Revolutionising energy through rooftops
In 2017, for the first time in history, the worldwide growth in solar power outstripped the growth in fossil fuel power. This has been a long time coming, seeing as the cost of solar panels has plummeted from around $30 per watt 20 years ago, to just $0.35 per watt today. On a per capita basis, Germany has the greatest solar power capacity – thanks to two decades of ambitious and stable environmental policy – followed by Australia. However, despite having the highest solar radiation per square metre of any country on earth bar Russia, when it comes to the contribution of solar to our national electricity needs, Australia lags behind in seventh place. This begs the question: why aren’t we using the vast amounts of renewable energy available to us?
Oliver Yates is an ex-investment banker at Macquarie Group, the former head of the Federal Government’s green bank, the Clean Energy Finance Corporation (CEFC), and, more recently, an ambitious yet unsuccessful independent candidate for the seat of Kooyong. During his tenure at the CEFC, the federal Liberal government tried to redirect the CEFC’s funding towards ‘clean coal technology’ and when that failed, tried to strip it of funding altogether. He believes the key problem has been political. “Without an agreed emissions pathway [decarbonisation plan], businesses cannot invest with any confidence to phase out the existing generation of power plants and build the new generation,” he says.
Australia has the highest take-up rate of rooftop solar in the world, with 20 percent of households using panels.
In his experience, regulatory issues have also created problems. Since solar panels and wind farms are relatively small-scale, geographically distributed, and intermittently on, they have been discouraged by the rules that govern how energy is produced, transported, consumed and paid for, which in Australia have remained stubbornly tailored towards big power plants. “The failure of the Australian Energy Market Commission (AEMC) to develop rules consistent with the changing mix of generation and technology is a major problem. And we still today don’t have any clarity on how storage will be paid for.” One of the highest-profile examples of these failures was the Liberal government’s attempt in 2015 to scuttle the Howard-era Renewable Energy Target (RET), which caused renewable energy investment to grind to a halt until a compromise was reached with Labor to retain some of its initial ambition. The RET encourages investment in solar, wind and other renewables by lowering their cost to households and project developers, and, since 2001, has been paid for by electricity consumers through a levy on their power bills.
Despite these setbacks, Australia is commanding a respectable place in the global energy revolution. Australia has the highest take-up rate of rooftop solar in the world, with 20 percent of households using panels; a figure which rises to 30 percent in Queensland and South Australia. This is partly due to the RET, and partly to the rising cost of electricity – five times CPI over the past 20 years – which has made rooftop solar comparatively affordable. By 2020, also thanks to the RET, we will have built over 11,000 MW of grid-scale solar and wind farms, which is about a quarter of the size of the country’s coal, gas and hydro power plant fleet. National electricity demand has remained flat for five years, even while the population has grown by eight per cent.
Everybody loves the sunshine
While the growth in rooftop solar power installations shows no signs of slowing down, most of this growth is in the owner-occupied households. For renters and people living in apartments, rooftop solar is much harder to access. Darren Gladman, Director of the Smart Energy program at the Clean Energy Council says that is because it is not an overly profitable area for landlords and body corporates, due to the transactional issues involved. “No one has really made a very successful business model out of [those market segments],” Gladman says. “There’s a lot of measurement, a lot of billing, for a fairly thin margin.” He says, however, that it can work for larger projects. “Shopping centres, for example, do this all the time, because you get a really good rate of return – but when you take it down to the residential level, you lose the profit margin in the transaction costs – things like metering and retrofitting.”
There is a growing acknowledgement around the world that the renewable energy revolution is happening – the question is whether it’s happening fast enough to slow, stop and reverse a global temperature rise of 1.5 degrees Celsius.
Around Australia, there are community organisations helping renters and apartment dwellers implement sustainable energy projects. The Australian Energy Foundation (AEF), based in the northern suburbs of Melbourne, is one such organisation. Manager of AEF’s Solar for Renters and Apartments programs, Sebastian Klein, says the dilemma is that the people paying for the technology aren’t necessarily the ones who will benefit. “When you invest in capital expenditure, but a different party is going to receive the benefits – in the case of landlords, the tenant, or in the case of apartments, a range of parties – how do you ensure that the capital expenditure has a financial return, such that the beneficiary of the power still receives a saving? The model that we use, in both cases, involves accounting for, and distributing, that benefit.” In practical terms, this means asking renters/apartment dwellers to share the savings on their power bills with their landlords and body corporates to cover the cost of financing and installing the panels. But working out how much more the latter should be allowed to charge is not so simple, and striking the right price is often the sticking point. Klein continues: “We think that if you can make it transparent, if you can make it simple to use, and if you can demonstrate that there’s a gain for both the landlord and the tenant, and for all the apartment dwellers, then people will take it up.”
Software, services and tools are being developed to help distribute these benefits. For example, a startup SunTenants has developed an online calculator where tenants can propose a fair rent increase, which strikes a balance between the tenant’s reduced energy bills and the landlord’s expenditure on the solar infrastructure. SunTenants then facilitates the necessary contractual changes, and charges a flat rate to tenants per annum, for a new meter to monitor the bill savings over time. Some councils, like Darebin in Victoria, are supporting landlords by providing interest-free loans for rooftop solar, as well as offering assistance to tenants to negotiate a fair rental increase.
So how can such powerful new business models be scaled up? “I think more than anything, it’s about awareness building,” Klein says. “Owners corporations and apartment dwellers need to show that it’s possible, and then be able to share the successful case studies.”
Sign o’ the times
The energy revolution is intersecting with the tech revolution. Over time, every aspect of how we use energy at home will become digital, real-time, customisable and controllable. “The systems are getting far more intelligent,” Gladman says. “That’s going to enable peer-to-peer energy trading, but also a lot more trading between consumers, their retailer, or possibly their network. There will be more options to monetise your investment in solar and storage – you might just keep it and that’s fine, but you might be able to make money at times.”
Sebastian Klein from AEF agrees. “The biggest change is going to be around the democratisation of the energy grid, and the shift to a multi-directional grid,” he says. “The critical thing in that is empowering the consumer – how do we ensure that the consumer benefits? It’s really about educating people, but also providing the tools, such as peer-to-peer trading, ‘prosumer’ [a producer and consumer at once, i.e. rooftop solar owners] energy exchange, for those who traditionally have been the least able to control their electricity systems.”
We need to start thinking about who we, as citizens, can engage to change the system.
Another business model that is already entering the energy marketplace is the virtual powerplant. Here, governments and power companies enter into agreements with households to remotely control their energy production and/or consumption at the same time, essentially creating a new digital power plant out of a collection of existing rooftop solar panels, batteries and non-essential loads like air conditioners. This allows them to deliver maximum impact when the grid needs support, which, in principle, should create some financial return to participating households. The Australian Energy Market Operator has counted around 700 MW of VPPs under development by both public and private players. For a sense of scale, this is roughly equivalent in size to the Kogan Creek coal-fired power plant in Central Queensland, which is the largest single generating unit in the country and may well claim the title of the last coal-fired power plant ever to be built on the east coast of Australia.
One of the biggest challenges facing the renewable energy market in the long run is the lack of energy storage. The grid needs a certain level of predictability to run safely and reliably 24/7, and this can’t always be provided by renewables. Darren Gladman believes it is a necessary step in our transition to a renewable grid. “We’ve got a system that’s been designed around coal and gas, and a bit of hydropower,” he says. “We need storage for sustainability, because without it, reaching really high levels of solar and wind [as a share of total installed capacity in the grid] get more difficult.”
Higher ground
There is a growing acknowledgement around the world that the renewable energy revolution is happening – the question is whether it’s happening fast enough to slow, stop and reverse a global temperature rise of 1.5 degrees Celsius. The United Nations Intergovernmental Panel on Climate Change released a dire report in October 2018, giving the global community until 2030 to change its behaviour before we lock in a disastrous level of warming. So, what advice do the experts have for Australian households looking to contribute?
Darren Gladman says we need to start thinking about who we, as citizens, can engage to change the system. “Once people have done all the sensible stuff that they can do as a consumer, make your views known to your local federal and state politicians,” he says. “What are you doing about electric vehicles, and about charging stations? What about the future economy? How will Australia benefit? How will my kids have jobs in future? Are you taking every advantage of the transformation of our entire energy system?”
Oliver Yates has some pragmatic advice. “I really can’t think of anything better that putting solar on your roof,” Yates says. “But I find the real innovation comes from the understanding your power use. Once you understand it, you change your behaviour.” And, like Gladman, he agrees that the solution is ultimately political. “Naturally, if you really want to change things and make this transition happen faster, you need to replace the politicians that are actively delaying this process.”
A warm thank you to Ryan Alexander for his wisdom on such an important topic. Ryan has an instagram account focusing on green news – follow him here. If you’re a tenant and would like to implement a sustainable energy project, visit the The Australian Energy Foundation.