The Force of Good: How Tariffs on Solar Sponges Could Be Good for Your Pocket and the Planet

When our old hot water system needed to be replaced, I wanted to install an energy-efficient heat pump.

They cost more, but they use much less energy, and I calculated that we would get our money back by cutting $270 off our annual bill. We would also be doing our part to reduce greenhouse gas emissions and reduce demand on the overloaded electrical grid.

But installing a heat pump in our 20th-floor Melbourne apartment proved impossible.

The existing hot water system was in the laundry cupboard, with water heated by a component integrated into the storage tank. The heat pump works like a reverse cycle air conditioner, drawing heat from the air, and must be installed outside.

There was no room for a heat pump on our balcony, and the housing association regulations did not allow it anyway.

Defeated, we replaced the old immersion heater with a new one, but I knew there had to be a better solution.

The most popular type of water heater in Victoria, however, is the immersion water heater, which is the most expensive to run, even though, like most people, we heat our water at night when electricity is cheaper.

With our current plan we can heat water for just 20.5c per kilowatt-hour after 11.30pm, whereas during the day electricity costs us 34.5c per kWh.

This struck me as outdated. Australia now has a growing surplus of electricity in the middle of the day, when the grid is flooded with so much solar power that some is even “poured” out of the system. Government agencies are encouraging “load shifting” and “demand flexibility” to help absorb this excess energy and stabilize the grid.

The typical advice is to run the dishwasher or washing machine in the middle of the day, but these tasks are a small part of the demand. Plus, you have to be home and thinking ahead. Hot water systems, on the other hand, account for about 30% of average household energy use, and we don’t even have to be awake to turn them on.

Couldn’t we heat water in the middle of the day and take advantage of that cheap, distributed solar energy?

My initial inquiries left me perplexed. I found others who had asked similar questions online but received impenetrable technical answers. Different states had different regulations, and retailers offered a bewildering array of plans and prices.

But I’ve latched onto the idea of a solar sponge. Available in some regions, these cheap daytime rates match the times when solar panels are pumping out the most energy and households are using the least electricity.

I rang our supplier and was told that yes, I could access the solar sponge and pay just 9c per kWh between 10am and 3pm. That was what I was looking for. Then came the disappointment. No, I couldn’t use it for hot water as our system was metered separately from everything else in the flat. That’s why it shows up on our bills as ‘controlled load usage’.

Puzzled, I turned for advice to Mark Ellis, an energy efficiency expert who worked for the International Energy Agency and has advised governments for decades.

“We hear a lot about batteries as part of the transition to renewable energy,” says Ellis, “but almost every home already has a battery in the form of a modest hot water system. A typical 300-litre system can store about 15 kWh of energy, which is roughly equivalent to a standard domestic battery.”

In the past, we’ve been encouraged to run our hot water systems at night to absorb the electricity produced by coal-fired power plants that run in the dark. As these aging plants leave the system, we should instead switch to the afternoon sun peak and store the excess renewable energy in hot water systems, the “batteries” that are already installed in most homes.

While switching to new technology is relatively simple, governments, electricity producers and retailers are doing little to make the process easier.

Ellis advised me to call an electrician to do two basic jobs. First, rewire the hot water system to disconnect it from the separate “controlled load” meter and connect it to the general meter with all the other appliances. Second, install a timer on the hot water system so that it would only come on between 10am and 3pm, which would coincide with the cheap electricity rates from the solar sponge.

You may need to look for a competitive quote. For the community organisation Electrify Bouddi, Ellis has just organised a spark to make the switch on the Central Coast for $350 using a simple analogue timer. I got a quote of $1000 for the job in our Melbourne apartment, with a digital timer that I can control via a Bluetooth app. Even at that price the job will soon pay for itself as we will only be paying 9c per kWh for electricity.

For many people, the best solution is likely to be to replace traditional immersion or gas water heating systems with heat pumps, especially if they can benefit from energy from roof-mounted solar panels.

However, if that is not an option and you can access a solar sponge tariff, consider setting your conventional hot water service on a timer to take advantage of cheaper energy. You don’t have to wait until your system needs replacing to make the switch.

This could be good for your pocket and the planet.