Could a Greater Emphasis on Demand
Management Hinder Future Energy Efficiency
Initiatives?
Terry Daly – Practice Leader, Energeia
February 2013
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Confidential
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Who Are These Guys?
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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)
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Overview
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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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Australian Policy Developments
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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
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Energy
Efficiency
Demand
Management
Pricing
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Problem 1
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Confidential
Energy price rises are the dominant community energy issue
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Problem 1
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100% increase in NSW network charges over 5 years
House Hold Energy Bill ($)
$2,500
$2,000
$1,500
$1,000
$500
$0
2007/08
Network
Retail
2012/13
Carbon tax
Source: IPART, assuming consumption of 7MWh per year
Confidential
Green Energy Schemes
Energy charges
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Problem 2
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The divergence between demand and energy growth is
expected to continue
Cumulative Increase ince 2004
16%
14%
12%
10%
8%
6%
4%
2%
0%
2004
2005
2006
Underlying Energy
Source: Ausgrid
Confidential
2007
2008
2009
2010
2011
Weather Corrected Peak Demand
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Problem 3
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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
0.8
0.7
$/kWh
0.6
0.5
0.4
0.3
0.2
0.1
0.0
2013
2014
PV
Source: Energeia
Confidential
2015
CHP
2016
2017
2018
Mains ToU Peak
2019
2020
2021
2022
Mains ToU Off Peak
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Problem 3
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Source: UBS 2013
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Not unique to Australia
UBS forecast for the price of retail prices versus DER for residential
customers in Germany
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Problem 4
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DNSP’s load factors continue to decline. For example in SA load
factor declined by 33% from the early 2000’s to 2011.
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As revenues for DNSP’s decline, network charges must rise further
to compensate
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This has been termed “The Energy Market Death Spiral”
Source: Simshauser and Nelson 2012
Confidential
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Impact of “The Death Spiral” - Residential
Cumulative Avoided Network Revenue ($M)
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Energeia modelling forecasts for NSW:
 Further take up of DER;
 Further erosion of network revenues;
 Distribution charges increase further to compensate
$80
$70
$60
$50
$40
$30
$20
$10
$0
2013
Source: Energeia
Confidential
2014
2015
2016
2017
2018
IBT
TOU
Capacity
2019
2020
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2021
2022
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The Proposed Industry Solution
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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 crosssubsidies
The impact being
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Customers have much less incentive to reduce energy
consumption – only demand !
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All is Not Lost !
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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.
Appliance Refresh Rate ('000)
600
500
400
300
200
100
0
Fridges
Source: Energeia
Confidential
Freezers
Televisions
Washers
Dryers
Dishwashers Pool Pumps
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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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