IEEE Power & Energy Magazine - July/August 2015 - 59

As rooftop PV systems have expanded, tariff structures,
particularly with respect to network charges, have become more
topical and widely discussed.

(Millions of Australian Dollars per Year)

PVs, installed at the point of use, is such that the established Tariff Structures
centrally dispatched electricity model is now in a "death spi- As rooftop PV systems have expanded, tariff structures, particral," declining demand for grid-supplied electricity leading ularly with respect to network charges, have become more topito higher prices leading to declining demand. We estimate cal and widely discussed. Network charges make up about half
that rooftop PV systems can now be installed at a price, after of the total bill to average consumption households in many
capital subsidies, of around AU$.06/kWh. This compares to states of Australia, and so network tariffs paid by retailers and
the nationwide average household electricity price of around that influence their retail offering to households are significant.
AU$320/MWh, or an average incremental consumption
A particular focus for the tariff debate has been on the size of
charge of around AU$250/MWh. In other words, households the fixed element of network and retail tariffs. There are no regcan produce their own electricity for around a quarter of the ulatory controls for the way that network charges are reflected
incremental charge. This suggests a significant potential in the electricity tariffs determined by retailers, and the split
for further expansion of PVs, and if battery storage can be between fixed and variable elements of both network and retail
supplied for lower than around AU$250/MWh for 15-kWh tariffs vary widely across Australia. For example, in Victoria,
systems, then it would be more economical for many house- the fixed element of the network service provider charges for
holds who have the opportunity to leave the grid altogether. household tariffs makes up about 5% of the charge, while for the
Larger rooftop PV installations (such as shopping centers retail tariff (which is the tariff the householder sees), the fixed
and retail outlets) are only starting to expand in Australia, element is around 15% of the average bill. The opposite applies
typically based on power purchase agreements or leasing. in Queensland, where up to 30% of the network charge is fixed,
Such larger consumer electricity prices are typically about but just 10% of the charge that households actually pay is fixed.
30-40% lower than that paid by households, but scale econThe regulatory arrangements in Australia grant monopoly
omies in PV installation can make up part of the difference rights to network service providers and, with this, the right to
in the relative economics of PVs to grid-supplied electricity. recover revenue lost from one group of customers from the
On the basis of what we have seen and our knowledge remaining customers. Network service providers do this, in
of the relative economics and expectation of future costs, it due course, by raising their prices so that they recover their
is not difficult to conclude that the traditional centrally dis- regulated revenue entitlement. (For many, network service
patched industry model is facing a serious competitive threat providers' prices, rather than revenues, are regulated. This
for a large segment of the market (by number of customers, brings additional complications, although the essential point
even if not by proportion of aggregate sales). This is not to remains.) In this sense, household PVs, like other distributed
suggest that the demise of
the centrally dispatched
500
system is certain or will
happen quickly. The rate
450
of decline in battery costs
400
Vic
Qld
NSW
Tas
ACT
WA
SA
is obviously very important
350
in determining future out300
comes. But, regardless of
250
this, regulatory policy, tariff structures, technology,
200
and market developments
150
will have a major impact.
100
The incumbent utilities,
50
with vast sunk costs in
0
networks and generation,
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
are unlikely to sit idly and
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
watch their assets become
increasingly stranded.
figure 7. Jurisdictional mandated FiTs, 2010 to 2030, in millions of Australian dollars (2014).
july/august 2015

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