Energy Networks Association Submission
9 November 2010
Mr Tony Wood
Chairman
Medium Scale Solar Working Group
Energy Sector Development Division
Department of Primary Industries
GPO Box 4440
MELBOURNE VIC 3001
Dear Mr Wood
ENA Submission on Medium Scale Solar Discussion Paper
The Energy Networks Association (ENA) welcomes the opportunity to provide a response to the Medium-Scale Solar Discussion Paper developed by the Medium-Scale Solar Working Group.
ENA is the peak national body for Australia’s energy networks. ENA represents gas distribution and electricity network and transmission businesses on economic, technical and safety regulation and national energy policy issues.
Energy network businesses deliver electricity and gas to over 13 million customer connections across Australia through approximately 800 000 kilometres of electricity distribution lines and 76 000 kilometres of gas distribution pipelines. These distribution networks are valued at more than $60 billion and each year energy network businesses undertake investment of more than $6 billion in distribution network operation, reinforcement, expansions and greenfields extensions. Electricity transmission network owners operate over 57 000 km of high voltage transmission lines, with a value of $15 billion and undertake $1.6 billion in investment each year.
ENA acknowledges that there will be significant challenges in terms of the market uptake of medium scale solar systems (MSS) and we are keen to continue to participate in the Medium-scale Solar Working Group.
General Comments
The uptake of embedded generation, including solar at all scales, is expected to significantly increase as a result of drivers such as renewable energy targets and national emissions strategies.
ENA supports the proposition that individual medium and large scale solar systems can have very different connection related issues and operational network issues. The specific generation facility needs to be dealt with on a case by case basis with regard to size, technology, location on the network and localised uptake, etc. ENA seeks strong representation on the connection related issues group to ensure that the connection/network issues are appropriately dealt with. In our view connection of medium scale solar (MSS) cannot be easily streamlined but needs to be dealt with on a case by case basis.
ENA has engaged CSIRO to analyse and report on the impacts and benefits of embedded generation in Australian electricity networks. This study will review existing work and research on the value and impacts of embedded generation, develop methods of analysis that enable the modelling of the range of likely outcomes that will be encountered on typical Australian distribution feeders under various embedded generation scenarios, and model the impacts of widespread embedded generation on the technical performance of electricity networks under a range of scenarios.
The study is due to be completed in December 2010 and ENA anticipates that it will provide useful and valuable input into the embedded generation discussion.
Comments on the discussion paper
Voltage regulation and grid stability
ENA supports the proposition stated in the MSS discussion paper that the use of intermittent generation such as solar where output can suddenly drop or increase due, for instance, to changing cloud cover conditions, can affect voltage regulation and grid stability and that where embedded generation is concentrated in a particular area, such issues are more likely to occur. These issues may be exacerbated in areas where networks are remote and/or have capacity constraints.
ENA recommends that specific standards be developed for medium scale inverter connected systems to address issues such as voltage regulation, harmonic contribution, flicker and fault level contribution. In addition, inverter technology for MSS should have the capability to import and export reactive power for voltage control. We note that the current Australian Standard AS 4777 covers small scale inverter connected systems. Specific MSS inverter systems should also be approved by an appropriate certification body.
The potential need for network upgrades
Each installation will be site specific and will require assessment on an individual basis. Costs will be incurred by DNSP’s for technical review, network modelling to assess impacts, and potential system reconfiguration and network upgrades. These costs could be substantial depending on factors such as location, network constraints and concentration and capacity of MSS. At some point, additional capacity of installed inverter generation systems will require augmentation and modification to the electricity network. Significant uptake of solar generation will require networks to be designed on a different basis compared to existing networks and augmentation and modification of existing networks may not be straightforward.
Contributing to Security, Reliability and Affordability of Supply
Whilst ENA recognises the potential benefits of MSS, the expectation that there will be significant contribution to the security, reliability and affordability of Victoria’s electricity supply can not be assumed. At a local level MSS is unlikely to have significant security and reliability of supply benefits unless it can be combined with demand management or energy storage technologies, neither of which are close to commercialisation and wide spread implementation. Just like small scale solar electricity generation, MSS is likely to consist of photovoltaic (PV) arrays which have an intermittent output dependent upon sunlight. While there is some correlation between generation output power and network load, the peaks do not exactly coincide. Peak output from PV arrays occurs several hours earlier in the day than peak network load. In fact coincident demand and supply overlay does not always occur in practice.
Response to specific questions in the discussion paper
| Section 4: Definition of Medium-Scale Solar |
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| QU1: It is appropriate to define medium-scale solar as falling between 100kW and 5MW? |
| QU2: Do you agree with such a definition and if not, why not? |
The selection of a suitable definition for Medium Scale Solar (MSS) should depend upon the purpose of providing such a definition. If the purpose is to define what size generating systems shall be eligible for financial or other support to encourage the development of such sized generators then the definition appears reasonable for the reasons discussed in the MSS discussion paper. The prime reason for setting a lower limit of 100kW is to ensure MSS is ineligible to receive the standard feed in tariff and thereby ensure no overlap of financial support policies.
Despite the current standard feed in tariff which applies for generators under 100kW, there are very few PV generators over 5kW in Victoria. It therefore appears that the current standard feed in tariff and other mechanisms such as the renewable energy certificates (RECs) are insufficient to encourage PV generators over 5kW in size.
| Section 5: Identification of Potential Barriers to Uptake of Medium-Scale Solar |
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| QU3: What are the immediate financial short-term barriers to investing in the medium-scale solar sector and how do these differ from investment in small or large-sale solar? |
| QU4: What are longer-term financial barriers to investing in the medium-scale solar sector and how do these differ from investment in small or large-scale solar? |
| QU5: Have all the relevant barriers to uptake of medium-scale solar been identified in this Discussion Paper, and if not, what are they? |
| QU6: Can these barriers be differentiated by market segment (for example, are business entities likely to encounter different barriers to government organisations or community groups?) |
| QU7: What is the most significant barrier affecting your particular market segment? |
Financial Barriers
The single largest barrier is the high upfront capital cost of installing PV generating systems. Despite significant reductions in cost in recent years, PV remains one of the most expensive forms of electricity generation. Even though maintenance costs are low, and fuel costs are nil, upfront capital costs are a significant barrier.
There are several ways this barrier can be minimised. One of the preferred methods of incentive is in the form of feed in tariffs where a premium is paid for clean renewable energy generation that is actually generated as opposed to installed capacity.
Where a system is optimally designed to maximise the amount of electricity that is generated, the system owner should be rewarded accordingly. Different installation methods and PV technologies can affect this efficiency. Examples include array installation direction and pitch, tracking versus non tracking arrays, array shading, PV cell efficiency versus operating temperature, inverter efficiency, cabling energy losses etc.
The current Australian Government scheme that applies for small scale solar PV generating systems based on producing RECs (or STC’s after 31 December 2010) that can be redeemed upfront is not a good system for MSS. While this is relatively simple to apply it is based on installed capacity rather than energy produced. A well designed system with an array that is optimally orientated will receive the same number of RECs as a system with a poorly positioned array that is heavily shaded and faces the wrong direction.
Any government funded incentive schemes or schemes subsidised by general energy users with large upfront subsidies do not encourage generating system owners to maintain their systems in the long term or to use long life components because the lifespan of the system becomes less important. If the scheme has a relatively long economic payback then the owner of the generator must ensure that the system continues to operate as long as possible and any faults are repaired quickly to ensure that the system continues to produce as much electrical energy as possible to obtain the feed in tariff. By designing the incentive scheme so that it encourages the maximum amount of energy to be produced and exported to the electricity distribution network will align the community’s objectives with those of the generation system owner and ensure the maximum benefit is obtained from the support provided.
One of the major problems with the government incentives that have been implemented to date for small scale solar is the complete lack of certainty. This has had a detrimental impact on system owners, installation businesses and distribution businesses. Uncertainty in general makes investment risky and acts as a barrier to the uptake of clean renewable energy. As a result, ENA members have had considerable difficulty forecasting demand which has impacted our ability to connect new generators to the distribution networks and install the required metering.
Generator owners obviously face significantly lower risk if they are provided with an upfront subsidy to offset the capital cost of the system installation. Regardless of future policy decisions these funds will not be returned. These schemes have been very successful in driving uptake in the small scale solar sector, however for the reasons listed above this type of subsidy is not recommended for MSS. Without a predictable long term cash flow from earnings or savings generated from MSS, investment will be severely constrained.
Other barriers
In the early days of grid connected small scale solar, many generator owners faced difficulties with the grid connection process. In addition each distribution business applied slightly different connection processes and technical requirements. While most of these issues have now been largely overcome it is very likely that similar issues could also occur for MSS unless common connection processes are adopted. At this stage there is a lack of suitable processes and technical requirements within the MSS sector because very few systems of this size have ever been connected to the distribution networks.
The technical barriers listed in the MSS discussion paper are valid. This includes dynamic and steady state voltage regulation, protection operation, prevention of the formation of electrical islands and thermal ratings of network electrical equipment. It is likely, however, that many of the MSS installations will be PV arrays mounted on large commercial or industrial roof spaces. At these locations the output from inverters is likely to be connected close to large capacity indoor, ground type or kiosk substations. Source impedances are typically lower at these locations and fluctuations in voltage are less likely to be a problem. Nonetheless in certain locations (such as industrial areas) where load may reduce over weekends and public holidays, voltage rise could become a problem. Likewise, in rural areas where source impedances are generally higher voltage rise could also be a problem. It is therefore recommended that inverter standards be established that permit the injection of reactive power to assist with voltage regulation.
| 6.1: Broader Policy Aims for Medium-Scale Solar |
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| QU8: What level of uptake would be required for medium-scale solar to make a significant contribution to meeting renewable energy and greenhouse gas reduction targets and how feasible is such a level of uptake? |
| QU9: What contribution is medium-scale solar likely to make to the security and reliability of supply? |
| QU10: How does this contribution differ from the contribution that is likely to be made by small or large-scale solar? |
| QU11: What are the opportunities for establishing local manufacture and production of solar technologies? To what extent are these regionalised? |
| QU12: What are the benefits of increased community engagement in this space over and above financial benefits? To what extent can these be quantified or do they remain largely intangible? |
| QU13: What support models for medium-scale solar are likely to provide the greatest opportunities for community engagement? |
| QU14: Are there any further broad policy aims which should be considered? |
ENA recognises that there are some potential network benefits arising from the installation of MSS. It could assist in reducing average demand on distribution and transmission networks and to reduce network energy losses. When combined with other forms of renewable generation such as wind, the diversity between the output from these different forms of generation could provide a greater level of security of supply.
However, consistent with all forms of intermittent generation MSS will also make demand forecasting more difficult and until accurate models can be developed, MSS could mask true load growth and reduce network security and reliability.
| Section 6.3: Potential for Medium-Scale Solar in Victoria |
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| QU19: To what extent is increased uptake of medium-scale solar a regionalised opportunity? |
| QU20: If a support mechanism is deemed appropriate, to what extent should this be differentiated in relation to the type of grid connection? |
| QU21: To what extent is the need to import system components likely to impact on a project’s capital costs (for example through foreign exchange rates and increased distribution costs)? |
| QU22: Is labour density likely to increase or decrease when investing in larger installations? In other words, is the relationship between kilowatts installed and number of jobs created a constant, or are medium-scale installations likely to require more or less employees than smaller-scale installations? |
| QU23: How are safety and OH&S concerns best addressed when implementing medium-scale solar? |
| QU24: Is there a need to modify or extend current accreditation procedures in relation to medium-scale solar? |
| QU25: What opportunities are available for increased training in the solar sector? |
There is no established accreditation procedure for installers of MSS. If MSS uses PV arrays then MSS installation principles will be similar to but not the same as small scale solar. If MSS uses other technologies such as solar thermal to generate electricity then the installation principles could be completely different.
Distribution businesses in Victoria will treat MSS generators consistently with other embedded generators in relation to assessing grid connection. This is expected to ensure grid connection standards are satisfied. Nonetheless safety standards could be compromised and system performance issues could arise if system installers are not suitably qualified and experienced. The distribution businesses are not responsible for ensuring other components of the generator installation meet applicable standards including those impacting health and safety.
These issues could be minimised if the distribution businesses were involved in the development and publication of appropriate standards, guidelines and codes for the connection of MSS generators to the distribution networks. These standards, guidelines and codes would form the basis of appropriate accreditation and training programs for system designers and installers.
| Section 7.1: Potential Solutions to Addressing Current Barriers to Medium-Scale Solar |
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| QU26: Given the barriers you have already identified as being the most significant in your particular instance, what would be the most appropriate solution and why? |
Technical grid connection barriers
To address some of the network connection barriers it is recommended that working groups be established to create the necessary standards and network connection processes before the introduction of new incentive schemes.
Financial barriers
The longer term objective should be to reduce and finally remove financial support over time as MSS becomes lower in cost consistent with other measures such as the introduction of a potential price on carbon. In the interim, feed in tariffs should be more consistent.
FIT Scheme Design
The discussion paper notes that one of the proposed solutions to encourage uptake is a medium scale feed in tariff. The scheme design could include differentiation by technology, configuration, and commissioning year.
The ENA notes that DPI has a number of schemes either in place or under consideration in addition to this medium solar feed in tariff scheme as follows:
- Standard feed in tariff scheme
- Premium feed in tariff scheme
- Low emissions feed in tariff scheme
- Large solar feed in tariff scheme
Some of these schemes are limited to solar, whilst others may include other forms of renewable generation or low emission generation technology. Therefore a customer could adopt a mix of embedded generation types e.g. solar and wind or solar and co-generation and the tariff structure should reflect this complexity.
Where these schemes are adopted with the potential for frequent review and possibly an amendment to the feed in tariff by time of day or year of commissioning then the communication of these details in Page 7 industry will become more important. There will need to be consideration of communication of the scheme type, installed capacity, technology, feed in tariff rate, year of commissioning etc so that retailers who provide market offers have access to the appropriate level of information. It is important that there is visibility of these details and the potential that mixed technology types eg wind and solar may be unable to be differentiated in terms of a specific rate of generation scheme and hence only one feed in tariff scheme could apply to all generation.
Distributor Cost recovery
ENA’s view is that there should be appropriate cost recovery mechanisms in place for distributors to recover the incremental costs associated with MSS and other embedded generation systems.
If you have any questions on this paper, please contact Dale Weber.
Yours sincerely
Andrew Blyth
Chief Executive
