Falling network utilisation is the breeding ground for disruption

A conversation with a few colleagues the other day wandered to ride-sharing and the new paradigm for travel accommodation. Uber, Airbnb and others tend to represent themselves as technology ‘apps’ much more than being a mechanism for transport or travel.

Underpinning the success of these pin-up disruptive vehicles however is the existence of spare capacity. Assets that are already paid for, easily available and generally idle for periods of time are the fuel for disruption; whether those assets be cars and drivers (ride sharing), apartments (accommodation) or your internet connection (newspapers, job search and letters, for some).

The electricity distribution network is right up there as a fairly lazy asset for the vast majority of its life. Admittedly, the fundamental product of a distribution network is difficult to define, as is the meaning of ‘spare’ capacity.

A review of the Tariff Structure Statements highlights the fact that the service of the transport of energy has many interpretations, including a volumetric energy transport capability, an ability to meet peaks in demand, an element of reliability to support the needs of consumers and a tangle of regulatory compliance and shareholder risk management.

Not only is the installed capacity of the network focused on a few days of peak demand per year, the fact is that the number of transformers and power lines that actually run at full capacity at any point in time in a year is in the decimal points of a percent. The Distribution Annual Planning Report of one larger utility forecasts that only 11 of their over 2000 distribution feeders are forecast to operate at or over their rating in 2015-16.

The price tag that comes with network reliability and security standards, and by extension the spare capacity, is very high; with no greater highlight than the increase in network costs in the last 12 years in an environment of planning criteria that specify ‘N minus 2’ (two full-capacity backup systems, just in case), ‘N minus 1’ (fully duplicated capacity at time of peak demand) or even a 66 per cent load transfer requirement for lower-voltage networks. But with this reserve capacity comes duplication and the associated significant unused capacity in the networks for the vast majority of time.

The heat map above, taken from Energex’s public reports, shows the times when the network as a whole – which in itself is not that meaningful but does act as a proxy indicator for many individual elements of the network – is working close to peak demand. The green and yellow, however, represent the times when the Mercedes is in the garage and available for use, or the waterfront apartment is unoccupied and could earn opportunistic revenue to help keep the overall costs down.

Customer technology also has a role here. Hybrid inverters mean that those who value reliability can pay for it themselves, without pushing the costs to all energy users. DUoS (distribution use-of-system) charging, which reflects the fact that only a few elements of the network are employed in moving power from a generator to a customer only a few houses away, is critical. The wide application of reliability standards that have pushed costs higher and cruelled efficient use of a very expensive public amenity must be questioned.

Yes, the distribution network is a very complex animal. But the environment of new technologies, high costs and prices and flat growth, industry’s current language and regulation has to move away from peak demand, LRMCs and cost recovery to the simple question of ‘how best do we use the capacity of such a large, existing, integrated, 24/7 and in many cases publicly owned facility’?

It’s a hard paradigm to change, especially against a fairly archaic regulatory framework. Yet with such a volume of energy transport capability that is underutilised for such great periods of time, it’s just a matter of time until someone from completely outside the industry develops an app for that.

In fact, I think the code is already half-written.

Mike Swanston is Principal Consultant at the The Customer Advocate, a  company focussed on the needs, empowerment and benefit of energy customers.