Molehills into mountains: Transitional pressures from household PV-battery adoption under flat retail and feed-in tariffs

With Australia's significant capacity of household PV, decreasing battery costs may lead to widespread use of household PV-battery systems. As the adoption of these systems are heavily influenced by retail tariffs, this paper analyses the effects of flat retail tariffs with households free to i...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Say, Kelvin, John, Michele
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2020
Subjects
Households
Tariffs
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Summary:With Australia's significant capacity of household PV, decreasing battery costs may lead to widespread use of household PV-battery systems. As the adoption of these systems are heavily influenced by retail tariffs, this paper analyses the effects of flat retail tariffs with households free to invest in PV battery systems. Using Perth, Australia for context, an open-source model is used to simulate household PV battery investments over a 20-year period. We find that flat usage and feed-in tariffs lead to distinct residual demand patterns as households' transition from PV-only to PV-battery systems. Analysing these patterns qualitatively from the bottom-up, we identify tipping point transitions that may challenge future electricity system management, market participation and energy policy. The continued use of flat tariffs incentivises PV-battery households to maximise self-consumption, which reduces annual grid-imports, increases annual grid-exports, and shifts residual demand towards winter. Diurnal and seasonal demand patterns continue to change as PV-battery households eventually become net-generators. Unmanaged, these bottom-up changes may complicate energy decarbonisation efforts within centralised electricity markets and suggests that policymakers should prepare for PV-battery households to play a more active role in the energy system.