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Saturday, April 14, 2012

Discussion of Electricity Prices

Overhauling Australia's Electricity Sector as Prices Soar

Updated: Saturday, June 16, 2012

This is not a discussion about the carbon tax. It is also not a discussion about renewable and non-renewable energy sources.

This discussion is on another cause of soaring electricity prices in Australia and for now is a brief summary of a number of ideas that different organisations and people have raised.

When the noise over the carbon tax dies down and attention moves to renewable energy versus non-renewable energy, the issue of cost-effective grid capacity for extreme peaks in demand will still need to be addressed. There is and has been very little public debate on this costly issue.

The Productivity Commission reports (Overview: Electricity, Gas and Water) that a cause of rising electricity prices is rapidly growing peak demand and the investments being made to supply energy to satisfy peak demand:
" increase in the ratio of peak to average electricity demand lowered average rates of capacity utilisation.
This was largely attributable to rapid growth in household use of air conditioners."
The view by the Productivity Commission is reflected in various places.

AGL: $1.5 billion power plant "switched off for months on end"

"AGL project manager Neil Cooke said the planned $1.5 billion gas turbine power station would only operate between 200 and 400 hours a year during periods of peak demand and could be switched off for months on end."
(Article in Canberra Times, May 7, 2011 - page 15)

Financial offer for electricity price rise

"Clean Energy Council chief executive Matthew Warren said electricity prices were likely to go up by 100 per cent between 2008 and 2015 due to network costs that came from increased peak demand."
(Article in Canberra Times, May 26, 2011 - page 3)


  1. Encourage customers to cut peak electricity use. 
  2. Increase electricity supply in peak periods. 
  3. Reduce electricity consumption. 
    • RMIT Adjunct Professor Alan Pears says Australia has to reduce electricity demand at all times of the year: "The rules of the energy market need to change in a pretty serious way so that energy networks have a financial incentive to help people to save energy rather than to get them to use more."
      (Example: Rising power prices prompt calls for overhaul)
    • In the US, where energy saving has been big for decades, you can read your usage in real time, online. In 2008 15.2 trillion kWh were saved.
      (Example: It's time to switch on to the great switch off)
    • Innovate - "An air-conditioning system that can reduce energy consumption and greenhouse gas emissions in commercial and industrial buildings by up to 85 per cent has won the 2011 Australian Clean Technologies Ideas Competition.
      SMAC Technologies was announced as the competition winner at an awards gala dinner in Sydney..."

The third option can have the opposite effect if the savings are made without slowing the growth in maximum peak demand. During the recent drought in Sydney when calls to cut water consumption were heeded, the price per kilolitre of water was raised to maintain revenue.

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One Perspective: Try to Change Consumer Behaviour
"In addition to increased household consumption, it is peak demand that is really growing at an extraordinary rate and putting pressure on our electricity grid and prices.

Over the period 1998 to 2010 Brisbane saw a 35% increase in the number of households.

At the same time peak electricity demand increased by 104%, and the number of households with an air conditioner installed increased from 23% to 72%, with 34% of homes running two or more air conditioners.

Reducing or moderating the increase in peak demand is an important objective.

One measure to achieve this – and Victoria is leading the nation in this respect – is the deployment of smart-meters.

If the functionality is enabled smart-meters can allow time of use pricing so that consumers see higher costs at times of higher demand."

The Hon Martin Ferguson AM MP
Minister for Resources and Energy, Minister for Tourism
Australia's Energy Future
04 May 2011
Committee for the Economic Development of Australia

Another Perspective: Accept Consumer Behaviour
"For many South Australians first quarter electricity bills will reach new heights driven up by record levels of electricity consumption during the recent heatwave.

Some households however, will have lower bills than expected, not because they are being more energy efficient, but rather because they lost power for long periods of time during the blackouts. The blackouts forced thousands of households and businesses to go without power for hours in the middle of sweltering heat.

A preliminary report on the blackouts by the Essential Services Commission of SA (ESCOSA) shows that the number of customers affected far exceeded the initial estimate of 50,000. In fact around 63,000 customers representing nearly 10 percent of the SA customer base were affected.

Around 1000 customers were without power for over 12 hours."

Power Struggles - apologies are not good enough
Monday, 13 February 2006
Author: Associate Professor John Spoehr (Australian Institute for Social Research)
The Adelaide Review
February 2006

"Following a 2003 heatwave in Europe that caused 80,000 deaths, the World Health Organisation recommended that heat health action plans be established." Draft Heatwave Plan released for public exhibition

"Heatwaves are increasing in frequency, intensity and duration, and are associated with an increase in mortality"
Heatwaves and the elderly
from Australian Family Physician Vol. 40, No. 8, July 2011

An Affordable Solution?
Instead of attempting to discourage use of energy in extreme peak periods with very high electricity prices, and instead of investing in energy generation and distribution capital that is only needed for very small periods each year, a less-expensive approach is to make additional use of existing equipment on those few occasions when extra energy is needed.

Hybrid electric vehicles such as the Toyota Prius have onboard engines/generators able to produce 50 kilowatts of electrical energy or more.

Connecting hybrid electric vehicles to natural gas fuel lines in their owners' garages and dynamically scheduling them to generate power or shutdown in response to demand by a Smart Grid supply management system provides a possible low-cost solution.

Petrol in the vehicles' fuel tanks would be used when the vehicles were being driven, and not when garaged and generating electricity.

Further reading -

Reduce demand to manage power bills: Hunt

Source: AAP June 14, 2012
A federal coalition government could encourage big business to "bid" to use less energy on peak-demand days as a way of reducing future electricity price rises for households.

Climate action spokesman Greg Hunt says a coalition government would limit power bill rises by ... looking at incentives for so-called demand reduction.

Network costs are to blame for the significant increases in power bills over recent years.
"Demand reduction bidding is an incredibly effective means of reducing the pressure on capital expenditure."

Mr Hunt said such bidding would require a change to the current regulatory regime. But he met with a major energy company last week to discuss such a mechanism.

See the related post Energy Strategy

This includes a discussion of U.S. measures implementing "demand reduction" along the lines coalition Climate action spokesman Greg Hunt first raised publicly on June 14, 2012.