Plug & PlayFacilitating grid connection of low emissions technologies

CONSULTATION SUMMARY PAPER FEBRUARY 2017

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ClimateWorksAustralialSeedAdvisoryFebruary2017

PlugandPlay ExecutiveSummary

Harmonisedrequirementsforconnectionstoallelectricitydistributionnetworksareakeypartofensuringthattheinnovativetechnologiesandbusinessmodelsrequiredtomeetclimatetargetsanddriveenergyproductivitycancontributetotheirfullpotentialinprovidingourenergyneedsinthefuture.

Harmonisedrequirementsshouldleadtolesscostlyconnectionrequirements,moreresponsivetothedevelopmentofnewtechnologies.Eliminatingunnecessarycoststoconsumersandthewidereconomyshouldincreaseconsumeruptakeofnewtechnologies.Thisincludesnewtechnologiesthatcanreducegreenhousegasemissionssuchasdistributedelectricitygeneration,storage,demandmanagementequipmentandelectricvehiclecharginginfrastructure.Removingunnecessarycostsfromgridconnectionscancreateavirtuouscircle–supportingAustraliainmeetingourpolicyobjectivesinenergyproductivityandemissionsreduction.Removingunnecessarytechnicalrequirementsfromgridconnectionscanalsosupportproductdevelopmentandtheuptakeofinnovation,aswemovefromsmallerlocaltolargernationalmarketsforequipmentandtechnology.

ForAustraliatoplayitsfairshareintheglobaleffortagainstclimatechangewemustensurethattheinnovativetechnologiesandbusinessmodelsrequiredtomeetclimatetargetsanddriveenergyproductivitycanreadilyparticipateintheenergymarket.

TheobjectiveofthePlugandPlayprojectistoidentifyanddrivetheimplementationofinstitutionalandpolicysolutionstomakegridconnectionsforexistingandemergingtechnologiesasstraightforwardandcosteffectiveaspossibleforcustomersandproponents,whilesafeguardingelectricitysupply.

Thispaperoutlinesthefindingsfromthefirststageoftheprojectwherewehavelookedatthecurrentconnectionrequirementsandprocessesandthebarriersandunnecessarycoststheyimposeontheconnectionoflowemissiontechnologiestotheelectricitynetwork.Thepaperisinformedbydesktopresearchandinitialconsultationswithstakeholdersfromthepropertysector,energyserviceproviders,manufacturersandsuppliersofequipment,andfundersofrenewableenergyprojects.ItbuildsonpreviousworkbyClimateWorksAustraliaandSeedAdvisoryinthearea.Wewillbeseekingfurtherinputfromstakeholdersinthesecondstageoftheprojectproposedtofinishinmid-2017.

Duringthesecondstageoftheproject,wewillundertakefurtherconsultationtoidentifyandtesttheproposedsolutionswithkeystakeholdersandrefinetheseintoafinalreportinmid-2017,settingoutasolutionsroadmap.Itwillidentifythekeyactorsandtheirrolesinenactingthesolution,aswellasdocumentinternationalexamplesofsolutionstotheidentifiedbarriers.Subsequentphaseswillfocusonimplementationtheagreedsolutions.

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Aboutus

ClimateWorksAustraliaClimateWorksAustraliaisaleadingindependentorganisationactingasabridgebetweenresearchandactiontoidentify,modelandenableend-to-endsolutionstoclimatechange.

Sinceourlaunchin2009,ClimateWorkshasmadesignificantprogressandearnedareputationasagenuineandimpartialadvisertokeydecisionmakersfromallsidesofpoliticsandbusiness.Ourcollaborativeapproachtosolutionsthatwilldeliverthegreatestimpactencompassesathoroughunderstandingoftheconstraintsofgovernmentsandthepracticalneedsofbusiness.

Wedothisbylookingforinnovativeopportunitiestoreducegreenhousegasemissions,analysingtheirpotential,resolvingobstaclesandhelpingtofacilitateconditionsforourtransitiontoaprosperous,netzeroemissionsfutureby2050.

ClimateWorkswasco-foundedbyTheMyerFoundationandMonashUniversityandworkswithintheMonashSustainableDevelopmentInstitute.

SeedAdvisorySeedAdvisoryisacommercialadvisoryfirmspecialisingintheenergysector,withexpertiseinstrategy,riskmanagement,policydevelopmentandcommercialmanagement.

Sinceourlaunchin2008wehaveadvisedenergymarketparticipants–newandprospective–onthecommercialandregulatoryimplicationsoftheirpotentialinvestmentsinconventionalandrenewabletechnologies.Wehavealsoadvisednationalandstategovernmentsontheinteractionoftheirenergy-relatedpoliciesandotherareasofgovernmentpolicy,suchastherelationshipbetweensmartmeteringandAustralianPrivacylaw,ortheimpactonelectricvehicleuptakeoflocalregulationanddistributionbusinesspracticesaffectingresidentialandcommercialconnectionavailabilityandcost.

AcknowledgmentofSupport

ClimateWorksAustraliaandSeedAdvisorywouldliketothankthoseexpertswhohaveprovidedinputtotheconsultationsundertakenforthisproject.

WewouldalsoliketothanktheAustralianEnergyCouncil(AEC)foritsfinancialsupportofthisproject,anditsmembersfortheirparticipationintheconsultationsundertaken.ForafulllistofthoseconsultedpleaseseeAppendix2.

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Contents

1.Abouttheproject...........................................................................................1

2.Whyfocusonconnectionrequirements?......................................................2

2.1Otherbarriers...............................................................................................3

3.Theelectricitysystemischanging..................................................................4

3.1Customersarebecomingactiveparticipantsinthesystem.........................4

3.2Thedistributors’challenge...........................................................................5

3.3Meetingourenergyproductivityandemissionsreductionobjectives........5

4.Currentconnectionrequirements..................................................................7

4.1WhathappensduringaConnectionApplication?........................................8

5.Impactofthecurrentconnectionprocess...................................................11

5.1Coststobusinessandconsumers...............................................................11

5.2Impactonuptake.......................................................................................12

5.3Inefficiencieswheninstallinginmultiplelocations....................................12

5.4Variationsinrequirementsreducescompetitioninequipmentmarkets..13

5.5Impactoninnovationandtechnicalchange..............................................14

5.6Riskofunfairmarketadvantage................................................................14

6.Characteristicsofpreferredsolutions..........................................................15

6.1Consistentnationalstandard:rareexceptions..........................................15

6.2Minimumperformancestandards,setindependently..............................16

6.3Responsivenesstotechnologicalchange...................................................17

6.4Competitiveneutrality...............................................................................18

7.Whatnext?...................................................................................................19

8.References....................................................................................................20

Appendix1:Summaryofenergymarketreformprocesses.............................20

Appendix2:Stakeholderengagement.............................................................22

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1. Abouttheproject ClimateWorksAustraliaandSeedAdvisorycommencedthePlugandPlayprojectinSeptember2016.Theoverallobjectiveoftheprojectistoidentifyinstitutionalandpolicysolutionswhichwouldmakeconnectiontothegridforexistingandemergingnewtechnologiesasstraightforwardandcosteffectiveaspossible,whilesafeguardingtheperformanceofthegrid.

Theprojectfocuseson:

• identifyingandaddressingthesourceofbarrierstoinstallationandunnecessarycosts

• describingthewiderimpactsofcurrentrequirementsandprocessesforconnectiontothegridonuptakeandenergyproductivity

• consideringhowstandardsandrequirementsintheelectricityindustryareset,interpretedandapplied

• proposingsolutionstocreategridconnectionprocessesthatwillensurethatnetworkedelectricityissecure,affordableandlowemission

Thisprojectwillundertakeabroadanalysisoftheimpactsonthemarketofthecurrentsituationforconnectionsofembeddedgenerationandstorage,onuptakeofthesetechnologiesandoncapacitytomeetourenergyproductivityandemissionsreductionobjectives.

Thisprojectwillnotlookatspecifictechnicalrequirementsoftheelectricitydistributionnetworkservicesproviders(distributors).Issuesaboutthesetechnicalrequirementsarewell-documented.DistributorshavebeenobligedtopublishtheirownrequirementssinceOctober2014,andourpreviouswork,andthatofothers,hasanalysedthedifferences.Ourpreviousworkfound'evenwithinjurisdictions,distributorstakemateriallydifferentapproachesto…connectingembeddedgenerationtotheirnetwork’.(ClimateWorksAustralia(CWA),PropertyCouncilofAustralia(PCA)andSeedAdvisory2015).Similarly,Energeia’sworkfortheCleanEnergyCouncil(CEC)foundthat‘Technicalrequirementsareinconsistentacrossnetworks’(CEC2016).

ThePlugandPlayprojectinsteadfocusesonthecoststhatcurrentdifferingrequirementsimposeonconnectionproponentsandthewidereconomy,andonalternativemodelsthatcouldreducethesecostswhilemaintainingthesafetyandperformanceofthenetworks.

Ourworktodatehasconfirmedourinitialthinkingthatvariationinrequirementsandprocessesbetweendifferentdistributorsisactingasabarriertotheadoptionofnewtechnologiesandimposingadditionalcosts.Thisdiscussionpaperexplainstheissuesarisingfromthecurrentconnectionrequirementsandprocessesandotherresultsarisingfromourinitialconsultations.

ClimateWorksAustraliaandSeedAdvisorywillbeseekingfurtherinputfromstakeholderstocollaborativelydevelopinstitutionalandpolicysolutions,beforeengagingwithdecisionmakerstoassistthosecollaboratingwithuscanadvocateforreform.

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2. Whyfocusonconnectionrequirements? TheinitialfocusofthePlugandPlayprojectwillbeontheimpactsofconnectionrequirementsandprocesses;andtheirvariationacrossAustralia.Thefocusoftheprojectstemsfromanumberofissues:

•AmajortransformationinthestructureofAustralia’selectricitysectoristakingshape.Thistransformationisbasedoncustomers’interestinandabilitytogeneratetheirownrenewableenergyand,lookingforward,ontheabilityofcustomerstomanagetheirinteractionswiththegrid.Inthefuture,customersarelikelytocollectivelyprovidearangeofservicespreviouslyrestrictedtolargespecialisedgenerationunits.Newtechnologiesandservicesarebeingdevelopedatarapidratewithtrialsforinnovativetechnologiesunderway.

• Federalandstatepolicytoincreaserenewablegenerationanddecreaseemissionsacrosstheeconomyiscombiningwithrapidlydecreasingcostsoflowcarbontechnologies,andconsumers’desiretoachievegreaterenergyindependence,tofuelthistransformation.Suchpolicywillresultinfurthershiftsinthenumber(andtype)ofconnections.

• Australia’sfifteendistributorshavevariedconnectionrequirementsforrenewableenergygenerationandstoragetechnologies.Ourownwork(CWAetal2015),andworkfortheFutureProofinginAustralia’sElectricityDistributionIndustryProject(CEC2014)haveextensivelydocumentedtheextentofvariationintheseconnectionrequirementsandprocesses.

• Thevariationinrequirementscreatescomplexityandthusadditionalcostsforcustomers,projectproponentsanddistributors.Insomecasesitcanleadtotheabandonmentofotherwiseattractiveprojects.TherecentAll-EnergyConferenceidentifieddelaysinthecustomerdecisionmakingprocessandintheconnectionprocessassourcesofincreasedinstallationcosts.

• Thevariationinrequirementsmayhaveaparticularimpactonthecommercialsector.Thereisahighlevelofambitionwithinthesectortorefurbishexistinginstallationsand/orinstalldistributedrenewablegeneration,asthishasbecomemorefinanciallyattractive.Installationatscaleispotentiallymorecost-effectivethansmall-scaleinstallations.However,stakeholdershaveidentifieddifficultiesduetovaryingconnectionrequirementsandprocesses.DistributorsacrosstheNationalElectricityMarketacceptsmallinverterconnectedsystemsprovidedtheinvertercomplieswithAS4777;nosimilarharmonisedrequirementsexistformid-sizesystemsbelow30MW.

• Developmentsinbehindthemeterapplicationscompetewithservicescurrentlyorpotentiallyprovidedbydistributorsand/orgenerators.Realisingthefullpotentialofnewtechnologieswillrequireashiftfromsmall,localnetworkmarketstoanationalmarket:platformeconomiesarebestrealisedatscale.Newtechnologiesandservicescanshiftwhobenefitsfromthediversityofcustomerbehaviour–thecustomer,thedistributororthemarket.Currentconnectionprocesseswhichrequireindividualdistributorstomanagethesafetyandperformanceoftheirnetworksmaybeasourceofpotentialcompetitivedisadvantagetonewentrantsandcustomers–evenundertherecentlyintroducedring-fencingguideline1.

• Finally,stakeholderfeedbacksuggeststousthatourelectricitymarketscurrentlylacksupportforinnovationintechnologiesandservicesforbothnewmarketentrantsandexistingmarketparticipants.

1.TheAustralianElectricityRegulator(AER)hasintroducedthering-fencingguidelinetoensurefunctionalseparationoftheprovisionofdirectcontrolservicesbydistributorsfromtheirprovisionofotherservicesandtopromotecompetitionintheprovisionofelectricityservices.

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Australia’svariableconnectionrequirementsraisepublicpolicyquestionsaboutthecostsimposedonallnetworkconnections;thecostsofreducingcompetitionintheequipmentmarketbylimitingavailablemarkets;and,therelationshipbetweenthedistributor’sdecisioninadoptingitsownrequirementsandthewiderimplicationsforcompetitionbetweendistributorsanddistributedenergyproviders.Asitcurrentlystandsthere’snooversightoftheappropriatenessofdistributors’requirements.Thereisnomechanismtocheckwhethertherequirementsstrikethecorrectbalancebetweenreducingrisksandthecoststheyimposeonconnectionsandthecommunityasawhole.

Harmonisingconnectionrequirementsandaddressingthewayinwhichthoserequirementsaredevelopedwillmakethetransformationofourenergysystemeasier,cheaperandmoreequitable.Itcouldallowconnectionrequirementstobemoreresponsivetotherateoftechnicalchange.

2.1OtherbarriersWerecognisetheexistenceofarangeofbarrierstotheuptakeofembeddedgenerationandthedevelopmentoffurthermarket-basedservicesenvisagedaspartofthewiderenergymarkettransformation.Ourstakeholdershavenominatedthefollowingkeyconcerns:

• Noexistingplatformormechanismtoeffectivelyrewardgridsecurity/demandmanagementservicesforservicesthatarenotreadilyincludedincurrentdemandmanagementprograms.

• Currentwholesaleelectricitypricespresentlittleincentivetosellintothegrid,evenforlarger,morecost-effectiveinstallations.

• Distributorscontinuetoimposesignificantbarrierstoexportsfromaconnection,totheextentthatconnectionproponentsnowroutinelysizetheirinstallationssoastoremainwithintheenvelopeoftheproperty’suse,regardlessofthepotentialscalebenefitsoflargerinstallations.Aggregationmechanismsinthewholesalemarketareunsuitableforportfolioscombiningloadandgeneration,andonlyasmallnumberofretailersarepreparedtoaggregateacustomers’supplyanddemandacrossthecustomer’sportfolio.

• Therearestillnoeffectivemechanismstoaddressthe“lastin,worstdressed”approachtothecostsofupgradingalocalnetworkimposedonaconnectionproponent.Standardcontracts,requiredbyChapter5oftheNationalElectricityRules,aresilentonmechanismstoaddressthisissue(CWAetal2015).

• Islanding–thatis,theabilityofapropertytocontinuetoself-generatewherethelocalnetworkhasfailed–representsasignificantpotentialbenefitforpropertieswherethepropertymightrequirepowerintheeventofalocalnetworkfailure.Exampleswherethismightbeofbenefitinclude:localemergencycentres;otherlocationswheresignificantnumbersofpeoplemightbepresentatthetimeofafailureormightcongregateafterfailure;etc.However,distributorscurrentlyareunwillingtoconsiderislandingapartfromsomesmall,localisedtrialschieflyinvolvingresidentialcustomers2.

However,theseissuesaresecondarytotheimportanceofestablishingacost-effectiveconnectionprocess.Intheabsenceofcost-effectiveconnections,someinstallationswillnotgoahead,whileotherswillbesmallerthanoptimal,givensitecharacteristics.

2.Forexample:http://www.ausnetservices.com.au/CA257D1D007678E1/All/41F5DC5437B4E7C2CA257F3A0020577041F5DC5437B4E7C2CA257F3A00205770/$file/160419%20Mooroolbark%20trial%20launch%20%20FINAL.pdf

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3. Theelectricitysystemischanging

3.1CustomersarebecomingactiveparticipantsinthesystemMassadoptionofdistributedsolarPVgeneration,especiallyintheresidentialsector,hasdrivenatrendtowardsmoreactivecustomerparticipationintheelectricitysystem.TheEnergyNetworksAustralia(ENA)andCSIRO’sElectricityNetworkTransformationRoadmapprojectfocusesontheneedtoplaceconsumersbothresidentialandcommercialatthecentreofnetworkplanningtomanagethetransitionfrompassiveconsumersofelectricity,togeneratorsandtradersofelectricity(ENAandCSIRO2016).

Figure1:TotalinstalledcapacityofrooftopPVandIPSSintheNEM(AEMO,2016b)

Inresponse,theelectricityindustryisshiftingtowardsamorecustomercentricmodelwherecustomers’choicesandactionsareincreasinglyimportant.Regulatorsandpolicymakersareundertakingarangeofreformsinmeteringandinformationprovision.TheresearchandpolicyreformprocessesunderwayaddressingawiderangeofissuesaresummarisedinAppendix1.

BatterystoragetechnologiesnowenteringtheAustralianmarketarelikelytofollowasimilartrendwithahighlevelofinitialconsumerinterestandconsumerpricespredictedtodecreaserapidly(MorganStanleyResearch2016).AEMOcurrentlypredictsthatbatterystoragecapacitywillincreasefromalmostzeronowto6.6GWhoverthenexttwentyyears,whilerooftopsolarPVisprojectedtoincrease350percentfrom4.3GWto19GWoverthesameperiod(2016b)3.Theseprojections,whichmaybeconservativegivenpreviousexperiencewiththerateofsolarPVuptakerelativetoinitialprojections,implyahighnumberofrelativelysmallconnectionsintheshorttomediumterm.Bytheendof2016,therewerealready1.6millionsmallsolarPVsystemsinstalledinAustralia,mostofwhichwereconnectedintheNEM.(CleanEnergyRegulator2017).

3.Thistotal19GWofsolarPVincludes3.8GWexpectedtobeintegratedwithbatteries.

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3.2Thedistributors’challengeAsthetraditionalstaticnetworkoflarge-scalecentralisedgenerationevolvestorespondtoactiveconsumerswhogeneratetheirownelectricity,distributorsfacesignificantchallengestotheircurrentoperatingmodelandtothemanagementofthesafetyandperformanceoftheirnetworks.Thedistributors’requirementstomanagethisarediscussedinSection04.Thesechallengesincludeasignificantmismatchbetweenconsumptionandtheproductionprofiles,requiringtwo-wayflowstobefacilitatedinlocalnetworkareasandacrossnetworks.

Rapidchangesinnetdemandduetotransitoryweatherconditionsaremorecommon,changingwholesalemarketdynamics.InsomesituationsandweatherconditionssolarPVcanreducenetworkpeaks.However,theflowsfromembeddedgenerationcanbeunpredictable,overalladdingtothecomplexityofmanagingthenetwork.CombiningsolarPVwithbatteriescanmitigatethetechnicalchallengespresentedbyincreasedlevelsofdistributedenergygeneration,forexample,byallowingcustomerstoreducetheirexportsintothenetworkbystoringtheirenergyproductionforuseatpeakconsumptionperiods.4However,networkchallengesarelikelytoremain.

IfcustomersincludemanagementsystemswiththeirsolarPVandbatterysystem(integratedinthebattery,orasathirdpartyproviderservice),thencustomerscanco-ordinatetheirdemandandgenerationwiththemarket.Thesemanagementservicesseektooptimisewhenthecustomerexportselectricityandwhentheyimportit–eitherforuseorstorage.Thisfurtherincreasesthepotentialfortheirnetdemandtochangefrommomenttomoment.

Allthesedynamicscanalternetworkinvestmentrequirementsandwholesaleenergydemand.Thecombinationofembeddedgeneration,storageandmanagementsystemscancompetewithservicescurrentlyorpotentiallyprovidedbydistributorsand/orgenerators,whichcanchangewhobenefitsfromthediversityofcustomerbehaviour–thecustomer,thedistributororthemarket.

3.3MeetingourenergyproductivityandemissionsreductionobjectivesChangestoourelectricitysystemwillbeintegraltomakingouruseofenergymoreproductiveandreducingouremissions.TheCouncilofAustralianGovernments(COAG)hascommittedtoagoalofimprovingAustralia’senergyproductivityby40percentby2030.TheNationalEnergyProductivityPlanoutlinesaseriesofinitiativestoreachthisgoalinordertoreducecoststoconsumers,maintainingAustralianbusiness’competitivenessandreducinggreenhousegasemissions.5

Australia’sratificationoftheParisAgreementon9November2016commitsAustraliatoanemissionsreductionpathwayinlinewithconstrainingglobalwarmingtowellunder2degrees.Australiahasalsocommittedtobepartofcollectiveglobalactiontoreachnetzeroemissions.AnalysisindicatesthatdoingAustralia’sfairsharerequiresachievingnetzeroemissionsacrosstheAustralianeconomyby2050.6

ClimateWorksDeepDecarbonisationPathwaysreportdemonstrateshowthisgoalcanbeachievedwhilemaintainingeconomicgrowththroughfourpillarsofdecarbonisation.

4.TherecentEnergyTransformationRoadmappresentation(ENAandCSIRO2016),forexample,raisedthepossibilitythat,dependingonthewayinwhichtariffsarestructured,andthemanagementofcustomerdiversity,peaknetworkrequirementscouldbeshiftedtotimeperiodsimmediatelybeforepeakpowerratescutin,orimmediatelyafteroff-peakpowerratescommence.5.COAGEnergyCouncil,20156.Forexamplethelong-termcarbonbudgetproposedbytheClimateChangeAuthority(CCA2014,Chapter8)willrequirenetzeroby2050givencurrentemissionrates.

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Figure2:The4pillarsofDecarbonisation

Gridconnectedlowcarbontechnologiesplayacentralroleinachievinganetzeroeconomy.Distributedrenewablegenerationcontributestowardsdecarbonisationofthegrid,whiledemandmanagementequipmentcontributestoambitiousenergyefficiency,andstoragetechnologiessupportnetworkstabilitywithhigherpenetrationofrenewablegeneration.Electricvehiclecharginginfrastructuresupportsfuelswitchingfrompetroleumtolowcarbonelectricity.

ASBECandClimateWorksAustralia’srecentreportLowCarbon:HighPerformance,onemissionsreductionpotentialintheAustralianbuiltenvironmentsectorfoundthatinstallationofcommercialandresidentialdistributedsolargenerationcouldcontributeareductionof50MtCO2eby2030.Thiswoulddeliver18percentofAustralia’scurrent2030emissionsreductiontarget.7

7.ASBEC2016,LowCarbonHighPerformance.

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4.Currentconnectionrequirements

Statelegislationconfersondistributorstheresponsibilityformanagingthesafetyandperformanceofthenetworkwithinlocaljurisdictionalguidelines,andthepowerstocontrolcustomerconnectionsinlinewiththeseresponsibilities.Somestatesimposesymmetricrightsandobligationsoncustomerswhouseanetwork;inothers,customers’responsibilitiesoutweightheirrightswhenconnectingtothenetwork.

Distributorssettechnicalconnectionrequirementstoallowthemtomeettheirresponsibilitiestomanagetheirnetwork.TherequirementsfitwithintheNationalElectricityRuleswhichhasthreedifferentconnectionprocessesforproposedinstallationsthatarethefocusofthisproject.Installationsunder30kW,whicharecoveredbytheAustralianStandardAS4777(seebreakoutbelow),followtheprocessforabasicconnection.Largerinstallationsunder5MWmayfollowastandardornegotiatedconnectionprocess.WithinthebroadguidelinesintheNER,eachdistributoremploystheirownprocessesfornegotiatingtheconnectionofnon-standardinstallations.Mostinstallationsabove30MWsarecoveredbyChapter5oftheNER.

Eachdistributor’srequirementsgovernthetypeandperformanceoftheequipmentthatcanbeconnected,andthelevelofprotectionrequiredforaninstallationtobeapprovedinthatdistributor’sfranchisearea.TherequirementsmayberelevantAustralianStandards,internationalstandards,requirementsspecifictothedistributor,orsomecombinationofthese.Connectedequipmentmustbecertifiedascompliantwiththerelevantrequirement(s).Requirementsvaryfromnetworktonetwork.Thedifferencesbetweendistributors’requirementsandtheissuestheycreatearewelldocumented8.

AustralianStandardsaimtoacceptrelevantinternationalStandards,oracceptwithmodificationswhererequiredforAustralianconditions.WheretheAustralianmarketisaheadofdevelopmentofinternationalstandards,astandardisdevelopedindependently.Forexample,StandardsAustraliaisdevelopingastandardforresidentialbatterystorageinstallationsintheabsenceofarelevantinternationalstandardapplicabletotheAustralianmarket.Oncethatstandardisavailable,however,there’snoguaranteethatnetworkswillallowinstallationsconsistentwiththestandardtoproceedwithoutotherlocalrequirements.

Asitcurrentlystands,there’snooversightof,ormechanismtoreview,theappropriatenessofdistributors’requirementsandthecoststheymayimposeonconnections,orthecommunityasawhole.Proponentshavetheabilitytocontestthedistributor’sdecisionsoncemade,butthisreviewisonlypossibleinstallationbyinstallation.

Insettingrequirementsforequipmentthatdifferfromthoseadoptedbyotherdistributors,orrelevantAustralianorinternationalstandards,thelocaldistributorisassertingitsjudgementthatuniquerequirementsareneededtoaddressconditionswithinitsnetwork.Thedistributormayhavespecificrequirementsinparticularareascharacterisedbypoorlyperforming,vulnerableoroldinfrastructure.However,stakeholdershaveraisedconcernswithinourconsultationsthatthesejudgementsarenotalwaysappropriate9.

8.ClimateWorksAustralia,PropertyCouncilofAustraliaandSeedAdvisory,ImplementingtheConnectingEmbeddedGenerationRule:ProjectOutcomesReport,May2015Energeia,EmbeddedGenerationGridConnectionStandardsScopingStudy:Task3B.1,May20169.Insomeinstances,stakeholdershaveexperiencedresponsesfromdistributorswhereolderversionsofcurrenttechnologiesweremandatedinpreferencetobetterperforming,morerecentversions.

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4.1Whathappensduringaconnectionapplication?Thediagramonthefollowingpage(Figure3)isastylisedrepresentationoftheconnectionprocess(otherthanforverysmallapplicationscoveredbyAS4777)foraconnectionapplicationinadistributionnetwork.Atypicaldescriptionoftheconnectionprocesswilloutlinethevarioussteps.Thisdiagram,incontrast,focussesonthedecisionpointsinaconnectionapplicationarisingfromthedistributor’stechnicalrequirements:

• Self-assessment:Theproponent’sself-assessmentthattheapplicationcomplieswiththedistributor’sspecificrequirements.

• Thedistributor’sassessmentoftheapplicationagainstitsownmandatedrequirements.

• Safeinthislocation?Thedistributor’sassessmentoftheapplicationinrelationtothenetworkcharacteristicsofthelocationforwhichtheinstallationisproposed

• Meetingadditionalrequirementsofthelocation:Ifnecessary,thedistributor’srequirementsforremediationoforaugmentationtothelocalnetworktoenabletheinstallationtoproceed.

Thediagramalsodescribes,ataveryhighlevel,theproponent’savenuesforclarifyingordisputingadistributor’sdecision,wheretheseexist.Thisdiagramhasbeenusedinourinitialconsultationswithstakeholderstoassistusinidentifyingandclassifyingproponents’experiences.

Standardisedrequirementsforsmall-scalePVCOAGadoptedtheAustralianStandardAS4777(anditssuccessors)astheprimarytechnicalrequirementforabasicconnectionforsmallscalePV.AS4777mandatesinverterconnectionforallcomplyingsolarPVinstallations.Initsmorerecentversionsithasaddedadditionalfunctionalityrelatingtothemanagementofthenetwork.ThisuseofaharmonisedstandardhasfacilitatedthewidespreadinstallationofsmallscalesolarPVpenetrationinEasternAustralia.

However,somedistributorsaddadditionalrequirementsforconnectionscoveredbyAS4777,forinstanceiftheirnetworkhasahighpenetrationofsolargeneration.Distributorswhowishtoreduceexportsintothenetworkfromahighpresencesolargenerationhaverespondedinanumberofways.Thedistributormaylimitthesizeofthesystemtoasetsizeorasizelessthanthatcustomer’sconsumptionenvelope;theymayrequirethatbatteriesareinstalledaspartofthesystemortheymaynotpermitfurthersolarPVinstallationsinspecificareasintheirnetwork.Othersincludeanadditionalassessmentstepbeforeasmall-scaleapplicationisformallyprocessed;orlongerwaitingperiodsthanforabasicconnectionapplicationaspartoftheassessmentperiod.

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Figure3Stylisedrepresentationoftheconnectionprocessforaconnectionapplicationinadistributionnetwork

Self-assessmentFirst,aproponentassesseswhethertheproposedconnectionissafeandcompliantwiththedistributors’requirements,basedonthedistributor’spublishedmaterials,beforemakinganapplication.

Theproponentmayhavedifficultydecidingiftheproposedinstallationiscompliantduetolackofclarityinthedistributor’sinformationabouttheirrequirements.Forexample,ifadistributor’srequirementsrefertoawidegroupofstandardswithadditionalrequirementstheproponentmayhavetomakeajudgementbetweenapparentlydifferingrequirements,andmaynotbeconfidentthattheirjudgementonwhichapplieswillbeacceptabletothedistributor.Thisisdiscussedinourearlierwork(CWAetal2015)andtheEnergeiastudyfortheCEC(2016).

Theequipmentconfigurationproposedmayhavebeenacceptableandsuccessfullyinstalledelsewhere,butthelocaldistributormayhavedifferentrequirements.There’snorecoursetoanotherauthorityintheeventthatadistributor’srequirementsruleoutequipmentconsistentwithotherdistributors’requirements,Australianstandardsorcomparableinternationalstandards.

Thedistributor’sassessmentSecond,inmakinganapplication,theproponentisaskingthedistributorwhetheritagreesthattheconnectionapplicationmeetsitsrequirements.Ifthedistributorrefusesanapplicationonthesegrounds,aconnectionproponenthasrecoursetotheNER’sdisputeresolutionprocedures,shouldtheproponentchoosetopursueadispute.Thedistributortowhichtheconnectionapplicationisbeingmadeistheonlyauthorityonrequirementsforitsnetwork.

Someofthestakeholderswehaveinterviewedhavearguedthatambiguitiesindistributor’spublishedmaterialsmakethisstepasdifficultforthedistributorasitisforproponents.Intheabsenceofclearrequirements,thedefaultpositioncanbearejectionofacompliantapplication,ratherthantheexerciseofjudgementintheinterpretationofvagueorambiguousrequirements.

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Typically,thisstepintheprocessisnotdifferentiatedfromadecisiononwhethertheproposedinstallationissafeatagivenlocation.Wehavedistinguishedbetweenthetwobecausetheoutcomesoffailingeachofthesearedifferent.Ifadistributordecidestheconnectiondoesnotmeetitsrequirementsitmayrejecttheconnectionapplication,requireanamendmenttotheproposedconfigurationorequipmentorrequirefurtherstudies.

Ifnetworkcharacteristicsrequiresignificantadditionalprotectionequipment,oraninvestmentinnetworkaugmentation,thedistributormustspecifytherequirements,and,inthecaseofnetworkaugmentationworks,provideanestimateofthecostsoftheworksrequired.

Safeinthislocation?Alllocationsinanynetworkcannotsupportallconnectionapplications:networkcharacteristicsdifferbylocationandovertime.Adistributor’sintimateknowledgeofprevailingconditionsinthelocalnetwork,andmoreadvancedconnectionapplicationsrelatingtothesamelocationmeanthedistributoristheobviousarbiterofthesafetyofanapplicationinrelationtoanygivenlocation.

AsweunderstandtherequirementsoftheNER,ifaninstallationwouldnotbesafebecauseofthelocalconditions,adistributorshouldimposespecificrequirementsontheconnectionapplicationorrequiretheconnectionproponenttofunddownstreamworksinthedistributionnetwork.Inthefirstcase,thoserequirementsareintendedtobringintocompliancetheproposedconnectionandthedistributor’ssitespecificrequirements.Inpractice,connectionproponentscontinuetopointtooccasionswhereabanonallexportsintothenetworkhasbeenimposed,ratherthantherequirementsforexportstobeacceptableintherelevantsectionofthenetworkbeingspecified.AconnectionproponentcanusetheNER’sdisputeresolutionprocedurestodisputetheadditionalrequirements,ortocontestadistributor’srefusaltocontemplatetheapplicationattheproposedlocation.

MeetingadditionalrequirementsofthelocationWherethenetworkrequiresadditionalinvestmenttomaketheinstallationsafeinthatlocation,insomestatestheconnectionproponentmaychooseitsowncontractortoundertaketheworks,orrequirethedistributortoseekcompetitivequotesfortheworksrequired.Theproponentcanchoosenottoproceedwiththeapplicationifthecostsaretoohigh,ormaychoosetodisputethedistributor’srequirementsundertheNERdisputeresolutionprocedures.Iftheproponentgoesaheadwiththeworktheyhavearighttocollectfromfutureconnectionscontributionstosharedinfrastructureinvestments,but,intheabsenceofco-operationfromthedistributor,thatrightisunenforceable(CWAetal2015)10.

Aconnectionproponenthasonlyalimitedabilitytopredictthedistributor’sspecificationofitsdownstreamrequirements,excepttotheextentthatthedistributor’sDistributionAnnualPlanningReportprovidessomecurrentinsightintolocalconditions.Distributorshavearguedthatlocalconditionscanchangesorapidlythatthetaskofkeepingpubliclyavailablematerialsonlocalstatusup-to-dateisanoneroustask.

10.Noneofthemodelcontractsrequiredtobepublishedbythedistributorsandreviewedinthereportmadeanyreferencetothepotentialfortherecoveryofexpendituresonnetworkaugmentationfromfutureconnections.

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5.Impactofthecurrentconnectionprocess

Customersconnectingnewtechnologiesundercurrentprocessesbearunnecessarycosts–whethermeasuredinthetimetoconnect,ordirectcostsofconnection,orboth.

VaryingrequirementsfromdistributorsfragmenttheAustralianmarketintostateandlocalnetworkareas.Thisfragmentedmarketdirectlyincreasesthecostsofequipment.Thefurthercostsitimposesonstandardisationandlearningbydoingareadragonenergyandnationalproductivityandinnovation.

Further,thesecostsrepresentareductionincustomerwelfare.Thestatusquoalsohindersbusinesses–thedistributorsandallthoseinvolvedwithofferingtechnologiesandservices.Thesecostsreducetheuptakeofnewtechnologiesand,byextension,limittheachievementofAustralia’semissionsreductionandenergyproductivitygoals.Inthefollowingsections,we’vesummarisedobservationsaroundthecurrentconnectionprocessfromouranalysisandconsultationstodate.

5.1CoststobusinessandconsumersInconsistentandnon-transparentrequirementsfortheconnectionoftechnologiestothegridimposecostsandreducethebenefitsavailablefromharmonisation.Ambiguityortheabsenceofawrittendescriptionofdistributor’srequirementsincreasesthedifficultyofaninstallation.Restrictingtheequipmentapprovedforusedecreasescompetitionintheequipmentmarketandhence,mayincreasecoststocustomers.

Givenprojectedcustomeruptakeofrenewableenergyovertheshorttomediumterm,anyreductionintransactioncostsassociatedwithmoreconsistent,transparentandbalancedconnectionrequirementsislikelytodeliversignificantaggregatedcostsavings.Forexample,AEMO’sprojectionsfortheNEFRsuggestcommercialandindustrialcustomerswillinstallaround25,000solarPVsystemsoverthenext10years,addingaround1GWtototalsolarPVinstalledintheNEM.

Directcostreductionsfromharmonisingconnectionrequirementsareexpectedtobesubstantial.Thereductioninconsumers’installationscosts–fromthefirst10yearsofanationallyconsistentsetoftechnicalrequirementsforgridconnectionsforsmalltomedium(30kWto5MW)embeddedgenerators-couldbeworthatleast$140m($2016),accordingtoestimatespreparedbyEnergeiafortheFuture-ProofinginAustralia’sElectricityDistributionIndustryProject(FPDI)(CEC2016).AEMO’sprojecteduptakeofsolarPVbycommercialandindustrialcustomersinthe2016NationalElectricityForecastingReportisaround20percenthigherthantheestimateEnergeia’susesinitsbenefitcalculation:onalike-for-likebasis,savingswouldbe20percenthigher(SeedAdvisorycalculationbasedonAEMO2016b).11

Whicheveroftheseestimatesareused,thebenefitsfromchangestotherequirementsforgridconnectionsareunderstated,becausetheyonlyconsidercurrentlevelsofinstallation.Broadeningnationallyconsistentrequirementstolargerandsmallerconnectionswouldincreasedirectbenefits,andlowercostswouldbelikelytoincreasethenumberofinstallationsofembeddedgeneratorsofallsizes.Reducingthecostofinstallationscanhaveequityimplications–somecustomerscurrentlyexcludedfrominstallingtheirownrenewableenergycouldaffordtodosoandsavemoneyacrossthelifeofthesystem.

11.TheestimatehasbeencalculatedbasedonAEMO’sprojectionsforadditionstosolarPVinstalledbyCommercialandIndustrialcustomers,assumingthesameaveragesizeinstallationandsimilarcostsperinstallationasusedbyEnergeia.AEMO’sandEnergeia’sprojectionshavedifferentinitialtrajectories,butovera10yearperiod,thenumberofinstallationsassumedtounderlieAEMO’scalculationsisaround20percenthigherthanEnergeia’sprojectionforthesameperiod.

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5.2ImpactonuptakeIncreasingthenumberofinstallationsandreducingthecostscouldcreatearangeoffurthereconomy-widebenefits,improvingenergyproductivity,increasingtheuptakeofrenewableenergyandcontributingtonationalobjectivesforreducedemissions.Lowercoststocustomersincreasedemand:theprogressofresidentialsolarPVinstallationsshowsusjusthowpotentthiseffectcanbe.If,forexample,wetakeAEMO’sassumptionsthatcustomers’responsivenesstopricechangesis0.1percentforeverypercentagechange,thenforevery10percentreductionininstallationcostsachieved,thenumberofinstallationsincreasesby1percent(calculationsbasedonAEMO2016b).Overa10yearperiodcustomerswillinstallaroundanextra2,100systems,oraround86MWoffurthersolarPV,ifusingEnergeia’sestimateforannualinstallations(CEC2016).TheincreaseislargerusingAEMO’sprojections,byaround10MW12.

Conversely,delaysandcostsinachievinginstallationsreducedemand.Forlargerpotentialinstallations,thistakesanumberofforms.Theconnectionproponentcouldreducetheirambition,reducingthescaleoftheprojectproposedeithertoaddresspotentialnetworkissues,orinresponsetodirectdistributorfeedbackonanapplication.Or,theprojectmaybeabandoned;inthecommercialpropertysector,projecttimelinesandconnectionapplicationtimelinesarestillinconsistent,despiterecentreformstoconnectionapplicationprocesses.Thecostsofdelayingaprojecttypicallyfaroutweighthebenefitsofembeddedgeneration:timeconsumingconnectionprocessesdirectlyreduceproponents’interest.

Stakeholdershavealsomentioneddistributorrequirementsthatdirectlylimitembeddeddistribution,withouttakingintoaccounttheindividualinstallation.Anexampleisdistributors’useofanabsolute,undiversifiedcapacitylimit,wherethetotalcombinedinstalledcapacityofsolarPV,batteryandinverterinstallationsisrestrictedtobelowadefinedlimit,regardlessofthelikelypatternofconsumptionandproductiononthecustomer’spremise.

Informedbytheirexperiencesinothermarkets,customersexpectbehind-the-meterinstallationstofollowrapidlyafterthepurchasedecision.Stakeholdershavereportedtousthedifficultiesconfrontingretailerssimultaneouslymanagingcustomerexpectationsforclose-to-immediateinstallationanddistributorprocesses,insomecasesrequiring60businessdaysprocessingtime.Managingtheseprocessesimposesadditionalcostsonretailersand,ultimately,allcustomers;andthedelaysmayreducethepotentialsizeandgrowthofacurrentlyimmaturemarket,ifcustomers’experiencesarenegativeintheearlystagesofthemarket.

5.3InefficiencieswheninstallinginmultiplelocationsThecurrentsituationhasobviousimplicationsforproponentsaimingatstate-wideornationalroll-out.Thedifferencesfromonedistributortothenextmeanthateachprojectwillbetoagreaterorlesserextentunique.Designs,procurementandinstallationcostswillallbemoreexpensivethanwouldotherwisebethecase.LargersolarPVinstallationsaresubjecttosignificantlylongerdelaysthansmallresidentialinstallations.Thedelaysintroducesignificantlagsintoinstallers’businessesrelativetothepipelineforsmallresidentialsolarPVinstallations.

Alternatively,aproponentcouldinvesttimeandcostup-fronttoseekdistributors’agreementtoacommondesign.Thereis,however,ariskthatthemostonerousdistributorrequirements(orthedistributortheleastwillingtonegotiate)setthebarforallinstallations.Thiswouldimposeunnecessaryexpenseonthetotalproject,and,forsomeprojects,reducethelikelihoodoftheprojectproceeding.

12.Incalculatingtheimpacts,we’veassumedAEMO’sprojectionsarebasedoncurrentconnectionprocessesandtimelines.

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Inthecommercialpropertysector,hightransactioncostsresultingfrominconsistentrequirementsfromdistributortodistributor,non-transparentandcomplexconnectionrequirementsandprocessesallremainsignificantbarriers.Thisisparticularlytrueforbusinesseswithsitesspreadacrossdifferentdistributors.Consequently,despitehighlevelsofambitioninthesector,commercialsolarPVinstallationsinAustraliaareprogressingataslowerthandesiredrate.Projectsareapproachedonanindividualbasis,evenwhenthepropertyownerormanagerrecognisesthepotentialbenefitsofapproachingprojectsaspartofawiderprogramofwork.Installationratesaresloweventhoughrooftopsolarshouldbeacost-effectiveinvestmentformanybuildingowners,especiallythosewithlargeunutilisedroofspacessuchaslargeretailandindustrialassets.

Theinabilitytoachieveeconomiesofscaleisnotlimitedtotheconnectionproponent.Banksandfundmanagerswiththegoalofincreasingtheirlendingtorenewableenergyprojectsseeharmonisationaspartofaprocessthatshiftsprojectfinancingfromthecurrent,highcost,bespokemodeltoasimplereplicablemodelwithaprojectpipelinetosupportefficientfundingapproaches.Incontrastwiththecurrentmodel,areplicablemodelforprojectdevelopmentwouldsimplifyprojectdocumentation,duediligenceandsecuritisation,decreasefinancingcostsandincreasefinanceavailability.

5.4VariationsinrequirementsreducescompetitioninequipmentmarketsTheAustralianmarketforconnectionequipmentisnotlarge;iflocaldistributorsadoptdifferentrequirements,themarketfortheaffectedequipmentisreducedtofragmentedlocalmarkets.WehaveheardfromequipmentmanufacturerswhochoosenottocompeteintheAustralianmarket,becauseofthecostsofparticipation13.ThestatusquoaffectsnotonlytheavailabilityofproductsintheAustralianmarketbutalsothedepthofproductandserviceoffering,particularlywheredistributorshaveuniquerequirements.Lowerproductavailabilityresultsinlesscompetition,andinturn,highercosts.WehavealsoheardfromastakeholderwhereAustralianinstallationsinaninternationalroll-outofidenticalfacilitieshavetheunenviablepositionofdominatingthelistof“10mostexpensiveinstalls”internationally.Thestakeholderstatedthiswaslargelyowingtodifferencesincostofequipment,drivenbyalackofcompetitioninthemarketplaceinAustraliaforcertifiedequipment,andreinforcedbythehighcostofcertification14.

LimitedcompetitionintheAustralianmarket,combinedwiththehighcostofcertifyingequipmentforAustralianrequirements,resultedinasingleavailablecertifiedmodelintheAustralianmarketofaspecifictransformer.ThattransformercostmorethanfourtimesthecostofthesameequipmentintheJapanesemarket.GivenalimitednumberofexpectedinstallationsthecostsofcertificationspecificallyfortheAustralianmarketmeanstherewouldbenopaybackforthecustomerinimportingandcertifyinganalternativetransformerforherownuse.AndthefragmentationoftheAustralianmarketreducestheincentiveforothermanufacturerstocompetewiththeexistingcertifiedmodel.

Insummary,installationtechnologiesinAustraliacanbesignificantlymoreexpensivethaninothersimilarcountries,becausethechoiceofequipmentcertifiedtoAustralianStandardsislimited,asaresultofacombinationofthesmallsizeoftheAustralianmarket,theextensivedifferencesinnetworks’requirementsandthecostsofcertification.

13.Thesamecouldbesaidwhere,forexample,StandardsAustraliaadoptsmateriallydifferentstandardsfromtheprevailinginternationalstandards:customersbearcostsfromareductioninsupplierstotheAustralianmarketplace,whiledifferentstandardsmayprovidenocommensuratebenefittocustomersorthecommunitymorebroadly.14.Thisinformationwasprovidedduringstakeholderconsultations.

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5.5ImpactoninnovationandtechnicalchangeLocaltechnicalstandardsettingforconnectionofequipmentlimitstheabilityofnewmodelsornewtechnologies-includingthosedemonstratingsuperiorperformanceandsafety-toenterthemarket.Issuesidentifiedduringourconsultationsinclude:

• ExistingAustralianStandardsareslowtoadapttotechnicalchange.Forexample,asinverterdesignschange,therequirementthatallsmallsolarPVinstallationscomplywithAS4777shutsnewerdesignsoutofthemarketuntilthatstandardisupdatedtorecognisethechangestodesigns.

• Weareawareofbusinesseswithmoreadvancedmodelinverterswhohavebeenadvisedthatthebestandmostproductiveroutetomarketisthroughinternationalcertification,followedbyAustralianmarketentry,ratherthanenteringtheAustralianmarketdirectly.

• Internationalequipmentmanufacturers’decisionstoparticipateintheAustralianmarketareinformedbythescaleoftheavailablemarketandthecostofcompliancetospecificAustralianrequirements.StakeholdersrepresentingAustraliantechnologydevelopershavestatedthatthestatusquorestrictsmarketentry.

• ThecostofcertificationinAustraliaishigh(particularlywhenconsideringthesizeofthemarket),andstakeholdersmentionedinstancesofsomedistributorsacceptingAustralianStandardsastheonlyacceptablecertificationregardlessofcertificationinothermarkets.

• Newbusinessmodelsfacedifficultiesingettingestablished,especiallyforstatewideornationalbusinessofferingscrossingmultipledistributionbusinesses.

5.6RiskofunfairmarketadvantageStakeholdershavealsoexpressedconcernsthatasaresultoftherequirementsadoptedbyindividualdistributors,innovationinproductsandservicesmaybelimitedtothedistributionbusinessesthemselves-providinganunfairmarketadvantage.We’vealsobeentoldofdistributorsrequiringextensiveandcompetitivelysensitiveinformationaboutthesoftwarebeinginstalledwithsolarPV/batterybundles,aswellasdistributorrequirementsthatseektorestrictsmallresidentialcustomersfromexportingfromtheequipmentinstalled.Similarly,we’veheardconcernsfrombusinessesthattheremaybetheselectiveapplicationofdistributorrequirements–oneruleforthedistributor’sownbusinesses,andoneforconnectionapplicationsbyunrelatedbusinesses.

Akeyquestionrelatestowhetherthestatusquoisconsistentwithcompetitioninnetworkservicesprovidedbehindthemeter.Intheabsenceofanyoversightofdistributors’individualrequirements,itisnotclearwhetheritis.Currentstatelegislationprovidesnooversightmechanismfordistributors’requirements,orthebalanceofsafety,performanceandcompetitiveaccessachievedintheapplicationofthoserequirements.AsidefromfuturerulechangesextendingthecoverageoftheNERtonetworks’requirements,theonlymechanismcurrentlyavailableundertheNERisadisputebetweenaconnectionproponentandthenetworkonaspecificapplication.

Clarityontherelationshipbetweendistributors’requirementsandthecompetitivelandscapeisunlikelytoresultfromconnectiondisputes,becausecustomers’abilitytodisputetherequirementsislimited;thedisputeresolutionprocessesundertheNERareavailableonlyonacase-by-casebasisandinrelationtospecificconnectionapplications;anddisputeresolutionprocessesareonlyavailableonceaconnectionapplicationhasbeenmade.Projectsthatdon’tproceedtotheapplicationstagebecausetheproponent’sassessmentofthenetwork’srequirementsisunfavourabletotheprojectproceeding,havenorecoursetoadjudicationofanysort.

15.Someoftheseeffortsappearpoorlydesigned:customerundertakingsnottoexportaredifficulttoenforceifthecustomeratthepremisechanges,whilerequirementsonretailerstoenterintoundertakingsacustomerdoesnotexportareunlikelytosurviveacustomer’schangeofretailer.But,morerelevantly,limitationsofthissortappeartobeinconsistentwiththetreatmentofsmallcustomersundertheNER,andraisematerialquestionsaboutcompetitiveneutrality.Inprohibitingacustomerexportingthroughtheirretailerorathirdparty,isthenetworkeffectivelypositioningitselfastheonlypossibleproviderofthisvaluestreamtothecustomer?

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6.CharacteristicsofpreferredsolutionsInordertominimisecostsandmaximiseuptakeoflowcarbongridconnectedtechnologies,webelievethatnewinstitutionalsolutionsarerequiredtoreplacethecurrentnetwork-by-networkprocess.Thesesolutionsshouldideallyminimisedelayandreduceupfrontandtransactioncostsofinstallationasfarasispractical,whilemaintainingsafetyandsecurityofthenetwork.Thiswouldbeasubstantialpublicbenefit–installingembeddedgenerationandstoragecanhelpAustraliatransformourenergysystemandreduceemissions.Harmonisedrequirementswillmakethiseasier,cheaperandmoreequitable.

Wehaveidentifiedsomecharacteristicsofanapproachwhichcandeliverontheseobjectivesmoresothanthestatusquo,andwe’vehadanearlylookatalternativeinstitutionalmodelsasaguidetowhatthismightbe.Inthenextstageofthisproject,ourobjectiveistodevelopalternativeinstitutionalmodelsinlinewithourpreferredcharacteristics,todevelopapreferredalternativetothestatusquowithstakeholders.

Consideringstandardsasprovidingaminimumacceptablesolutionoraperformancebasedspecification,ratherthandefiningtheonlyacceptablesolution,couldbeasolutionintimesofrapidtechnologicalchange.

6.1Consistentnationalstandard:rareexceptionsAconsistent,clearandtransparentnationalconnectionstandardwouldreducethecostandmarketimpactsofthecurrentarrangements,providebenefitstocustomersandtheeconomy,andunblockuptakeofnewtechnologies.State-basedsolutions,liketheproposalbyErgonEnergy,EnergexandtheQueenslandgovernment(2016)potentiallyoffereasierstepsforward,butthisproposalandothergovernmentproposalsofwhichweareaware,donotfullyaddresstheissue-especiallyforbusinesseswithanationalfootprint,andinrelationtocompetitionintheequipmentmarket.

Nationalstandardsmustexplicitlybalanceriskstosafetyandnetworkperformance,costsandwiderpolicyobjectives:Thereisacosttobothinappropriatelyhighandinappropriatelylowstandards,andtheprocessusedtodevelopnetworkstandardsneedstorecognisethesecosts16.Theperformanceoftheelectricitysystemasawholeneedstobeconsidered,inadditiontolocaldistributorrequirements,accordingtoAEMO’srecentworkoninvertersettings(2016a)anditsFuturePowerSystemSecurityProgram(2016c).AEMO’sinitialworksuggestedthatundercertainspecificcircumstancescurrentlocaldistributorrequirementsmaybeinconsistentwithsystem-widerequirements:forexample,distributors’requirementsforinverterstorespondtounder-frequencyeventsbydisconnectingcouldcontributetotheworseningofsystem-wideperformance.

Thedistributormayhavespecificrequirementsinparticularareascharacterisedbypoorlyperforming,vulnerableoroldinfrastructure:inourview,thesecharacteristicsshouldbeaddressedatalocallevel,notthroughadistributor-widestandard.

It’salsoimportantthatnetworkstandardsreflectconditionsinthenetworkswheretherearealargenumberofconnectionsandwherethemajoreconomicactivityis,thatis,inhighlymeshedurbannetworks,highperformingbyinternationalstandards.Settingnetworkstandardsbasedontheperformanceoftheleastwellperformingareasofthenetworkwouldresultinnetworkrequirements‘levellingup’tomeetthemostonerouscurrentrequirements.Ourviewisthattheoppositeshouldbethecase:nationalnetworkstandardsshouldbesetattheminimumconsistentwiththesafetyandperformanceofnetworks,andareaswhereexceptionstothosestandardsareappropriateshouldeitherbeexplicitlyexcised(foraperiod)fromthecoverageofthestandards,ordealtwithonanexceptionsbasis.Thisistheappropriateuseofthetestastowhetheranapplicationissafeattheproposedlocation,thethirdofthetestsinourdiagraminSection4.16.InthecourseofthedebatesurroundingthechangestoconnectionprocessesinChapter5oftheNER,astakeholderrepresentativeclaimeditwasamatterofsomepridethattheautomaticconnectionthresholdintheNERScheduleswasasonerousasitis.Toaneconomist,ofcourse,astandardsetsohighitcanneverprofitablybeimplementedisineffectiveandexpensiveregulation,notadesirableoutcome.

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6.2Minimumperformancestandards,setindependentlyConsistenttechnicalstandardsforequipmentwouldbebestsupported,asinotherindustries,bycommonstandardssupportedbyindependentandcosteffectivetestingandcertificationacceptedacrossAustralia.StandardsAustraliaacknowledgesthatinrelationtotherepresentationonitsCommitteesdevelopingstandardsfortheelectricityindustry,therepresentationoforganisationsdirectlyrepresentingcustomers’interestshasdwindledovertime,leavingtheCommittees’membershipdominatedbydistributorrepresentatives.

Wehaveidentifiedmodelsforsettingharmonisedrequirementssupportedbyappropriatetestingandcertification.ThesecovertheregulatedsolutionrepresentedbytheAustralianCommunicationsandMediaAuthority(ACMA);thecoordinatedapproachadoptedbyAustraliangasnetworkswhichrelyonStandardsAustralia’sstandardsasthebasisforindustrystandards18;andtheaviationsectorapproachwhichreliesoninternationalstandardsandmodifiesthemonlywherestrictlynecessaryforAustralianconditions.

Telecommunicationsandtransportareregulatedbythefederalgovernment,butthegasindustry’sapproachsuggeststhatstateregulatedindustriescanarriveatanationalapproach,ifindustry(andthelocalregulators)havethewilltodoso.

17.Earlyintheprocessofopeningtelecommunicationstocompetition,theincumbentoperatorinsistedonrestrictingconnectedequipmenttoequipmentitmanufactured.18.Inothermarkets,competitionextendstothedevelopmentofstandardsthemselves,withcompetentorganisationscompetingfortherighttodevelopstandardsonbehalfofindustryorganisationsandregulators.

TechnicalstandardsinthetelecommunicationsindustryTherearealternativemodelsavailablethatbetteraddressquestionsofcompetitiveadvantage.Forexample,atthebeginningofthetelecommunicationindustry’stransformation,theincumbentAustraliannetworkoperatorwasthearbiterofallequipmentthatcouldbeconnectedtoitsnetwork17.Inthetelecommunicationssector,theincumbentwasnational,whichmeantthateconomiccostsimposedbyitsrestrictionswerelowerrelativetothosecurrentlyresultingfromthedifferingrequirementsamongelectricitydistributionnetworks.Thecompanieslockedoutofthemarket–equipmentmanufacturersinparticular–werelarge,internationalbusinessesandthecustomerswererepresentedinitiallybylargeinternationalbusinesses,likeOptusandVodafone.Thequestion–whenwastheincumbentappropriatelysafeguardingitsnetwork’sperformanceandsafety,andwhenwerethereanti-competitiveimplicationsfromtheincumbent’sdecisions–wasresolvedbymovingthedevelopmentoftechnicalstandardstoanindependentregulatoryauthority.

TheAustralianCommunicationsandMediaAuthority(ACMA)haslegislativeresponsibilityfor,amongotherthings,licensingandregulatingtelecommunicationscarriers,certainstandardsfortelecommunicationsequipmentandcabling,andelementsofnetworkperformance(interference,forexample).ACMA’srequiredapproachtothetechnicalstandardsisthatthestandardsarethelowestlevelconsistentwiththesafeperformanceofthenetwork,anditsenforcementprogramadoptsarisk-basedapproachtoitspriorities.

ACMAhasanaccreditedradiocommunicationscompliancelaboratorythatcarriesoutcompliancetestingofradiocommunicationsdevices.Itsmainpurposeistosupportindustrycompliancewithregulatoryarrangementssuchastheradiocommunicationsstandardscomplianceandlabellingarrangements.ThelaboratoryisaccreditedbytheNationalAssociationofTestingAuthorities(NATA)forassessingcompliancewithcompliancelevelstwoandthreeforthefullrangeofACMAstandardsandequivalentinternationalstandards.

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Insomecases,theregulatoryauthorityhasitsowntestingfacilities,althoughtestingisnotrestrictedtothosefacilities.Inothercases,theindustrybodyownsatestingfacility,operatedasafor-profitbusinessincompetitionwithothertestfacilities.

6.3ResponsivenesstotechnologicalchangeThedevelopment,adoptionandrevisionofstandardsintheelectricitysectorwouldbenefitfrombeingrevisedtoallowformorerapidturnaroundtimes.Alternatively,theprocesscouldfocusonestablishingminimumrequirementsorperformance-basedrequirements,ratherthanmandatoryrequirements.Thiswouldallowcustomerstobenefitfrominnovativetechnologicaldevelopments.

DiscussionsaboutworkonaninstallationstandardforsmallscalebatteryinstallationsataStandardsAustraliaworkshopinAugust2016highlightedthechallengesofthecurrentstandardsprocess,thepaceoftechnologicaldevelopmentandthepotentialcoststoconsumers(andmanufacturers).OneoftheCommitteemembersdiscussedtheclaimsbysomebatterymodelstohavetechnicalsafeguardsagainstcommonriskstoahouseholdfromabatterymalfunctionorotherincidents.Intheabsenceofaperformancestandard,however,themodelsmakingtheseclaimscouldnotbetested;and,asaresult,theinstallationrequirementsforsmallbatteriescouldnotdifferentiatebetweenequipmentwithorwithouttheclaimedsafeguards.Asaresult,installationrequirementsarelikelytobebasedontheleastsafemodels.Thiswouldmeanthedistributormayrequireadditionalmeasuresforallinstallations;forthoseofferingsuperiorperformance,thoserequirementsarelikelytobeoverlyonerous.

Some,butnotall,batteriesofferadditionalsafetyfeaturesthatreducetheriskoffiretoacceptablelevels,forexample.Ifthestandardoradistributordoesnotdifferentiatebetweenthosewithandthosewithoutthesefeatures,allbatteriesmayberequiredtobeinstalledexternallyinametalfireproofcabinet.Thisrequirementcreatesextracostsforallbatteriesinstalled,andstopsbatterieswiththeadditionalfeaturesbenefittingfromthosefeatures.Stakeholders’experienceofamendingAustralianstandardsinresponsetotechnicaldevelopmentssuggeststhatamendmenttocaptureindustrydevelopmentswillbedifficultandtimeconsuming.

EquipmentstandardsintheAustraliangasindustryAustraliangasnetworksshareequipmentstandardsacrossAustralia.ThecurrentprocessforqualifyingequipmentforconnectiontoanAustraliangasnetworkisbasedonStandardsAustralia’sdevelopmentofrelevantstandards(althoughthereareconcernsaboutthespeedofStandardsAustralia’scurrentprocesses,andtherepresentativenessofStandardsAustralia’scommitteememberships).Equipmentsubjecttoaspecificstandardistestedandcertifiedbyoneofanumberofcompetingaccreditedfacilities.TheAustralianGasAssociationoperatesanaccreditedfacility.Accreditedfacilitiesareauditedregularly,typicallybythestate-basedtechnicalregulator,toensuretestproceduresareappropriate.CertifiedequipmentcanbeconnectedtoanygasnetworkinAustralia.

Gasnetworks’safetyandperformance,likeelectricitydistributionnetworks,isastateresponsibility.However,co-ordinationeffortsbythetechnicalregulatorshaveresultedintechnicalregulationconvergingtoanationalmodel,eventhoughstatelegislationdiffersinthepowersandprocessesappliedfromstatetostatebythedesignatedtechnicalregulator.

Insomestates,additionalcertificationprocesseshavebeenintroducedwheretheequipmentforwhichcertificationisbeingsoughtisnotexpectedtobeinstalledinsignificantvolumes.Thisadditionalcertificationcategoryisapossiblemodelfornewtechnologiesintheearlystagesofdevelopment,orwherethereareonlyasmallnumberofcertifiedproductsavailableintheAustralianmarket.

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Thereisalsoaneedtoconsiderthecurrentprocessesforsettingindividualnetworks’requirements,whichrelyonindividualdistributorsandtheircapacitytoassesstechnologiesandtheimplicationsfortheirnetworks.Thenextstageoftheprojectwillconsiderfurtherwhetherthestatusquoisappropriateandcostefficientduringaperiodofrapidtechnologicalchange.Thiswillincludewhetherindividualdistributorshavethecapacitytokeepupwiththedevelopmentsinthemarketplace,andifitiscosteffectiveforindividualdistributorstoduplicatesuchactivity.

6.4CompetitiveneutralityDistributorsareincreasinglyseekingtodeliverbehind-the-meterservicestomanagedemandandinvestmentintheirnetworkaswellasforcommercialbenefit.Therisktocompetitiveneutralityfromdistributors’controloftheirownconnectionrequirementsandtheabsenceofanyeffectiveoversightofthoserequirements,ortheirapplication,hasthepotentialtobecomeasignificantissue.

Currently,adistributordecideswhetheraparticularinstallationortypeofinstallationissafe,subjecttothelocaljurisdictionalframework.Thedistributoralsodeterminestheconditionsunderwhichtheproposedconnectioncanbemade,andconsequentlythedirectcostoftheconnection.Thisallocationofresponsibilitymaycreateconflictsforcompetitiveneutralitybetweenthedistributor’sregulatedbusiness,itsunregulatedbusinessanditspotentialcompetitors.Giventhereislittleoversightofdistributors’technicalrequirementsortheirdecisionmaking,thecurrentprocessoffersfewavenuestoeffectivelycontestdistributordecisions.Thiswilltendtodecreasetheprovider’sconfidencethattherewillbecompetitiveneutralityforpotentialproductsandservicesbehindthemeter.

TheEnergeiareport(CEC2016)includesacommentfromonerespondenttotheirstakeholdersurveythattheRing-FencingGuidelinewillensurecompetitiveneutralityindistributors’requirements.However,theGuidelinedoesnotdiscussthepotentialconflictofinterestfromthedistributorsactingasgatekeeperstotheirnetworksforserviceswiththepotentialtocompetewiththeirownservices.

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7.Whatnext?

GatheringfurtherevidenceofimpactWewillworkwithacoalitionofstakeholderstobuildfurtherevidenceabouttheimpactofidentifiedbarriers.Thiswillparticularlyfocusonthecostanduptakeimpacts,ofthestatusquoonconnectionrequirements.Wewilldevelopworkablesolutionsthatcanberapidlyimplementedtounblockbarriers.

ArticulatingthesolutionWewilldevelopinstitutionalandpolicysolutionstotheissuesidentifiedthroughacollaborativeprocesswithstakeholdersacrossarangeofsectors.

Weaimtoundertakefurtherconsultationwhichwillallowtheproposedsolutionstobetestedwithkeystakeholdersandrefined.

Wewillfinaliseareportincludingasolutionsroadmapinmid-2017.Itwillidentifythekeyactorsandtheirrolesinenactingthesolution,aswellasdocumentinternationalexamplesofsolutionstotheidentifiedbarriers.

BuildingsupportforactionWewillengagewithstakeholderstopresenttheproposedsolutionsandgarnersupportforaction.Thiswillalsoincludebroaderengagementwithkeypolicymakers,regulatorsandindustryplayers,plusafocusedmediacampaign.Wewillidentifystakeholderswhowishtoformacoalitionactiveroleinimplementingthesolutions.Wewillrunaseriesofforumssothatcoalitionmemberscanengagedirectlywithkeydecisionmakersandclearlyvoicetheirsupportforreform.

ImplementationandmonitoringofreformWehavelearntfromourpreviouseffortsindrivingchangeintheenergymarketthatittakestimeandefforttoseethingsthrough.Oncesupportisbuilt,wewillcontinuetoengagewithdecisionmakerstoobserveimplementationofthedesiredoutcomesandmonitoractiononthegroundtoensurethatchangeisembeddedintopractice.

ProjectfundingClimateWorksandSeedAdvisorycurrentlyseekfundingforthisproject,fromavarietyofsourcesandarekeentodiscussthiswithinterestedparties.

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8.ReferencesAustralianEnergyMarketOperator(AEMO)2016a,ResponseofExistingPVInverterstoFrequencyDisturbances,April2016https://www.aemo.com.au/-/media/Files/PDF/Response-of-Existing-PV-Inverters-to-Frequency-Disturbances-V20.pdfAEMO2016b,NationalElectricityForecastingReport,NationalEnergyMarket.https://www.aemo.com.au/-/media/Files/Electricity/NEM/Planning_and_Forecasting/NEFR/2016/2016-National-Electricity-Forecasting-Report-NEFR.pdfAEMO2016c,FuturePowerSystemSecurityRoadshowpresentations,2016https://aemo.com.au/-/media/Files/Electricity/NEM/Security_and_Reliability/Reports/2016-FPSS-Roadshow-presentation-1.pdfAustralianSustainableBuiltEnvironmentCouncilandClimateWorksAustralia,2016,LowCarbon,HighPerformance,Sydney.http://www.asbec.asn.au/wordpress/wp-content/uploads/2016/05/160509-ASBEC-Low-Carbon-High-Performance-Full-Report.pdfCleanEnergyCouncil(CEC),2014,2013-14GridConnectionExperiencesSurveyResults,Melbourne.Task4C.1byCEC,2014http://fpdi.cleanenergycouncil.org.au/dam/cec/policy-and-advocacy/ARENA/FPDI/Grid-Connection-Experiences-Survey-Results-Report.pdfCEC,2016,EmbeddedGenerationGridConnectedStandardsScopingStudy,Melbourne.Task3B.1byEnergeia,May2016http://fpdi.cleanenergycouncil.org.au/dam/fpdi/reports/embedded-generation-study-report.pdfCleanEnergyRegulator,2017,Postcodedataforsmall-scaleinstallations.Viewed17January2017http://www.cleanenergyregulator.gov.au/RET/Forms-and-resources/Postcode-data-for-small-scale-installations#Summary-of-postcode-data

ClimateChangeAuthority,2014ReducingAustralia’sGreenhouseGasemissions–TargetsandProgressReviewFinalReport,Melbourne

ClimateWorksAustralia,PropertyCouncilofAustraliaandSeedAdvisory,May2015,ImplementingtheConnectingGenerationRule:ProjectOutcomesReport,Melbourne.http://climateworks.com.au/sites/default/files/documents/publications/implementing_the_connectin_embedded_generation_rule_report_20150507.pdfCOAGEnergyCouncil2015,NationalEnergyProductivityPlan2015-2030:BoostingCompetitiveness,ManagingCostsandReducingEmissions,Canberra.https://scer.govspace.gov.au/files/2015/12/National-Energy-Productivity-Plan-release-version-FINAL.pdfEnergyNetworksAssociation(ENA)andCommonwealthScientificandIndustrialResearchOrganisation,2015,ElectricityNetworkTransportRoadmap:InterimProgramReport,Sydney.ViewedOctober2016.http://www.energynetworks.com.au/electricity-network-transformation-roadmapErgonEnergy,EnergyQueenslandandEnergex(2016)Above30kWto5MWEmbeddedGeneratingSystemConnectionStandardforQueensland–ConsultationPaperhttps://www.ergon.com.au/__data/assets/pdf_file/0005/383144/Above-30kW-and-up-to-5MW-EG-Connection-Standard-Consultation-Paper.pdfMorganStanleyResearch,2016,AustraliaUtilitiesAsiaInsight:Solar&Batteries.

21

Appendix1:Summaryofenergymarketreformprocesses

Who Process Timeline

AER

Ring-fencingGuidelines

FinalguidelinespublishedendNovember2016:

http://www.aer.gov.au/system/files/AER%20Ring-fencing%20Guideline%20-

%2030%20November%202016.pdf.

COAG

EnergyStorageRegistrationConsultation

Consultationpaperreleasedin2016:

http://coagenergycouncil.gov.au/sites/prod.energycouncil/files/publications/documents/EMTPT%20-

%202016%20Forward%20Work%20Program_2.pdf

COAG

StandAlone

EnergySystemsintheElectricity

MarketConsultation

Consultationpaperreleasedin2016:

http://coagenergycouncil.gov.au/sites/prod.energycouncil/files/publications/documents/EMTPT%20-

%202016%20Forward%20Work%20Program_2.pdf

COAG

FinkelReview

ReporttoCOAGDecember2016withfinalreport

early2017:http://coagenergycouncil.gov.au/independent-

review-reliability-and-stability-national-electricity-market.

StandardsAustralia

Energystorageinstallationstandards

DiscussionpaperreleasedforcommentJuly2016:

http://www.standards.org.au/OurOrganisation/News/Documents/Second%20Standards%20Australia%20Energy%20Storage%20Standards%20Discussion%20Pa

per%202016.pdf

StandardsAustralia

DistributedGenerationRoadmap

DiscussionpaperreleasedforcommentJuly2016:

http://www.standards.org.au/OurOrganisation/News/Documents/Standards%20Australia%20and%20the%20Future%20of%20Distributed%20Electricity%20Di

scussion%20Paper%2011%20July.pdf

Inadditiontothislist,theCompetitioninMeteringreformsareexpectedtocommencein2017andtheAEMCisconsideringawiderangeofRuleChangeproposals.

22

Appendix2:Stakeholderengagement

SeedAdvisoryandClimateWorksconsultedthefollowingorganisationsduringthisproject:

ABB

AGL

AECOM

AECmembersandassociatemembers

AMPCapital

ANZ

Brookfield

CharterHall

CleanEnergyCouncil

Dexus

FrasersProperty

Goodman

TheGPTGroup

ISPT

Investa

JetCharge

Lendlease

Mirvac

OakleyGreenwood

PropertyCouncilofAustralia

Pro-utility

RedEnergy

ScentreGroup

SimplyEnergy

Stockland

Tesla

VicinityCentres

Duringtheconsultations,SeedAdvisoryandClimateWorksraisedthefollowingissuesrelatingtothelackofharmonisedrequirementsthathadbeenbroughtupinpreviousconsultations:

• Increasedcoststobusinessesandconsumers

• Downscalingofambition

• Abandonmentofprojects

• Difficultiesaccessingprojectfinance

• Reducedmarketavailabilityofproducts

• Difficultiesinrollingoutnewbusinessmodelsandtechnologies

• Limitinginnovationandpoorresponsivenesstonewtechnology

Organisationscouldeitherraisetheirownissuesorwerepromptedwiththefollowingquestions:

• Hasyourbusinessexperiencedanyoftheseimpacts?

• Whatisthecostimpactofcurrentstandardsandprocessesonyourbusiness?

• Whataretheimpactsintermsofupdateofdistributedgenerationandnewtechnologies?

• Arethereadditionalimpactswehavenotdiscussed?

For further information about this project, contact ClimateWorks Australia:

ClimateWorks Australia 16/41 Exhibition St Melbourne Victoria 3000 PHONE +61 3 9902 0741 EMAIL: info@climateworksaustralia.org

Published by ClimateWorks Australia Melbourne, Victoria, February 2017 © ClimateWorks Australia 2017

This work is subject to copyright. Apart from any use permitted under the Copyright Act 1968, no part may be reproduced by any process without written permission from the publisher.

This report may be downloaded at www.climateworksaustralia.org

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