Small power producers gridlocked in electricity market

By SIMON COLLINS, science reporter

Renewable energy operators want a change in the rules of the electricity market to give them a better chance to feed power into the national grid.

Wind, solar and bioenergy producers say the current rules are stacked against them because power companies see them as competitors.

The Government has drafted regulations to force lines companies to accept surplus electricity from small producers within their districts with no extra fees beyond what they already charge to supply power.

But the renewable producers say the biggest problem is not the lines companies, but energy retailers such as Mercury and Genesis. They want regulations to force the retailers to buy power from local producers at the same price they sell it at, through a "net" metering system which nets out amounts bought and sold.

The Government's draft regulations were proposed in a discussion paper last September after the Energy Efficiency and Conservation Authority (EECA) failed in an attempt to get a voluntary industry agreement on net metering.

Wind, solar and bioenergy still make up less than 1 per cent of New Zealand's total electricity supply, and the discussion paper said investment in "distributed generation" generally - as opposed to big centralised power stations - had been "minimal" in the past few years.

The discussion paper proposed:

* Lines companies should provide standardised interconnection agreements for anyone wanting to generate power within their districts.

* Interconnection should be provided at no extra charge for generators of up to 10 kilowatts (kW) selling up to 10,000 kilowatt hours of power a year into the grid.

* Generators with capacity above 10kW should be charged any actual costs of upgrading the network to accommodate their surplus power, plus an annual fee of up to 5 per cent of what the lines company would charge to provide power lines to a consumer in the same locality.

* In exchange, lines companies should pay such generators at least 85 per cent of any Transpower transmission charges which the lines companies save by buying power from local generators rather than the national grid.

The Wind Energy Association has endorsed the proposals, but asked for regulations to force energy retailers to adopt net metering as well.

"Some lines companies have agreed to it," said wind consultant Ian Shearer. "Others are saying we'll buy at 3c/kWh and sell at 16c."

The Photovoltaic Association wants not just net metering but no charges in either direction, apart from a fixed connection fee, for a house that aims at self-sufficiency by generating within plus or minus 15 per cent of the power it uses.

Association president Tony Bittar said New Zealand could have "the equivalent of a 400MW power station distributed on the rooftops" if this charging system was adopted.

The Electricity Networks Association, representing the major lines companies, agrees that most people generating less than 10kW of electricity from small windmills or solar panels will face no extra charge for feeding power back to the network over an established power line.

But it wants the regulations to allow charges, even for small installations, if there are any extra costs.

Chief executive Alan Jenkins said the lines companies had built much of the country's distributed generation and had assets of $7 billion with low debts, but were now legally barred from building power stations.

A bill now before Parliament will allow them to build power stations again with a total capacity of up to 10 per cent of each line company's business, with no restriction on investing in renewable energy.

"But we are not allowed to market it. All we can do is sell it to an incumbent generator," Mr Jenkins said.

The chief analyst of the Ministry of Economic Development's resources and networks branch, Evelyn Cole, said officials hoped to have the new regulations in place by July or August.

She said they would not cover net metering because there was not yet any legal power to regulate electricity retailing. The current bill will allow the new Electricity Commission to consider regulating retailing for the first time.