Project 4: Institutional Barriers, Economic Modelling and...

Project 4: Institutional Barriers, Economic Modelling and Stakeholder Engagement

Intelligent Grid Cluster Researchers Meeting Brisbane, 14 April 201

Chris Dunstan, Research DirectorInstitute for Sustainable Futures, UTS

(With thanks to Ed Langham)

Components of P4

1. Cost and potential of Distributed Energy (DCODE)

2. (Network) Benefits of Distributed Energy (DANCE)

3. Institutional Barriers to DE

4. Policy tools: How to facilitate DE?

5. Distributed Energy Roadmap

DE Technology Assessment:

Costs, Scale, LimitationsInstitutional Barriers

What obstructs cost-effective DE?Status

(current and progress)

Simplified Roadmap Components

Policy Instruments

Can institutional barriers be effectively overcome?

Avoidable Network Costs(time and place)

Potential(current and

future)

Policy Palette

(Working Paper 4.2)

DCODE Model

(Working Paper 4.3)

Assumptions &Scenario Analysis

Optimisation & Outputs:Costs, Prices, Emissions

DANCE Model(Working Paper 4.4)

Recommendations

Proposed Distributed Energy Roadmap

Barriers Analysis

(Working Paper 4.1)

Roadmap Report

(Working Paper 4.5)

Peak Load Management

What is Distributed Energy (DE)?

Energy EfficiencyDistributed

Generation

Cogeneration

Interruptible loads

Efficient motors & chillersEfficient LightingEfficient showerheadsEfficiency Retrofits

Power factor correction

Gas Chillers

Ice Storage

Electric to Gas Hot Water

Standby Generation

Time of Use tariiffs

Biomass GenerationSmall Gas GenerationSolar Photovoltaics

Behaviour change

Battery Storage / EVs

Cost and Potential of Distributed Energy

See Working Paper 4.3

www.igrid.net.au

Presenter

Presentation Notes

www

http://www.igrid.net.au/�

Description and Cost Of Distributed Energy(D-CODE Model)

Potential Benefits of Distributed Energy

Lower costs Lower greenhouse gas emissions Increased reliability Managed peak load Enhanced social equity and access Avoided generation costs Avoided network costs

- See Working Paper 4.4 (forthcoming)

Source IPART Review of Regulated Retail Tariffs 2010-13 (March 2010)

11Source: Rod Sims, ‘Energy market outlook’ (Presentation to the Multi-Party Climate Change Committee, 10 November 2010)

“Residential electricity prices have increased by about 40 per cent over the last three years and are forecast to increase in the order of 30 per cent in the next three years to June 2013.”

- Martin Ferguson, Weekend Australian, 2 April 2011, p.4

A $20 per tonne carbon price is forecast to increase electricity prices by 10% (and petrol by 4%)

© Institute for Sustainable Futures, UTS 12

Network Investment: >$45 Billion by 2015(bigger and sooner than National Broadband Network)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$m Network Capital Expenditure (>$9b p.a.)

NSW

Qld (draft)

Vic (prop.)

WA

SA (draft)

Presenter

Presentation Notes

The network infrastructure to bring the power form new MtPiper and bayswater to consumers is about twice the cost of the power stations themselves

1

Regulated Retail Tariff (up 21%)

0

2

4

6

8

10

12

14

16

18

08/09 09/10 10/11 11/12 12/13 13/14

Ele

ctrc

ity P

rice

(cen

ts/K

Wh)

Year

Network Prices Domestic

Low Voltage Business

[1]Energy Australia, Revised Regulatory Proposal and Interim Submission, January 2009, p. 190

Energy Australia Indicative Network Charges

... pushing power prices up steeply

Where, when and what is the network value in Distributed Energy?

MONTHLY DEFERRAL VALUE

HOURLY DEFERRAL VALUE

Status of Network DM

• Survey of Electricity Network Demand Management in Australia (SENDMA) commissioned by the Australian Alliance to Save Energy (A2SE)

• ISF/UTS with Energetics, Climate Works and Energy Futures Australia

• Funded by DECCW (NSW), DPI (Vic), NEM Consumer Advocacy Panel in conjunction with IGrid

• SENDMA is part of Stage 1 of a larger research project on DM and Networks






Policy Instruments




future)

Policy Palette

(Working Paper 4.2)

DCODE Model

(Working Paper 4.3)




Recommendations


Barriers Analysis

(Working Paper 4.1)

Roadmap Report

(Working Paper 4.5)

Why Survey Network DM?

> To understand current practice:– What is happening, what is it delivering, what

does it cost > To share experience and lessons> To raise awareness of potential, barriers and

solutions:– among policy makers, utilities and community

> To establish a baseline and test an approach

> You can’t manage what you don’t measure.

Survey Responses Utility Response Utility Response

ActewAGL Received SP Ausnet ReceivedCitiPower Received Transend Received

Country Energy Received NT Power & Water Received

Electranet Received ETSA Received (2010 only)Energex Received Jemena ReceivedEnergy Australia Received Ergon Received

Horizon Power Received United Energy ReceivedIntegral Energy ReceivedPowerCor Received Aurora Energy Not yet receivedPowerlink ReceivedTransgrid ReceivedWestern Power Received

Caveats

> This is incomplete data– Not all network businesses have responded– Not all current projects reported– Not all projects have reported complete data

> There may be errors> Part of the point is to start the analysis. We expect it to be

imperfect.

0

5000

10000

15000

20000

25000

30000

35000

40000

MW

Pea

k D

eman

d

Year

US Utility Demand Management (DM)- Actual Peak Load Reductions

Energy Efficiency

Peak Load Management

Total Aust. NEM Summer Peak Demand

(Sources: US Energy Information Administration & AEMO)

= 4.4% of US Peak Demand

0

10

20

30

40

50

60

08/09 09/10 10/11

Ener

gy S

aved

(GW

h)

Financial Year

Residential

Commercial

Industrial

Mixed

0

10

20

30

40

50

60

08/09 09/10 10/11

Ener

gy s

aved

(GW

h)

Financial Year

TAS

ACTNT

VIC

WA

SA

QLD0

10

20

30

40

50

60

08/09 09/10 10/11

Ener

gy s

aved

(GW

h)

Financial Year

DG

EE

LM

Energy Savings (and Generation)

Note that energy generation was reported for 2 NSW DG projects in 08/09, but not in subsequent years.

= 0.01% of Energy Use

By technology By state

By sector

Presenter

Presentation Notes

ENERGY 2009/10 FINANCIAL YEAR QLD 51,503 NSW 75,470 VIC 46,895 SA 14,145 TAS 10,704 Total 198,717 WA 23,000 ??? Total 225,000 GWH p.a. final demand http://www.aemo.com.au/planning/0410-0002.pdf

0

50

100

150

200

250

300

350

08/09 09/10 10/11

Peak

Dem

and

Redu

ctio

n (M

W)

Financial Year

Residential

Commercial

Industrial

Mixed

0

50

100

150

200

250

300

350

400

08/09 09/10 10/11

Peak

Dem

and

Redu

ctio

n (M

W)

Financial Year

TAS

ACT

NT

VIC

WA

SA

NSW

QLD0

50

100

150

200

250

300

350

400

08/09 09/10 10/11

Peak

Dem

and

Redu

ctio

n (M

W)

Financial Year

Peak Demand Reduction (DG)

Peak Demand Reduction (LM -Summer)

Peak Demand Reduction

= 0.1% of Peak Demand


By sector

0

50

100

150

200

250

08/09 09/10 10/11

$M p

er a

nnum

Financial Year

NSW FIT

Residential

Commercial

Industrial

Mixed

NSWNSW

NSWQLD QLD

QLDWA WA WAVIC VIC VIC

NSW FIT NSW FIT

NSW FIT

0

50

100

150

200

250

08/09 09/10 10/11

$M p

er a

nnum

Financial Year

NSW FITTAS

NT

ACT

VIC

SA

WA

QLD0

50

100

150

200

250

08/09 09/10 10/11

$M p

er a

nnum

Financial Year

NSW FITDG

EE

Expenditure on DM with NSW FiT

Note: NSW FIT expenditure estimates for 10/11 were included here only

= 1% of Capex


By sector

0

10

20

30

40

50

60

08/09 09/10 10/11

$M p

er a

nnum

Financial Year

Residential

Commercial

Industrial

Mixed

QLDQLD

QLDNSW

NSW

NSW

SA

SA

WA

WA

WA

VIC

VIC

VIC

NT

NT

NT

0

10

20

30

40

50

60

08/09 09/10 10/11

$M p

er a

nnum

Financial Year

TAS

ACT

NT

VIC

WA

SA

NSW

QLD

0

10

20

30

40

50

60

08/09 09/10 10/11

$M p

er a

nnum

Financial Year

DG

EE

LM

Expenditure on DM

Figures shown here are without estimated NSW FIT expenditure estimates for 10/11

= 0.1% of Capex


By sector

Deferral and savings from DM

Annualised Capex savings calculated using a 7.5% Weighted Av. Cost of Capital (WACC) and 40-year straight line depreciation = 10% p.a.

0

10

20

30

40

50

60

70

08/09 09/10 10/11

$M c

apit

al d

efer

red

Financial Year

By technology

DG

EE

LM 0

10

20

30

40

50

60

70

08/09 09/10 10/11

$M c

apit

al d

efer

red

Financial Year

By stateTAS

NT

ACT

VIC

WA

SA

QLD

0

10

20

30

40

50

60

70

08/09 09/10 10/11

$M c

apit

al d

efer

red

Financial Year

By sector

Residential

Commercial

Industrial

Mixed

Cost Effectiveness - energy

$/MWh figures only provided for projects which had relevant data

1

10

100

1,000

10,000

100,000

1,000,000

1 10 100 1000 10000

$/M

Wh/

year

Scale of Project ($k pa)

LM-NSW

LM-QLD

LM-SA

EE-QLD

EE-WA

DG-WA

By technology and state

0

10,000

20,000

30,000

40,000

50,000

60,000

08/09 09/10 10/11

$/M

Wh

Financial Year

By sector

Mixed

Industrial

Commercial

Residential

Cost Effectiveness - demand

$/kW figures only provided for projects which had relevant data

0

1

10

100

1,000

10,000

100,000

0 1 10 100 1000 10000 100000

$/kW

/yea

r

Scale of Project ($k pa)

LM-NSW

LM-QLD

LM-SA

LM-VIC

LM-WA

EE-NSW

EE-QLD

DG-NSW

DG-WA


0

10,000

20,000

30,000

40,000

50,000

60,000

08/09 09/10 10/11$/kW

Financial Year

By sector

Mixed

Industrial

Commercial

Residential

0.01

0.10

1.00

10.00

0 1 10 100 1000 10000

Cost

Ben

efit

Rat

io

Scale of Project ($k)

LM-NSW

LM-VIC

EE-NSW

EE-QLD

DG-NSW

Cost Benefit Ratio

Cost benefit ratio figures only provided for projects which had relevant data


0.0

1.0

2.0

3.0

4.0

5.0

6.0

08/09 09/10 10/11

$ co

st/$

ben

efit

Financial Year

By sector

Mixed

Industrial

Commercial

Residential

Projects Summary

Expenditure vs. savingsNumber of projects by stateTAS, 0

ACT, 0 NT, 2 VIC, 5

QLD, 15

WA, 7

SA, 27

NSW, 51

TAS

ACT

NT

VIC

QLD

WA

SA

NSW

0

5

10

15

20

25

30

35

40

08/09 09/10 10/11$M

per

ann

umFinancial Year

Expenditure

Savings

> Future Surveys:– Systematic, consistent, regular?– Who to manage?

> The Future of DM and Networks:– Core or marginal activity ?– Obligation, business opportunity or neither?– Cost or profit centre?

Perceived Barriers to DM Survey

> To reality check proposed barriers from analysis – Do stakeholders agree these are barriers?

> To assess perceived relative importance of barriers.> To improve understanding of different stakeholders

perspectives

Barriers

Technical Institutional

Current Technology

Current Costs

Regulatory Failure

Inefficient Pricing

Payback Gap

Split Incentives

Lack of Information

Cultural Barriers

Classifying Barriers to Distributed Energy

Institutional barriers are crucial

What it does

What it costs

What slows it down

Institutional barriers

Survey Respondents

Survey Respondents Category Respondents No. of Respondents

Utilities Energy Utility – NetworkEnergy Utility – RetailerEnergy Utility – Generator

2951

Government Government Agency – Federal Government Agency – State Government Agency – Local

2208

End User Energy Consumer – Commercial Energy Consumer – Industrial

122

DM Provider Demand Management ProviderDemand Management ConsultancyEnergy Supply Consultancy

81714

Other Environmental organisationConsumer organisationIndustry organisationRegulatorResearch InstitutionOther

168322628

I1 Limited experienced / skilled DM service providersI2 Lack of data on costs, reliability, potential from DM precedentsI3 Lack of information about network constraintsS4 Competing priorities in utilities limit consideration of DMS5 Disaggregated electricity market - DM benefits hard to captureS6 Landlord-tenant relationshipG7 Lack of capital, financiers, funds for DM project proponentsG8 Consumers / utilities want shorter DM payback than for supplyG9 Utilities have easier access to finance than DM providersP10 Lack of carbon priceP11 Local peak / network constraints not reflected in power pricesP12 ToU tariffs don't represent time / location cost of energyR13 Electricity suppliers profit from electricity sold, DM cuts profitsR14 Networks don't invest in DM unless constraint is imminentR15 Regulatory processes (security, reliability ) don't consider DMR16 Regulatory Test (RIT) limits assessment of DMR17 High $ threshold of Regulatory Investment Test restricts DMB18 Lack of state / national government consideration for DMB19 Utility bias towards centralised supplyB20 Electricity suppliers lack expertise / experience with DMB21 Absence of DM / environmental objective in National Electricity LawB22 Electricity consumers lack interest in saving energyB23 Consumers want to use power when & how they chooseB24 Electricity suppliers prefer CAPEX to OPEX, DM is OPEXC25 Coordinated approach lacking at state / national level

Institutional barriers

Extent of Agreement

Policy Tools to Move the Market

Push PullLi

ft

Regulation Incentives

Information

The Policy Palette

Primary Instruments

Facilitation

Pricing

Targets


Information

Facilitation

Pricing

Targets


Information

The Policy Palette - “PIRFICT”

Coordination

20 Policy Tools for DE

Information

Regulatory Reform

Incentives

Information

Facilitation

Pricing reform

Targets

1

Coordination

1: Decouple electricity sales from network profits

2: Reform National Electricity Rules

3: Streamline DG Licensing4: Carbon Price 5: Cost reflective pricing6: Network support payments 7: Distributed Energy Fund8: Reform feed-in tariffs9: Public recognition & awards10: Streamline network

negotiation process11: DE Ombudsman 12: Annual DE Review13: Training & skills

development14: Energy audits & technical

support15: Network planning info16: DE handbook & advisory

service17: Resource assessments &

case studies18: Extend retailer EE targets19: DE targets & reporting20: DE Coordination Agency

23

4

56

7

8

9

10 11

12

13

1415

16

2019

18

17

Towards an effective policy package for DE

> Reducing upward pressure on electricity prices via:

> An Energy Savings Partnership with electricity networks• Focus on reducing peak demand • Collaborative targets and regular performance reporting• Partnership fund to incentivise energy savings actions

and Demand Management

55

• Recognition that a permanent research ‘centre of excellence’ for Energy Efficiency and Decentralised Energy is warranted, given the opportunity

• Building on A2SE’s networks and ISF’s capabilities

• International linkages and networks

• ACCEDE prospectus now available for comment and foundational financial supporters being sought

Proposal for ACCEDE






Policy Instruments




future)

Policy Palette

(Working Paper 4.2)

DCODE Model

(Working Paper 4.3)




Recommendations


Barriers Analysis

(Working Paper 4.1)

Roadmap Report

(Working Paper 4.5)

Chris [email protected]

Tel: 02 9514 4882

Thanks to: Ed Langham, Chris Cooper, Katie Ross, Nicole Ghiotto, Nicky Ison, Jay Rutovitz,

Stuart White, Lou Boronyak

Thanks

mailto:[email protected]�

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