In the second of our series analysing the Finkel Review, we look at Dr Finkel's assessment on the growth of distributed energy resources (DERs) in the Australian energy landscape and his suggestions for future incentivisation and 'orchestration'. These suggestions have raised a number of considerations and opportunities, particularly in relation to the pioneering of business and government programs and partnerships to incentivise DER. Partner Andrew Mansour, Senior Associate Emily Gerrard and Law Graduate Sarah Dobbie report.
- Incentivise participation: Rule changes should be implemented to incentivise DER participation to provide services such as frequency and voltage control. More attention should also be paid to rewarding consumers for demand management and distributed generation.
- Facilitate access: Opportunities should be identified to improve access by low income households to DERs.
- Increase visibility: New data collection frameworks or mechanisms should be used to increase the visibility of all forms of DERs.
- Orchestrate services: New communications infrastructure should be utilised in order to coordinate and optimise DER dispatch in a dynamic manner.
The Finkel Report is the product of an extensive examination of all aspects of the future of the National Electricity Market (NEM). (See our previous Client Updates Finkel: the solution for our energy future? for a broad overview, and Finkel Review – Gas: A revolving door or real change? for a more specific look into gas.)
While not the major focus of the Finkel Report, considerations and opportunities relating to DER are still firmly on the horizon. As Dr Finkel notes, the NEM is on a path to increasingly smaller, distributed and non-synchronous generators, and the uptake of new technologies is putting residential, commercial and industrial consumers at the centre – by 2050, an estimated 30 to 45 per cent of annual electricity consumption could be supplied from consumer-owned generators.
Set out below are the key recommendations outlined in the Finkel Report relating to DERs. We have also considered the opportunities flowing from both these recommendations and the Finkel Review at large.
These recommendations would need to be managed in the context of any applicable regulatory framework, including any ring-fencing obligations.
The takeaway point for businesses is that change and policy development bring with them significant opportunities.
The role of subnational governments around Australia is critical in supporting the expansion of DERs. As land managers and regulators of land use and development, state, territory and local governments can incentivise growth by streamlining approval or consent processes and/or revisiting hurdles to localised DERs.
At present, community-based or small-scale distributed energy projects face varying impediments and grey areas in state and local government planning laws and regulations. For example, in Victoria there are some obstacles to the development of community DERs, eg community wind energy facilities, in some local government areas, including in the Macedon Ranges, where there is strong support for a community wind farm.1
In line with the general sentiment of the Finkel Report, however, the Victorian Government has committed to investigate and remove the hurdles to DER projects:
- Notably, in late 2016, the Victorian Government committed to allow community wind farm development in the Macedon Ranges.
- Further, the Victorian Government is currently investigating the PILOR rates framework in consultation with the public.2
While some impediments continue to exist in state and local government planning laws, businesses and governments are also pioneering programs and partnerships to incentivise take-up of DER.
In Canberra, for example, the ACT Government selected Capital Estate Developments (CED) to develop part of a new suburb named Denman Prospect. The Development Guidelines for Denman Prospect, which were prepared by CED, provide that each house must have a minimum 3kW solar system, which will generate around 4146kWh of electricity annually.3
CED has partnered with ACT Government-owned utility, ActewAGL Retail, for the bulk purchase and instalment of solar systems in the first 350 homes. Separately, ActewAGL Retail has also begun installing battery storage systems in Denham Prospect, under the ACT Government's Next Generation Renewables Energy Storage Scheme.
Denman Prospects provides an example of a developer-led program that increases the uptake of distributed energy.
The Coalition Government has adopted 49 of Dr Finkel's 50 recommendations. However, one of the most significant recommendations, the adoption of a Clean Energy Target (CET), has not been adopted. While the Energy Minister has said that the CET is still under consideration, it remains to be seen whether and how such a scheme will develop in the face of some opposition.
In light of ongoing divisions at the federal level, and the nature of the recommendations themselves, the task of actually implementing Dr Finkel's recommendations regarding DER may largely fall to the business community, and to state and local governments, which are responsible for planning laws.
As the examples above demonstrate, however, despite some obstacles, businesses and governments are pioneering programs and partnerships to incentivise take-up of DER.
- Macedon Ranges Planning Scheme, Schedule to Clause 52.32; Victorian Government, Submission to the Parliamentary Inquiry into Community Energy Projects (December 2016)
- Macedon Ranges Planning Scheme, Schedule to Clause 52.32.
Sophie Vorrath, 'Australia's new solar 'burbs' – where rooftop PV is mandatory' (One Step Off the Grid, 24 May 2017); Willow Aliento, 'Denman Prospect to be Australia's First Mandated Solar Suburb' (The Fifth Estate, 15 October 2015)