Electricity consumption rates for business users in South Australia have been slashed in a move that will make rooftop solar less attractive to consumers, but could provide added incentive for consumers to adopt both solar plus battery storage, reducing their reliance on the grid.

The decision by SA Power Networks to slash the electricity usage component of its network charges to just 3.3c/kWh, just one-fifth of its previous peak rate, and impose hefty “demand charges” is part of a range of measures taken across the country that the solar industry says disadvantages rooftop solar.

The moves are part of a massive battle – both in Australia and overseas – between old and new technologies, as incumbents seek to protect the revenues from existing business models and old technology, and continue to resist change to new business models and new technology.

Last month, SAPN sought to impose a special fee on solar households equivalent to $100 a year, although this was rejected by the regulator. Across the country, fixed tariffs are being increased, demand charges introduced, and special metering fees added which increase the cost of solar installations. Elsewhere, the price paid for exports of solar output back to the grid are being slashed – even though the significant value of rooftop solar is being recognised in the US – and in some cases solar systems are not allowed to export into the grid.

The SAPN changes, which come into effect on July 1, introduce a new tariff and metering system for businesses using more than 160MWh a year, although the new tariff design may be progressively introduced to small business users and households.

SAPN says the new tariffs are part of the new “cost reflective” tariffs that are being encouraged by regulators. But the solar industry says that in many cases the notion of “cost reflective” is turning into a meaningless label and is being used simply as a grab for revenue.

The SAPN usage charges for its network have been slashed to just 3.3c/kWh, compared to 16.4c/kWh for peak usage under the old tariff.

The new supply charges (see table on the right) translate to a minimum bill of around $4,100 a year, just for connection. That is nearly three times the previous fixed supply fee, according to installers.

“It’s entirely predictable,” said Rob Passey, from the Australian PV Institute, which argues that cost reflective tariffs must be what they are labeled as – truly cost reflective. It argues that these tariffs, proposed by SAPN, are not.

“Their focus has always been more on maximising revenue than on being cost-reflective,” Passey said of utilities in general. “Now that they have been allowed to get away with claiming that tariffs are cost-reflective when clearly they aren’t, their response will be to see how far they can push it.

“Of course, this will backfire on them because the broader they make their demand charge the more likely people are to install PV/batteries and reduce their electricity use.”

That’s exactly what installers are predicting will happen. “Initial feedback from the market is that this will put the brakes on solar-only arrays for the commercial sector,” said Peter Elliott, from Sunstainable. “But those customers are already seeking pricing on battery storage to overcome these changes.”

While solar-only installations may now look much less attractive, solar plus battery storage is starting to look much more interesting, because the solar output can be stored to ensure that the demand benchmarks are not exceeded, although this will depend on the usage patterns of the household or business consumer, and on the set up of their solar and battery storage installations.

This, in turn, would lead to a lot less electricity being drawn from the grid. Which, in turn, potentially leads to what people describe as the “death spiral”. It is exactly what the modern “how to” texts advise not to do.

It’s ironic, because South Australia’s state government and the City of Adelaide are looking to encourage storage in more positive ways, offering limited up-front incentives to homes and businesses looking to install battery storage.

Battery storage – and other forms of storage at grid level – is seen as a key element of integrating renewables and managing peaks in demand.

But network operators and pricing regulators are still struggling to find a formula that encourages installation of storage as an incentive, rather than a penalty, and in a way that can reduce investment in poles and wires and grid upgrades.

The way that demand tariffs work, businesses are charged according to the most amount used in a single 30 minute period during the month. So even a low consumption user that happens to have all its equipment switched on at the same time for one short period will face a significantly higher bill.

There is a vigorous debate about how demand tariffs are structured, centred around the definition of “peak demand”, which can often stretch from 12pm to 9pm for the purposes of billing, but which may actually only occur in the early evening.

Rooftop solar – which accounts for nearly 7 per cent of total demand in South Australia over the year, and has been installed on more than one in four homes – has already pushed peak demand back several hours in the state, from the afternoon to the early evening.

SAPN has even admitted that solar PV has added stability to the grid at peak times. In the US, these factors are taken into consideration to propose a much higher tariff for rooftop solar. In Australia, rooftop solar is rewarded with minimal prices for exports back into the grid.

There is also controversy over the use of declining block component of the demand bill. The highest rates are charged for the first units of consumption, Heavy users actually pay less for the excess capacity.

The APVI has argued strongly that the demand charges should be based on consumption on the “network peak”, rather than individual usage peaks, because they may occur at totally different times.

SAPN, in its explanation to consumers, says that the demand charges are designed to try to reduce the size of the “highway” needed to meet peak demand. It compares the grid to a 10-lane highway built to meet peak demand. Only two lanes may be used for most of the time, but the full 10 lanes for just a few hours on just a few days a year. The network is built – and the costs paid by consumers – on the basis of these few hours.

SAPN says solar PV and battery storage may reduce the level of demand reached at a consumer’s site, but may not be able to be relied upon to consistently lower levels of demand.

“For example, if sunny days line up with peak demand days, then solar panels may enable the actual peak or shoulder demands to be lower in those months. However, in other months, there may be cloud cover on peak demand days resulting in less energy generated by your panels and therefore higher demand on the network.

“Battery storage may enable a more reliable demand reduction, although this will be highly dependent on how your installer configures your system. “

It also warns that consumers making alterations to their site – such as adding solar and storage – may result in a change in their tariffs, and to metering charges, which are also being lifted, as they are in other states.