By John Bradley, Chief Executive Officer – Energy Networks Association
In the first edition of Utility I wrote that 2014 promised to be a busy year for those interested in the energy supply chain. As expected – a year is a long time in the energy industry.
Since last year Australia has added the equivalent of a large power station – 590MW – in distributed solar generation capacity.
AEMO has released the 2014 National Electricity Forecast, which saw the range of uncertainty for energy consumption in 2020 double compared to the previous year. That is, the gap between high and low scenarios of energy consumption in 2020 – one regulatory period away – increased 20,000MW to 40,000MW.
We have also seen extreme and unusual temperatures early in 2014 in south-eastern Australia’s heatwave and high temperatures in Queensland during the G20. The January 2014 heatwave demonstrated the benefits of the smart grid and smarter price structures, as well as the integration of residential solar and Australia’s domestic gas networks to support system performance. It also highlighted the work of quiet heroes in network businesses who maintain a focus on operational excellence in such a challenging technological, regulatory and commercial environment.
During this time the pace of policy and regulatory debate has been relentless in a networks sector that is responsible for the delivery of essential services to the community. We’ve also witnessed the consolidation of key changes to the regulatory framework, the emergence of significant changes to structure and ownership, and new analysis of the future of the energy industry.
There is every indication that the year ahead will be just as busy.
We have elections coming up in two eastern states which will have significant implications for the networks sector.
There are also critical decisions for Ministers to make on tariff reform and metering through the COAG Energy Council.
The Energy White Paper will be released early in 2015 – an opportunity to provide an important framework for the direction of energy policy in Australia.
While this takes place, the pace of change and transformation of the energy system continues.
Australian networks are integrating rooftop solar panels at world-leading rates of penetration – induced by subsidies which are now anachronistic and harmful to general consumers. At the same time, there are other technologies travelling quickly down the cost curve – including battery storage, electric vehicles and energy management systems, which could either provide significant improvements or significant risks to the economic outcomes for Australian consumers and the safety, reliability and quality of our supply. Behind them on the horizon is the potential for fuel cells and micro-wind turbines.
These are important, and welcome, advances in technology that can strengthen the grid, and the network sector has been actively supporting the deployment of these breakthrough technologies.
However, this transformation also suggests that it is worth taking a closer look at the true value of the grid.
In November ENA released an important piece of analysis conducted by Oakley Greenwood. The study quantifies the often ‘hidden’ services that customers receive from the grid, and how much it would cost a customer to supply them. The evidence is that the electricity grid provides significant value to consumers today and in the long-term.
While recent advances in solar and storage technology mean customers could choose to leave the grid entirely, the independent analysis by Oakley Greenwood shows it is unlikely to deliver better financial outcomes or better services.
If your family or your business is after an equivalent, safe, reliable and hassle-free service as today, this research shows that, to provide a nearly equivalent service, a stand alone power system would cost $600 to $850 per month or five to six times the cost of grid supply.
A do-it-yourself solution is unlikely to be the best outcome – over the course of a year, the connected customer is up to $8,700 better off than they would be with a stand-alone power system providing a nearly equivalent service.
A disconnected customer would also lose grid benefits like the ability to sell surplus energy or participate in new markets which may emerge using distributed energy resources – such as demand response markets or balancing services.
The grid will be the gateway for better, more efficient energy services – so quitting the grid is like having a home computer but disconnecting it from the internet. You still have one, but you are not connected to the services that connection provides you and the broader community.
As energy consumers engage in decisions on energy use in new ways, it is clear that the preferences of consumers will shape the development of future networks, by requiring network businesses to rethink their approach to price, reliability, technology and energy sources.
It is important that as this takes place, customers are well informed as to the costs and benefits of their choices. Energy networks are well placed to efficiently integrate new technologies and services with the grid, supporting consumer choice, and delivering a resilient and sustainable energy system.