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Australia has the highest levels of rooftop solar power (PV) in the world, thanks in part to generous government subsidies that have typically flowed to higher-income, home-owning households:
The wealthy are most likely to install solar and battery storage because they can afford the high upfront costs. This leaves poorer households and renters facing steep increases in their power bills as fixed network costs are spread across a shrinking pool of customers.
Various green energy schemes have been regressive wealth transfers, leaving those unable to afford upfront solar investments to bear the escalating costs of the grid.
The Australian Energy Market Commission (AEMC) has proposed replacing variable electricity network charges with fixed charges from 2030.
The AEMC argues that the existing network charges regime, based heavily on electricity usage, benefits households that have invested in rooftop solar panels and storage batteries, at the expense of households that cannot afford to do so.
The AEMC proposes to replace variable network charges (based on grid usage) with fixed charges from 2030.
The rationale behind the change is that households with solar and batteries use less grid electricity and therefore avoid paying their share of network upkeep.
Network costs can account for up to 50% of a normal household’s electrical bill. The charges are collected to repay private operators of the poles and wires network, and they vary with the amount of power used. This means that homes with batteries and solar panels that use less grid electricity pay lower network prices.
According to the commission’s plan, network prices will be fixed beginning in 2030, ensuring that all consumers pay a fair share for network upkeep, regardless of whether they have reduced their grid usage through solar and battery systems.
AEMC chair Anna Collyer argues the current system is outdated and inequitable:
“Inaction is not a neutral option. The longer we wait, the more costly and more complex this system becomes, and the heaviest burden falls on those least able to carry it”, Collyer said.
The likely winners from the reforms would be high‑usage households, electrified homes (those replacing gas with electric appliances), renters, and households without solar or batteries.
These groups would benefit because lower variable charges outweigh higher fixed charges, they currently pay more during peak periods, and they have fewer ways to avoid network costs under the current system.
By comparison, the losers from the reforms would likely include low‑usage households and owners of solar and battery systems.
These groups would lose because higher fixed charges reduce the value of self-generation, and low-usage households would lose the ability to minimise their bills due to low consumption.
Tony Wood, senior fellow at the Grattan Institute, argued that the proposed reform aimed to address a growing problem: households with the means to afford solar and batteries were no longer paying an equitable share of the cost of a network built for everyone.
“The AEMC is not resiling from its position that the people with solar and batteries are avoiding paying for the network and that’s got to be fixed”, Wood said. “Just because the financial attractiveness of rooftop solar and batteries may be less, that doesn’t mean we shouldn’t do it”.
Wood is referring to the electricity “death spiral”. That is, the more people who adopt solar power, the more fixed costs are spread among everyone else.
In my view, a shift to higher fixed charges is a sensible move. Everyone benefits from the electricity grid, so we must ensure that fixed network costs reflect the actual cost of running the grid and are recovered efficiently and fairly.
If solar and battery owners are unhappy, they should disconnect completely and try living “off grid”. Good luck with that.
© 2023 Macro Associates Pty Ltd

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