afternoon.

I have two systems installed presently. Once facing N and the other split E - W. At 8am in the morning at this time of year, the E - W one is producing decent output whereas the N facing one is virtually idle. Much the same at 4pm.

I don't think you quite understand how the system works for my dad. Possibly he signed up for a bum deal as he originally thought he was on a net metering scheme ie produce 5 and use 10 only pay for 5.

Basically all his energy has to be exported at 8c kWh

All his electricity usage has to be at 28c kWh

Unless he could go off grid the only financial incentive for him is to have the panels producing the maximum amount of electricity through the day.

 

[Smurf1976]

Ah, now it makes sense.

Seems that he is on gross metering whereas I was assuming the more common net metering arrangement.

If it's gross then yes, you want to maximise production and that means facing the panels north. But for anyone on net metering with a FIT rate lower than the rate paid for power from the grid, the E - W arrangement will typically be the best option financially.

 

[medicowallet]

I'm waiting for the company to come out and sell me a share in a solar farm. If I could buy 5kWh of capacity i think that would generate enough income to provide for my household consumption - avg 8.5kWh most days.

Exactly.

This over subsidy is just crazy.

MW

 

[sptrawler]

Ah, now it makes sense.

Seems that he is on gross metering whereas I was assuming the more common net metering arrangement.

If it's gross then yes, you want to maximise production and that means facing the panels north. But for anyone on net metering with a FIT rate lower than the rate paid for power from the grid, the E - W arrangement will typically be the best option financially.

Wouldn't it still be best to face them E - W as the solar would still reduce the 28c demand at peak periods.
As opposed to exporting more at 8c over the mid day period?