The 2016 South Australian state-wide blackout and the subsequent localised blackouts in Victoria and New South Wales, together with the 2019 bushfires and serious smoke pollution have reignited the discussion on energy security and reliability.
The Australian Energy Market Operator (AEMO), the entity responsible for operating Australia’s east coast and southern gas and electricity markets and power systems, warned in its recent 2019 summer readiness plan that all states run the risk of unplanned blackouts because of increased heatwaves and bushfires. Victoria remains the state at the highest risk of power outages due to faults at a number of coal and gas plants.
The threat of blackouts combined with the continued hike in the retail energy price on the one hand and the rapid price decrease of solar energy systems and the improved capacity in battery technology on the other hand, has led to more and more homes and businesses opting for solar energy systems with or without battery facility as an alternative energy source to the traditional supply model.
Developers are responding to this shift in the market’s perceptions and desires with offers from included individual home solar and battery systems, to stage or whole development-wide embedded solar or co-generation networks and ‘shared’ rooftop PV systems on multi-unit developments and industrial and office developments.
Drawing on our experience from advising clients on these emerging energy projects and projects that have an energy component, we provide a brief overview of the issues any developer would need to consider before embarking on their own solar experience.
Registration and licence requirements
The electricity industry is regulated at both the state and federal level.
In Victoria, state legislation requires that anyone who wishes to generate electricity for supply or sale must obtain a licence authorising the relevant activity or be exempted from the requirement to obtain a licence.
At the federal level, the National Electricity Law and the National Electricity Rules prohibit a person from owning, controlling or operating a generating system that is connected to a transmission or distribution system unless that person is registered by AEMO as a generator.
While registration and licencing/exemption are unlikely to be required in a scenario where the solar generator is owned and operated by an energy supplier (e.g. an energy retailer or solar installer), you should seek legal advice on whether or not registration and licencing requirements would apply if you plan to own and/or operate the solar generator or supply energy generated from the solar system to a related entity or a third party (i.e. if you plan to own and/or operate an embedded network).
Power purchase agreements
A power purchase agreement or a PPA is an agreement between the owner or operator of a generator and an energy buyer whereby the owner or operator agrees to sell and the energy buyer agrees to buy all or a portion of the energy generated by the generator at a pre-determined price.
A PPA would typically last between 10 to 30 years and the seller may operate and maintain the solar generator in addition to selling energy.
Renewable energy certificates
Depending on the size of the solar generator installed, and whether or not you own and/or operate the solar generator, under the federal Government’s Renewable Energy Target, you may be eligible to:
- create and trade large-scale generation certificate (LGCs); or
- create and trade, or receive small-scale technology certificates (STCs).
Connecting to the grid
If you intend to install a small scale solar generator and plan to sell excess energy generated by the solar generator and receive a feed-in tariff then your solar generator will need to be connected to the grid (i.e. the distribution network) via an inverter. Your energy retailer or the solar installer would generally be able to assist you with the connection.
Connecting to the distribution network is much more complex if you intend to own and/or operate a large scale solar energy generator and supply energy to third parties (e.g. an embedded network with a capacity greater than 5 MW). You will be required to enter into a suite of connection agreements with the relevant distributor and AEMO under which certain infrastructure may require to be built to allow for the connection of the embedded network to the distribution network and supply of energy. Depending on the size and complexity of the project, such a process can take months to complete.