The Australian Energy Market Commission (AEMC) has finalised a new reform package – to increase small-scale solar uptake and boost the grid, whilst also supporting the growth of batteries and electric vehicles.

The reforms will put tough new obligations on power network companies to make their networks ‘smarter’, making them accountable for transitioning their businesses to solar and battery-friendly.

A key part of the changes is removing the companies’ ability to put blanket bans on customers sending solar energy back to the grid.

The reform package also means power networks can offer a range of options – including a basic free service – to encourage solar owners to limit solar waste, save money and benefit the grid.  

Other changes in the final reform package include giving the Australian Energy Regulator (AER) power to develop a framework, to govern how power networks should provide export services to customers and how they must report back.

Smart solar: the reforms at a glance

  • Obligations on power network businesses to support energy flowing both ways: includes a performance framework, mandatory reporting on how they are delivering on expectations to deliver more solar and removing blanket export bans
  • Power network companies will be able to offer a range of options – including a basic free service – to encourage solar owners to limit solar waste, save money and benefit the grid
  • Guaranteed free options will apply up until 2041 until changes are made, if required
  • Those choosing paid plans could earn more for solar export at some times and less at others but they’ll have more opportunities to earn and save
  • AER has oversight, with all new network plans to be scrutinised and signed off as being in consumers’ interest – networks would have to consult widely and test and trial the options they put forward
  • No new pricing plans for existing customers before July 2025, giving customers more certainty

The reforms are a long-term sustainable plan to have more customers benefit from solar, put downward pressure on electricity prices and help decarbonise the energy sector faster.

AEMC Chair, Anna Collyer, said, “These new measures to drive smart solar are fundamental to enabling a modern electricity grid that delivers out to 2030 and beyond. 

“They represent a profound change to the way poles and wires businesses must think about how they manage their network and turn the current one-way street delivering power to people’s homes into a two-way super-highway where energy flows in both directions. 

“Power network companies will need to deliver services to support solar – and they’ll be judged on their performance on how much solar exports they allow into the grid.” 

The AEMC said that the reforms acknowledge that Australia has the fastest rate of solar take-up in the world, and reflect concerns from industry, energy market bodies, consumer and environmental groups and other experts that without action, the grid will be unable to handle the volume of solar forecast to double over the next decade. 

This is currently an issue for some solar owners who are being blocked from sending energy back to the grid to avoid daytime supply disruptions. 

The changes aim to move solar around to when it’s most needed so solar owners can get more from their panels and more solar can get onto the grid. 

“By carving a path for smart solar, batteries and electric vehicles, more solar can be used, we will keep costs down for all consumers and protect the value of household solar investments already made,” Ms Collyer said. 

“We don’t want to see solar going to waste. That costs everyone more because less cheap renewable energy gets into the system.” 

Increasing certainty for solar investments

The final reforms also address the diverse views on this issue, including requests for more certainty on what the changes will mean for current and future solar investments.

AEMC Chief Executive, Benn Barr, said, “We’ve listened to the feedback we have received and have tightened protections for consumers to increase certainty.”

This means networks will have to offer a free basic service alongside any paid solar export plans, so people won’t have to pay if they don’t want to. If they choose a paid plan where they earn more at some times and less at others, there will be more ways to earn and save.

“Those with a battery or an electric vehicle could earn for sending energy when it’s needed or save by consuming more of their own solar,” Mr Barr said. 

“There are smart devices and set and forget systems out there now to help customers navigate a more dynamic energy system – like delay start functions on dishwashers, and automated systems that control solar inverters to send energy when it’s most beneficial to the grid and the household budget. All of this can be as easy as using a mobile phone.”

There are also other things open to power network businesses to do to promote smart energy use, like encourage access to community batteries. 

The AER will need to sign off on all network plans as being in the long-term consumer interest, and each network will retain the ability to develop its own incentives, as each has a different customer mix level of solar penetration and congestion, and different government preferences to consider. 

“This is about getting ahead of the curve and preparing the grid for change that is happening now and only going to accelerate over the next ten years,” Mr Barr said.

“Getting this right means adapting the grid to handle more solar in a smart way that keeps costs down, keeps significant financial benefits for those who choose to go solar and saves money on electricity bills for those who don’t or can’t.

“Getting it wrong means less clean energy in the system and existing and future solar and battery customers miss out.” 

More benefits, lower bills

Based on the latest retail and solar feed-in tariffs in each jurisdiction, 80 per cent of customers should see their bills drop under this reform because they would no longer pay for solar export services they aren’t using. 

AEMC modelling shows even under a worst-case cost scenario, solar owners choosing paid plans would still earn at least 90 per cent of what they do now – and that’s before taking any action to change their energy behaviours. This compares favourably with lost income from being blocked from exporting energy.

ESB Chair, Dr Kerry Schott, said that integrating more distributed energy resources to provide benefits to all consumers is one of the four key areas identified as critical by the Energy Security Board.

“This determination removes blockages for renewable energy entering the system. It’s important for customers and is a major step towards the new clean and affordable energy system,” Ms Schott said. 

ENA Chief Executive Officer, Andrew Dillon, welcomed the new reforms and said it was a milestone decision that would enable more customers to embrace and benefit from distributed energy technologies such as rooftop solar, batteries and electric vehicles.

“The AEMC has worked closely with a range of stakeholders to deliver a framework that will allow more DER onto the grid and support Australia’s transition to a renewable future,” Mr Dillion said. 

“Without future proofing the grid, the growth in DER means networks will increasingly need to restrict or even block energy exports to prevent voltage spikes and localised black outs.

“Customers need to be able to confidently invest in renewable energy technologies and know they are able to export to the grid when they have an excess of energy.”

Tariff guidance on the way

AER Chair, Clare Savage, also welcomed the rule change, and said it is a balanced set of reforms that are in the long-term interests of energy consumers. 

The AER will soon commence a consultation process on developing the Export Tariff Guideline, starting with publishing an Issues Paper in September 2021, with the aim to publish a draft guideline for community feedback in early 2022.

“For the household rooftop solar investors out there, and network companies, we want you to know that we will work with you to develop a set of guidelines that encourage network investment that supports the national grid, the environment, and is good news for retail energy bills,” Ms Savage said.

“Our Export Tariff Guideline will promote confidence in the tariff setting process by providing greater transparency around the AER’s decision-making, how networks should develop their proposals, and how stakeholder views should be taken into account. 

“We look forward to working with stakeholders and encourage anyone with an interest in solar reforms to join the conversation throughout our consultation.”

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