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© 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
1
© 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?
© Energeia 2012. All Rights Reserved 2
© Energeia 2012. All Rights Reserved Confidential
Overview
© Energeia 2012. All Rights Reserved
• Australian policy development
• Four key problems facing the electricity market
• Solution being considered
• Impact on energy efficiency
• All is not lost!
3
© Energeia 2012. All Rights Reserved Confidential
• 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
© Energeia 2012. All Rights Reserved
Energy Efficiency
Pricing
Demand Management
4
© Energeia 2012. All Rights Reserved Confidential
Problem 1
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• Energy price rises are the dominant community energy issue
5
© Energeia 2012. All Rights Reserved Confidential
Problem 1
© Energeia 2012. All Rights Reserved
Source: IPART, assuming consumption of 7MWh per year
• 100% increase in NSW network charges over 5 years
6
$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
© Energeia 2012. All Rights Reserved Confidential
Problem 2
Confidential © Energeia 2012. All Rights Reserved
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
© Energeia 2012. All Rights Reserved Confidential
Problem 3
Confidential © Energeia 2012. All Rights Reserved
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
© Energeia 2012. All Rights Reserved Confidential
Problem 3
Confidential © Energeia 2012. All Rights Reserved
Source: UBS 2013
• Not unique to Australia
• UBS forecast for the price of retail prices versus DER for residential
customers in Germany
9
© Energeia 2012. All Rights Reserved Confidential
Problem 4
Confidential © Energeia 2012. All Rights Reserved
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”
10
© Energeia 2012. All Rights Reserved Confidential
Impact of “The Death Spiral” - Residential
Confidential © Energeia 2012. All Rights Reserved
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
© Energeia 2012. All Rights Reserved Confidential
The Proposed Industry Solution
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• Customers have much less incentive to reduce energy
consumption – only demand !
The impact being
12
• 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
12
© Energeia 2012. All Rights Reserved Confidential
All is Not Lost !
© Energeia 2012. All Rights Reserved
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)
© Energeia 2012. All Rights Reserved Confidential Confidential
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
© Energeia 2012. All Rights Reserved 14