Summer Study EE 120318

© Energeia 2012. All Rights Reserved Confidential Confidential

Could a Greater Emphasis on Demand

Management Hinder Future Energy Efficiency

Initiatives?

Terry Daly – Practice Leader, Energeia

February 2013

© Energeia 2012. All Rights Reserved

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© Energeia 2012. All Rights Reserved Confidential

• Focused on supporting clients tackling the industry’s greatest challenges

and opportunities:

Australia’s only real-time demand response system (King Island)

15-20 year Customer, Network and Organisation of the Future visions

Market outlooks emerging energy technology, e.g. solar PV, microgrids

Energy services growth and margin strategies

High margin smart meter enabled products and services

• Proprietary research enabled insights and advisory services

Electric vehicles, storage, renewables, energy efficiency, demand

response, smart grids, cogeneration (CHP)

Who Are These Guys?

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Overview


• Australian policy development

• Four key problems facing the electricity market

• Solution being considered

• Impact on energy efficiency

• All is not lost!

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• The key Australian developments over the past 18 months

include:

The National Energy Savings Initiative (NESI) maps out

2020 energy efficiency target

Victorian VEEC

Freedom of Choice Review (DSP3) kicks off AEMC’s

third demand side participation review

Government investigation of mandating the DRED

standard

AEMC Power of Choice

Productivity Commission report

Senate Committee on Electricity Pricing

Australian Policy Developments


Energy Efficiency

Pricing

Demand Management

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Problem 1


• Energy price rises are the dominant community energy issue

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Problem 1


Source: IPART, assuming consumption of 7MWh per year

• 100% increase in NSW network charges over 5 years

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$0

$500

$1,000

$1,500

$2,000

$2,500

2007/08 2012/13

Ho

use

Ho

ld E

ne

rgy

Bill

($

)

Network Retail Carbon tax Green Energy Schemes Energy charges


Problem 2

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Source: Ausgrid

• The divergence between demand and energy growth is

expected to continue

7

0%

2%

4%

6%

8%

10%

12%

14%

16%

2004 2005 2006 2007 2008 2009 2010 2011

Cu

mu

lati

ve In

cre

ase

ince

20

04

Underlying Energy Weather Corrected Peak Demand


Problem 3


Source: Energeia

• Forecast take-up of distributed energy resources (DER) will exacerbate

problem 2

• Depending on pricing, small scale PV and CHP costs are becoming

attractive on an LCOE basis

8

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

$/k

Wh

PV CHP Mains ToU Peak Mains ToU Off Peak

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

$/k

Wh

PV CHP Mains ToU Peak Mains ToU Off Peak


Problem 3


Source: UBS 2013

• Not unique to Australia

• UBS forecast for the price of retail prices versus DER for residential

customers in Germany

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Problem 4


Source: Simshauser and Nelson 2012

• DNSP’s load factors continue to decline. For example in SA load

factor declined by 33% from the early 2000’s to 2011.

• As revenues for DNSP’s decline, network charges must rise further

to compensate

• This has been termed “The Energy Market Death Spiral”

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Impact of “The Death Spiral” - Residential


Source: Energeia 11

• Energeia modelling forecasts for NSW:

Further take up of DER;

Further erosion of network revenues;

Distribution charges increase further to compensate

$0

$10

$20

$30

$40

$50

$60

$70

$80

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Cu

mu

lati

ve A

void

ed

Net

wo

rk R

eve

nu

e (

$M

)

IBT TOU Capacity


The Proposed Industry Solution


• Customers have much less incentive to reduce energy

consumption – only demand !

The impact being

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• Time based pricing is being discussed; but

• Capacity based pricing is rapidly being recognised as the only

sustainable solution to maintain network revenues and stop cross-

subsidies

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All is Not Lost !


Source: Energeia

• While consumers will face diminishing incentives to reduce energy

• DER penetration will continue to reduce grid supplied energy

• Energeia’s modelling of NSW per annum appliance refresh rates

is also demonstrating some moderate energy efficiency gains.

13

0

100

200

300

400

500

600

Fridges Freezers Televisions Washers Dryers Dishwashers Pool Pumps

Ap

plia

nce

Ref

resh

Rat

e (

'00

0)

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Thank You

Energeia

L20 Tower 2, 201 Sussex Street, Sydney NSW 2000, Australia

P +612 9006 1550 F +612 9006 1010 E [email protected]

W www.energeia.com.au

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mailto:[email protected]

Summer Study EE 120318

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