How the grid can manage the influx of solar power

Published: 21 July 2021

With many homes and businesses in the same region starting to use solar power, there is a technical challenge for the grid.

Solar panels have a low cost compared with the power bill savings they achieve. With the abundance of sunlight in Australia, and the high tariffs charged by local electricity providers, most homeowners can expect a payback period of less than five years when going solar. Considering that high-quality solar panels last more than 25 years, their payback period is only a small fraction of their service life. However, solar panels have advantages and limitations, like any power generation technology. When many homes and businesses in the same region start to use solar power, there is a technical challenge for the grid:

  • All those solar panels reach peak production around noon, and it often exceeds the energy consumption of the buildings using them. As a result, their surplus electricity is sent to the power grid.
  • Grid operators must deal with a large influx of solar power coming from homes and businesses. In many cases, the electricity network is not prepared for this, and grid operators are forced to limit solar exports from homes and businesses.

Solar power production decreases rapidly as sunset approaches, exactly when the population is returning home and using light fixtures and appliances. The grid must deal with a sudden drop in solar generation, combined with a power consumption peak from homes. This can be solved by having power plants on standby and constantly upgrading the grid, but the associated cost is very high. As you might guess, the cost of new power plants and grid infrastructure leads to higher electricity prices for everyone.

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Creating incentives for solar battery systems

Solar battery systems can help solve the challenges described above. When there is surplus generation from homes and businesses, they can simply store electricity that is not being consumed. With the widespread adoption of batteries, solar owners could use a larger portion of the electricity they generate, and grid operators would no longer deal with a high influx of solar power around noon.

  • After the evening, when homes need more electricity and there is no solar generation, they can simply use the energy stored in batteries.
  • This also helps power grids, since they must no longer deliver the kilowatt-hours being supplied locally by batteries.
  • Energy storage systems are useful even if their owners don’t have a high consumption after the evening. They can be configured to send electricity to the grid during peak demand hours, and owners can be rewarded for this.

Homes and businesses with battery systems can support the grid, but they don’t have enough incentives to do it. The feed-in tariffs paid to solar owners are much lower than the kWh prices charged to them, and they are not rewarded for supplying electricity during peak demand hours. Solar owners are simply selling their surplus generation at noon, since there is no extra benefit from selling it later. This means that solar batteries are generally installed for self-consumption, since there is no economic incentive for using them to help the grid.

However, the Australian Energy Market Commission (AEMC) has become aware of these issues, and several reforms are being implemented in the electric sector. 

  • The AEMC wants to reward solar owners who export electricity to the grid at times of high demand, which would create an incentive to use more battery systems.
  • There will also be measures to limit the solar power influx at times when the grid has excessive production.
  • The AEMC reform was introduced in June 2021, but the specific measures for each state and territory will be determined individually by local governments.

Why surplus solar generation is a missed opportunity

Generally, homes only consume around 30-50% of their solar generation, and the rest is exported to the grid in exchange for a feed-in tariff. By introducing measures that incentive energy storage and controlled exports, grids can accommodate a much higher solar capacity without supply and demand issues.

The alternative is upgrading the grid to manage solar generation peaks around noon, and residential consumption peaks in the evening. However, this requires major investments in the grid, and higher electricity bills for homes and businesses alike. 

  • These tariff increases would also improve the financial return of solar batteries, but there would be no opportunity to coordinate their operation – battery owners would simply avoid consumption from the grid as much as possible.
  • On the other hand, when there are incentives for solar batteries that support the grid, their financial benefits are maximised.

The grid needs enough power plants and transmission capacity for peak demand hours, even when all that capacity is only used for short periods. Unfortunately, all this infrastructure has fixed costs that increase electricity prices. However, when the right incentives are in place, peak demand can also be managed with distributed energy resources – this includes solar batteries.

According to the AEMC, distributed energy resources such as rooftop solar panels will provide 45% of Australia’s electricity by 2050. However, this requires a transformation in how the grid operates. Electricity no longer moves in a single direction from power plants to homes and businesses, since there is now plenty of generation at the point of use.

Find out more on our blog.

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