Some businesses in the Australian state of Queensland are being hit with daily service charges of more than $500 a day (AUD, equivalent to approximately $466 in U.S. dollars) on their electricity bills, in a move the solar industry says is designed to kill the rollout of commercial-scale rooftop solar across the state.
The charges were quietly unveiled by the Queensland Competition Authority (QCA) and the state government in July. But their implications are only now being absorbed as business operators run the numbers on proposed solar installations.
The new tariffs affect a range of businesses, but the worst hit are those that use more than 100 megawatt-hours of electricity a year and thus are deemed to be “large energy” users.
In tariff 46, for instance, those daily charges for “service” -- originally a charge for reading the meter -- have jumped to $488 a day from $42 a day. The “energy” price on consumption has dropped to 10.4 cents per kilowatt-hour from 11.6 cents per kilowatt-hour.
The fixed service charge replaces a “demand charge," which could vary according to consumption. There is still a demand charge in place, but it only applies if a customer uses more than 400 kilowatts in any 30-minute interval.
This is how Ergon Energy has structured its tariff 46. With the additional GST tax, the service charge rises to $537 a day.
All amounts shown in AU$
The changes have provoked strong reactions from members of the solar industry, businesses looking to install solar, and those who have invested tens of thousands of dollars in energy-efficiency measures such as LEDs or upgraded machinery.
According to Steve Madson, director of Country Solar, one of the country’s largest installers of commercial-scale solar, that’s because the new tariffs reduce any incentive for businesses to lower consumption from the grid, either by installing solar panels for their own use, or by investing in more efficient machinery and lighting.
Madson says the charges appear to be designed to stop the rollout of commercial-scale solar in Queensland.
“The changes are clever in their design,” Madson said. “They do not actually result in an increase in total electricity costs, and in some cases they actually [result in a decrease]. But they kill the possibility of reducing the bills by installing solar." He added, "How can they charge $500 a day to read the meter?"
The QCA and the state government have long been accused of acting only to protect the interests of the network operators and retailers, and to boost the dividends paid to the government.
Last year, QCA came out in favor of imposing special tariffs on residential solar customers, even though it admitted that such a system would be costly, ineffective, unfair and possibly illegal. But the agency favored the move because it would protect network revenues.
The raising of fixed charges has been a common response among utilities fearing the impact of rooftop solar and a “death spiral” of falling revenues on a fixed asset base.
Analysts such as Morgan Stanley have ridiculed the practice of imposing high fixed charges, saying it may ultimately be self-defeating and could simply accelerate that death spiral, encouraging people to go off-grid, particularly when battery storage becomes commercially viable.
“There may be a ‘tipping point’ that causes customers to seek an off-grid approach -- higher fixed charges to distributed generation customers are likely to drive more battery purchases and exits from the grid,” the Morgan Stanley researchers wrote.
Madson agrees: “In three years’ time [when battery storage improves], this will also be enough [to cause] a mass exodus from the grid.”
It is not the first move made by Queensland authorities against rooftop solar. In June, new rules were imposed that allow the network operators to stop businesses and homes from exporting excess electricity from rooftop solar systems back into the grid.
Ergon Energy, which operates in the regional areas that cover 97 percent of the grid, has admitted that the move could encourage more battery storage -- and ultimately cause consumers to leave the grid, which would not be the most desirable outcome for society as a whole.
John Grimes of the Australian Solar Council said the QCA ruling is discriminatory and aimed squarely at shutting down solar PV in Queensland.
“It is also really dumb,” Grimes said. “Commercial and industrial solar is exactly where we should be supporting solar, not locking it out."
Madson has crunched the numbers for a number of clients in Queensland based on various tariff structures, showing them how they will be impacted by the changes.
For those transitioning from tariff 20 and using 300 kilowatt-hours a day, the new structure and fixed service fee mean that the benefits of cutting consumption by one-third will narrow from a 30 percent reduction in the annual electricity bill to just a 10 percent reduction. To those using more energy, the benefits of reducing consumption by one-third will fall to just a 4 percent reduction in the bill.
These changes will affect businesses such as motel owners, and any other business with high levels of air conditioning and/or refrigeration needs.
According to Madson, "Small and medium-sized business employees are the majority of people in our state, and yet small and medium-sized businesses are the ones constantly being slammed to [make up for] shortfalls in coal revenue. Electricity prices have doubled in five years; gas prices are set to triple."
Giles Parkinson is the founding editor of Reneweconomy. This piece was originally published at Reneweconomy and was reprinted with permission.