Lights Out! Now who’s to blame?

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Blackouts in Victoria illustrate how networks and regulators have failed to change their business models, and failed to keep up with technology.

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Now everyone is firmly back into full soap opera mode in Canberra, the more immediate and far reaching power crisis has been pushed off the front pages.  Don’t worry though, it isn’t going away any time soon.

The blackouts which affected almost 100,000 Victorians over the Australia Day weekend have been blamed by the Coalition on the failings of the Andrews government energy supply policy, whether allowing the closure of Hazelwood or encouraging the rapid build-out of renewables generation across the state.

Fortunately for the government, the Australian Energy Market Operator came to its defence and confirmed that there was indeed enough electricity supply to go around. Problem was, they just couldn’t get it to the customers.

Seriously?

Now if the affected customers lived in some far flung parts of the state, this might be understandable. But those areas affected most were across the south east suburbs of Melbourne, where to my knowledge there’s been a reasonable sized settlement for the past 75 years. So why did the lights go out for so many homes?

If we are to believe the energy distribution companies, it was a combination of factors.  We are informed that high temperatures caused fuses to blow.

There is little further detail on whether the companies were surprised by the occurrence of high temperatures in late January or the fact that fuses blow in such conditions.

Either way, the state’s electricity network is only 100 years old, so it’s perhaps too early to make a definitive judgement. Alternatively poor Hugo Armstrong from Ausnet  blamed the fact that “people put in air-conditioners they didn’t tell us about”.

I confess to having forgotten to write and inform them when I bought that new Daikin, so I too apologise to my neighbours for any inconvenience caused.

The real reason the network was unable to deliver power is that the energy companies, together with the Essential Services Commission (ESC) which regulates the Victorian electricity industry, have failed completely to change their business model in the face of global changes in the electricity industry.

As more customers generate a larger portion of their own energy, there is naturally less revenue for the distribution companies.

In order to maintain their regulatory return, they therefore have two choices. Reduce costs and become more efficient in their operations, or increase electricity tariffs for everyone else.  No prizes for guessing which path they have pursued.

So what of the regulator?  Surely it has pulled up the network companies and insisted they look at new and more cost efficient ways to run the network?

Sadly not. Having established the market leading Victorian Energy Efficiency Target Scheme in 2009 under the Brumby Labour government, the ESC has done nothing to keep up with technology developments.

The scheme was designed to promote new energy saving technologies by requiring energy retailers to purchase a pre-set level of Energy Efficiency Certificates based on the size of their customer base. The only way to generate these certificates was to install energy saving technologies in customer homes.

Smart idea, if only the scheme had evolved with the times to recognise new, disruptive technologies which may be more effective in delivering ongoing efficiency benefits.

The retailers know that there is a whole lot more they could be doing but, unfortunately, the ESC continues to resist inclusion of any new technologies beyond the original LEDs, showerheads and standby power controllers.

As a result, the scheme is going nowhere.  There has been no encouragement from the regulator for distribution networks to adopt the latest energy saving technologies.

These include voltage management, which can reduce domestic electricity consumption by over 10%, or peak power demand reduction equipment, which in Queensland lowers electricity demand charges for small businesses by over 20%.

So this is where the Victorian government can make a difference. Without incentives, we will continue in this spiral of higher costs and lower reliability.  Kick the ESC to embrace new energy efficiency technology and we have a plausible way forward.

Everyone’s grandmother will tell you that the best way to save money is not to spend it.  Using less energy is the cheapest way to ensure the lights don’t go out.

Oh, and don’t forget to call your power company about that new aircon that didn’t work when you should have been watching the tennis.

Richard McIndoe is a former head of EnergyAustralia and is now executive chairman of Edge Electrons.

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7 Comments
  1. trackdaze 2 years ago

    Demand Management of Pool pumps would be a start. You’d only need to curtail use for 12 hours of the year.

    There solved.

  2. Jonathan Prendergast 2 years ago

    I believe the issue was high demand causing fuses to below. The high demand was due to the heat. But the hot ambient temperature did not blow the fuses directly. Just for clarity.

  3. Joe 2 years ago

    Blame The COALition.

  4. Ray Miller 2 years ago

    Richard failed to disclose that if you want to install Solar you need to seek permission (at least in Queensland) and then limit to 5kVA single phase. But the sting in the tail, no such requirement for the load side, with numbers of houses installing 10’skVA of load without a problem.
    In fact if you ditch your gas (for expense reasons, importantly then only one service charge) I’m sure the distribution company would want to know?
    The other critical piece of data which is unknown to the distributors and the whole NEM is what the temperature sensitively of the various elements of the load is? Some very general figures are available but none going to the individual buildings.
    As every kW of peak load costs $10,000’s of infrastructure one would think the likes of our brilliant engineers would have asked some fundamental questions by now?
    It seems that with the amount of money to made no one has any interest in implementing any solutions which ultimately benefit the consumer.
    Too many cartels protected by the AEMC, I think enough is enough, the AEMC should be thrown under the bus and let the new AEMO get on with the job.

  5. Dennis Kavanagh 2 years ago

    If the fuses blow because of the high demand then put in bigger fuses. If other parts of the network fail because of the bigger fuses then put in more robust network components. That’s whst you network owners were supposed to be doing with the ever increasing charges you impose on us!

  6. ds 2 years ago

    Richard, interesting article, however you may also want to articulate that in this instance, the ESC don’t set policy – they only administer the policy that is set by the relevant government department, so I believe that they are actually powerless to change anything in regards to the things you are talking about in the article.
    Also, their new project-based activities method claims to be technology neutral (and someone may correct me if I’m wrong, but I believe this does include things like voltage management devices), so it sounds to me more like the Victorian government are actually taking huge leaps forwards.

  7. simulacrum 1 year ago

    “So what of the regulator? Surely it has pulled up the network companies and insisted they look at new and more cost efficient ways to run the network?”

    – The ESC has no mandate in this regard. The agency that reviews the distributors costs is the AER, which retains jurisdiction of the economic regulation of network operators in Victoria.

    “…Having established the market leading Victorian Energy Efficiency Target Scheme … the ESC has done nothing to keep up with technology developments… if only the scheme had evolved with the times to recognise new, disruptive technologies which may be more effective in delivering ongoing efficiency benefits.”

    – The ESC neither established the scheme nor determines what new technologies become scheduled activities in the scheme. That’s the job of the government (ie the Minister for energy and DELWP). The ESC merely administers the scheme.

    It would help if you made an effort to understand the regulatory framework before confidently casting aspersions.

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