Anger mounts over Gillard’s power ultimatum – ABC News (Australian Broadcasting Corporation).
I beg to differ with the PM over this one.
Many, many reports have been written on why electricity prices keep rising. And, despite what the PM thinks, it’s not “energy” prices that are rising, but the cost of providing you with a reliable energy supply.
Australia’s glorious recent prosperity has led to a massive increase in the use of domestic air-conditioning. In many cases, flicking on the AC in your house will double and even triple your energy demand.
So, since nearly everyone has AC now, the network must be sized to meet the demand if EVERYONE turned on their AC at once. Even if this only happens for 30 minutes a year, the network must be ready.
Why though? Well, electricity supply in Australia has traditionally been demand driven; if a consumer asks for electricity, they get it. But, in some areas, particularly in congested network sectors, industrial customers are given incentives to switch off loads at times of high demand. At an old job the local network operator would pay us $100k to switch off for half an hour. This sort of stuff is all bucketed together as “demand side management”.
This sort of Demand Side Management is difficult with residential consumers because they are only charged for the amount of energy they use; the network charges are all lumped together in a “network fee”. Industrial users on the other hand are charged for the amount of energy they use, plus some charges for the rate at which they demand power.
These points together mean that residential consumers are actually the ones driving price rises (because new AC means the network needs to be upgraded) but they don’t receive the individual incentive to manage their demand. If everyone had a smart meter they could be given an incentive to turn off during periods of high demand. This would control the spikes to some degree and defer network upgrades.
The energy trading side of the market works really well and I strongly doubt there is much saving to be made there by Federal involvement. A small part of me thinks this is all just a bit of politicking, but I’d hate for my cynicism to get in the way of cold, hard analysis.