New Horizons for utility: Community solar in regional Western Australia

Horizon Power responded to a recent bushfire by piloting a community solar project that takes customers off the grid. This post explores the opportunity for expanding the program to counter challenges posed by climate change, and what it would take for Horizon to deliver.

Horizon Power is responsible for generating, procuring, distributing and retailing electricity to regional Western Australia (WA), the biggest area with the least customers served by any electricity in the world – for every 53.5 square kilometers of terrain, Horizon have one customer.[1] This unique environment translates to unique challenges and opportunities when responding to the physical manifestations and regulatory impacts of climate change.

Australia’s Department of Environment and Energy has recognized that climate change will make WA more vulnerable to extreme weather events, such as bushfires and intense tropical cyclones.[2] These events can be devastating for Horizon and the communities it services.[3]

However, bushfire recovery efforts recently led Horizon Power to implement an innovative project, taking some of its customers “off-grid” on solar infrastructure for the first time.[4] The project allowed Horizon an alternative to rebuilding a part of the network that was particularly susceptible to adverse weather and vulnerable to bushfire.[5] Horizon will own and operate these systems, charging consumers the same as they previously paid for traditionally generated electricity.[6]

Replacing traditional infrastructure with “community solar” is an attractive option for Horizon to consider in response to regulatory impacts too. Like many governments globally, WA has introduced regulation to respond to climate change that nudges consumers toward clean energy options.[7] However, as government subsidies and feed-in tariffs increase consumer take up of roof-top solar options, this hurts Horizon’s grid stability and cost base.[8]

As customers install solar, the network’s fixed costs become shared among fewer remaining consumers. Further, with the variability of many distributed rooftop generation units feeding power into the network, the grid becomes less stable and more complex and expensive.  Both these challenges are exacerbated in Horizon’s context, since the communities it serves are sub-scale. This means fewer consumers than in metropolitan areas need to take up these regulatory advantages before Horizon experiences issues.

While the physical manifestations and regulatory environment create challenges for Horizon, Horizon’s current operating model means there is also an opportunity to adapt by proactively introducing community solar as an alternative to individual take-up.

Horizon’s network has a few small towns on one interconnected grid and isolated non-interconnected towns, or “islands”.  The distance between towns means it is less expensive to operate towns as islanded systems with their own generation, than to connect towns to share generation infrastructure building and maintaining hundreds of kilometers of redundant network. While the lesser of two evils, islanded networks are expensive to run, since conventional generation requires transporting diesel, gas or coal to many remote points of generation. The small population in these towns means that plants are also usually sub-scale and higher cost.

Strategically introducing community solar would help Horizon provide consumers the opportunity to participate in climate change solutions while avoiding issues with grid integrity posed by piecemeal consumer adoption. Further, it would replace traditional network infrastructure less vulnerable to the physical manifestations of climate change.

In many towns, providing solar infrastructure solar would even lower the cost to serve – some sub-scale, remote island systems are viable to serve even at today’s prices of solar technology. In terms of implementation, community solar could be introduced island by island as the cost to serve stacked up economically. As the technology and cost of solar solutions improve, more towns would become viable. In the interim, Horizon could consider Hawaiian electric’s approach. Hawaiian Electric required consumers to join waiting lists before solar installation to protect grid stability.[9] Horizon could consider this if island networks came under duress while waiting to become part of its community solar projects.

Administering community solar would require significant changes to Horizon’s operating model. Horizon will need to move from long term asset management to shorter term maintenance of very different (solar) assets, including a period where it will need to support both kinds of infrastructure. This change will impact maintenance and investment decision making. As solar technology improves and prices come down, it will have many choices about what technology to choose and when which will determine its success. To continue to reduce cost to serve, Horizon will need to develop its ability to make effective choices when integrating emerging technology into its network.

Perhaps most important will be its capability to engage effectively with stakeholders. Before embarking on a transformation of this scale, Horizon will need the endorsement of its owner government. As it looks to dramatically change the way it services remote communities, Horizon will need to educate the community on what the change means for them and win their support. Especially given the often politically charged nature of regional service provision in Australia, community support of Horizon’s venture would be critical.

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[1] Horizon Power, “Company Profile”, https://horizonpower.com.au/media/1589/company-profile.pdf, p 4, accessed November 2016.

[2] Department of the Environment and Energy, https://www.environment.gov.au/climate-change/climate-science/impacts/wa, accessed November 2016; see also Ed Wensing, Sharon Harwood, Deanne Bird and Katherine Haynes, “Disjuncture between Climate Change Knowledge, Land Use Planning and Disaster Resilience”, Geography Research Forum, 34 (2014), 92-107, 93 and Horizon Power, (horizonpower_wa), “An average to above-average number of #cyclones are expected”, October 10 2016, 10.17 pm, https://twitter.com/horizonpower_wa/status/785710832357302273.

[3] Government of Western Australia, “Media Statements”, https://www.mediastatements.wa.gov.au/Pages/Barnett/2015/03/Big-thanks-to-Horizon-Power-and-partners.aspx, accessed November 2016.

[4] Horizon Power, “Solar powered future in WA’s first off-grid power”, https://horizonpower.com.au/news-events/news/solar-powered-future-in-wa-first-off-grid-power/, accessed November 2016, see further detail at Energy Council, “Going off grid goes West”, https://www.energycouncil.com.au/analysis/going-off-grid-goes-west/, accessed November 2016.

[5] Ibid.

[6] Ibid.

[7] Department of Finance, “Help me go solar”, https://www.finance.wa.gov.au/cms/Public_Utilities_Office/Homes_and_Communities/Renewable_energy_help/Help_me_go_solar.aspx, accessed November 2016.

[8] Australian Renewable Energy Agency, “Report: Investigating the Impact of Variability on Grid Stability”, http://arena.gov.au/files/2015/03/150302-Impact-of-Variability-Report-for-public-release.pdf, March 2015, accessed November 2016

[9] Diane Cardwell, “Solar Power Battle Puts Hawaii at Forefront of Worldwide Changes”, New York Times, April 18 2015, http://www.nytimes.com/2015/04/19/business/energy-environment/solar-power-battle-puts-hawaii-at-forefront-of-worldwide-changes.html?_r=0, accessed November 2016.

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3 thoughts on “New Horizons for utility: Community solar in regional Western Australia

  1. Smithovic, thanks for the great article. It was very interesting to learn about how a WA power provider is facing both a unique (in its customer scale) and common (in its long-term energy source strategy) issue. I think it is particularly interesting to view this problem in terms of the end-customers. How do they feel about the changeover to community solar? Although the prices are said to be the same, will they understand why they are getting charged the amount on their bill, even though it will be generated in a different way?

    Interestingly, Xcel Energy in Minnesota organized a Community Solar Garden (CSG) initiative which should go live this year. However, in Xcel’s program, third-party CSG developers invest in the solar panels and set up while Xcel provides transmission and distribution services. Customers have to opt to use the CSG source rather than regular Xcel energy. [1]

    The Xcel Energy example is different than Horizon’s current dilemma but does show how a company could slowly move a customer base over to solar energy. Most likely, Xcel is hoping that early adapters will convince others to join the program, thereby creating a large solar grid. The question is if the early adopters are not satisfied with the program, will solar hit a stopping point in Minnesota? One would think that Horizon is considering similar questions as it looks to kick off a community solar program.

    [1]Tiffany, Doug. “How will a community solar subscription impact your electricity bill?” Accessed at http://www.cleanenergyresourceteams.org/blog/how-will-community-solar-subscription-impact-your-electricity-bill

  2. This is a really interesting example of a company thinking ahead. I agree that community solar could hold a lot of potential for sub-scale, remote islands. I would be curious to better understand how you’re thinking about community solar in this context. If I understand correctly, this community solar model is not an off-site grid-connected project that generates electricity which is sold to a utility and then a customer receives a credit on their bill for the share that they subscribed for. That is the community solar model used in the U.S. Are you referring to more of a SolarCity type of model in which Horizon would go and do on-site installations on people’s houses? I think if it’s the latter, I agree with your assessment that there will be a number of challenges. It is an entirely different business model which is a lot more customer-centric than utilities are traditionally known for. It seems like this model is growing in Australia (https://www.theguardian.com/sustainable-business/2015/dec/08/australia-community-solar-energy-project-take-on-the-big-energy-companies).

    For areas that already have grid connectivity, I would recommend the first type of model which I think aligns better with a utility’s core operating model. By using a regulatory scheme in which the customer doesn’t actually have to put solar on their roof but instead can purchase a share in an off-site project, Horizon can avoid having to deal with a range of customer challenges and instead stick to what they know which is generation, distribution and retailing. This is a popular way that large utilities in the U.S. are trying to play in the solar space without actually having to dramatically change their business model (http://www.powermag.com/press-releases/xcel-energy-breaks-ground-on-solarconnect-community-project/).

  3. Great article by Smithovic, love that you tied in a great example from home! You make a compelling case for Horizon’s continued push to solar – one question that comes to mind is the counterargument to this: if this was such a success on all fronts (i.e. in terms of revenue, sustainability, etc), why hasn’t Horizon made the push to expand on this? Is it just a matter of the project being so new that it hasn’t had a chance to take hold yet? Or something more? Not alluding to anything in specific, just curious.

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