Smart meters, deregulation seen as cures for rising power bills

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The federal government’s final Energy White Paper names retail price deregulation, increased community engagement, improving the efficiency of energy networks, and the nation-wide roll-out of smart meters as some of the key critical reforms needed to help lower retail electricity prices.

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How to deal with rising power bills – and how to help increasingly disenchanted energy consumers deal with them? It’s a thorny issue for Australian governments and, thus, a major theme of the Gillard government’s final energy white paper, which was released in Melbourne on Thursday.

The long-awaited paper – titled “Australia’s Energy Transformation” and launched by federal energy minister Martin Ferguson – calls for an overhaul of electricity pricing and for innovations to allow customers to better manage their energy use, in an era when retail electricity prices have been rising faster than inflation (in fact, as Ferguson pointed out, there have been average retail price rises of about 40 per cent nationally over the past four years and well above 50 per cent in some states), despite falling wholesale prices and rapidly changing patterns of demand.

“The Australian Government recognises that rising energy prices are hurting households and businesses and that, while there are no quick fix solutions, carrying out the energy market reforms outlined in the Energy White Paper will help to ease price pressures over the longer-term,” Ferguson said today in his speech at the launch.

The minister was quick, however, to shift at least some of the responsibility for “Australia’s Energy Transformation” over to the states, saying that “governments at all levels” needed to embrace key reforms, including improving the efficiency of electricity networks, establishing effective competition and removing retail price caps, providing for greater demand-side participation and moving towards cost reflective pricing.

“If I could highlight one area of critical reform needed to improve competition and deliver innovative solutions to consumers it would be retail price deregulation,” he said.

Ferguson said that Victoria had led the way on this front, and the willingness of other state governments to take on such “hard reforms” would be essential. “It will take political courage where others have failed,” he said.

“Pricing structures are resulting in inefficient peak demand,” Ferguson said in his speech. “This means that additional capacity is required to be built that might only be used for one per cent of the year.”

The problem of excessive investment in “poles and wires” – also referred to as network gold plating – and the effect it has on retail power prices has been apparent to many in the industry for some time, but was recently afforded some political credence by the Prime Minister herself, when she declared that “the inefficiencies that exist in the current system” could no longer be ignored.

As Ferguson noted today, “current market arrangements are distributing the costs of this across the entire consumer base.” And the minister pointed to Productivity Commission estimates suggesting that consumers who didn’t use the additional capacity were effectively subsidising their neighbours (with their multiple TV sets and air conditioners) by as much as $330 per year.

“This is clearly an unfair cost,” Ferguson said, “particularly on those less able to afford it.”

Ferguson also gave Victoria and its previous Labor government a nod of for its roll-out of smart meters, praising it for seeing the potential benefits – while acknowledging that the chosen method of roll-out may have been somewhat counterproductive.

Smart meters and other smart technologies ranked high among some of the key recommended utility and consumer-based “innovations,” aimed at raising public awareness of energy usage patterns and costs, which included charging more for power at peak times.

Ferguson called on the power industry and governments to lift their “engagement with the community,” to help raise awareness of the benefits of monitoring and adjusting consumer energy use, using smart technology and implementing household energy efficiency measures.

Currently, aside from a couple of fairly light-weight demand-management programs in Victoria and NSW, practices like electricity load shifting and automated demand management have yet to really catch on in Australia.

But if the findings of a this recent study are anything to go by, these technologies and practices will soon be the norm; so much so that by 2022 power companies will be managing 1.2GW of load across two million households – the equivalent to around four new gas-fired peaking power generators.

In the meantime, those who aren’t paying attention to time-of-use, or who just happen to use lots of power at peak times, can probably expect even higher power bills. Just one of the many “hard decisions” Ferguson said today were part of a broader move to “overcome populism” for what was in the long-term interests of consumers.

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5 Comments
  1. Paul 6 years ago

    With a regurgitation of many previously touted ‘solutions’, including the ultimate furphy of smart meters, this white paper has, in my humble opinion, done very little to spark confidence in the governments ability to control the heaving jubaka that is the utility sector.
    Sure the AER needs more authority, and authoritative people to run it, but most of the rest of this papers boring repetitive narrative reveals nothing new and certainly nothing is likely to yield results for energy users without them first coughing up more dosh for the utilities to burn on infrastructure they will wind up owning and controlling.
    The Fed’s and the State’s equally share the responsibility for profligate waste and opportunities lost. Now they want us to accept the imposition of expensive hardware like smart meters as a necessary tool to bring down usage charges. Wake up Australia and demand a royal commission into the energy & water utilities sector.

  2. Sean 6 years ago

    the NEM needs to be broken up into much smaller areas, to create markets to accurately reflect the geographic challenges faced by market operators.
    Power users in NSW are not conveniently organised into one single point in the middle of the state. the market should reflect this fact. the reason there is so much “gold plating” going on, is that there is no price difference between using power at 3pm on a mild day in spring and using the same amount in summer when it is 45C. faced with a choice between brownouts/rolling blackouts and spending more money upgrading the network for peak usage, guess which occurs. Demand does not occur homogeneously in each market area, so the retailers have to place bets and charge accordingly.

    If there were smaller geographic markets, players would find economic incentive to provide extra capacity when it was viable, and when users were willing to pay for it. This would also create a great opportunity for distributed generators to provide great value without being a further distortion to the retailer. the generator would get paid a fair price for the value of his power, and the transmitter would get paid for the relative change in price between sectors, as is now seen at a state level, especially in tasmania

    if general residents had the opportunity to access a regulated market (one with price caps similar to the NEM)
    Don’t force it on people. show them the numbers, let them decide if they want to have a power company raise the cost of power, just in case they decide to all buy power at one particular time. Let the customer decide that they wish to have some appliances shed load when the price of power goes too high. I would gladly change the hours i did my washing if it saved me money. but slugging people nearly 50 cents /kwh for power that is on the state market at 5c/kwh is a bit rich for me.

  3. Diego 6 years ago

    The kWh price is not the problem, the high electricity usage in Australia is.

    An example:
    NSW average 2012/2013 is:
    $2230/($0.25/kWh) = 8920kWh/year, or 24.5 kWh/day.

    We use in comparison 2500kWh/year, or 6.8 kWh/day.
    The 2500kWh we use are for a two-person household in a house with aircons and a pool in Queensland. So our electricity bill in NSW would be 2500kWh x $0.25 = $625.

    Because we use a small amount of electricity we need only a small 2kW PV system and pay no bill at all. No matter how high the electricity prices will go, we never ever will pay an electricity bill.

    How did we get there? The answer is with energy efficiency.
    ———————

    We have NO standby, pool pump, appliances and lighting are efficient. Our electric water heater is wrapped in thick insulation and has a timer that heats it only every 2.5 days. And we changed our habits, meaning we turn our internet router and lights off when not in use, use sweaters/blankets in winter and the pool instead of using the aircon and sweat a little, you get the picture.
    We installed insulation and sealed the house air-tight so cold and heat stay out, temperature is moderated. Shaded East/West windows.

    Aircon is only in use 5 times in winter and summer and only in rooms we stay in. Aircons are completely off otherwise bacause they use $500 iThe kWh price is not the problem, the high electricity usage is.n standby-costs-per-year, so check yours too! Same for fans and microwave oven.

    To find standby hogs and manage electricity usage install a whole house power meter. Without it we would be lost.

    Go to the very comprehensive portal: http://livinggreener.gov.au

    To sumarise, I’m really not sure if the recommendations in the white paper will be any help to the problem of ever higher power bills.

    But I know that our way of implementing energy efficiency and installing solar PV for the remainder of the electricity usage is a sure way of solving the problem once and for all.

    Unfortunately the QLD Newman Government thinks their solution is to kill all green programs and the feed in tariff. Because solar and efficiency are the culprits and not the solution? I can only say good luck!

  4. Paul 6 years ago

    Diego’s point, whilst partially valid, is completely unrealistic if put forward as a short term quick fix resolution to the issues dogging energy cost escalation.
    With 87% of housing stock needing very substantial upgrades to both envelope and appliances, on top of mammoth behavior change, the children need to be disposed of somehow, huge populations of rental properties, 20%+ of homes that cannot utilise solar anything, and don’t count on inaccurate misleading toy energy monitors to generate more than mountains of dead batteries every few months.
    Good on you Diego. We need exemplars to show what’s possible, but averages do not tell the story, nor justify utility routing.

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