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Energy Efficiency & Australian Electricity Industry Restructuring
Document Sample
ACRE Energy Policy Group
Workshop on Energy Efficiency in Practice
UNSW, 4 March 2004
Energy Efficiency & Australian
Electricity Industry Restructuring
Hugh Outhred
School of Electrical Engineering and Telecommunications
The University of New South Wales
Sydney, Australia
Tel: +61 2 9385 4035; Fax: +61 2 9385 5993;
Email: h.outhred@unsw.edu.au
www.sergo.ee.unsw.edu.au
End-use
The stationary energy sector Renewable
Energy
energy conversion chain Options
The electricity supply industry
end-use
primary generation transmission distribution
energy
energy forms &
forms services
e.g: e.g: light,
The natural gas supply industry
coal, gas heat,
renewable transmission distribution motive
power
energy losses & external impacts
Energy efficiency & Australian electricity industry restructuring 2
Decision-making in
the stationary energy sector
• Engineering-economics perspective:
– Start from point of end-use
– Determine cheapest way to deliver an end-use
energy service considering all available options
– Decide if direct & indirect benefits outweigh costs
• Commercial perspective:
– Participants attempt to influence outcome based
on their commercial returns
– Socially desirable outcome only if commercial
framework provides appropriate signals
Energy efficiency & Australian electricity industry restructuring 3
Decision-making in
the electricity industry
• Supply-demand symmetry
• Centralised decision-making required:
– All short term issues (instantaneous power flow)
– Strongly interacting longer term issues,eg:
• Network services,many end-use issues
• Social & environmental externalities
• Decentralised decision-making achieved:
– Commitment & dispatch of existing resources:
• Limited demand-side participation at this stage
• Ambiguous: investment in new resources
Energy efficiency & Australian electricity industry restructuring 4
Wholesale & retail electricity markets
Wholesale market Retail
(National Electricity Market) Market(s)
Zone
Inter-connector substation
to another region Large Small
(including MNSPs) Consumers Consumers
Transmission
substation
Transmission Sub-transmission Distribution Reticulation
(220-500 kV) (33-132 kV) (11-33kV) (240/415 V)
Embedded
Large Generators
Generators ≤ ~30 MVA
100-700 MVA
Energy efficiency & Australian electricity industry restructuring 5
Commercial decision-making in the NEM
Generation Financial instrument Retail Embedded
Sector:- & REC (emission) trading sector generators
large Retailer 1
generators Multi-region Contestable
& MNSPs Intentions National Intentions Retailer 2 Retail end-users
offers & Electricity bids & Markets
Gen 1 payments Market payments Franchise
(NEM) End-users
Retailer Z
Gen 2
Distribution End-use
Transmission
Transmission sector sector
Tx network Sector
Sector Tx network Network
Gen 3 pricing pricing Distributor 1 access End-use
NSW
NSW Equipment
Victoria
Victoria Distributor 2 &
South Aust. Distributed
South Aust.
Electricity resources
Gen X
Electricity Queensland Electricity
Queensland
& possibly
& possibly Distributor Y
Tasmania
Tasmania
Energy efficiency & Australian electricity industry restructuring 6
Wholesale & retail markets
• Participants in wholesale markets:
– Mostly large, with electricity as core business
• Participants in retail markets:
– Mostly small, without electricity as core business
– Multiple decision makers with split incentives &
strong mutual dependencies
• Market design:
– Dysfunctional retail market design contributes to
poor industry outcomes, eg: energy efficiency
Energy efficiency & Australian electricity industry restructuring 7
EnergyAustralia residential airconditioning
marketing campaign, December 2000
“EnergyAustralia can provide you with advice
on your airconditioning needs. Just call 131364
and talk to our energy experts about 2 years
interest free on any airconditioning system”
(EnergyAustralia “bill stuffer”, 12/00)
– Affects both peak demand & energy & undermines
housing design standards
– Supported by NSW government’s Electricity Tariff
Equalisation Fund, with volume set ex-post
– Similar marketing campaigns in all states
Energy efficiency & Australian electricity industry restructuring 8
Residential & commercial air conditioning is
the key driver for peak demand growth
(IE Submission, IPART DNSP Review, 2003)
Residential ADMD
Pre 2000 houses: 3.5-4.0 kVA
Post 2000 houses: 5.0-7.5 kVA
Energy efficiency & Australian electricity industry restructuring 9
In 2001 NSW load
>90% peak for
~5% of time
NEM load
duration curves,
January-March
2001 & 2003
(NECA quarterly
Market Statistics)
In 2003 NSW load
>90% peak for
<2% of time
Energy efficiency & Australian electricity industry restructuring 10
Projected surplus reserves NEM states
(Medium growth + extreme (10% POE) weather, NEMMCO SOO, July 03)
Growing peak demand is symptomatic of a broader demand-side dysfunction
Energy efficiency & Australian electricity industry restructuring 11
Conclusions
• Strong incentive to sell electricity:
– Difficult to remove, even for regulated industry
• Demand-side options have not faired well:
– Electricity not core business
– Multiple decision makers with split incentives
• A way forward:
– Internalise important externalities
– Improve customer interface:
• Interval metering, spot & forward contract tariffs
– Improve demand-side decision making:
• Replace retailers with “end-use facilitators”
Energy efficiency & Australian electricity industry restructuring 12
