Rooftop Solar Upends Australia’s Electricity Markets

Rooftop Solar Panels

By Arman Kazemi

July 10, 2014

The Australian state of Queensland boasts more than 1.1 gigawatts of solar energy capacity, one third of Australia’s total. But, there are no large state-funded solar projects in the state, and few industrial-scale solar installations. Instead, almost one in four houses have rooftop solar generators, giving Queensland the highest per capita solar uptake in the world.

Last week, these rooftop systems flexed their muscles, showing the power of distributed solar generation to shake up electricity markets. With clear skies and ample sun, the panels caused the wholesale price of electricity in the state to plummet below zero, the point at which coal generators usually pay others to pick up their energy slack.

Such “negative pricing” moves are standard fare during down periods – at night when populations are asleep, for example, and demand is low. During these times, fossil fuel generators are better off selling their excess output than switching off their generators altogether.

But, as Queensland’s incumbent utilities learned last week, “the influx of rooftop solar has turned this model on its head,” as Giles Parkinson wrote in the Guardian this week.

According to Parkinson, Queensland’s rooftop generators are “producing electricity just at the time that coal generators used to make hay (while the sun shines).”

“The impact has been so profound,” he continues, “and wholesale prices pushed down so low, that few coal generators in Australia made a profit last year. Hardly any are making a profit this year.”

Wholesale electricity prices operate somewhat independently of retail prices. Retail prices reflect the cost dynamics of getting electricity from a local transmission station to individual consumers, and are often subject to regulatory control. Wholesale prices, on the other hand, are driven by the costs of constructing power plants and operating a grid of high-voltage transmission lines.

With an abundance of electrons from rooftop solar flooding the electrical grid, the wholesale-retail dynamic has been upended. Coal-burning energy in Australia tends to cost around 19 cents per kilowatt-hour, once all the costs of production and distribution are factored in. Estimates for solar generation put the price between 12-18 cents/kWh, with costs projected to drop to 10 cents in the future.

Such rates have kept nearly 4,000 households making applications to install rooftop solar each month in southeast Queensland alone, according to a recent article in Australia’s RenewEconomy blog.

These are trends Canada’s nascent solar economy should be aware of. On Monday, the largest solar field in western Canada officially began construction in Kimberley B.C., with 4,000 solar cells to be erected at an old, contaminated mine.

Canada has yet to deploy solar technologies to the extent of countries like Australia or Germany, an article on reports, due in part to the abundance of hydroelectricity, coal and natural gas in provinces like Alberta and B.C. But with solar prices continuing to drop, a shake-up in the electricity market is inevitable.

Speaking about the project in Kimberly, B.C. Energy Minister Bill Bennett, said: “This project is not at all about providing huge amounts of electricity. This project is about proving solar energy is viable.”

If the SunMine in Kimberly proves anywhere near as successful as rooftop solar in Australia, fossil fuel burners may need to look down under for a presage of their fate.