TRIALS RESULTS: VIRTUAL NET METERING & LOCAL NETWORK CREDITS

Jay Rutovitz, Institute for Sustainable FuturesAll Energy Conference 2016, Melbourne, Oct 4th 2016

The bigger picture

Background - the project & the concepts

Results

− Winton

− Cogeneration (Willoughby)

− Community solar garden

isf.uts.edu.au

OUTLINE

THE BIGGER PICTURE

TODAY:

HIGHLY CENTRALISED

NETWORK

THE FUTURE:

DECENTRALISED

NETWORK

…WITH FAR MORE

LOCAL ENERGY

Local

Energy

CLIMATE POLICY & NETWORKS

Paris Agreement: To keep global temp. rise "well below" 2oC & "endeavour to limit" rise to 1.5oC

Net zero carbon energy sector ~2050 >

• Current RE: 15%

• Future RE: 100%

We will need new REcapacity everywhere - how do we maximise the value of existing network?

isf.uts.edu.au

BACKGROUND: THE PROJECT

Local Network Credits

Local Electricity Trading

THE PROJECT: WHO’S INVOLVED

PROJECT

LEAD

MAIN

SPONSOR

CITY OF

SYDNEY

Essential Energy

Ausgrid

Energy Australia

Origin Energy

Winton Council/ LGIS

Australian Energy Council

Electricity Networks Association

Clean Energy Council

Coalition for Community Energy

Objective: To facilitate the introduction of local network charges* & Local Electricity Trading**

WHAT DID WE DO?

Five case studies, or “virtual trials”

A recommended methodology for Local Network Credits

An assessment of requirements & costs for Local Electricity Trading

Economic modelling of benefits & impacts

Increase stakeholder understanding and support for Local Network Credit rule change

** also called Virtual Net Metering or VNM

** implemented as Local Network Credits paid to the generator

THE CONCEPTS

Local Network Credits:export credits for energy

generated & consumed ‘locally’;

recognises the value in reducing

future network costs

isf.uts.edu.au

affects this

part

affects this

part

$ network

charges

$ energy

costs

$ retail

TYPICAL MAKEUP OF

ELECTRICITY BILL

Local Electricity Trading** netting off generation from one site

at another site on a time-of-use

basis, so that Site 1 can ‘sell’ or

assign generation to nearby Site 2

**also known as Virtual Net Metering (VNM)

NEEDS A CHANGE IN

ELECTRICITY MARKET

RULES

CAN HAPPEN NOW –

SOME RETAILERS

OFFER SIMPLE

VERSIONS

LGNC RULE

CHANGE PROPOSAL

Submitted July 2015 by City of

Sydney, Total Environment Centre,

and the Property Council of

Australia

Local network charges achieved via

a CREDIT TO GENERATOR

AEMC draft determination 22nd

September – rejected proposal

Need your input to the consultation!

LET: UTS ‘CUSTOMER LED RENEWABLES’

isf.uts.edu.au

Competitive procurement: specified PPA in with bill “netting off”

200kW Singleton Solar Farm Dr Chau Chak Wing Building

12% of

demand

Local Electricity Trading

Increase consumer choice

− customers can choose where their power

comes from, making energy ‘personal’

− unlocks local energy projects

− Enables stand alone community energy projects

Competitive advantage for retailers offering LET

(esp. local govt, large corporates, community

energy customer groups)

POTENTIAL BENEFITS OF LET

Local Network Credits

• Reduce future network costs and consumer costs

• Reduce load defection and maintain network

utilisation

• Unlock new local energy projects

• Unlock new product offerings e.g. neighbourhood

energy storage, LET

POTENTIAL BENEFITS OF LNC

THE TRIALS

- WINTON RESULTS

- DISPATCHABLE GENERATION

(COGEN)

- ONE TO MANY

THE TRIALSWINTON - FRINGE OF GRID

Tech Geothermal

Network Ergon Energy

Retailer Ergon Energy

Model 1 1

BYRON

Tech PV

Network Essential

Retailer Origin Energy

Model Council 1 1

WILLOUGHBY

Tech Cogen + PV

Network Ausgrid

Retailer Energy Australia

Model Council 1 1

MOIRA/SWAN HILL

Tech PV

Network Powercor

Retailer AGL

Model 1 Many

WANNON WATER

Tech Wind

Network Powercor

Retailer AGL

Model 1 2

21.9c 22.3c

19.6c18.0c

15.3c 15.2c

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

Annua

l e

ne

rgy

co

st, a

ll site

s Private wire repayments & O&M

Generation costs minus income

Energy volume charge

Network volume charge (note 1)

Network capacity charge

Network & retail fixed charge

Average electricity cost (net) c/kWh

WITH LOCAL GENERATIONWITHOUT

LOCAL GENERATION

Private wire reduces Winton

Council annual energy cost

by $105k BUT network loses

$282k. Paying LNC of ~$64k

leaves both parties better off

Reduces energy

cost by 6.7 c/kWh

TRIALS RESULTS – WINTON GEOTHERMAL PROJECT ANNUAL ENERGY

COST BY SCENARIO

ALL TRIALS – IMPACT ON PROPONENTS (TOTAL ENERGY COSTS)

50%

60%

70%

80%

90%

100%

110%

Byron Shire Council

Willoughby Council

Wannon Water andGlenelg Shire Council

Winton Shire Council

WITH LOCAL GENERATIONWITH LOCAL GENERATION

BAU annual energy cost

WITHOUTLOCAL GENERATION

RESULTS: DISPATCHABLE

LOCAL GENERATION

(COGEN CASE)

0c

2c

4c

6c

8c

10c

12c

14c

16c

18c

12

AM

1 A

M

2 A

M

3 A

M

4 A

M

5 A

M

6 A

M

7 A

M

8 A

M

9 A

M

10

AM

11

AM

12

PM

1 P

M

2 P

M

3 P

M

4 P

M

5 P

M

6 P

M

7 P

M

8 P

M

9 P

M

10

PM

11

PM

c/k

Wh

Time of day

Cogen: marginal O&M cost CoGen Marginal fuel Cost

LET income + Network income (LGNC) Energy income (LET)

Energy income (Current market)

COGENERATION – LGNC IMPACT ON MARGINAL

OPERATION

Marginal

operatin

g cost

COGEN – LGNC IMPACT ON MARGINAL OPERATION

• An LGNC could meaningfully shift the operating

profile of existing dispatchable generators to

make it available at peak times

• Operating profile changes could in turn shift

system design size for new systems, so that

proponents size for efficient heat utilisation

rather than zero electrical export.

RESULTS:

ONE-TO-MANY

SOLAR GARDEN

ONE–TO-MANY (COMMUNITY SOLAR FARM)

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Time of use basis

HOW DOES THE MONEY WORK?

isf.uts.edu.au

Community solar farm

Time of use basisElectricity “netted off”

according to share of farm

Households/ businesses invest in farm

If share of solar farm generation greater

than house/ business consumption,

electricity “exported” and gets FIT

If Local Network Credit is paid to generator,

goes to each premise according to their share

Local Generation Certificates go to

management company (and some

electricity output if there is a shortfall)

Appears as credit on electricity bill

Network charges etc are paid just as normal

– it is just the ENERGY portion netted off

1

2

3

4

56

WHAT YOU GET FOR EACH KWH SOLAR

isf.uts.edu.au

$ network volume charges

$ energy

costs

$ retail

BEHIND THE

METER

$ network volume charges

$ energy

costs

$ retail

$ network

$ energy

costs

$ retail

Local Electricity

Trading

LET AND Local

Network Credit

WHAT WE LOOKED AT IN THE TRIAL

Investor types- Residential at home weekdays

- Residential out weekdays

- Residential out weekdays with summer AC

- Business, 5 day week

- Business, 7 day week

With and without a Local Network Credit

A larger/ smaller share

How it works for the management company

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BUSINESS CASE OUTCOMES

isf.uts.edu.au

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Res - outweekdays, 1.5kW

Business, 5d week

Annual energy cost outcomes by investor profile

Annual energy costpre investment

Annual energy costwith LET

Annual energy costwith LET and LNC

Annual energy cost(solar on own roof)

5.9%

12 yrs

IRR

Simple payback

8.3%

10 yrs

10.8%

9 yrs

12.9%

8 yrs

ANNUAL ENERGY COST - OUTCOMES BY INVESTOR TYPE

OVERALL BUSINESS CASE OUTCOMES

isf.uts.edu.au

Project size = 200 kW

Before

investing

Local Electricity

Trading (LET)

LET & Local

Network Credit

Annual energy

cost ($)$314 k $278 k $272 k

Simple payback

(years)11 yrs 10 yrs

Investment rate of

return (IRR)5% to 12.3% 7.5% to 14.2%

Lifetime benefit ($) $757 k $887 k

Project cost = $382,000

94 residential and 12 business investors

KEY INFLUENCE ON INVESTOR OUTCOMES

Generator cost

What you pay for your energy without solar

What proportion of netted of electricity you

consume at your home/ business

isf.uts.edu.au

Behind the meter has better return

Not suitable for large business because

energy volume charge is low

The more LET electricity you consume on

site, the better the payback

CONCLUSION

KEY FINDINGS FROM TRIALS

Potential for distributed generation projects to meet local

consumption needs, unlikely to be realised in today’s market

Cogen likely to be undersized without something to

incentivise exports

An Local Network Credit could maintain utilisation of the grid,

and help reduce perverse incentives to go behind the meter

LET (and LNC) could unlock community energy sites and

increase access to renewable energy

isf.uts.edu.au

THANK YOU

PROJECT WEBSITE

http://bit.do/Local-Energy