28 C
Byron Shire
January 29, 2022

Networks and retailers fight for solar-plus-storage market

Latest News

Dr Kerry Chant COVID-19 stats update for January 21 to 27 and local update

NSW Chief Health Officer Dr Kerry Chant gave her weekly COVID-19 stats update this morning during Premier Dominic Perrottet’s press conference.

Other News

Comment: Welcome to the Byron Bay family law dilemma – Jesus wept

In spring 2013, Mary and Joseph bought a house in Suffolk Park for $500,000.

Byron Shire 2022 Citizen of the Year

Jacqui Boyett, founder of the not-for-profit Global Ripple charity and op shop, is the Byron Shire 2022 Citizen of the Year.

Alcohol free zones extended in Ballina Shire

A group of theoretically temporary alcohol-free zones in Lennox Head, Alstonville, Ballina and Wardell have been extended until 2025, despite rumblings of discontent from some Ballina councillors.

Check a charity’s status before donating to a good cause

It wouldn't be the first time generous people have been scammed by fake charities and in the wake of the Tonga disaster, Australia's charity regulator is urging a quick check before donating.

Richmond Valley Council Citizen awards

The contribution made to the Richmond Valley community by its citizens was recognised on 26 January through a range of awards and most particularly through the award of Citizen of the Year and Young Citizen of the Year. 

From border to border – an ocean pools odyssey

Three women on a mission plan to ride their eBikes along the NSW Coast from the Victorian border to the Queensland border and visit ocean pools on the way in a quest to raise money for three deserving charities.

By , www.reneweconomy.com.au

The fight for supremacy in Australia’s electricity market is shifting away from wholesale markets and retail tariff wars to inside the home – and the two biggest forces of the Australian energy market are now lining up for a massive turf war over who gets to deal with the customer.

The growing adoption of rooftop solar, the massive interest in battery storage and the accelerating push towards a decentralised energy system is shifting the focus of the electricity market to ‘behind the meter’ products like solar, storage and smart software.

IMG_0464-300x225This, in turn, is reshaping the industry and its business models. These technologies are reducing the need for network costs and reducing the need for centralised generation, and lowering prices. But as one revenue model declines, others are emerging.

What was once an exclusive club of network providers, centralised generators and bill providers has been bust open as millions of new connections, and the incumbents are fighting over who should be able to offer those services to the consumers – be they households, business, or communities. And new players are also trying to get into the market.

The issue is complicated by the fact that no one is too sure what the business model of the future will actually look like, apart from the fact that it will be vastly different from the oligopoly that dominated the past and the present.

Two recent announcements from the network side of things will cause disquiet, particularly among the ‘gentailers’ – the combined retailers and coal- and gas-fired generators.

The first was a recent study by Ausnet that pointed out that the benefits of solar and storage are about equal to both consumers (who save money) and the networks (who avoid network upgrades).

The second, revealed in RenewEconomy on Wednesday, was the announcement by South Australian Power Networks that it will offer big discounts to consumers on rooftop solar and battery storage from Tesla and Samsung, in a trial that it expects to prove that it can save millions on grid upgrades through these technologies, and reduce bills for consumers.

Suddenly, after fighting the introduction of solar and storage for years by playing with tariffs, the networks are seeing the value in the technology, and a deep relationship with the customer. And they are vowing to change.

Basil Scarsella, a former head of the South Australia grid operator and now CEO of UK Power Networks, one of the big network operators in England, told the ENA2016 conference in Adelaide today that this is all part of a transition from network operators to ‘full service system providers.’

Scarsella said the industry was, in many ways, going back to its past, where it developed through smaller discrete grids and as regional electricity companies. But instead of providing power through coal, it will be supplied mostly by renewables.

‘The question for us as network operators, is how to protect our revenue going forward … We need to provide a service to customers and communities in a way we have never done before.’

That, he says, means providing services ‘behind the meter’. He pointed to the way his company offered such services to Heathrow Airport. He saw no reason why this could not be replicated across the market.

Paul Italiano, now the head of NSW transmission operator Transgrid, and until last month the head of WA utility Western Power, echoed those thoughts.

He pointed to the opportunity of new business models such as micro grids, including nearly self-sufficient communities where the network installs solar and battery storage, and maintains a small connection, as the lowest cost, local solution. It’s cheaper, cleaner, and more reliable, Italiano notes.

‘The challenge for integrating renewables is not a matter of finding solutions to … their variability, because there are plenty of solutions,’ Italiano says. The challenge, he says, is finding something that fits into a regulatory regime that didn’t contemplate such developments.

That’s why the networks are keen to get in behind the metre, and the big gentailers – such as Origin Energy, AGL Energy and EnergyAustralia – and many smaller players are keen to keep them out. It promises to be one of the biggest and most significant regulatory battles of the past few years.

There is a lot at stake. The big three gentailers have traditionally made money out of packaging up bills (retailing), and from profits from their coal- and gas-fired generators.

But if the networks get to talk to the customer and offer their own services, and technologies such as local generation and battery storage clip the profits from the wholesale generation business, the gen-tailer business model is at risk. If the networks can’t price this service properly, then consumers will find other alternatives and leave the grid.

The gentailers have responded by creating ‘new energy’ divisions and offering solar and storage to their customers, and increasing their interest in owning these assets. And they are leading the fight at the regulatory level about keeping network providers – at least the ‘regulated’ side of the business – away from customers.

Both businesses are at risk in an energy market that shifts largely to local generation. And while the retailers are rapidly expanding their solar and storage options, and linking with providers of smart technology services, they are also seeking to protect their huge investments in large generation.

The gentailers are making strong submissions to an Energy Regulator review of ‘ring fencing’, and arguing that the regulated part of the network business should not be allowed in the market.

‘The regulated networks can’t be allowed to have an unfair advantage when dealing with customers,’ AGL managing director Andrew Vesey said recently. ‘Not much regulation comes from regulated businesses.’

The gentailers have some support from consumer groups, who don’t trust the networks to do the right thing, given the huge rise in network spending over the last few years, which has caused electricity prices to soar and opened the door to these new technologies, and their monopoly power, which might make it difficult for smaller players.

Networks have also been accused of framing tariff and other rule changes that have reduced incentives for installing solar and other technologies, and have been accused of putting their own revenue interests first.

As Merryn York, the CEO of Queensland transmission network Powerlink, told ENA2016, ‘one of the big challenges we have is our history.’

York pointed to the huge burst in spending that followed a series of big outages in Queensland more than a decade ago, when the response was simply to spend more on a bigger, rather than smarter, grid.

This has been a complaint of consumers and the solar industry for years. But it seems, now, that the network operators see their future in meeting customer needs. Or at least that is what they are saying.

‘We need to make a cultural change to think differently,’ York said.We have got to focus on the customer. The regulated part of our network will reduce over time and there will be more distributed generation in households. As assets age we will be looking for alternatives. The regulated part of the network will be smaller, and the contestable, deregulated side will be focused on renewables.’

Indeed, some networks, such as SAPN, have suggested that the gentailers – as currently presented – have no future in a decentralised energy world. They say networks will always be needed to provide connections, even at a local micro-grid level. The ability to do that and save on network costs, and reduce generation costs, is a big threat to the generators and retailers.

Paul Adams, the head of Victorian network operator Jemena, echoed those remarks: ‘The current model of a retailer and a network – that is not going to be the model in 5-10 years time,’ he told the ENA2016 conference. He pointed d to the likes of Google entering the energy services market.

And in contrast to the claim of AGL’s Vesey about the lack of innovation by regulated businesses, Transgrid’s Italiano says retailers in other industries are rarely architects of new products and in the electricity industry they are retailers only, and not managers or operators of assets.

‘If you offer the community cheaper power, more reliable power and cleaner power, they will beat the door down wanting it,’ he said.

‘We are at a fantastic juncture in the world. The need for electricity is greater than it has been. It is up to us as an industry to gather all these technologies together and listen to the consumers. If we do that, we won’t have to worry about (regulated) revenue.’

That is an ominous warning for the retailers and gentailers, and York acknowledged there is ‘friction’ in the industry, as both move towards a decentralised system and away from past models.

The networks are confident they will prosper, even in a changed world, because connections will be needed – to transport vast amounts of mostly renewable electricity along the transmission lines, and even in micro-grids, where the electricity is produced locally and shared within a community, be it a town, suburb or region.

The future of ‘gentailers’ is likely to be more problematic, unless they can form alliances with the networks and become service providers too. In the new world, there is less need for large centralised generation, and probably fewer profits to be made. And on the retailing side, they need to do more than package up bills and act as a hedge.

That’s why retailers are increasingly focused on the solar and storage market, and moving into metering, and electric vehicles. But any push to change the model is hindered by the fact that they are making so much money in generation.

Solar technology can be combined with wild flowers to create havens for endangered species, experts say.   Photo AGL

Some suggest that they are integrated the wrong way – the retail and wholesale businesses are used as a hedge in the current model, but there is a conflict of interest in a distributed future. The networks, on the other hand, seem to face a simpler task, adopt new technologies, provide a service, spend less money and engage with the consumers.

‘We wont be on the list of companies that did not adapt to change and are no longer in business,’ Scarsella said.

Time will tell. After being dragged into this new energy paradigm against their wishes, they are now fighting over who can be the most progressive.

Kobad Bhavnagri, from Bloomberg New Energy Finance, says the the energy system is rapidly evolving into a decentralised and renewable footing, driven by economics and innovation.

‘This will provide more choice for consumers …. and will require a new array for services. Who provides these will be an evolving contest.’

Additional note: Paula Conboy, the head of the Australian Energy Regulator, was later asked if the regulator was confident in being able to identify what services needed to be ring fenced, and what needed to be regulated.

‘I am confident that we can get there … that we can limit the ability of regulated companaies to confer benefit. We are working on that. We are doing a lot of consulation on ring fencing guidelines.’

Support The Echo

Keeping the community together and the community voice loud and clear is what The Echo is about. More than ever we need your help to keep this voice alive and thriving in the community.

Like all businesses we are struggling to keep food on the table of all our local and hard working journalists, artists, sales, delivery and drudges who keep the news coming out to you both in the newspaper and online. If you can spare a few dollars a week – or maybe more – we would appreciate all the support you are able to give to keep the voice of independent, local journalism alive.


  1. The fight for supremacy in Australia’s electricity market is revolting. The company vaults over the company straight to the customer and zaps him.

  2. If you want to reduce the end users electricity bill, go back to having the distribution network owner billing the customer directly, based on a regulated price set by a group that is answerable to the voting bill payers.

    The retailers do nothing but add another layer of cost. One more duplicated layer of executive salaries. One more duplicated layer of profits going back to their respective owners. One more duplicated layer of administrative efforts.

    How many MW of electricity does Dodo’s electricity division produce? How about Click Energy or QEnergy?
    How much of the network did they build or maintain?
    The answer to all of the above is 0.

    They only exist because an artificial market has been created as an added expense on the average power bill.
    They cannot push the price lower than it was when the bill only payed for the electricity and supporting infrastructure. The only competition is for the extra amount charged to keep this artificial market in existence.

    If the government was serious about lowering our power bills, it would change the state constitution to forever outlaw successive governments from raiding our network operators and state owned generators to make up their state budget shortfalls, set the price of electricity from the distributers to the cost of providing the service (and the electricity itself) + 5% and let them deal directly with *all* end customers, not just the ones in unprofitable regional areas. If the existing retailers could cope with that, then good luck to them. Otherwise, good riddance.

    Another step would be to regulate the price state owned generators are allowed to charge for their electricity to cost + 5% and instruct the distributors to purchase contracts for their projected electricity requirements from those state owned generators. Thereby cutting the volatile national electricity market out of the equation.

    These two steps would cut more than a third off the average power bill.
    Everything else is just tinkering around the edges.


Please enter your comment!
Please enter your name here

Richmond Valley Council Citizen awards

The contribution made to the Richmond Valley community by its citizens was recognised on 26 January through a range of awards and most particularly through the award of Citizen of the Year and Young Citizen of the Year. 

How depression makes people vulnerable to misinformation

A US study has found that people suffering from depression are much more likely to believe misinformation about COVID-19 vaccines.

Countbacks or by-elections for Ballina?

Cr Rod Bruem's first appearance in the Ballina Council chamber saw an attack on ALP candidates who narrowly failed to win seats in the recent local government election, with the councillor claiming it would be undemocratic for a countback to include 'rejected' Labor Party candidates if another councillor was unable to serve during the next 18 months.

Community building and disaster resilience

If you’ve ever wanted to be a volunteer, the Community Carers and Responders might be where you can lend a hand.