A policy designed to give households access to abundant free solar power has been nobbled by a regulatory process that put electricity retailer interests ahead of consumer bill savings, according to veteran electrical engineer Ty Christopher.
Christopher, director of the Energy Futures Network at the University of Wollongong, describes the federal government’s Solar Sharer policy as a “great piece of public policy”.
But he says its original purpose – sharing cheap daytime solar with households that don’t have rooftop solar and helping them cut their bills – was compromised once “retailer viability” became one of the considerations in its design.
“Retailer viability is actually code for making sure the retailers don’t lose any money out of this. And as soon as you implement it without the retailers losing any money, it was never going to save anyone money.”
Speaking to Renew Economy’s SwitchedOn podcast, Christopher accused retailers and gentailers of “successfully neutering its entire intent in terms of delivering results to consumers”.
Solar Sharer requires major retailers in NSW, South Australia and south-east Queensland to offer eligible households three hours of free electricity in the middle of the day.
It was pitched particularly at people unable to benefit directly from rooftop solar, including renters and apartment dwellers.
Bill savings were also central to the government’s sales pitch. Energy minister Chris Bowen said the offer would provide “direct bill savings” for households that shifted consumption into the free period, while his department promoted it as a way to help households cut electricity bills.
The Australian Energy Regulator (AER) says that remains the intention.
“The Solar Sharer Offer was designed so a customer shifting load into the free period would be better off relative to the same customer on the residential time-of-use Default Market Offer,” an AER spokesperson told Renew Economy.
But there is an important qualification.
Solar Sharer is a regulated standing offer within the Default Market Offer framework, not a competitive market offer. The DMO is designed as a safety-net price for customers who don’t shop around, and as a benchmark against which cheaper market offers can be compared.
So while shifting electricity use into the free period can make a Solar Sharer customer better off than the equivalent time-of-use DMO, it doesn’t necessarily mean they will be better off than on other deals available in the market.
Christopher says the warning signs about Solar Sharer emerged during the consultation process, when the need to consider “retailer viability” was included alongside the consumer objectives of Solar Sharer.
He argues the regulator failed to push back hard enough against the industry.
“They haven’t been sufficiently challenging and robust in pushing back against what the retailers have been telling them.”
“It’s set up so that the retailers are not out of pocket. It’s not going to save anyone money by design.”
Free electricity, but higher charges
The problem can be seen in the Solar Sharer offers retailers have launched.
As Inner West Community Energy’s Gavin Gilchrist recently reported in Renew Economy, Solar Sharer customers can face significantly higher daily supply charges and higher usage rates outside the three-hour free window than those on competitive market offers.
“Retailers have inoculated themselves against energy loss and revenue loss by cranking up the standing charge,” Christopher argues. “They get their money no matter whether you use more or less energy.”
Christopher says his comparisons found daily charges on Solar Sharer offers can be 10 or 20 per cent higher than other offers from the same retailers, and in some cases substantially more, while electricity prices outside the free window can also be higher.
The AER acknowledges that electricity rates outside the free period are higher, and says that is deliberate.
“For the Solar Sharer Offer, the usage rates outside of the free period are slightly higher. This was done to allow retailers to cover the costs of supplying energy during the free period.”
But Christopher argues that allowing retailers to recover those costs elsewhere undermines the bill-saving purpose of giving consumers free electricity in the first place.
For a high-use household consuming around 21 to 22kWh a day in Sydney’s Ausgrid network, Christopher calculated that an AGL customer could pay around $400 a year more on Solar Sharer than on another AGL offer, before taking account of savings achieved by shifting consumption into the free period.
He found a similar gap comparing Origin offers.
That means households need to make substantial use of the three free hours simply to catch up with cheaper market offers.
“You’d have to do at least $400 a year worth of shifting of your energy into the solar sharer window just to break even under these offers.”
Gilchrist reached a similar conclusion in his analysis for Renew Economy, finding Solar Sharer offers could leave some high-use households hundreds of dollars worse off than cheaper market offers if they failed to shift enough consumption.
The AER acknowledges that competitive market offers may be cheaper than Solar Sharer and admits “the Solar Sharer Offer may not be for everyone.”
Christopher says that is particularly problematic given who the policy was supposed to help.
Households with large batteries can charge them for free during the Solar Sharer window and use that electricity later. But renters, apartment dwellers and social housing tenants – some of the consumers the policy was designed to benefit – are much less likely to have a battery.
“The regulator had the opportunity to prevent that from happening and didn’t,” Christopher argues.
If solar is worthless, why not give it away?
Christopher says there is also an irony in the industry’s response to Solar Sharer.
Australia’s electricity system is increasingly struggling with an abundance of rooftop solar in the middle of the day. Wholesale prices regularly fall to zero or below, feed-in tariffs have fallen, and governments and networks are introducing emergency backstops capable of curtailing rooftop solar when supply overwhelms demand.
Christopher says retailers and gentailers have repeatedly pointed to low and negative wholesale prices to argue that daytime solar exports have little value.
“Look, energy is free or negative, therefore why should we have to pay people to export energy?”
Christopher argues that if “you’re telling us it’s worthless and free, how about you give it to people for free?”
However, the Australian Energy Council, which represents major generators and retailers, argued during the Solar Sharer consultation that retailers would continue to incur wholesale and network costs during the free period and needed to be able to recover those costs elsewhere.
But for Christopher, that goes to the heart of what went wrong: “the core intent of bill saving of Solar Sharer was lost.”
Make free power actually free
Christopher says two changes would substantially improve Solar Sharer.
“The standing [supply] charge needs to be pegged at the same as the standing charge for any other tariff that’s offered by the retailers.”
He says retailers should also be prevented from charging Solar Sharer customers more for electricity outside the free window than they charge under their other comparable offers.
Christopher says the problems with Solar Sharer illustrate a broader problem with Australia’s electricity market and the influence industry has on its regulation.
“Solar Sharer is not a one-off failure in so far as how things are operating. It’s a symptom of a broader gap.”
And for consumers, his advice is simple: “Run your numbers very, very carefully, and then run them again. It is very confusing and it is challenging out there to land on what’s the best energy plan for you. And Solar Sharer is just one of them.”
You can hear the full interview on the SwitchedOn podcast with Ty Christopher here.
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Anne Delaney
Anne Delaney is the host of the SwitchedOn podcast and our Electrification Editor. She has had a successful career in journalism (the ABC and SBS), as a documentary film maker, and as an artist and sculptor.
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