You’ve probably seen the headlines “Three hours of free electricity for everyone!” now fed up.
Most readers of these headlines assume that three free hours of energy will appear in their current plan, as if by magic. They won’t. Instead, it looks like the plan is to force every retailer to offer at least one “free hours” plan among all others.
If you take advantage of your dealer’s “free” solar sharer offer next July, be prepared for higher peak rates and higher daily fees to make up the shortfall. The government doesn’t reduce your bill; It just postpones the pain1.
Smart politics, stupid politics
It’s a brilliant policy – but a terrible policy that won’t change much at all.
And that’s because consumers can already get these “three free hours” if they want. Last time I checked, OVO, GloBird and AGL all offer tariffs with free daily electricity. They’re not doing it out of charity – they’re probably losing money in those hours because they see it as a customer acquisition strategy. As a business decision, that’s fine. What’s wrong is the government stepping in and forcing every retailer to do the same. It stifles competition and forces every player to offer the same model.
It’s a bit like the government noticing that Nando’s offers free drink refills and deciding that every restaurant in Australia must do the same. Sounds generous – until you realize that someone has to pay for the extra syrup. A clever marketing advantage becomes a forced loss-maker and drives up prices for people who prefer tap water with their extra-spicy chicken quarters.
Does this really help tenants?
The idea is to help renters and low-income households by shifting energy use to midday, when solar energy is plentiful. Fair enough: tenants can’t install panels, and most people don’t shift demand unless there’s a clear reason to.
But my Back-of-a-Nando’s napkin calculation says that you need to shift at least 6kWh of consumption from evening to midday to come out on top with a ‘3 free’ tariff. It’s easy to use 6 kWh in 3 hours. Just leave the oven on. But switching – i.e. not using the 6 kWh in the evening – is much more difficult.
And let’s be honest about who can actually take over the load shift. It’s not the rent warriors or the people who work shifts. It’s the wealthy. They are more likely to live in well-insulated homes, have a partner at home during the day, have flexible work hours and own smart devices. “Free electricity at lunchtime” helps the family with the electric vehicle, the home battery, the smart home and the home office, not the one who rushes home at six to cook dinner. Although these policies are characterized by fairness, they are quietly deepening the divide.
Tenants definitely deserve a head start. The smarter approach would be cheap daily rates for tenants only, paired with plug-in batteries enabled by relaxed (but still secure) standards to allow tenants to avoid peak rates. Instead, this blunt policy creates inequality: the new divide will not be between solar and no solar, but between battery and no battery.
Electric vehicle owners are expected to be among the bigger beneficiaries of the new plan, as highlighted in the federal government’s promotional materials. But why the hell is there a cable wrapped around a Sunny Storage Battery Inverter and where does it go? And I hope LG Chem RESU has been recalled. And what is the box on the left with the green cable? I smell Photoshop or AI or both…
Will this slow solar uptake?
It also defeats one of the best reasons to buy solar panels. To date, while a handful of retailers have offered limited free electricity deals to attract customers, smart homeowners suspected that these deals were unlikely to last, so installing solar still made sense. Now that government-mandated free energy is in place, the logic turns to: “Why buy panels when I can already get free electricity from noon to three?”
To be clear, it can still make sense to buy solar energy. If you have solar panels, you can opt out of the “free electricity” plan and switch to a plan with much lower daily and peak rates. In other words, when it comes to solar energy, you still have a choice – and that choice is valuable. But that’s a subtlety only energy nerds will notice. To everyone else, it just looks like the government has made solar power pointless. And perception determines behavior. When people stop buying panels, the whole change slows down.
This is dangerous. Australia needs to double or triple its solar capacity to reach 100% renewable energy. We need daily excess supply – although often constrained – to meet demand in winter, cloudy days, and early morning and late seasons. If solar power is installed slowly, the entire plan falls apart.
Politics should not override pricing
I grew up on benefits in a housing association house and have rented for most of my adult life. I understand why cheaper electricity is important – it’s not abstract to me. But I’ve also started and run companies, and I know what happens when the government starts forcing companies to give things away for free. It’s a dangerous precedent. The moment politics overrides pricing, things break.
When Climate Change and Energy Minister Chris Bowen announced the policy, he claimed – as he spoke – that electricity prices in South Africa, southeast QLD and NSW were negative. Technically true – for two 30 minute periods in NSW. For the rest of the day, prices were positive, peaking at around $200/MWh (~20¢/kWh wholesale).
On the day Bowen announced the solar sharer offer, wholesale prices in NSW only briefly fell into negative territory.
“Free electricity for everyone!” is a vote-winning headline that distorts the market and risks slowing the transition it is intended to accelerate.
Pure political clickbait.
Footnote: Yes, I know SolarQuotes is now owned by Origin. Before anyone comments, my opinion on this stuff was exactly the same before I sold it. I have always supported a profitable, sustainable network, even if it made me unpopular.
Phase Shift is a weekly opinion column from SolarQuotes founder Finn Peacock. Subscribe to SolarQuotes’ free newsletter to have it emailed to your inbox each week along with our other home electrification coverage.
Footnotes
- SMH reports: “The electricity market regulator, the Australian Energy Regulator, has been ordered by the government to prevent energy suppliers from imposing higher electricity prices for periods outside the free window.” But they conveniently forget about the network rates that local networks impose on retailers, which are much higher at peak times if you’re on a “3 Free” plan. ↩
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