Tag Archives: electricity supply chain

The beginner’s video guide to assessing the value of buying or building your own renewables

One of our clients recently went to market via an Expression of Interest (EOI) to solicit interest from firms and potential partners with building or sourcing large-volume renewable energy to meet a significant fraction of their electricity demand.

We were contracted to review the responses to the organisation’s EOI and provide our recommendations about sourcing large-volume renewables. The requested interest was for two technical options, to build a solar farm on the organisation’s land, or to purchase renewable electricity from other projects – for example from utility-scale wind and solar projects elsewhere in the National Electricity Market.

Energy markets and evaluating EOI responses is complex, so for our final presentation, we were asked to also cover some of the basics to allow the leadership team to understand how we arrived at our recommendations.

When we created the slide deck for this presentation, we thought about how we could best present the underlying information. Pictures say more than words, so we decided to use animations to

  1. explain the fundamentals of the electricity supply chain,
  2. the components of your electricity bill, and the
  3. difference between installing solar behind your meter versus building a large-scale solar farm, versus sourcing renewables from an offsite project.

You can watch the video with our animations here:

If you need help with going to market or with evaluating responses to your EOI, RFT or RFP,  please contact Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.

Nine ways to maximise the financial benefit from your surplus solar energy

9 ways to maximise the financial benefit from your excess solar
9 ways to maximise the financial benefit from your excess solar

Our recent blog posts related to the treatment of surplus solar energy. We considered the carbon accounting treatment of your exported solar, explained peer-to-peer energy trading and its applicability to solar exports. In this blog post, we are investigating nine ways how you can maximise the financial benefit from your excess solar.

Nine ways to maximise the financial benefit from your surplus solar

1 Negotiate a good Feed-in-Tariff (FiT)

Your exported solar electricity has a value, which is equal or close to the wholesale electricity market price. Many retailers will offer feed-in rates with most drawing on annual guidance by IPART on appropriate FiT rates or ranges. Some retailers will offer a fixed rate, while others will offer a credit at the same Time-of-Use (ToU) retail rate that applies when the electricity is exported.

You should review your current agreements for treatment of excess solar energy generation, and look to agree on a fair rate or specify this requirement in your next retail energy negotiation.

2 Find a retailer who is willing to net off your supply and demand

If no FiT can be negotiated, then crediting export to another site could see savings at the receiving building’s full retail electricity rate. Although we are not aware of such an arrangement at a small scale, you may be able to negotiate this with your retailer.

It is possible to assign generation from one site to another, but to do this, the following needs to be in place:

  • You need to find a willing retailer
  • The retailer needs to have a billing system that allows for the assignment of generation on a time of use basis – a tricky issue for tier-1 retailers with legacy billing systems.

There is an example for this scenario with a Power Purchase Agreement undertaken by the University of Technology Sydney (UTS). UTS and its electricity retailer have agreed to ’pass through’ generation from a 200 kW Singleton solar PV farm to UTS’ Broadway campus. However, the electricity from the Singleton solar farm only makes up 2% of UTS’ total load.

3 Ask your network provider for local network sharing tariffs

Historically, network pricing has not considered the proximity of a consumer to a prosumer. However, this needs to change to reflect that the grid is changing to two-way energy flows. If more and more customers ask for this, change can happen.

There are trials underway where network providers have agreed to a new local sharing network tariff. The town of Newstead in Victoria, for instance, has been able to develop a local sharing tariff (for a 2-year trial) with Powercor.

Thus far there are no similar arrangements in place in NSW, though discussions are ongoing. Enova Energy and Essential Energy, for instance, are trying to develop a local generation tariff in the Byron Bay Arts and Industrial Estate.

4 Consider an embedded network

An embedded network is a private network, in which only one parent meter is connected to the grid. Behind that parent meter, several customers are being supplied with electricity, with the Embedded Network Operator controlling how the private network operates.

The operator buys the electricity for the embedded network from a retailer and onsells the energy, usually at a discount to market. In order to set up an embedded network, you need to get a retailer exemption from the Australian Energy Regulator (AER).

Embedded networks are common in caravan parks, business parks, shopping centres, apartment blocks, office buildings, airports and university campuses. They are relatively easy to set up from scratch but expensive to retrofit.

An embedded network may work for you if you are looking to share your excess solar electricity with tenants in the same building that your organisation owns.

5 Use battery storage to increase self-consumption from solar

Instead of sending the excess solar electricity into the grid, you could send it to an onsite energy battery storage system. You can then use this stored energy to supply you with power during times when the sun doesn’t shine, or to help you reduce your peak demand.

Unfortunately, at this stage, the costs of battery storage are still high. This is particularly the case where you export most of your energy during weekends. You would need a large battery to deliver cost savings during working weekdays.

If used primarily to trim peak demand further then the business case will be a little better as a smaller-size battery will be required.

6 Solar with battery storage in a virtual power plant (VPP)

The NSW Government recently announced plans to develop a 200 MW Virtual Power Plant (VPP) that will harness the capacity and stored energy in household and business batteries to provide dispatchable energy during peak network demand periods, typically hot days in summer. This is being developed under the Smart Energy for Homes and Businesses program which is expected to launch early in 2019.

Stored energy can also have value by being capable of being aggregated with other batteries to bid into the wholesale market. This is a key part of some pre-existing VPPs such as Powershop-Reposit’s Grid Impact product, and similar VPPs in other jurisdictions such as the ACT, with a large-scale VPP in development in South Australia.

7 Consider a microgrid

If you are also interested in sharing energy for the purpose of increasing your resilience in the event of a grid failure you can consider a microgrid. Customer-level microgrids and embedded networks are similar, where you are looking to share energy in a private distribution network. The main difference is, however, that the microgrid can disconnect from the main grid.

A microgrid works best in conjunction with battery storage large enough to still supply you with power, even during a blackout.

8 Peer-to-peer solutions like PowerLedger or Greensync

At this time a number of trials of P2P have been progressing, with most commercial projects occurring in strata or similar precincts where energy can be shared behind the main meter. This is because, currently, P2P solutions are easiest to set up in embedded networks.

If the P2P solution is outside an embedded network, where energy is shared between sites via the grid, you need the cooperation of a retailer offering a product that stacks up with credits from the distribution network provider.

For more information on P2P energy trading trials, you can read our blog post on peer-to-peer energy trading.

9 Consider a portfolio approach

Last, but not least, you should always consider a portfolio approach when maximising your financial benefits of solar. Every time you go to market for a new retail contract, you need to evaluate options that give you the bests financial return overall for your portfolio of assets. In addition to evaluating solar export, you may also want to pair this with demand flexibility mechanisms.

 

100% Renewables can help with evaluating these options for you. Please contact Barbara or Patrick for further information.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.

The current reality of peer-to-peer energy trading for sharing surplus solar energy

With falling prices for solar panels and with experience gained on previous solar PV projects, many of our clients are thinking about increasing the size of their current solar installation where space allows.

By increasing the size of their system, many clients would be exporting some of their solar electricity, especially on weekends. Naturally, the question arises how to maximise the financial benefits from that surplus electricity.

It is not uncommon for the value of exported solar energy generation to be forgone, whether through lack of management or an unwillingness by a retailer to offer or negotiate a feed-in rate. In this scenario, you would lose any financial opportunity from exported solar.

This is when many of our clients ask about the status of peer to peer trading and local energy sharing.

What people tend to think happens in a P2P energy trading transaction

It seems such a straightforward concept. You have excess electricity from your solar installation on Building A, you assign this to Building B across the road, which can’t have solar (e.g. is overshadowed). Building A benefits by increasing the size of its solar PV array leading to higher bill savings, and being able to assign or sell the exported electricity to Building B. Building B would benefit by potentially having a lower electricity bill, and a renewable energy supply.

100% RE - Expectations for P2P energy trading
100% RE – Expectations for P2P energy trading for exported solar electricity

The reality of current P2P energy sharing for your surplus solar

Unfortunately, the reality is different. When you produce electricity from solar panels that isn’t used on site, you usually export it to the grid. You can’t get the electricity from Building A to Building B without using the network.

And here is the problem: while your buildings might be close to one another, you will incur the full network charges (which for some organisations can be up to 50% of their overall bill). Network charges are made up of transmission and distribution charges. When you share energy locally, theoretically you shouldn’t have to pay the transmission charges, but in reality, you do.

In 2016, the City of Sydney, the Total Environment Centre and the Property Council Australia argued for the introduction of Local Generation Network Credits (LGNCs) with the Australian Energy Market Commission (AEMC). Unfortunately, the AEMC did not go ahead with this proposed rule change.

This means that currently, there is reduced incentive to oversize your PV system and export solar electricity, unless you have a great feed-in-tariff, or have an agreement with your retailer to net off the electricity consumption of your buildings with the surplus energy generation from another building (more on this in the next blog post).

Current reality of P2P energy trading for surplus solar electricity
Current reality of P2P energy trading for exported solar electricity

Recommended approach

At this time the recommended approach is to seek a feed-in rate for surplus solar energy generation with your electricity retailer – either immediately or included in your next contract negotiation. You may also be able to negotiate for the excess solar energy to be credited against the demand of your other building. If you are running an embedded network and you don’t own all the buildings in the embedded network, you can trial blockchain solutions like Power Ledger. We will have more information on these options in the next blog post.

In any case, you should evaluate the tariffs and prices against the portfolio of all your assets and evaluate demand flexibility options to achieve the overall best outcome. And as always, it is important to keep a watching brief on any new developments, as this space is evolving rapidly.

In the next blog post, we will expand on how you can maximise the financial benefit from your surplus solar by looking at nine different options. These include peer to peer trading, installing battery storage and participating in Virtual Power Plants, so stay tuned.

Meanwhile, if you need help with your journey to a clean energy future, please contact Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.

Peer-to-peer energy trading explained

Australia has more than 2 million solar PV installations, making us number one in the world in terms of the highest proportion of prosumers. While previously, the grid was designed to be one way only, it is now changing to two-way energy flows; facilitating exports of electricity as much as imports. One option to enable a two-way energy flow is local energy sharing or peer-to-peer trading.

What is energy sharing, or peer-to-peer energy trading?

Simply put, energy sharing is where one party produces excess electricity and then shares this with another party. Energy sharing is also known as Virtual Net Metering (VNM) or peer-to-peer energy trading.

Peer-to-peer (P2P) energy trading can be compared to file sharing programs on the Internet, like BitTorrent; to eBay in terms of shopping and to Airbnb in terms of accommodation. Fully enabled P2P trading would cut out the ‘middleman’ and allow transparent dealings between equals, as opposed to being treated as a ‘consumer’ by a corporation.

Peer-to-peer energy trading explained
Peer-to-peer energy trading explained

The party that sells electricity is called ‘prosumer’ because they not only consume energy, they also produce it.

Energy sharing could happen between tenants in a multi-rise, between adjacent buildings, or between anyone on the same network.

For example, if my solar panels at home produce excess electricity while I am at work, I could sell the surplus energy to my neighbour who can’t have solar panels. Similarly, your organisation could have multiple assets and wish to sell electricity to yourself or to donate electricity to neighbouring households or businesses as part of your social commitment.

Advantages of peer-to-peer-trading

The biggest advantages of local energy sharing are that:

  • Energy does not have to be transported from centrally located power plants, reducing electricity transportation costs
  • Energy generation can be based on renewables
  • Energy can be bought from a known source (which allows you to claim energy from a specific project)
  • Energy costs can be lower for the buyer
  • The financial benefit for the generator can be better than a feed-in rate
  • There is choice and transparency in dealing with other consumers

Barriers to peer-to-peer trading

Several barriers exist to P2P trading at present, and it is not known at what time these will be overcome so that consumers can begin to participate and benefit from renewable energy. Some of the main barriers include:

  • Not yet commercialised
  • Immature market for solutions
  • Multiple stakeholders that need to be convinced of the business case (e.g. retailers)
  • Regulatory barriers

Supporting technology – Blockchain

P2P energy trading involves a large number of transactions between prosumers and consumers and needs technology that allows for low-cost authentication, validation and settlement while protecting privacy. One of the most promising technologies to enable this is ‘blockchain’, a distributed ledger technology. Blockchain is mostly known as the technology supporting distributed trading, such as Bitcoin.

With blockchain, transactions are stored in virtual blocks, which are connected together in a chain. A complete history of all transactions that have ever occurred within a particular network is retained. Blockchain technology can offer a cryptographically secure, distributed ledger that can track where electricity was generated, where it can travel to and who used it.

There is no question about where a kWh came from and how it was produced. The technology is transparent and secure and does not require a central entity to store and manage shared data and business process. It will also make it easier for new and smaller players to be involved, right down to the individual solar household.

Current status of P2P energy trading

Progress with peer-to-peer trading is slow. A couple of trials in the residential market have been unsuccessful, partially because there was no funding, but mostly due to the current market situation.

On the one hand, regulated network tariffs mean there are little benefits to local energy trading. On the other hand, there are low levels of installed controllable distributed energy resources, which makes it hard for solution providers to provide value to their customers.

There are a number of trials using blockchain technology that have been or are currently being conducted, examples of which you can see below.

Most other forms of energy trading are heading down the Virtual Power Plant (VPP) pathway like AGL’s VPP in South Australia or Origin’s VPP in Victoria. However, like the blockchain trials, these solutions are not widespread and involve mostly the residential sector.

Blockchain-based peer-to-peer trials

AGL Solar Exchange trial in Victoria

AGL previously used blockchain technology in a desktop/virtual trial using solar panels, batteries and smart air conditioning in Melbourne homes. The aim was to understand the value in P2P energy markets.

Now AGL has launched Solar Exchange, which is an online marketplace enabling solar households to trade their excess solar power in the form of solar tokens. These tokens can be sold to other AGL customers residing in Victoria.

Under the right conditions, a buyer could buy tokens at a lower price than buying energy from the grid, while a household with solar could sell excess solar tokens at a higher price than the solar feed-in tariff. A successful trade of Solar Tokens can only be made if the buyer and seller have chosen compatible trade settings and have compatible solar export and grid usage profiles for the same trading interval.

The Solar Exchange is the largest consumer energy trading trial in Australia, with more than 250 Victorian customers participating since the pilot launched in August 2018.

Power Ledger trials in Western Australia

The Power Ledger Platform enables interoperability between diverse market management/pricing mechanisms and units of electricity (kWh) by way of pre-purchased tokens, called ‘Sparkz’, which are backed by blockchain bond called ‘Power Tokens’.

Sparkz are settlement tokens that are pegged to the local fiat currency (e.g. AUD in Australia, USD in the USA). Sparkz can be traded on the Power Ledger platform within defined trading groups through a suite of APIs that interface with smart meters.

The Power Ledger system tracks the generation and consumption of all trading participants and settles energy trades on pre-determined terms and conditions in near real time.

One promising use case for platforms such as Power Ledger’s is an embedded network, such as apartment blocks or housing developments, where residents can trade their solar energy with one another in a semi-regulated environment.

Power Ledger have implemented several successful trials of their technology under this embedded network scenario in Busselton and Fremantle. In the case of fully regulated markets, where a retail license is required to buy and sell energy on the national grid (such is the case in most of Australia), the ability for blockchain to facilitate true peer-to-peer energy trading on a wider scale than just embedded networks is somewhat constrained.

LO3/TransActive Grid in South Australia

LO3 is a US-based firm known for setting up a microgrid in Brooklyn and Germany, and for the fact that their solution is built on blockchain technology.

The company is focused on the physical transaction of energy, not the financial transactions. They see their strength in the need for fast-acting load responses, storage, controllable generation and reaction time. Their first rollout in Australia is the New TransActive Grid in South Australia.

Up to 6MW of distributed solar generation will be made available on a local energy marketplace, using LO3’s peer-to-peer trading platform. The microgrid will begin with a ‘discrete’ market using Yates Electrical Services’ Small Generation Aggregators License and their associated commercial or industrial customers, who will bid on solar electricity supplied by the firm.

A meter will be added onto a household or business which manages all energy inputs and outputs, giving participants access to cheaper electricity generated by local solar farms. The solar power will come from six locally built PV plants ranging from 200 kW to 1 MW in size (two have already been constructed) that are being sited on ‘redundant’ farmland in South Australia’s Riverland region.

deX

In December 2017, Greensync launched the ‘Decentralised Energy Exchange’ (deX). Normally, behind-the-meter generation capacity is invisible to the energy market operator. However, deX is a digital technology platform that allows utilities to see exactly what distributed energy resources are available at any time on customers’ premises and how they are performing.

deX can remotely control those resources, with the customers’ consent, at times of high demand or volatility to avoid shortages. The platform lists buyers and sellers, records agreements between them, manages event handling and verifies both parties met their obligations.

The deX program started with commercial and industrial system-owners and will expand to include about 1,200 battery-owning households, which will make up about 5MW of a total 11MW of network support. deX partners include retailers Powershop and Mojo, storage and power engineering firms Siemens, Tesla and ABB, and consumer technology suppliers like Geli, Jetcharge, Wattwatchers and Power Ledger. AEMO, ARENA, Energy Networks Australia and the Clean Energy Council are also partners.

Next blog post

In the next blog post, we will delve into greater detail whether peer-to-peer technology is suitable for exporting electricity from your solar PV installation.

Meanwhile, if you need help with your journey to a clean energy future, please contact Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.

How do I compare the value of onsite versus offsite renewables for my business?

Rising electricity prices and falling costs for renewable energy technologies have led many businesses to look at ways they can reduce their energy costs by installing solar panels ‘onsite’, or sourcing renewable energy ‘offsite’ by building offsite solar farms or buying renewable energy. So what approach offers the best value for money?

Onsite or ‘behind-the-meter’ solar installations

For many businesses installing solar panels is an excellent fit, as operating hours and sunshine hours are often the same. That means that the energy generated by solar panels can be used instantly instead of buying electricity from the grid.

In our last blog post, we explained how the electricity supply chain is made up of energy generation, transmission & distribution, electricity market and environmental costs. When you generate solar energy on your own site, this offsets all of these costs. In essence, you are replacing the whole electricity supply chain with every kWh of energy your solar installation generates, so the value of each kWh saved is high. For a small business the value of each kWh of solar energy generated may be 25¢/kWh, and for large businesses, it is typically 12-15¢/kWh. This is illustrated on the left-hand side of Figure 1 below.

When batteries become cheaper, businesses with

  • more roof space
  • intermittent energy demand
  • operations outside of sunshine hours

will be able to install more solar panels with batteries and achieve this same value for their savings.

Figure 1: The value of your renewable energy generation depends on whether it is onsite or offsite
Figure 1: The value of your renewable energy generation depends on whether it is onsite or offsite

Offsite renewable energy

Some businesses are considering building their own renewable energy generation system – typically a solar farm – or want to buy renewable energy from their retailer at the same or lower cost than current rates. In either case, the renewable energy generator that you source electricity from is ‘offsite’, and the electricity generated is delivered to the grid first. From the grid, the renewable power is distributed to your business premises in the same way regular power is delivered.

Because the energy still goes through the grid, you will still pay all the distribution and electricity market costs, as well as some or all of the environmental charges. Savings will be achieved where:

  • The cost of buying the renewable energy generated is less than the cost of buying ‘regular’ power from fossil-fuel generators, and where
  • The cost of Large-Scale Generation Certificates (LGCs) from the offsite plant is less than these costs when passed through on your electricity bill by your retailer.

This is illustrated on the right-hand side of Figure 1 above.

So which approach offers better value?

Onsite and offsite renewable energy strategies are complementary, and can both be pursued by business.

Offsite renewable energy generation can deliver small cost savings compared with buying ‘standard’ electricity from your electricity retailer. However, you may be able to source most or all of your electricity from renewables.

Onsite solar, and in future batteries, will deliver a much better return on investment because savings are across the whole electricity supply chain, but for most businesses the percentage of electricity that can be generated in this way is small, usually from 5-30% of total consumption.

By 2050, we believe renewables will power the grid, and that all businesses will run on 100% clean energy. However, reducing costs will be an ongoing focus for businesses. Maximising the use of onsite roof and land space for solar arrays and battery storage will improve your bottom line and provide clean energy at the lowest cost.

Each solar project is different, and each project needs to be evaluated on its own merit. If you are interested in getting a business case developed for your planned solar installation, please contact Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.

Electricity supply chain

Electricity can be complicated and there is often confusion about how the market works and the terminology that is being used. We would like to provide more clarity for our followers and will start with a blog post on the electricity supply chain and how the various parts are reflected in your monthly bill.

The electricity supply chain and resulting charges on your electricity bill
Figure 1: The electricity supply chain and resulting charges on your electricity bill

Components of your electricity bill

If your business is a large energy user, you will typically get ‘unbundled’ bills, where you can see all charges of the electricity supply chain spelt out. Looking closely at your electricity bill, you will probably see three major sections for your charges, being ‘Energy’, ‘Network’ and ‘Other’ as shown in Figure 1.

  • You pay for the electricity being generated (‘Energy’),
  • You pay for electricity to be delivered to you, including usage and daily access charges, and possibly peak demand (‘Network’),
  • You pay for State and Commonwealth environmental legislation and market fees (‘Other’),
  • You pay other fees, such as metering charges,
  • You pay the retailer to bundle these charges in your bill and manage all market risks associated with the electricity supply chain (‘Other’).

Typical contribution to your electricity cost

You can see the typical contribution of the various cost components of the electricity supply chain in Figure 2 below. Depending on what state you are located in, and whether your business pays Peak Demand charges (listed under the ‘Network’ portion of your electricity bill), the proportions for each component might differ on your bill. For example, you may find that in your case, network charges are 50% of your bill.

How the various parts of the electricity supply chain contribute to your electricity bill
Figure 2: How the various parts of the electricity supply chain contribute to your electricity bill

What you can and can’t negotiate

When you go to market for your electricity rates, you can negotiate your ‘Energy’ and some of your ‘Other’ costs. However,  you cannot negotiate your ‘Network’ costs, as they are regulated (though you can check to make sure you are being charged the correct tariff for your usage). The rates and fees you can negotiate are called ‘contestable’.

When someone talks about ‘retail’ rates, they usually mean the wholesale ‘Energy’ rate, plus the retail margin.

The benefits of onsite and offsite solar

We are sometimes asked why solar installed on-site saves more than buying solar from ‘off-site’. Put simply, if you install solar on your site (‘behind-the-meter’) then you reduce the amount of energy supplied from the grid. You are thus displacing all of your bundled per-kWh charges (‘Energy’ + ‘Network’ + ‘Other’), and potentially some peak demand charges. However, you can’t reduce your fixed charges.

However, if you buy renewable energy from an offsite project, you may save on your ‘Energy’ and some of your ‘Other’ costs, but electricity still has to be delivered via the network to your business, so you still pay the ‘Network’ costs. You can find out more about these differences in our next blog post.

Interested to learn more?

We intend to publish more content around energy management, and if you are interested, you should consider subscribing to our newsletter.

100% Renewables helps business transition to clean energy via efficiency, renewables, battery storage and carbon management. For more information, please contact Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.