In what may the first of its kind for Australia, a trial being conducted by Western Australia utility Horizon Power will test a time-of-use consumption allowance for electricity, in the hope that this can manage peak demand potentially cutting the overall cost of power.
The Power Ahead pilot program, to be conducted in the Port Hedland region over the summer of 2016-17, is investigating the potential to manage the daily electricity peak by changing people’s behaviour – an effort it hopes will help avoid further development of costly grid infrastructure.
To do this, the up to 500 households and businesses participating the trial will be given a consumption allowance for peak power periods (1pm-8pm), and given financial incentives – a lower electricity bill – to stay within this allowance by shifting their consumption patterns to off-peak times (8.01pm to 12.59pm).
WA energy minister Mike Nahan, who has committed to wide-ranging reform of the state’s “basket case” electricity market, said the trial would be structured similarly to mobile phone plans.
“Horizon Power has considered how other utilities around the world are adapting to changing electricity consumption patterns and decided that a pricing structure similar to mobile phone plans was the most suitable option for participating customers,” he said.
“(The project) …has the potential to deliver a fairer and more sustainable way of charging for electricity that avoids the development of costly infrastructure into the future, as we can effectively manage the peak by changing people’s behaviour.”
The trial differs from other products in Australia. Time of use tariff do exist, but they impose no cap on consumption. Some tariffs introduced by networks include a “demand tariff” to reflect the cost of the total usage at peak times, but these have been calibrated to the peak demand of individual consumers, which may have no bearing on network peaks.
The Australian PV Institute has been particularly strong is pushing for truly “cost reflective” tariffs that combine the amount of consumption with network peaks.
It is yet another strong initiative from WA, which is also reforming it capacity markets and demand response markets, and ordering the closure of 380MW of excess power (mostly coal) to deal with excess supply.
As we have reported here before, Western Australia’s energy market is undergoing some of the most radical reform in Australia, undertaking a complete rethink on traditional electricity market technology and business models.
This is largely due to the fact that the WA government subsidises electricity consumers by more than $500 million, or more than $500 per household – a completely unsustainable amount.
The suite of WA reforms have so far included embracing solar and storage, ordering the shut-down of excess generation capacity – mostly coal – and shifting some edge-of-grid customers off-grid, to safer and cheaper stand-alone renewable energy plus storage systems.
“Projects like this are essential in enabling us to adapt to a changing industry, which also includes increased renewable energy uptake and the integration of new technologies such as batteries and electric vehicles,” Nahan said in a statement on Friday.
“This pilot project also has the potential to deliver a fairer and more sustainable way of charging for electricity.
“By providing the right incentives to customers as to when and how they use electricity, we believe an opportunity exists to give customers more control over managing their electricity bills, and to reduce Horizon Power’s overall cost of supply.”
Indeed, precisely this type of time-of-use tariff was recently praised by former Energex executive turned consumer advocate Mike Swanston, who told the Solar and Energy Storage conference in Melbourne that it offered one of the best ways forward for both networks and customers.
“Keep it simple. Put in place a time-of-use tariff,” Swanston told the conference. “And the one that works for me is the slogan that says ‘Can it wait til after 8?’ Customers get that.”
Participants in the Horizon Power pilot will also have access to near real-time electricity usage data through an app on their smart phone, and will not pay any more than their current tariff rate for the duration of the trial.