Governance change in Australia's

renewable electricity transition

Carl Tidemann

Fenner School of Environment and Society

carl.tidemann@anu.edu.au

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Some context…

• Fenner School of Environment and Society

• ANU ARENA solar forecasting project

– 11 of 15 distribution network service providers

• Thesis by publication/compilation

– 2 published chapters, 2 to go

The “Energy Trilemma”

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Equity

System/supply security

Emissions

Energy Trilemma

A very broad definition of governance

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(Source Adapted from Ball et al. 2011)

Methods

• Mixed, inter, transdisciplinary?

– Interviews

– Submission analysis

– Quantitative data

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Interviews – round 1

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98 C. Tidemann et al.

Notes

1 This is made possible by envisioning the grid as a hierarchical structure – transmission above distribution above end consumers – and if batteries are installed at the lowest level, the possible applications flow upward. If they are installed above this level, the lower applications are removed from the picture.

2 Research into the software optimisation of different value streams is currently being undertaken by the CONSORT group and the Bruny Island Battery Trial. It is unknown at this time whether these issues have been overcome.

Appendix

Table A1 Interviewee details

Coded interview number Date of interview Background

1 11/11/2016 Academic/consultant

2 16/11/2016 Commissioner – regulatory body

3 14/11/2016 Consultant – various roles in sector

4 9/12/2016 Senior frameworks and regulation specialist, distribution network service provider (DNSP)

5 9/12/2016 Team leader, market strategy and compliance – DNSP

6 25/1/2017 Anonymous – DNSP

7 25/1/2017 Strategic asset engineer – DNSP

8 2/2/2017 Technical visionary – DNSP

9 24/1/2017 Director – battery and solar PV installer

10 30/1/2017 Energy efficiency and renewable energy program manager – electricity retailer

11 14/11/2017 Consultant, prior industry participant

12 11/1/2017 Policy adviser – industry body

13 Multiple interactions

Anonymous state government official

Table A2 Australian government review submissions

Review Timeline

Senate select committee on the resilience of electricity infrastructure in a warming climate

Created 12 October 2016 – submissions closed 3 February 2017

Standing committee on the environment and energy – inquiry into modernising Australia’s electricity grid

Referred 27 February 2017

Council of Australian governments energy council independent review into the future security of the national electricity market

Launched 7 October 2016

Council of Australian governments energy council energy market transformation public consultation: battery storage; stand-alone systems; and consumer protections consultation

August–October 2016

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Drivers in the National Electricity Market

• Marketisation

• Agencification

– Minimise politicisation?

• Early decision to externalise environmental

concerns to government

• Decades of policy debate on emissions

mitigation

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(Source Adapted from Ball et al. 2011)

The South Australian blackout

• Finkel Review

– Driven by lobbying efforts and ‘technology neutrality’

• “The final report must make a clear and unambiguous statement in favour of

a technology neutral approach to policy support for both CCS and HELE

coal technologies” (Minerals Council of Australia 2017a, p. 3).

– ‘Securitisation’ of the debate

• Federal Government creates a perceived mandate to promote policies they

have no jurisdiction over

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Changing discourses

• Emissions > Cost > Security

• Falsely invoke the Energy Trilemma to justify the

National Energy Guarantee

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Outcomes

• South Australia ‘goes it alone’

• We get the failed ‘NEG’

– And perhaps the demise of the current

government?

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Take homes

• Lobbying will always exist and we need a

transition policy

• The trilemma needs to be taken as a whole

• Retrofitting emissions reductions is a really bad

idea

– Needs to be integrated from the beginning

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1

Spatial disaggregation clarifies the inequity in distributional outcomes of household solar 1

PV installation 2

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Carl Tidemann1, Nicholas Engerer1, Francis Markham2, Bruce Doran1, and John C.V. Pezzey1 4

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1Fenner School of Environment and Society, Australian National University, Acton, ACT 2602. 6 2Centre for Aboriginal Economic and Policy Research, Australian National University, Acton, ACT 2602. 7

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22 February 2019 9

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Abstract 11

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Global installations of household solar photovoltaics (PV) are rapidly increasing, driven in 13

many cases by government incentives. We show a direct correlation between economic 14

resources and both PV penetration and average PV system size. Using data sets with high 15

areal resolution for socioeconomic indicators and household PV installations, we create an 16

Index of Economic Resources for Owner-Occupiers for the Australian Capital Territory, 17

Australia. Our analysis confirms the inaccuracy of using highly aggregated data sets in 18

exploring socioeconomic outcomes of renewable energy policy, an inaccuracy long known in 19

other disciplines. Analyses using such data sets are likely to overlook vulnerable areas, 20

which could increase perverse policy outcomes. 21

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Introduction 23

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Global installations of small-scale, solar photovoltaic systems (PV hereafter) have rapidly 25

expanded, in most cases supported by consumer incentives in the form of renewable 26

generation certificates and feed-in tariffs (Marques et al. 2016). PV creates a variety of 27

social benefits, to the consumer who installs it and to society more broadly, including 28

emissions reductions, less need for electricity system upgrades, and reductions in wholesale 29

electricity prices (Passey et al., 2018). 30

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15

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& Ambrey, 2019, Sommerfeld et al., 2017; van der Kam et al., 2018), analysis of large, 64

internally heterogenous spatial units is problematic. As the Australian Bureau of Statistics 65

(2018b; 31) suggests, the use of aggregated census data “will mask some diversity at finer 66

levels of disaggregation.” Problems with analyses of correlations in highly-aggregated data 67

have been noted in the social science and public health literatures for many decades 68

(Robinson, 1950), and are still important today (Anselin et al., 2007). 69

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Table 1. Summary of studies using spatial analysis of PV penetration and income or socioeconomic 71 variables 72

Authors Income as single variable

Areal unit Mean population

Correlation with penetration

Location

Poruschi & Ambrey, 2019,

Yes Postcode 8,753 Yes Capital cities, Australia

Sommerfeld et al., 2017;

Yes Postcode

8,753 No Queensland, Australia

van der Kam et al., 2018

Yes Postal code 4160 No Netherlands

Graziano et al., 2019;

Yes Census Block group

1000 No Connecticut, United States

Grover and Daniels

No – use socioeconomic index

Lower Layer Super Output Area

1684 Yes United Kingdom

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Second, income is only one of a number of economic variables that have previously been 74

found to explain installations. Its use as a proxy explanatory variable for wealth or economic 75

resources more generally (Graziano et al., 2019; van der Kam et al., 2018) is problematic 76

because, as Graziano et al (2019) themselves suggest, income being found to have a 77

negative relationship with installations could be due in part to income and wealth having 78

become dissociated. 79

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Analyses that find a negative relationship between income and installation rates typically 81

use areal units with large population size (e.g. van der Kam et al., 2018). For those studies 82

that use higher resolution data – Graziano et al’s 2019 analysis using block group level, for 83

example – income is the only variable related to socioeconomic advantage/ disadvantage. 84

There are of course exceptions. A recent analysis in Australia that used highly aggregated 85

data shows a positive relationship with income (Poruschi & Ambrey, 2019). Likewise, Grover 86

& Daniels (2017) found a positive relationship between installations and socioeconomic 87

Previous literature

Two major shortcomings

• Income as single variable to represent

“wealth”

• Aggregated data

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Creating a new Index of Economic

Resources for Owner Occupiers

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indicator for the area, especially where ‘salt and pepper’ social housing policy has 152

distributed social housing dwellings widely, including in areas of relative affluence (see 153

Musterd & Andersson, 2005). While some rented dwellings may have solar installations, the 154

inhabitants will not be the consumers that installed them. In the ACT, 66.6% of households 155

in the 2016 Census were owner occupied. 156

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We thus produced a new index, called the Index of Economic Resources for Owner 158

Occupiers (IEROO), using the variables calculated for each ACT Mesh Block shown in Table 2. 159

These variables are very similar to those used by the ABS for all households to calculate the 160

existing Index of Economic Resources (IER) (ABS, 2018). As well as excluding Mesh Blocks 161

with less than ten owner-occupied dwellings, we excluded records with missing data on 162

specific variables (i.e. ‘Not stated’ or ‘Not applicable’ values) from both the denominator 163

and numerator when calculating percentages. 164

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Table 2. Variables used in creation of Index of Economic Resources for Owner-Occupiers 166

Variable

Percentage of owner-occupied dwellings owning a motor vehicle

Percentage of owner-occupied dwellings whose household type was not a group house

Percentage of owner-occupied households with four or more bedrooms

Percentage of owner-occupied dwellings that are not mortgaged

Percentage of owner-occupied dwellings whose monthly mortgage repayments were less than $2,800

Percentage of adults in owner-occupied dwellings whose personal income was at least $650 per week

Percentage of owner-occupied dwellings occupied by a lone person

Percentage of owner-occupied dwellings not overcrowded according to Canadian National Occupancy Standard

Percentage of employed persons in owner-occupied dwellings who own the business in which they work

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Using this table of percentages, we conducted a principle components analysis (PCA) to 168

calculate our Index of Economic Resources for Owner-Occupiers. All variables were scaled to 169

have unit variance before the analysis was undertaken. The PCA was conducted using the 170

prcomp function in R (R Core Team, 2018). The PCA results for the IEROO were strongly 171

indicative of a single component index, as in the ABS IER (ABS, 2018). The first PCA 172

component explained 87.0% of the variation between Mesh Blocks, with an Eigenvalue of 173

8.71. Subsequent components had Eigenvalues of 0.72 or less. Furthermore, examination of 174

the scree plot (see Supplementary Material Figure S1) showed a clear ‘elbow’ after the first 175

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Findings

• High correlation between economic

resources and penetration

– ACT has highest median income

• Electricity Death Spiral

– Particularly with increasing battery

installations

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Take homes

• Data aggregation is a major problem when

assessing the distributional equity of solar

– At least in the ACT!

• Proof of concept

• Income as a single variable for “wealth

indication” is problematic

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• Policy analysis of the ACT’s battery storage

program

• Interviews

• Technology push or demand pull

– Old policy paradigms needing change

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Methods and themes

Behind the meter batteries

• Can help or hinder low voltage networks

– Possible reverse power flows, frequency

and/or voltage fluctuations

– Value streams can be mutually exclusive

• Dependent on position in the grid

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Policy analysis

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Promoting behind-the-meter battery storage 89

North (1990) suggests society is shaped by constraints on individual’s behaviour, and

formal and informal rules, known as institutions, structure all social, economic, and

political behaviour. Dovers and Hussey (2013, p.14) extend focus in public policy

processes from single institutions to the institutional system: “complex, interactive

systems of many institutions, organisations, and actors.” To understand social and policy

change, the interdependence in such systems needs to be understood.

To determine whether the policy has met its goals, the analysis needs to take into

consideration the limitations on batteries discussed above, as well as the possible impacts

on the institutional system. Table 3 summarises the categories used. Similar categories

have been combined and others have been rearranged in their order to reflect the use of

the framework in analysing, rather than selecting, a policy instrument. Category 1(d) has

been changed to reflect the impacts that could occur in the institutional system.

Table 3 Criteria for policy analysis

Criteria Explanation

1 Effectiveness criteria

Determining the likelihood of the instrument achieving goals in the absence of constraints

a Dependability Will the instrument be more likely than other options to achieve the outcomes required?

b Flexibility in space and time

Can the rate or style of application of the instrument be varied depending on context, or as the situation or status of knowledge changes

c Efficiency, in terms of achieving outcomes

Will the instrument achieve the desired goals in an efficient manner, i.e., more unit of outcome per of investment?

d Complexity and cross-sectoral influence

Can the instrument be well-targeted? With either fewer or identifiable/controllable impacts on other policy, social goals, or the institutional system more broadly?

2 Implementation criteria

Determining the likelihood of the instrument being successfully advocated and implemented

a Equity implications

Who bears the costs of the application and impact of the instrument, and is this equitable or fair (includes the polluter pays principle)?

b Cost Is the gross cost (especially financial, but also human, organisational, and informational resources) bearable in a practical sense? (This is an additional consideration to what instrument is the most efficient.)

c Monitoring requirements

Can the uptake of the instrument and/or its impact or effectiveness be monitored

d Constraints Do constraints on battery applications result in optimal outcomes?

Source: Adapted from Dovers and Hussey, (2013, pp.134–135)

5.4 Policy analysis

5.4.1 Cost and efficiency in terms of achieving outcomes

The NGRP uses an innovative funding mechanism that avoids any government budgetary

issues: by sourcing funding from winners of reverse auctions, as well as much of the

(Adapted from Dovers and Hussey, 2013, pp.134–135)

Main findings

• Consumer subsidies for batteries should be targeted and

coordinated to avoid system security issues

– VPPs?

• Governments need to account for the changing context, needs and

complexity of the electricity sector

• Augmenting markets should not be the dominant paradigm

• Decision making needs to include the actors affected by policy

actions

– Expanding policy networks to include DNSPs

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Governance of low voltage electricity networks

under high penetrations of distributed energy

resources

• High penetrations of solar and batteries – policy induced

– Small scale renewable energy target and feed in tariffs

• Frequency fluctuation, reverse power flows, planning

issues, voltage control

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Open Networks Process

• Imagining the future structure of low

voltage network control and governance

• Suggested models

– centrally controlled;

– separate “Distribution System Operators”; or

– a hybrid

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Methods

• Interviews

– DNSPs, electricity service providers,

regulatory and governance bodies

• Submission analysis

– ENA and AEMO consultation process

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Initial results

• There is no consensus on why and/or whether we need

Distribution System Operators of any kind

• ENA and AEMO have jumped the gun

– Likely driven by self interest

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Initial results continued…

• Visibility is a major problem, however

– Sunk cost fallacy

• Monitoring and control

– The investment could = the current value of the asset

base

» If a cheaper option is discovered after enormous

investment = cost recovery

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Initial results continued…

• There are options under the current market

arrangements that could overcome issues

– More flexible connection agreements

– Australian Standards

• In particular AS4777 for frequency control

– Demand pricing

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Initial results continued…

– Dependent on the penetration within a

particular DNSPs network

– Regulation and policy need to promote

opportunities for experimentation and cross

jurisdictional learning

– Reframing from solving problems to creating

opportunities for DER

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Questions?

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