Solar Sponge Tariffs could be the answer to the Electricity industry’s Duck Curve problems

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A new buzz term is circulating in the electricity sector as network operators look to introduce super cheap ‘solar sponge’ tariffs to reshape grid demand and encourage customers to shift their use to the peak solar generation period.

The issue comes to the fore as traditional fossil-fuel generators are struggling to adapt to the demands of very low electricity demand during the day which skyrockets as soon as the sun goes down.

You may have heard of this situation before, it is known as the Duck Curve.

Solar generation can only take place when the sun is shining.

As soon as people return home to put the kettle on and turn on the television, the sun has set and demand goes through the roof. 

This means that during the day, there is a huge amount of electricity being generated from rooftop and industrial solar.

Demand, as a result, bottoms out, leading to zero value spot electricity prices.

That is not the only problem. Oversupply of solar electricity can seriously damage distribution networks.

At the same time, traditional fossil-fuelled generators struggle with inertia, meaning that they cannot be shut down and expected to fire up and meet the evening demand. 

This is causing them to operate at huge losses during the day when prices can plunge into negative territory and in turn charge astronomic amounts in the evening. 

What is needed is literally a sponge that can soak up the extra electricity generated between 10am and 3pm.

Australia’s love affair with rooftop solar

But first, let’s put things into context. Just 10 years ago, the rate of rooftop solar penetration in Australia was negligible.

Fast forward to 2020 and it’s over 9GW which equates to just over a quarter of total average grid demand.

That is a pretty big number but pales in comparison to estimates by the Commonwealth Scientific and Industrial Research Organisation has forecast 60GW by 2050. 

The current total capacity in the National Energy Market is 50GW and the average maximum demand sits at 35GW.

While some view solar as a problem, especially for a grid that was designed for one way traffic, it seems that acceptance and ways to turn it into an opportunity are finally being considered.

South Australia has always been a trailblazer in the renewables field and South Australia Power Networks are introducing solar sponge tariffs to influence and change customer behaviour.

How do solar sponge tariffs work?

Residential customers are generally invoiced by their electricity retailer on a bundled tariff structure.

Bundled into each rate in the tariff is a network use of system cost which the retailer incurs and passes onto the customer.

Historically, this has been a single rate irrespective of the time of day at which the network was being used.

The “sponge” rate takes advantage of Time Of Use (peak shoulder and offpeak) tariff structures so different rates can be charged at different times of the day.

By offering a significant for low demand times, South Australia Power Network (SAPN) hopes to encourage households to switch “variable” loads such as hot water heating, pool pumps, and other appliances to the middle of the day rather than overnight.

The cost for the “solar sponge” – to be offered between 10am to 3pm – will be just one quarter of the normal network tariff, and one half of the “off-peak” that currently comes into effect around midnight.

The sponge tariffs differ depending on account types such as residential, SME and Commercial & Industrial, but are currently focussed on residential accounts, according to SAPN. 

A full breakdown can be found in the SAPN Document.

A potential stumbling block to the uptake of the scheme is the issue of older meters.

In South Australia,  about 87% of households have “accumulation” meters, which makes it difficult to switch the timing of loads. But the installation of more flexible interval meters will grow significantly over the next five years.

“The intent is to change behaviour in a way that will benefit customers in the longer term by reducing the need for future investment in the network and better utilising cheap solar energy generated in the middle of the day,” says SAPN spokesman Paul Roberts.

The change in attitude means that Australia is headed for a future in which solar, home batteries, electric vehicles, demand response technologies and other forms of Distributed Energy Resources (DER) will play a much greater part in our energy system than they already do, supplying perhaps half of all energy needs.

DER helps accelerate the decarbonisation of the grid, improve grid reliability, and make energy more affordable for everyone.

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