Forty Australian towns that should quit the grid

By Giles Parkinson, reneweconomy.com.au

A new study has identified at least 40 Australian towns that could, and probably should, quit the main electricity grid, because they would be saving money for themselves and for other electricity consumers.

A study by energy management consultants Energeia says that many small towns, particularly those at the edge of the grid, will find it more cost effective within a few years to actually cut the main link and provide the power with local generation, principally solar, and battery storage.

That is, if regulations can be changed to allow the true cost to be reflected.

In the National Electricity Market, which covers eastern Australia and South Australia (along with Tasmania, although the island has lost its connection) around 40 towns fit that category just with solar. There may be more that could look after their own needs with biomass or geothermal.

The study, yet to be formally released, will show that in small remote towns at the end of the network the economics are already compelling now, or will be by 2020.

What may be surprising to many is the number of larger, regional towns that will fit this category by 2025. The cost of locally generated solar and storage is, or soon will be, lower than the cost of burning coal in large centralised generators and transmitting the output across the network.

This will not be news to network operators, particularly Ergon in Queensland, SA Power Networks, and Western Power in WA, who have also said at various times that it may be cheaper to take towns off the grid. Nor will it be a surprise to the numerous communities that have expressed a desire to do just that.

‘The message is that this is happening anyway,’ says Energeia analyst Melanie Koerner. ‘We know that towns are looking to go off grid and that private networks are being built to get over some of those regulatory challenges.

Koerner says the purpose of the Energeia study (to be released next month) – and some other specific case studies done on behalf of the Australian Renewable Energy Agency, is to help identify which town should be encouraged to go off grid, and which ones maybe should not.

‘We need to make sure we are not taking off least-cost towns and then networks are left with high-cost towns to serve. This is the message we want to take to government – so they can ensure that tariffs and other barriers are not in the way.’

Koerner says the study will show network location is the key. For some towns, everyone will benefit from leaving the grid because the cost to serve that town is more expensive than micro-grid alternatives. For others, it might be cheaper for the township, but more expensive for others, because of their network location.

One of the biggest barriers to towns leaving the grid is the massive cross-subsidy paid to provide networks to regional towns. This is particularly visible in WA and Queensland. In the Ergon network, for instance, the average network costs alone to regional towns amount to around 20c/kWh.

Another major barrier is the current requirement for networks to provide grid connection to towns. Koerner says the rules need to change to accommodate these new technologies and the alternative they offer, as well as rules that govern who can operate a microgrid.

The study by Energeia highlights the rapidly changing nature of the grid – from a centralised, hub-and-spoke model built around large fossil fuel generators and an expansive network, to a decentralised model where suburbs and communities use microgrids to serve their own energy needs. These may or may not be linked to a broader network.

SAPN said this week that it was looking to take some remote towns off grid, or provide a ‘thin link’ back to the grid, while Western Power is looking at microgrids as a safety and cost measure, because of the threat of bushfires and storms and the cost of repairs.

And it may inspire more individual communities to pursue their dream of becoming ‘net zero towns’, or even leaving the grid altogether. One town, Tyalgum in northern NSW, is already considering this.

Others, such as Byron Bay, Lismore, and Yackandandah and Newstead in Victoria, are looking at rapid uptake of renewables and energy efficiency to become ‘net zero’ or 100 per cent renewable towns.

The massive change is driven by the plunging cost of solar, and now battery storage, part of it by the huge cost of networks.

Already, numerous housing developers are looking at the option of not connecting to the grid at all, looking instead to provide their own energy needs through a mixture of solar, storage and in some cases small gas generators as back up.

These may or may not be linked to a broader network. Another study being finalised by Energeia also points to the benefits of ‘local energy trading system’ – where utilities can provide customers with solar and storage and allow their output to be traded in a suburban network.

‘The shift to local energy trading model requires significant regulatory change,’ Koerner says.

And it will require a huge change in the way incumbent utilities look at their business models. Networks will need to look to a more ‘distributed’ model, while the implications for centralised generation, and for retailers, is also significant.