Mountain, Bruce ORCID: 0000-0002-2093-2038, Percy, Steven and Burns, Kelly (2020) Rooftop PV and electricity distributors: who wins and who loses? Working Paper. Victoria Energy Policy Centre, Victoria University, Melbourne, Victoria.

Abstract

We analyse 48,677 residential electricity bills of which 7,212 have installed rooftop photovoltaics (PV) to determine the impact of rooftop PV on network charges and on wholesale market prices. We find rooftop PV pushes down prices in wholesale markets far more than it raises prices for the provision of network services. This was somewhat unexpected and might be explained by Victoria’s extraordinarily high wholesale market prices and also by the fact that despite the high penetration of rooftop solar, the amount of grid-supplied electricity that is displaced by rooftop supply is not large. This is partly because distributors have adjusted their pricing structures to increase the fixed proportion of their charges. Over the 8 years to 2019, the distributors’ fixed charges increased by 490% while consumption charges only increased by 61% on average. By 2019, on average one third of the revenue that distributors recovered from residential customers was fixed. Such a high proportion of revenue recovery from fixed charges explains in part why rooftop PV production only gives rise to a $1.3/MWh (about 1%) increase in network prices relative to what they otherwise would have been. With respect to wholesale market impacts, our model estimates that residential rooftop PV reduced wholesale market prices by $6.4/MWh (about 8%) in 2019. The net effect of wholesale price reductions and network price increases associated with residential rooftop PV was $217m in 2019. In other words, consumers in Victoria were in aggregate better off in the amount of $217m as a result of the installation of rooftop PV on Victoria’s dwellings. Our study draws attention to the appropriate allocation of the costs and benefits of technology change.

Data Citation/Attribution

Mountain, B., Percy, S., & Burns, K. (2020). Rooftop PV and electricity distributors: who wins and who loses? Victoria Energy Policy Centre, Victoria University. https://doi.org/10.26196/5ECB4AF97F78C

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