By Bill Gaines and Colin Hansen
In November 2016, we had the great opportunity to represent the American Public Power Association in a fact-finding mission to Australia organized by the Smart Electric Power Alliance. We'd like to share this overview of the electric system Down Under and our takeaways from the land of kangaroos, koalas, and vegemite.
Australia: a country of just 20 million people spread out over an island the size of the entire United States. And a country that contends with an interesting mix of electricity issues — frequent policy changes; declining solar subsidies; complex disaggregation of generation, transmission, and distribution; and the unique reliability challenges posed by its geography.
The State of the System
All electric utilities in Australia were state owned until the late 1990s. At that point, the country adopted a competitive electricity model based on privatization and vertical separation of industry functions. Today, there is a regulated national wholesale energy market and a transmission grid that links the major population centers.
We quickly learned that Brisbane is tropical and Melbourne is cosmopolitan. And that Melbourne and Sydney have an intense rivalry.But it was a bit more challenging to figure out which entity takes care of which electricity function in each state or region. Add to that the vast number of utilities, generators, transmission companies, marketers, and the numerous agencies that pursue energy innovation — CSIRO, ARENA, Australian Research Council, CEFC, etc.
The generation and electricity retailing functions are completely privatized and competitive. Right now, Australia is about to disaggregate metering from distribution, adding yet another layer of complexity, and contention.
While we did not see any technologies in Australia that are not already in the US, we did see interesting and innovative applications of familiar technologies.For example, the distribution companies in Victoria are making innovative use of Lidar, AMI, and other remote sensing technologies to manage their networks. There is a very high penetration of rooftop solar — up to 28 percent — in some areas. This has spurred much interest in battery storage and improved use of demand side management measures such as water heater control, which has apparently been deployed on the distribution networks for quite some time.
As in the US, the utility industry and government policies vary widely across states and regions.While Queensland has massive amounts of rooftop solar, its overall renewable energy portfolio remains somewhat thin.Tasmania has much less rooftop solar but claims a 99.9 percent renewable energy penetration with large amounts of hydropower.
One interesting project we learned about was the Huntlee Community Energy Company, a local community that has been given a $5 million grant by the Australian Renewable Energy Agency to develop a residential microgrid for approximately 1,000 homes.The microgrid will include rooftop solar, battery storage, gas and diesel generators, and a microgrid management system.
We also learned about some interesting uses of AMI analytics by distribution utilities — customer to substation mapping, using "abnormal" feeder detection algorithms to detect and locate faults, and even detecting energy theft!
A slew of solar subsidies in the early 2000s enabled many Australians to install private solar at incredibly cheap prices.
According to 2015 data, one in seven Australian households had some form of solar installed. Queensland has the highest penetration of rooftop solar in the world — about 28.8 percent of single family households have installed rooftop solar.The initial growth was most definitely fueled by government subsidies and policies.At one point, customers in Queensland could take advantage of a feed-in tariff in excess of 40 cents per kWh.
While those subsidies are largely rolling off, officials now talk about the "mass scale tipping point" caused by the reduced cost of solar compared to retail rates.One Australian official said that with subsidies, the estimated cost of rooftop solar is 10-12 cents per kWh, nearly half the average residential rate. Where subsidies once drove investment in solar energy by average Australians, that continued growth is now driven by economics.
It was fascinating to turn on the TV (BTW, Aussies are obsessed with American politics in their programming) and see commercials for full solar systems at an installed cost of less than $4,000.
Recently however, the Australian government started implementing a plan to significantly downgrade subsidies, leaving many customers frustrated with what they now see as inadequate return on their investments.
Australia has been at the forefront of experimenting with pro-solar policies, and the many — and sometimes surprising — results of this experiment have lessons for U.S. utilities. Australia's reliability-focused investments in the transmission and distribution grids, combined with the heavy solar incentives, drove electricity rates up during 2008-2015.
Looking to the Future
What we heard the most about from industry experts was the need for a multifaceted approach as Australia looks to the future. Despite the decrease in subsidies, solar is not going away, and many customers are exploring battery storage as well.
The "prosumers" of the future are likely to be actively involved with customizing and designing products for their own needs. All aspects of the value chain seem to be shifting to a customer-centric model. Utilities must prepare for an increasing number of customers moving away from centralized power and toward onsite generation and should be communicating the value of the grid to stakeholders. There will also be more electric vehicles to charge.
However, it became clear to us over the course of our fact-finding mission that Australian utility customers have been somewhat frustrated by high prices and low reliability over the years. So one cannot help but ask whether the majority of customers will actually have the desire to be involved in-depth, moving forward.
A "Future Grid Forum" that we learned about has estimated that perhaps as many as a third of Australian customers could eventually leave the grid, using a combination of solar panels, storage, energy efficiency, and gas generation. Experts estimated that this departure may be economically viable as soon as 2030 or 2040.
So what can the electric utility industry do in the face of so much change? We didn't hear clear answers. But it is widely acknowledged that the coming decade will be a period of historic change for Australia's electric utilities.
When In Australia...
...we tried to do as the Aussies do and learned that Foster's is no longer the "it" beer — it's now all about craft beer, like here in the US.
Vegemite is not used as one would use peanut butter. Instead, you put a thick layer of butter on a piece of bread or a cracker and then use only a thin layer of Vegemite on top of that.Even buttery goodness could not overcome the taste of Vegemite — perhaps that's just for the locals. But Tim Tams are way better than Kit Kats!
Cricket, lawn bowling, and Aussie rules football are all very vogue — but for an American, figuring out the rules of those games is a different matter.And the sinks and toilets really do drain in the opposite direction from the Northern Hemisphere.
The Aussies drive on the wrong (left) side of the road, and they walk on the sidewalks that way too.
Other Lessons Learned
In a country known for its impressive assortment of animals that can kill you, some danger is to be expected. However, the danger can be mitigated by making smart choices. Going into the water? Wear a wetsuit to avoid jellyfish stings. Trekking through the outback? Check your shoes every morning for snakes and scorpions.
To stretch the analogy here, a certain amount of danger is to be expected as the electricity sector undergoes massive change.
However, the Australian electricity industry has been buffeted by the inconsistencies of federal and state energy policy over the years as various governments have moved in and out of office. The ramp-up and scale-back of extreme solar incentives, government grid investment mandates, and the imposition and subsequent removal of a nationwide carbon tax are examples. The critical need is for stable and predictable policy.
In the face of greater change, government must understand that the electric industry, unlike the administration, doesn't turn on a dime. Policymakers must factor in the time required for the industry to adapt to new ideas.
We tried throughout the trip to think about what small public power systems might pursue as a "no regrets" approach to distributed generation and AMI.What we saw reinforced that small public power utilities in the U.S. first and foremost to get their ratemaking right.For many, that means a fairly rapid move from variable to fixed pricing, with well thought out net metering policies and interconnection standards.
Very small utilities can confidently invest in GIS, but some may want to wait on AMI until they have a better system or means of handling the deluge of customer information that comes with it.Small systems need to "get big" by working with their joint action agencies or associations to gain economies of scale and master the level of complexity and sophistication likely to dominate the future electric industry.
And finally, we learned from the great folks at SEPA, while we were in Australia, to shout out "Elmo" when a subject matter seemed to have exhausted itself but the discussion continued.Elmo is — "Enough, Let's Move On" :)"