Solar PV: Scapegoat or scourge?

Earlier this year the ABC’s 7.30 featured The Solar Switch Off, where it explored proposed powers for regulators to turn off customer solar.

In the report customers expressed concern, saying they would not be happy if they were told their power would be turned off in the middle of the day - when they can see the sun shining and their homes benefitting from free electricity. Others said that instead of switching off solar, there should be more investment in grid infrastructure and batteries.

Another 7.30 feature that aired last week explored the suggestion that rooftop solar installations have highlighted the historical challenge of voltage management in distribution networks.

So, is solar power a scapegoat for problems that have long existed on the distribution network? We take a look at the arguments.

The underlying cause of voltage problems

Network owners and system operators have argued that solar puts extra stress on the electricity grid by increasing voltage. As the Australian Energy Market Operator’s (AEMO) Audrey Zibelman explained to 7.30, when there’s an excess of solar, there's so little load that AEMO can't manage to keep the balance with the generators. In that context, there is always a risk that the system will fail and will go black. Clearly AEMO is concerned, but not all stakeholders agree on the underlying cause of voltage problems. That has given rise to the current debate.

Voltage problems on distribution networks are nothing new, and knowing what’s happening on the grid is an ongoing problem. Energy Networks Australia (ENA) confirmed in 7.30’s report that in most Australian states, network companies had very limited information about voltages near people's homes.[1]

The ABC’s 7.30 highlighted UNSW research that supports a view that the voltage issue is principally caused by the power supply settings in the distribution networks, which they find is already close to and sometimes over the voltage limit. Voltages are set in this way by the networks primarily to manage ‘peak demand’ days where load on the network can be upwards of double the normal average. High loads in the network tend to lower voltage, and so to accommodate these high demand days, the voltages are set in the upper end of the allowable range, leaving very little or no headroom for solar.

This practice suggests that rooftop solar has little scope to operate and that they are not the primary cause of voltage issues.[2] The UNSW’s findings are consistent with the experience of some retailers, as their businesses seek to develop innovative aggregation services that draw upon the value of DER assets for the benefit of all grid users. With the continued growth in DER product and service offerings, the debate has implications for the current policy proposals aimed at integrating DER into the energy market system.

In a real life example of integrating DER, AGL’s South Australian Virtual Power Plant (SA VPP) orchestrates residential batteries to support grid stability and reliability, while rewarding customers for allowing their batteries to be used to provide these services. In findings consistent with the UNSW report, AGL also reported in 2017 that  voltage levels observed across the grid are generally high regardless of whether customers are exporting solar. Many retailers are concerned that these reports that run counter to the popular view of solar as the root cause of voltage problems on the distribution network are being overlooked or ignored. Many are also concerned that technical standards are being seen as the only solution.

In order to realise the greatest benefit from DER investment and participation for all consumers, policymakers need to assess the cost and benefits associated with adopting direct control approaches to customers’ assets through technical standards against alternative market-based solutions.

Policy approaches

There is a range of potential policy approaches to integrating DER.  To date, voltage management has focused on accelerating the technical standards required to enable greater use of customers’ assets to help manage grid power quality issues, including Standards Australia’s consideration of amendments to the AS4777.2 Inverter Standard, which is currently open for public comment.

Key proposed amendments to the inverter standard include more ambitious power quality response mode settings that would require customers’ assets to provide reactive power output (V-VAr) or curtail real power output (V-Watt) to contribute towards grid stability. In providing these power quality response modes, it is important to recognise that the ability of the individual assets to provide real power is curtailed, regardless of whether their solar system was exporting energy to the grid at the time, forcing them to buy their energy from the grid, even though their solar or battery system could be providing more power. This in turn reduces the value of a customer’s investment for self-consumption and limits their ability to transact in the value of that assets in ways that would mostly not be known to them before making the investment.    

While the Standards Australia Committee has been tasked with accelerating these reforms, industry is concerned that it has been provided with limited real world evidence of the effectiveness of these changes in reducing voltage, or the impact of the proposed power quality response mode settings on customer value.

The Inverter Standard AS4777.2 has the potential for material impacts upon customers, especially in distribution network locations where voltage levels are not effectively managed. This has been identified by recent AGL analysis that undertook a study of the effect of power quality response modes on its SA VPP with a view to understanding the effect of Volt-Var in reducing voltage and the impact of power quality response modes on customer value.

AGL’s review concluded that the voltage reduction impact of the Volt-Var mode spanned a wide range across the sites that were investigated, and that a meaningful impact was observed at only a minority of the sites. This preliminary analysis on customer value associated with AGL’s SA VPP battery assets, also identified a substantial equity risk with some customers experiencing material value loss[3].

To obtain a complete picture on impacts, this analysis should be extended by the proponents of Inverter Standards AS4777.2 to include a broader customer asset base, assessing impact to solar customers as well as the concurrent operation of Volt-Watt mode.

To ensure that the proposed inverter standard reforms fulfil their desired policy intent in supporting voltage management and grid stability whilst mitigating impact to consumers, a holistic cost benefit analysis should be undertaken that appropriately values the impact of solutions to DER customers against the system security benefits to be realised and cost of alternative solutions.

Market-based solutions

In a future where solar, batteries, and electric vehicles can provide a range of benefits to the broader energy market system, we need to make sure that we do not make short term policy responses that lock us into a regulatory framework that excludes or makes consumer participation passive. Specifically, market-based solutions should be preferred over mandated approaches as the most efficient and effective way to enable customers to engage and share in the value of a more decentralised market.

Through a market-based framework, a consumer can proactively decide to self-consume or, if appropriately rewarded, offer their DERs to stabilise the network system as well as other energy system services. In the view of many stakeholders, ultimately an incentive and market based solution is a better and more consumer friendly approach to managing the impacts of DER on the reliability of the distribution network system.

[1] https://www.abc.net.au/news/2020-08-17/solar-powerlines-already-over-voltage-limits-unsw-study-finds/12534332

[2] https://www.abc.net.au/news/2020-08-17/solar-powerlines-already-over-voltage-limits-unsw-study-finds/12534332

[3] The financial impact was calculated by valuing the cost to the customer of their additional grid consumption, consumption that would not have otherwise occurred if the Volt-Var modes had not been activated.