SubmissiontoSAPN’sTariffStructureStatementfor2020-25andtheirPricingProposalfor2019/20RobPassey1,2,IainMacGill1,3,NavidHaghdadi1,3,AnnaBruce1,2

1CentreforEnergyandEnvironmentalMarkets,UNSWSydney2SchoolofPhotovoltaicandRenewableEnergyEngineering,UNSWSydney3SchoolofElectricalEngineeringandTelecommunicationsEngineering,UNSWSydneyCorrespondingauthor:RobPassey May2019

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AboutCEEM

TheUNSWCentreforEnergyandEnvironmentalMarkets(CEEM)undertakesinterdisciplinaryresearchin the design, analysis and performancemonitoring of energy and environmentalmarkets and their

associated policy frameworks. CEEM brings together UNSW researchers from the Faculty ofEngineering,theAustralianSchoolofBusiness,theFacultyofArtsandSocialSciences,theCRCforLowCarbonLiving,theFacultyofBuiltEnvironmentandtheFacultyofLaw,workingalongsideanumberof

AustralianandInternationalpartners.

CEEM’sresearchfocusesonthechallengesandopportunitiesofcleanenergytransitionwithinmarketorientedelectricityindustries.Keyaspectsofthistransitionaretheintegrationoflarge-scalerenewable

technologies and distributed energy technologies – generation, storage and ‘smart’ loads – into theelectricity industry. Facilitating this integration requires appropriate spot, ancillary and forwardwholesale electricity markets, entirely re-envisaged retail markets that suitably facilitate distributed

resources, efficient network regulation that also supports beneficial innovation and incentivisesdistributedresourcestoprovidecompetitivenetworkservices,andcoherentandcomprehensivewiderenergy and climate policies that can deliver the low carbon energy future required to address

dangerousglobalwarming.

DistributedEnergyResources(DERs)areavitally importantsetoftechnologies,withvitally importantstakeholders, for achieving low carbon energy transition and CEEM has been exploring the

opportunitiesandchallengestheyraiseforthefutureelectricityindustryforoveradecade.Akeyissueis,ofcourse,networktariffarrangementsforconsumerschoosingtodeploythesetechnologies.Moredetails of this work can be found at the Centre website. We welcome comments, suggestions and

corrections on this submission, and all our work in this area. Please feel free to contact AssociateProfessorIainMacGill,JointDirectoroftheCentreati.macgill@unsw.edu.au.

www.ceem.unsw.edu.au

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Introduction

WewelcometheopportunitytomakeasubmissioninresponsetotheSouthAustraliaPowerNetwork’s(SAPN’s)RegulatoryProposalandTariffStructureStatement.WecommendSAPNforthelevelofdetailprovidedinthisTariffStructureStatement.Wemakesomegeneralcommentshere,andthenaddresssomekeyspecificdetailsoftheTSSandPricingProposal.

TheSAPNTSSOverviewnotes:

Whywehave tariffs: “…Tariff reform is proposed tohelp to keep futuredistributionnetwork costsdownby improvingcustomeruseof theexistingnetworkandreducingtheneedto increasenetworkcapacityinthefuture.”

We agree on the importance of highlighting this key role of the tariff reform process. However,proposalstoincreasefixed(daily)chargesclearlyworkagainstthisobjectivebyreducingincentivesforcustomersto‘improve’theiruseoftheexistingnetwork.Thisvexedissueisnotproperlyaddressedinourview.

Whatourtariffsdo:“…Ourpricingneedstosignal,viamorecost-reflectivetariffs,thecostofbuildingandmaintaininganetwork tobettermanagecustomerdemandpeaksand troughs. Increasingly thetroughsarebeingformedbysurplusenergygeneratedbysolaronSouthAustralianrooftops.”

WeareagreedontheimportanceoftariffreformaddressingthegrowingimpactofdistributedPVondemandtroughs.Ofcourse,utilityPVisnowalsogrowinginSouthAustraliaandisdrivingthismiddaydemandreduction furtheraswell.At theState level,certainly, this isnot justa rooftopPV issueandwhat ‘responsbility’ does SAPN believe households and businesses with PV should take for theseimpacts?

Itwouldbeuseful to alsoexplicitly flaghere the role that rooftopPV is playing in reducingdemandpeaks on the network. CEEM analysis using SA scheduled demand and estimates of 30 minutedistributedPVgenerationbasedon theAPVI SolarMap1overMay2018-April 2019 suggests that PVreducedtheStatepeakbyover13%on24January,whileshiftingitfrom2pmto7pm(Figure1).MuchofthetariffanalysisintheTSSdoesn’tappeartoproperlyaccountfortheveryvaluablerolethatPVisplaying in reducing peak demand which remains, certainly in the longer term, a key driver of totalnetwork costs. It could be argued that truly cost-reflective tariffs should properly reflect thiscontributionratherthaneffectivelytaking itforgrantedandfocussingonthe‘new’peakperiodaftersunset,thatPVdoesn’thelpreduce.

1. Haghdadi,N.,Bruce,A.,&MacGill,I.(2015).Assessingtherepresentativenessof‘Live’distributedPVdataforupscaledPVgenerationestimates.InPowerandEnergyEngineeringConference(APPEEC),2015IEEEPESAsia-Pacific.Brisbane,QLD:IEEE.doi:10.1109/APPEEC.2015.7380908

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Figure1:PeakreductionfromdistributedPVinSA24thJan2019

Overall,weestimate thatdistributedPVreducedhighestSouthAustralianpeakdemand for some23hoursoversevendayslastsummer.

Who will benefit from the tariffs: “We already have cost-reflective ‘demand-based tariffs’ for ourlargest customers. The tariff reform process is now looking to influence how households and smallbusinessesuseenergy…”

Thefirstpartofthisstatementisincorrect.Thecomplexityandnecessarysimplifyingabstractions(eg.Long Run Marginal Cost) of network economics means that ‘cost-reflective’ tariffs are extremelydifficult to define, let alone calculate. What we do know is that true cost-reflective network tariffswould require very significant locational variation. Particular tariffs smearedover significantnetworkregions as seen even with larger SAPN customers definitionally can’t be considered truly ‘cost-reflective’. This statement is reflective of amissing aspect of the current Australian NEM discussionaround more cost-reflective tariffs. It seems that some cross subsidies such as those betweenhouseholds with and without PV are problematic, yet significantly larger cross subsidies betweenhouseholds in different regions aren’t. There are certainly reasons why governments might wish toretain cross subsidies between city and country, but equity considerations need to be consideredholistically,ortheyriskbecomingdiscriminatory.

Weare,however,agreedontheimportanceofreformingtariffstoinfluencehowhouseholdsandsmallbusinesses use energy. Again, increases in fixed (daily) charges clearlywork against this objective asthereisnothingthattheseconsumerscandotochangethataspectoftheirbill.Whileflatvolumetrictariffsarepotentiallyproblematic it isnotablethatwhenteamedwithlow‘export’PVtariffs,theydoencourage householdswith PV tomove the operation of flexible demand, such as dishwashers andwashingmachines, intothemiddleof theday,henceassisting inreducingmorningandeveningpeakdemandaswellasreducingsolarexport.Bycomparison,peakdemandtariffscanoftenhavearather‘random’impactonhouseholdbillsduetotheinevitablevariabilityofhouseholddemand,whichmaynotreflectthesystemicpatternassociatedwithahousehold’sdemandduringpeakdemandwindows.Therearegoodreasonswhymanyconsumersdonotsupporttheirusegiventheseuncertainties.

Whenthetariffswillapply:“About13%ofresidentialcustomersand15%ofbusinesscustomersnowhaveintervalmeters.Weexpectthistogrowto45%by2025asallnewandreplacementmetersmustbeofthenewintervalmetertypeincludingsmallbusinessstarts. Allexistingcustomerswithintervalmeters will be assigned to the new cost-reflective tariffs as will all new customers. Other existingcustomerswillbeassignedwhentheygetaneworreplacementmeter.”

We support the universal use of intervalmeters across all consumer sectors in the Australian NEM,althoughthereareconcernsregardingthecostsofprovisionofthese,howthesecostsarecovered,and

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accesstodatathatstillneedtobeaddressed.Untilthereisuniversaldeployment,however,thereisariskofunfairdiscriminationbetweenexistingandnewconsumers,orbetweenconsumerswhodon’tordoundertakesomeactionthat requiresanewmeter (forexample, therequirement fornew intervalmeters for households that install PV) depending on their metering. Equity considerations are veryimportant here, and creating a class of legacy customer who stays on favourable flat tariffs due toretainedaccumulationmetersisproblematicinthisregard.

Howcustomerswillbenefit:“Ifretailerspassthesetariffsthroughtocustomers,somecustomerswillbemotivatedtochangeconsumptionpatternsandreducetheir individualbills. Othercustomerswillincorporatethesepricingchangesintopossibleinvestmentsinequipmentincludingmoreefficientplantanddistributedenergyresources(DER)…”

Thisisaverybig‘if’onwhichtobasethesereforms.Whileitcanbearguedthatcost-reflectivetariffsaremore efficient and equitable (causer pays) even if they are not passed through in cost-reflectiveform, this assumes an efficient retail market – a laughable assumption in the present retail marketarrangementsof theNEMasnotedbytheACCCandothers. Itseemsextraordinarythatall this tariffreformeffortliesinthehandsofahighlydysfunctionalretailmarketdominatedbyasmallnumberoflargeincumbentswithwhatwouldseemtobeverylittleinterest,indeedantagonism,towardsefficientretailmarketoutcomes.

On the issue of network tariffs signalling efficient ‘investment’ in DERs, it should be noted thatinvestmentreallyrequiressomecertaintyaroundfuturetariffstructuresandspecificcharges.Indeed,itseems likely that SAPN’sproposed tariff structuresmightadverselyandunfairly impactonpriorDERinvestments,forexampleinrooftopPV,bymakingtheseinvestmentslessvaluable.Itwouldbehelpfulfor SAPN to address the issue of how DNSPs can create a lower risk environment for consumersconsideringDERinvestments–certainlytheircurrentactionsseemtobeaddingtoratherthanreducingtheserisks.

Asafinalpoint,wewouldpreferthatSAPNandallDNSPSusethetermconsumerorenergyuserratherthancustomer.Whiledefinitionsvary,manywouldarguethatwecanconsiderusersascustomersonlywhen they have the choice on whether to interact with the organisation, and have meaningfulopportunitiestotakeactioniftheyareunhappywiththegoodsandservicesdelivered.Moregenerally,the DNSPS should be consumer, indeed citizen, oriented given their privileged position of regulatedreturns and key role in delivering societal welfare through affordable, reliable and environmentallysustainableenergyservices.

SummaryviewsontheproposedTSSandPricingProposal

Fixedcharges

• Asdiscussedabove,andinfurtherdetailbelow,thisincreaseinthefixedsupplychargeisregressiveandwillreducetheabilityofSAPNtariffreformtodrivecostreductionsthroughchangedconsumerbehaviour.

Incliningblocktariff

• Removingtheincliningblockcomponentofresidentialtariffswillalmostcertainlymakethetariffsforhouseholdswithaccumulationmeterslesscost-reflectivegiventhatthereisarelationshipbetweenmonthlydemandandtheircoincidentcontributiontonetworkpeakdemands.

TOUtariff

• TheTOUmorningpeakisunnecessary(sincethereisnonetworkpeakatthattime)andtheeveningpeakisfartoobroad(sincetheTSSmakesthecaseforthepeakwindowtobe4pmto9pm,notfrom3pmto1am).Havingsuchabroadeveningpeakperiodwilllikelyreducethe

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beneficialimpactofbatterysystemsreducingdemandduringthenetworkpeak-althoughaccordingtotheTSSthereisnolongeraneedtoreducetheeveningpeak,soitisnotclearwhythisisneeded.

• Thesolarspongeisintheoryanexcellentapproach,butwilltargetsolarhouseholds,thatalreadyhaveafargreaterincentivetomovetheirloadstothemiddleoftheday,sowilllikelyhavelittleimpactonthetrough.Thispricesignalshouldbeappliedtoallhouseholds.

• Thus,theTOUtariffappearstobedesignedtofinanciallydiscriminateagainstsolarhouseholds,despitethembeingresponsibleforreducingnetworkdemandpeaksandplacingsignificantdownwardpressureonwholesalespotprices,andthereforecostsforallhouseholds,andofcourse,reducinggreenhouseemissions.Theyarealsothehouseholdsmostlikelytotakeupbatteries,whichwillplacefurtherdownwardpressureonnetworkpeaksandtherebyincreasenetworkassetutilisation,furtherreducingcostsforallhouseholds.

Demandtariff

• Althoughthedemandchargewindowtheoreticallyappearstobereasonable,accordingtoouranalysis(seebelow)itmaynotactuallyresultinincreasedbillsforhouseholdswithhighdemandduringnetworkpeakperiods(suchasownersofairconditioners(A/C),andviceversa.

Batteries

• WeareconcernedthattheTSSunderestimatestheabilityofbatteryenergystoragesystems(BESS)toreducebothnetworkdemandandsolarexportpeaks.

• UsingrealBESSdatawehavefoundthatbetween37%and55%ofresidentialBESScapacitywasbeingdischargedduringthenetwork-wideandzonesubstationpeaks.

• WehavefoundsimilaroutcomesforBESSreducingsolarexports.

Controlledload

• Weagreethatshiftingthetimeofcontrolledloadisagoodidea.Otherwise,SAPNwillbeintherathercontradictorypositionofhavingapeakdemandwindowwithinwhichasubstantialamountofcontrolledhotwatersystemsturnon.

AnalysisundertakenusingtheUNSWTariffTool

• Incomeimpactso TheBlockandTOUtariffsdonotappeartohaveinequitableimpactsondifferent

incomehouseholds.o ThedemandandProsumertariffsincreasebillsforlowincomehouseholdsand

decreasebillsforhighincomehouseholds.o ConvertingthedemandandProsumertariffsintocoincidentdemandchargetariffs

avoidstheseequityimpacts.• Airconditioning

o NoneoftheTOU,DemandorProsumertariffssignificantlyincreasethebillsofhouseholdswithA/CcomparedtotheBlocktariff,andsodonotsendaneffectivepricesignaltocustomersmostresponsibleforincreasingnetworkpeaksandthereforecosts.

o TheonlytariffsthatresultedinasignificantdifferencetotheBlocktariffswerethetariffswithacoincidentdemandcomponent.

o Notethatwearenotprovidingthisanalysisintheexpectationthatcoincidentdemandtariffswillbeimplemented.Itislikelythatcost-reflectivetariffswillonlybeeffectivewhensystems,suchasdistributedhouseholdbatteriesandHomeEnergyManagementSystems,allowautomatedresponsestopricesignals.Inthesecases,accuratepricesignalsarecritical.

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• SolarPVo ThemostinterestingresulthereisthatallthreeDemandtariffsresultinthegreatest

billincreaseforhouseholdswithPV,withthecoincidentandProsumeroptionsresultinginaslightlygreaterincrease.

TariffStructureStatement2020to2025

WecommendSAPNforundertakingadetailedandtransparentanalysisofthevariousimpactsrelevanttotheirTariffStructureStatement(TSS).Wedo,ofcourse,havesomeconcerns,asdiscussedbelow.

After discussing the structure of the TSS’ proposed tariffs, we use the UNSW Tariff Tool (describedbelow) to assess the tariffs in the 2019/20 Pricing Proposal because our concerns regarding the TSStariffstructuresapplytothesealso.Herewefocusontheresidentialtariffs.WethenusetheTariffTooltoassessthetariffsproposedintheTSStoseeiftheyresultinimprovedoutcomescomparedtothosein thePricingProposal.Wethensuggestsomemodificationstothesetariffs.Weshould flagthat theabsenceofpubliclyavailableSouthAustralianhouseholdintervalmeteringdatameansthatouranalysismust useNSWdata.We invite, indeed urge, SAPN tomake suitably anonymised household intervaldatasetsavailableforthistypeoftariffanalysis.Intheabsenceofsuchdata,weareforcedtouselessappropriatedatasets.

1.Dailyfixedcharge

Attheriskofsoundinglikeabrokenrecord,2althoughfixedchargesmaybemorereflectiveofthecostsfacedbynetworks(i.e.largeamountsofcapexandsmallopex),theydon’tbetterreflecttheextenttowhichdifferenthouseholdsareresponsible forthosecosts.Asnotedbymanyothers,suchtariffsarealsoregressive.TheTSSstates(p35)that“Webelievethatthisimprovesthecostreflectivityofsmallerandmedium-sizedcustomersandismoreequitablebetweencustomerswithandwithoutDERsuchassolar.”Asstatedabove, it isnotclear thatsolarhouseholdsare in factbeingsubsidisedbynon-solarhouseholds when the benefits from reduced network augmentation costs, reduced spot prices andreducedGHGemissionsaretakenintoaccount.

Whatisclearhowever,isthatownersofA/Csystemsarebeingcrosssubsidisedbyhouseholdswhodonotown them,with the levelof cross subsidybeingproportional to the sizeof the system (meaningthat even owners of small A/C are subsiding owners of large A/C). This was estimated by theProductivity Commission to be in the order of $350 per year,3 and has been confirmed by our ownanalysis.4Increasingthefixedchargeincreasesthecrosssubsidyfurtherbecausetheusagechargesarereduced.

2.Blocktariff

Ouronlycommenthereisthatremovingtheincliningblockcomponentofresidentialtariffswillalmostcertainlymakethetariffsforhouseholdswithaccumulationmeterslesscostreflectivegiventhatthereisarelationshipbetweenmonthlydemandandtheircoincidentcontributiontonetworkpeakdemands.

2Anancienttechnologyusedtorecordmusic.3‘Electricitynetworkregulatoryframeworks’,ProductivityCommissionInquiryReport,No.62Vol.1,(2013),p.9.April2013.4Passey,R.,Watt,W.,Bruce,A.andMacGill, I. (2018) ‘Whopays,whobenefits?Thefinancial impactsofsolarphotovoltaicsystemsandair-conditionersonAustralianhouseholds’,EnergyResearchandSocialScience,39,p198-215.

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3.TOUtariff

TheTSSmakesaveryclearcaseforthepricesignalsusedtoreduceresidentialandbroadernetworkpeaks to be in the range 5pm to 9pm. It is unclear thenwhy the time-of-use (TOU) tariff charges ahigherratefrom6amto10amandfrom3pmto1am.Themorningpeakperiodisunnecessaryandtheeveningpeakisfartoobroad.Wenotethatthedemandchargepeakwindowcorrelateswellwiththe5pmto9pmnetworkpeak,sowhydoesn’ttheTOUpeakperiodcorrelatetothesamewindow?

HavingsuchabroadTOUeveningwindowwillencouragehouseholdstoreducetheirdemandoverthisentiretime,ratherthanduringthe5pmto9pmnetworkpeak.Thisisespeciallyrelevanttoownersofbatterysystems,whosebatteriesarelikelytodischargeearlyinthewindoworcouldbeprogramedtospread theiroutputover this entireperiod (and somakea reduced contributionduring thenetworkpeakitself).

Weagreethatthe‘solarsponge’componentoftheTOUtariff,withreducedratesinthemiddleoftheday, is an excellent approach. However, we note that households with PV already have a strongincentive tomove theirdemand to themiddleof theday (because theirusage tariff ismuchgreaterthantheirsolarFiT),andprovidingalowerusagerateinthemiddleofthedayisunlikelytomakeanyfurtherdifference.Thus,non-solarhouseholdsarelikelytobefarmoreresponsivetoalowermid-dayrate, and so should be the primary target of such a tariff. However, according to the TSS (p11), thehouseholds to be assigned to tariffs such as the TOU tariff are the existing householdswith intervalmetersaswellasallnewhouseholds.Given that solarhouseholds (whoare thehouseholds thataremost likely to have interval meters) now make up about 33% of the total,5 this tariff will bepredominantly applied to the households least likely to respond to it. Indeed, it might be that thisproposedtariffchangecouldactually reduce load in thatperiod fromhouseholdswithPVas there isnowlessvalueinmovingflexibledemandintothattimeofdayoncethereisnoPVexport.

Further, the TSS states (p14) “Whilst peak demand is still a consideration in building network torespond to customer needs, it is no longer a key driver for how we manage our network and theassociatedcostsweincurtoprovideSCS”and(p122)“SAPowerNetworksexpectsco-incidentdemandto be relatively flat over the period to 2025”. So according to the TSS there is no pressing need toreducetheeveningpeak.

Insummary,theTOUtarifftargetsperiodswherethereislittleornoneedtoreducedemandandarelikelytobeineffectiveindoingsoanyway.ThereasonforthedesignandmethodofassignmentofthisTOUtariffseemstobewellillustratedin17.45and17.46oftheTSS–tosimplyincreaserevenuefromhouseholdswithsolarPV.Thisisdespitethefactthat,asstatedanumberoftimesthroughouttheTSS,andashighlightedinouranalysisabove,thesehouseholdshavebeenresponsibleforreducingnetworkdemand peaks, and therefore costs for all households (not tomention placing significant downwardpressureonwholesalespotprices,andofcourse,reducinggreenhouseemissions).Asdiscussedbelow,they are also the households most likely to take up batteries, which will place further downwardpressureonnetworkpeaksandthereby increasenetworkassetutilisation,6 furtherreducingcostsforallhouseholds.

WerecommendthattheTOUtariffberedesignedtoatleasttargetperiodsthatareatriskofbecomingapeak(i.e. thesame5pmto9pmwindowastargetedbythedemandchargetariff), that it includea

5http://pv-map.apvi.org.au/historical6Onamoregenerallevel,lookingaheadoutto2030,itislikelythatthebestwaytodecreasenetworkcoststoconsumersistocombinetheuseofBESSwiththeuptakeofelectricvehicles–withtheirchargingcontrolledinsuchawaythatvolumesareincreasedwhiledemandpeaksarenot.Underrevenuecapregulation,thisincreasednetworkutilisationwillplacedownwardpressureofnetworktariffsforallendusers.

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solar sponge rate in themiddleof theday (any lost revenue shouldbe compensatedby theeveningpeaktariff),andbeopt-in.Thistariffdesignisassessedbelow.

Aminorpoint:whyisthesolarspongecomponentoftheoff-peaktariffduringadifferenttimewindow(from9:30amto3:30pm)?

4.Demandcharge

Theresidentialdemandchargecomponentappearstobereasonable,targetinganappropriatelysizedwindowinthewarmestmonths(althoughwenotethatp58oftheTSSreferstothepeakperiodbeing5.30 to 9.30pm, not the 5pm to 9pm used in the demand charge window). However, as discussedbelow,comparedtoaBlocktariff itmaynotactuallyresultinincreasedbillsforhouseholdswithhighdemandduringnetworkpeakperiods(suchasownersofairconditioners(A/C)),andviceversa.

Anotherconcern isthat itappearstoonlybeavailablethroughthe‘Prosumertariff’,whichcombinesthe demand charge with the TOU tariff (which as discussed above appears to have serious designflaws).Werecommendthatitbeavailableasastand-alonetariffand/oraspartofthemodifieddesignfortheTOUtariffwerecommendabove,bothonanopt-inbasis.

5.Theimpactofbatteries

WeareconcernedthattheTSSunderestimatestheabilityofbatteryenergystoragesystems(BESS)toreducebothnetworkdemandandsolarexportpeaks.Althoughbatteriesarediscussed inAppendixF‘Evolution of the customer’, they are not mentioned at all in Appendix D ‘Peak demand windowidentification’, nor in Appendix E ‘Tariff Philosophies (Watching brief on future tariffs)’, apart frombeingpartofanelectricvehicle(V2G)andaspartofamicrogrid.Theyarealsonotexpectedtohaveanimpactuntilthefollowingregulatoryperiod(p113).

Networkdemandpeaks

WearecurrentlyundertakingdetailedanalysisoftheoperationofBESSduringbothnetwork-wideandzonesubstation(ZS)demandpeaks.Althoughweareusingasmallsample(15BESS)fromtheEnergexnetwork, theresultsareconsistentacrossdifferentpeaksandacrossdifferent typesofbatteries (AC-coupledandDC-coupled).Using1mindata for the2017year,wehaveassessed theBESSoperationduringthetwohighestnetwork-widepeaksandduringthefourhighestZSpeaks.Wefoundthat,wheretheBESSarefunctioningasdesigned,onaverage37%(peak1)and55%(peak2)oftheBESScapacitywas being discharged during the network-wide peaks (a combined average of 46%). The equivalentvaluesfortheZSpeakswere:onaverage55%(ZSpeak1),41%(ZSpeaks2),53%(ZSpeak3)and41%(ZSpeak4) (a combinedaverageof 47%). TheseBESSwerenotpartof a virtual powerplant and sowere operating in load-following mode.7 As such, if the household’s demand was high and socontributingmoretothenetworkpeakatthetime,theBESSoutputwouldalsobehigh,andviceversa.

The average household peak demand is given as about 2.2kW in the TSS (p58) and there are about784,000residentialcustomers(p120).Thus,theresidentialpeak isabout1,725MW.ResidentialBESScapacity in SAPN’snetwork is estimated to increase to165MWby2021 (p121), and increase slightlythereafter.AssumingacombinedaverageBESScontributionatthetimeofthepeakof45%,theywouldreducethenetwork-widedemandbyabout74MW,or4.3%,andtheZSpeaksbyanequivalentamount.

Although this is a relatively small reduction,when combinedwith the expected low growth in peakdemand (asdiscussedabove), this couldsignificantly reduce theneed foranynetworkaugmentation

7ThisisthestandardmodeofoperationofBESSasitmaximisesthefinancialoutcomesforthecustomerbyminimisingbothexportstothegridandimportsfromit.

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over the regulatory period. It is of course also possible that, like solar PV, BESS uptake will be fargreaterthanexpected.

Solartroughandexportpeaks

The TSS identifies the solar trough and export peaks as significant issues in the coming regulatoryperiod.TheTSSstates(p30)“Withoutmorecost-reflectivepricing,andothermechanismswewillneedtoincreasenetworkcapacitytocaterforthelocalisedcoincidentpeakofextrasolargenerationduringthe‘solartrough’,ratherthantheair-conditioningdemandsofthepast.”ThenetworkcapacityreferredtohereisnotsomuchaMW-basedcapacitytodealwithasolarexportpeak,butthecapacitytodealwith issues suchas voltage riseand reversepower flow.Theseare indeed real issues, andarebeingobservedindistributionnetworksthroughoutAustralia.

However, there seems to be no acknowledgement that BESS operating in load-following mode willreduceboth solar export andby extension the solar trough (during the timeof solar generation thehouseholddemandwillstillbezero,butitwon’tbenegative).

Aspartofthesameresearchprojectdiscussedabove,andinresearchalreadypublished,wefoundthatBESSareveryeffectiveatreducingsolarexportpeaks.8Thus,DNSPsshouldbeactivelypursuingactionsto enable the uptake of BESS, which will not only help to defer network augmentation (and, asdiscussed above, increase asset utilisation and sodecreasehousehold costs), but help to reduce the‘solartrough’impactaswell.

6.ShiftingControlledLoad

TheTSSstatesthat(p32)“Wearealsoproposingincentivesandtimeclockadjustmentstoshiftsomehotwaterawayfromthe11:00pmspikeindemandandintothesolarsponge.”Weagreethatthisisagoodidea,andinfactallDNSPsshouldreallyhavedoneitsometimeago.Withoutthis,SAPNwillbeinthe rather odd position of having a peak demand window within which a substantial amount ofcontrolledhotwatersystemsturnon.

TariffAssessmentsUndertakenUsingtheUNSWTariffTool

WehaveanalysedtheresidentialtariffsinthePricingProposalandthetariffsproposedfor2020/21intheTariffStructureStatement,aswellassomeproposedmodificationstothesetariffs.WehavedonethisusingtheUNSWTariffTool.9Itisanopensourcemodellingtooltoassiststakeholdersinassessingtheimplicationsofdifferentpossiblenetworktariffdesigns,andhencefacilitatebroaderengagementintherelevantrulemakingandregulatoryprocessesintheNEM.WedonothaveaccesstoresidentialloaddataforSouthAustraliasohaveusedloaddatafromtheSmartGridSmartCities(SGSC)database10andfromtheAusgrid300database11,whichwebelieveareacceptableproxies.

8Young,S.,Bruce,A.andMacGill, I. (2019) ‘Potential impactsofresidentialPVandbatterystorageonAustralia’selectricitynetworksunderdifferenttariffs’,EnergyPolicy,128,p616-627.9 InformationontheTariffTool,andtheTariffTool itself,canbefoundherehttp://www.ceem.unsw.edu.au/cost-reflective-tariff-design.10https://data.gov.au/dataset/ds-dga-4e21dea3-9b87-4610-94c7-15a8a77907ef/details11https://www.ausgrid.com.au/Industry/Innovation-and-research/Data-to-share/Solar-home-electricity-data

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PricingProposal2019/2020

TheSGSCdatabase includesmetadata thatallows thehouseholds tobesubdivided intoanumberofdifferentcategories.HerewehavecomparedtheimpactsofdifferenttariffsonhouseholdsindifferentincomegroupsandonhouseholdswithductedA/CandwithoutanyA/C.

Income

Figure2showstheannualbillsforhouseholdsindifferentincomegroupsunderdifferenttariffsinthe2019/20PricingProposal.Itcanbeseenthat,asexpected,asincomeincreases,sodoestheannualbill.Underthedemandtariff,theannualbillforlowincomehouseholdsincreasesslightlycomparedtotheTOUtariffs,butforhighincomehouseholdsitdecreases.Theslightincreaseforlowincomehouseholdsmaynotbesignificant,giventhattheresidentialprofileinSAPN’snetworkmaybesomewhatdifferentto that inAusgrid’s network. Thedecrease for high incomehouseholdsmay reflect the lowdemandchargecomponentasdiscussedbelow.

Figure2.ImpactsofTariffsonHouseholdsofDifferentIncomes

Airconditioning

Figure3showstheannualbillsforallhouseholdsintheSGSCdatabase,andforthosewithoutanyA/CandthosewithductedA/C.12

As expected, householdswith A/C have higher bills than householdswithout A/C. Also as expected,householdswithout A/C have lower bills under TOU and lower still under Demand tariffs. However,giventhattheductedA/ChouseholdshavesignificantlyhigherdemandduringtheTOUeveningpeakperiodandduringtheDemandTariffpeakperiod (Figure7andFigure8), theywouldbeexpectedtohave higher bills on TOU, and higher again onDemand charge tariffs, but they do not. As discussedbelow, this is in part because the values of each component (the TOU peak rates and the demandchargerates)arenothighenoughtocompensateforthelowerratesinothercomponentsofthetariffs.

12TheSGSCdatabasealsoseparatesoutothertypesofA/C,suchassplitsystems,butwehaveusetheductedA/Ccustomersbecause theyhaveagreaterA/C impact (highpeaks),andsoshould illustrate themostextreme impactsof tariffson thesetypesofcustomers.

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Figure3.ImpactsofTariffsonHouseholdswith/withoutA/C

SolarPV

To compare the impacts of different tariffs on households with and without PV we have used theAusgrid300database.ForhouseholdswithPV,theirbills increaseslightlygoingfromblocktoTOUtodemand – see Figure 4. The impacts of refining these tariffs are discussed further on the followingsection.

Figure4.ImpactsofTariffsonHouseholdswith/withoutPV

2020/25TariffStructureStatement

InthissectionweassesstheimpactsoftheproposedTSStariffsonthesamehouseholdgroupsasabove.Wealsoassesstheimpactsofsuggestedmodificationstothesetariffs.ThemodificationsaredescribedinTable I.InallourmodifiedtariffstheaveragebillwasthesameasfortheTSSproposedBlocktariff(Type6).ThisallowsforaneasiercomparisonandhelpstonormalisefordifferencesbetweenourdatasetandthatusedbySAPN.TheratesfortheTSStariffsareasproposedonpage69ofthe2020/25TSS.

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TableI.DifferencesBetweenTariffsinthePricingProposal,theTSSandourrevisions

2019/20PricingProposal 2020-2025TSS SuggestedModifications

2stageblock Block Nochange

TOU TOU ModifiedTOU(TOU1.88):

Removedmorningpeak,madeeveningpeak4-9pm,andneededtoincreaserateofeveningpeakrateby1.88x(to37.2c/kWh)toresultinsamebillforaveragehousehold.Leftotherratesthesameasfor2020/21version.

Demand NoDemandtariff Demandtariff(Demand1.145):

Daily charge same as for TSS Block. NUOScharges increasedby same%as TSSBlock.Demand charges increased by 1.145xcompared to PP Demand charge (to$16.16/kW/month summer and$7.98/kW/monthwinter), to result in samebillforaveragehousehold.

Coincidentdemandtariff(Demcoinc3.01):

As for Demand charge except that thedemand charges are applied to thecoincidentdemand, andwere increasedby3.01x compared to PP Demand charge (to$42.49/kW/month summer and$20.99/kW/month winter), to result insamebillforaveragehousehold.

Coincident demand tariff, half daily (Demcoinc0.53.52):

As for Coincident demand charge exceptthat the daily charge was halved and thedemand charges were increased by 3.52xcompared to PP Demand charge (to$49.69/kW/month summer and$24.54/kW/month winter), to result insamebillforaveragehousehold.

Prosumer(Demand+TOU) ModifiedProsumer(Prosumer2.83):

AsfortheModifiedTOU,Removedmorningpeak, made evening peak 4-9pm. Dailycharge unchanged. Demand chargesincreased by 2.83x compared to Prosumer(to$28.50/kW/month),toresultinsamebillforaveragehousehold.

Modified coincident Prosumer (Pros coinc7.19):

As for Modified Prosumer except that thedemand charges are applied to thecoincidentdemand, andwere increasedby7.19x compared to Prosumer (to$72.50/kW/month),toresultinsamebillforaveragehousehold.

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Modified coincident Prosumer, half daily(Proscoinc0.58.38:

As for Modified Prosumer except that thedaily charge was halved and the demandchargeswere increasedby8.38xcomparedto Prosumer (to $84.50/kW/month), toresultinsamebillforaveragehousehold.

Income

Figure 5 shows the annual bills for households in different income groups. Compared to the PricingProposaltariffanalysisinFigure2,thefirstpointtonotehereisthatthemodifiedTOUtariffhasaverysimilar impacttotheBlocktariffacross incomegroups.Thesecondpointtonote is thattheDemandtariff (modified slightly to result in the same average bill as the Block tariff as described in Table I)increasesbillsforlowincomehouseholdsanddecreasesthemforhighincomehouseholds.Convertingthe Demand tariff into a coincident Demand tariff (especially with a lower daily charge) avoids thisinequitableimpactondifferentincomegroups.ThesecoincidentDemandtariffsarediscussedinmoredetailinthefollowingsection.TheproposedProsumertariffresultsinamuchloweraveragebillwhenapplied across all the SGSChouseholds, so havebeen increased as described in Table I, and like theDemandtariffhasinequitableincomeimpacts.Again,convertingthisintoacoincidentdemandchargeavoidssuchimpacts,especiallywherethedailychargeishalved.

Figure5.ImpactsofTariffsonHouseholdsofDifferentIncomes(TSS)

Airconditioning

Figure 6showstheaverageannualbillforallhouseholdsintheSGSCdatabase,aswellasforthosewithoutanyA/CandthosewithductedA/C,usingthesametariffsasdescribedinTable I.Asfortheincomegroups,theTSSTOUtariffresultsinaslightdropacrossallcategories.ThemodifiedTSSTOUtariffresultsinnosignificantdifferenceforallthreehouseholdgroups(allhouseholds,‘noA/C’and‘withA/C’)comparedtotheBlocktariff.Itisveryslightlylowerfor‘noA/C’householdsandveryslightlyhigherfor‘withA/C’households.Thus,neitherTOUtariffsendsamoreeffectivepricesignalthantheBlocktarifftohouseholdsonaverage.AsdescribedinTable I,themodifiedTSSTOUtariffhasthemorningpeakperiodremovedandtheeveningpeakperiodtightenedupto4-9pmandthepeakrateisalmostdoubled–soitissurprisingthatitsendsthesamepricesignalasaBlocktariff.

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Similarly,theadjustedDemand(1.145)tariffandtheadjustedProsumertariffresultedinlittledifferenceforallthreehouseholdgroupscomparedtotheBlocktariff–andsoagaindonotsendaneffectivepricesignaltohouseholdsonaverage.

Thereasonforthislackofeffectivepricesignals,forthedatausedhere,canbeseeninFigure 7andFigure 8.TheseshowtheaverageloadprofilesforhouseholdswithandwithoutA/Cinsummerandwinter.Itcanbeseenthatalthoughthesizesofthepeaks(andinfactthetotaldemand)isgreaterforhouseholdswithA/C,theshapesoftheloadsaveragedacrosstheseperiodsareinfactquitesimilar.TheTOUtariffisappliedacrossalldaysandsoaveragesouttheloadsandsoisnomoreabletodistinguishbetweenloadsofsuchsimilarshapesthanisaBlocktariff.TheconventionalDemandchargetariffsusedherefaceasimilarproblem,withthedemandchargeaveragedovera5hourperiod,over12monthsoftheyear.UnfortunatelywedonothaveaccesstoSAPNresidentialhouseholddatacategorisedaccordingtoownershipofA/Candsocannottesttheresultsonthosehouseholds.However,weseenoreasonfortheresultstobesignificantlydifferent.

TheonlytariffsthatresultedinasignificantdifferencetotheBlocktariffswerethecoincidentdemandtariffs.Halvingthedailyservicechargeandincreasingthedemandchargerateimproveditseffectiveness,asdidmovingtotheProsumerstructure–presumablybecauseofthehigherusagetariffduringtheA/Cpeak.Thus,thetariffthatcombinedthesetwoattributeswasthemosteffective.

Aswehavediscussedindetailinprevioussubmissions,andinapeerreviewedjournalpaper,13tariffsthattargetcoincidentdemand(i.e.thehousehold’sdemandatthetimeofthenetworkpeak)willbemorecost-reflectivethanthosethattargetabroadarea.However,herewearenotprovidingthisanalysisintheexpectationthatcoincidentdemandtariffswillbeimplemented–onlytohighlightthefactthatitisveryimportantthatthecorrectpricesignalsaregiven.Itislikelythatcost-reflectivetariffswillonlybeeffectivewhensystems,suchasdistributedhouseholdbatteriesandHomeEnergyManagementSystems,allowautomatedresponsestopricesignals.Inthesecases,accuratepricesignalsarecritical.Forexample,asdiscussedabove,inappropriatetimewindowsforhighTOUtariffratesandforpeakdemandchargescanresultinbatteriesbeingexhaustedoroperatingatlowcapacityduringnetworkpeaks.

Figure6.ImpactsofTariffsonHouseholdswith/withoutA/C(TSS)

13 Passey, R., Haghdadi, N., Bruce, A. andMacGill, I. (2017) ‘Designingmore cost reflective electricity network tariffs withdemandcharges’,EnergyPolicy,109,p642-649.

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Figure7.AverageLoadprofilesofHouseholdsWithoutA/C

Figure8.AverageLoadprofilesofHouseholdsWithA/C

SolarPV

Here,forthesakeofconsistency,wehaveappliedthesametariffsaswereappliedtotheSGSCdata(sotheTOUandDemandtariffshavenotbeennormalisedtoresultinthesameaveragebill,althoughtheDemand tariffs come pretty close). Themost interesting result here is that all three Demand tariffsresultinthegreatestbillincreaseforhouseholdswithPV,withthecoincident14andProsumeroptionsresultinginaslightlygreaterincrease.

14Onaslightlytechnicalpoint,theTariffToolappliesthecoincidentdemandtarifftothenetworkpeaks,whichistakentobethesumofallthecustomerdemandprofiles.FortheSGSCdata,thisisjustthesumofalltheSGSChouseholds.HoweverfortheAusgrid 300data, the samehouses are analysedwith andwithout PV,which effectively creates twodifferent networkprofiles,whichmayhavepeaksatdifferenttimes.Howeverthis impactshouldbeimmaterialforthepurposesof illustratingtheimpactofthecoincidentdemandchargeshere.

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Figure9.ImpactsofTariffsonHouseholdswith/withoutPV(TSS)