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Energy Efficiency & Australian Electricity Industry Restructuring

VIEWS: 2 PAGES: 12

Energy Efficiency & Australian Electricity Industry Restructuring

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									             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

								
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