News & Current Affairs
18 August 2014
The $500-a-day service charge designed to kill solar
Queensland businesses are being hit with daily service charges of more than $500 a day on their electricity bills, in a move the solar industry says is designed to kill the roll-out of commercial-scale rooftop solar across the state.
The charges were quietly unveiled by the Queensland Competition Authority and the state government in July. But their implications are only now being absorbed as business operators do the numbers on proposed solar installations.
The new tariffs affect a range of businesses, but the worst hit are those that use more than 100MWh of electricity a year, and are deemed to be “large energy” users.
qca tariff 46In tariff 46, for instance, those daily charges for “service” – originally a charge for reading the meter – have jumped to $488 a day from $42 a day. The “energy” price on consumption is dropped to 10.4c/kWh from 11.6c/kWh. (See below, does not include GST).
The fixed service charge replaces a “demand charge”, which could vary according to consumption. There is still a demand charge, but only if a customer uses more than a 400kW threshold in any 30 minute interval.
This is how Ergon Energy has structured its tariff 46. With GST, the service charge rises to $537 a day.
The changes have horrified members of the solar industry, businesses looking to install solar, and those who have invested tens of thousands of dollar in energy efficiency measures such as LEDs or upgraded machinery.
That’s because, according to Steve Madson, director of Country Solar, one of the country’s largest installers of commercial-scale solar, the new tariffs reduce any incentive for businesses to lower consumption from the grid, either by installing solar panels for their own use, or by investing in more efficiency machinery and lighting.
Madson says the charges appear designed to stop the rollout of commercial-scale solar in Queensland.
“The changes are clever in their design,” Madson told RenewEconomy. “They do not actually result in an increase in total electricity costs, and in some cases they actually cause a fall. But they kill the possibility of reducing the bills by installing solar.
”How can they charge $500 a day to read the meter, that is what the daily service charge is after all.”
The QCA, and the state government has long been accused of acting only to protect the interests of the network operators and retailers, and to boost the dividends paid to the government.
Last year, as RenewEconomy reported, QCA came out in favour of special tariffs on residential solar customers, even though it admitted that they would be more costly, ineffective, unfair and possibly illegal. But they favoured the move because it would protect network revenues.
The raising of fixed charges has been a common response among utilities fearing the impact of rooftop solar and a “death spiral” of falling revenues on a fixed asset base.
Analysts such as Morgan Stanley have ridiculed the practice of imposing high fixed charges, saying it was ultimately self-defeating and could simply accelerate that death spiral, and encourage people to go off-grid, particularly when battery storage became commercially viable.
“There may be a ‘tipping point’ that causes customers to seek an off-grid approach — higher fixed charges to distributed generation customers are likely to drive more battery purchases and exits from the grid,” the Morgan Stanley researchers wrote.
Madson agrees: “In three years’ time (when battery storage improves), this will also be enough for a mass exodus from the grid altogether.”
It is not the first move by Queensland authorities against rooftop solar. In June, as RenewEconomy revealed at the time, new rules were imposed that allow the network operators to stop businesses and homes from exporting excess electricity from rooftop solar systems back into the grid.
Ergon Energy, which operates in the regional areas that cover 97 per cent of the grid, has admitted that the move could encourage more battery storage - and ultimately consumers to leave the grid, which would not be the most efficient social outcome.
John Grimes, from the Australian Solar Council, says the QCA ruling is discriminatory, and aimed squarely at shutting down solar PV in Queensland.
“It is also really dumb,” Grimes told RenewEconomy. “Commercial and industrial solar is exactly where we should be supporting solar, not locking it out.
“That is because when the sun shines, business is hard at work. Solar is feeding electricity into businesses at exactly the right time, when the machines spin and the computers run. There is a direct correlation between the production and demand curves for electricity in this sector.
“In turn, this reduces peak demand, bringing wholesale prices down, and delaying or eliminating the need for expensive infrastructure upgrades. Queenslanders are already playing a heavy price for past unneeded infrastructure spending. Now a shortsighted government wants to double up and compound the problem further.”
Madson has crunched the numbers for a number of clients in Queensland on various tariff structures, and how they will be impacted by the changes.
For those transitioning from tariff 20, and using 300kWh a day, the new structure and fixed service fee means the benefits of cutting consumption by one third will narrow from a 30 per cent reduction in the annual electricity bill to just a 10 per cent reduction. To those using more energy, the benefits of reducing consumption by one third will fall to just a 4 reduction in the bill.
These will affect businesses such as motel owners, and any other business with large amounts of air conditioning or refrigeration needs.
“This is a blatant cash grab by the Newman Government,” Madson said.
“The Queensland government is in such a financial mess because of coal, and the forecasted royalties from coal in particular that never eventuated.
”Small and medium business employee the majority of people in our state and yet small and medium businesses are the one constantly being slammed to provide for the short falls in coal revenue. Electricity prices have doubled in 5 years, gas prices are set to triple.
“We have been successful in reducing peak demand which was the all evil 10 years ago causing rolling blackouts all over the state. “With Battery storage coming online in multiple forms we have the opportunity to level our demand which means that no capital will need to be spent on upgrading our network until our population doubles in 140 years!!! This is evident by the huge surge in profits by the networks.
“By preventing businesses investing in renewables and energy efficiency, this government are killing Queensland.”
“These businesses are spending their money in improving the state-owned assets, creating jobs, improving the environment and upgrading in efficient infrastructure.
“We see that renewables are the push to teach these people that there are better ways and these are measurable, once a business sees the results of going solar they soon reinvest their savings into extra measures to get further reductions which creates more jobs.”