Antinuclear

Australian news, and some related international items

Dennis Matthews scrutinises the “ELECTRICITY NETWORK TRANSFORMATION ROADMAP: FINAL REPORT

Comments on “ELECTRICITY NETWORK TRANSFORMATION ROADMAP: FINAL REPORT Energy Networks Australia and CSIRO Dennis Matthews, April 2017”

INTRODUCTION This 100-page document is a composite of two distinctly different contributions. The smaller part, which appears to be the work of CSIRO, is technical, relatively free of jargon, to the point, objective and mostly about computer modelling studies.

The majority of the report is loaded with jargon, feel-good words and phrases, and gives the general impression of a sales document. For example, “network platforms”, “service platform”, “incentivise”, “new information platforms will be required to animate new distributed energy resources”, “intelligent networks and markets”, “empowered”,        . This latter part is presumably the work of Energy Networks Australia.

CSIRO is a well known and generally respected government organisation. Energy Networks Australia comprises electricity low voltage distribution and high voltage transmission network companies.

The report is best understood from the point of view of electricity distribution and transmission monopolies that are seeing a rapid erosion of their businesses because of the rapid uptake of rooftop solar electricity generators and associated battery storage. These (rooftop solar + battery) systems are an emerging competitive threat to monopolistic electricity network companies, which are seeking to short-circuit the threat by co-opting these small, distributed electricity suppliers with a variety of financial “rewards”.

The report emphasises the “customer” and is almost entirely about how the electricity consumer-cum-generator (gensumer) will benefit from working with the distributor. There is no mention of how the electricity distributor will benefit from this arrangement.

The following comments use the same headings as the report.

EXECUTIVE SUMMARY  After acknowledging the customer-driven nature of changes in the electricity system (“transformation on an unprecedented scale”), the report concludes:

“By connecting millions of customer owned generators and energy storage systems to each other, networks can act as platforms which help match supply and demand and reduce the need for inefficient duplication of energy investments.”

  1. INTRODUCTION

Under the heading “customer oriented electricity” we are promised that “transformed electricity networks actively connect customers with a growing range of market actors and customized electricity solutions”.

Under “Incentives and network regulation” there will be “A fairer system through active implementation of network tariff and retail pricing reform and modernised regulation and competition frameworks.” In the past, privatised electricity distribution networks have opposed regulation and have resisted attempts to constrain network tariffs, the latter causing expense to the electricity consumer through court costs, which are recovered from the consumer.

Achieving “full development of a customer oriented network” will require “a network optimisation market (NOM) where distributed energy resources services can be procured”. This new electricity market would be in addition to the present, strongly criticized, national electricity market (NEM).

The Roadmap is divided into two phases, the Foundation Phase (2017-22) and the Implementation Phase (2023-27). The former may be considered a realistic timeframe but the latter is highly speculative. It is the latter phase that is claimed to “deliver enhanced customer choice and value”.

“Optimisation” means greater use of the electricity network, which will undoubtedly be financially beneficial to the owners of the electricity network, but no data is given on how much of this financial benefit is passed on to the consumer; presumably this is “commercial in confidence”.

At no stage in the Roadmap is the effect of privatisation (vs public ownership) of the electricity distribution system evaluated.

The Roadmap supports “advanced metering” but only gives a broad description of what an “advanced meter” will do. For decades, the electricity industry has resisted the simple idea of having a meter placed where customers can get instantaneous feedback on usage and cost in a way that will help customers manage their demand. This has clear benefits to customers but would probably lower revenue to the electricity industry.

  1. CUSTOMER ORIENTED NETWORKS

According to the Roadmap, “Customers are being provided with unprecedented choice and control over how and when they consume electricity.” It would appear however, that the choices are limited and determined by the electricity industry, whilst customer control, in such a complex system with “smart meters” designed by and for the industry, is likely to be minimal.

In a system designed by and for the electricity industry, it is highly likely that the major financial beneficiary will be the electricity industry. In the absence of data on industry financial benefits, it has to be assumed that the electricity networks are “seller oriented” rather than “customer oriented”.

Given, it is the customer that has taken the initiative, rather than the electricity network industry, by initially installing rooftop solar, then battery storage, and in the near future electric vehicles, it is the customer that should be the major beneficiary of any changes in regulations, metering, and tariffs.

The electricity industry has been negligent at all levels in its forward planning and lack of service-oriented ethic. The electricity industry has lost customer confidence. For the industry to now try to subtly impose its will on the customer demonstrates that it has learnt nothing.

  1. CUSTOMER SAFETY NET

The Roadmap has concerns that regulations may not favour the networks co-opting emerging distributed PV + battery electricity generators. These concerns are phrased in terms of service to customers and protecting network-connected customers.

In addition, forecasts to 2050 are used. It is only in the 2027-2050 that significant savings in average electricity bills are forecast. These forecasts are so speculative as to be irrelevant.

 

  1. PROGRAM EVALUATION AND BENEFITS

Despite the emphasis on customer service and lower tariffs, in the period 2017-27 there is negligible projected savings in residential household electricity bills. It is only in the highly uncertain forecasting period 2027-2050 that any savings are forecast. In the more certain period 2017-2027, the forecast is that the Roadmap plan will make very little difference.

In respect to greenhouse gas emissions the report finds

“barriers to efficient decarbonisation will be exacerbated if distributed energy resources are not utilised to support system balancing, facilitated by network optimisation systems.”

The critical words here are “efficient” and “optimisation”. The former means that there will be more decarbonisation of the electricity sector if the Roadmap is adopted. But the report shows that decarbonisation of the electricity sector is already occurring and there is negligible effect of the Roadmap to 2027. It is only in the highly unpredictable period 2027-2050 that significant differences are forecast.

The next section is headed “Navigating to a customer oriented future”. This heading encapsulates, what would be, a revolutionary change for privatised electricity distributors from an almost exclusive profit-oriented business to one which is service-oriented. For example, “customers are placed at the centre of Australia’s future electricity system and empowered with greater choice, control and autonomy”. This would indeed be a transformation on an unprecedented scale.

The report makes no mention of the possible role of direct current (DC) versus alternating current (AC) electricity. This, despite the acknowledgement of the increasing roles of rooftop solar + battery systems and electric vehicles, which inherently generate, store and use DC electricity.

The Roadmap considers there is the potential for the regulatory and consumer protection frameworks “to stifle delivery of customer valued services”.

  1. CARBON AND RENEWABLE POLICY OPTIONS

In considering the effect of policy on household electricity bills, the Roadmap considers three scenarios:

  • Continuing present policies involving setting abatement targets (‘business as usual’)
  • Adjusting present policy so that it does not favour renewable (‘technology neutral’)
  • Present policies are replaced by a carbon price on all emissions (‘carbon price’)

Although not mentioned explicitly, the implication is that a key feature of ‘business as usual’ is setting renewable energy targets rather than greenhouse gas abatement targets. It is the renewable energy target (RET) scheme that has delivered large decreases in carbon emissions from electricity generation.

The Roadmap finds that the lowest household electricity bills occur in the ‘technology neutral’ scenario, which produces negligible increase in bills for six years, followed by a slow increase by 2030. By contrast, the ‘business as usual’ and ‘carbon price’ scenarios produce an abrupt 20% increase followed by a slow increase to 2030. The comparatively low cost for the ‘technology neutral’ scenario arises because

“It does not impact on gas bills as there are no changes to wholesale gas prices between the scenarios.”

Apparent errors in Figure 9 of the Roadmap makes this section particularly puzzling.

A key cost included in ‘business as usual’ appears to be “retirement costs of plant being removed from the system”.

“A lower resource cost is required in other scenarios as they allow more efficient use of existing infrastructure.”

So far, most of the plant being removed from the system is very old, unreliable, coal-fired power stations such as those at Port August in South Australia and Hazelwood in Victoria.

  1. EFFICIENT CAPACITY UTILISATION

The Roadmap does not make a clear distinction between grid electricity consumption and electricity consumption in general (including rooftop solar); for example, when it refers to “a flat or declining outlook for electricity consumption”, which is the present trend for grid electricity consumption. Poor planning, especially in the electricity network, now means that the network is delivering less electricity. Rather than taking responsibility for its bad decisions, the industry wants to continue to maintain profits by increasing its prices.

“ .. waiting for customers to opt-in to new network tariffs fails to achieve timely take-up of fair and efficient network tariffs.”

  1. GRID TRANSFORMATION

 

 

The Roadmap states that “Falling costs of large and small scale renewables and other distributed energy resources, such as rooftop solar, energy storage, and electric vehicles, are driving rapid deployment and are encouraging both power system interdependence and independence .”

 

The examples given for renewable are all inherently direct current (DC) systems (lighting is also easily supplied by a DC system), yet the Roadmap makes no comment on the role of DC versus alternating current (AC) systems. This is all the more puzzling given the considerable concern over frequency control in AC networks.

  1. NETWORK OPTIMISATION AND PLATFORMS

The Roadmap favours distributed electricity generators being connected to the electricity network in order to increase the stability of the networks, to use the full capacity of underutilised networks, and to provide income to network owners. In return, owners of distributed electricity generators will be able to obtain unspecified payment for these electricity services which they will sell through a ‘Network Optimisation Network’.

“ …  it is expected that procurement of distributed energy services will initially be through very basic Network Optimisation Market (NOM) processes”.

  1. TECHNICAL ENABLERS

The Roadmap will require “new skill sets not currently being widely taught in Australia” and

“funding levers at federal state and territory levels will need to be considered to enable the initial rapid transformation of appropriately skilled workers.”

APPENDICES – REGIONAL ANALYSIS

The Roadmap calls for “a stronger role for state transmission interconnectors”.

According to the Roadmap, the incentive for owners of roof top solar to install battery storage will result from the disparity between the price received for exporting electricity from rooftop solar (6-11c/kWh) and the price of grid supplied electricity (22-27c/kWh). Battery storage will become more valuable as it becomes used to avoid “network critical peak days” and “daily peak pricing periods

 

The Roadmap favours

 

“introducing new network tariffs and retail pricing options and establishing frameworks for networks to buy grid services from customers with distributed energy services.”

 

To make this easier, the Roadmap favours almost universal installation of smart meters “to enable an early assignment of customers to cost reflective tariffs”:

 

“ residential and small business customers are assigned to a new range of cost reflective network tariffs by a high penetration of smart meters.”

 

At no stage is ‘smart meter’ clearly defined. There is no indication that the proposed ‘smart meters’ will be consumer friendly. For decades, there have been calls for meters to be installed where they can be easily read by consumers, so they know what their consumption is costing, and gives them the opportunity to manage their demand and to minimise their electricity bill.

 

 

  1. REGULATION AND POLICY FRAMEWORKS

 

According to the Roadmap, the present regulatory framework is unlikely “to promote the long-term interests of consumers, or to protect the medium term interests of the network sector as it evolves” and it calls for a “light-handed framework of economic regulation”. The Roadmap calls for a greater role for market forces.

 

It is debateable as to whether the present regulatory framework, which was put together in a pro-privatisation climate, promoted the interests of the consumer. Rather, it appears to have promoted the interests of the electricity network sector above that of the consumer and the present over-investment in the electricity network appears to be a direct result of this bias.

 

The ‘light-handed framework’ would be less ‘regulator-driven’. Despite the regulator being seen as “a proxy for consumers” the Roadmap’s proposed new regulatory framework is claimed to be “consumer centric”.

 

Constant challenges to the electricity regulator have meant that the consumer pays not only for the cost to the industry, which it passes on to the consumer, but also for the costs to the regulator and governments, which are paid for by the taxpayer. The proposed ‘light handed’ regulatory framework would result in a grossly unequal contest between the electricity industry and small consumer.

 

 

“  …. it will be difficult for the electricity sector to avoid price increases as it recovers the cost of maintaining supply capacity from less delivered energy.”

 

In a competitive market, those who make bad decisions and become uneconomic would go out of business or be bought out at a loss. It is only because of the monopolistic nature of the electricity network that staying in business by increasing prices can be countenanced.

 

A forecast significant increase in electric vehicles (EV) is one of the developments seen as a possible economic saviour of electricity network monopolies provided the vehicles are charged through the grid and not through distributed, non-grid connected generators.

 

Unlike rooftop PV, EV uptake is likely to be gradual as existing vehicles age and need replacing. Rooftop PV, on the other hand, can occur very quickly because it doesn’t have to wait for the grid to be replaced.

 

The electricity network industry strategy is to get rooftop electricity generation and electric vehicle charging connected to the grid “to make more efficient utilisation of electricity system capacity”. This strategy means getting EV charged during off-peak periods, for example overnight. This contrasts with the more sensible strategy of recharging with rooftop solar during the day with supplementary charging overnight.

 

 

  1. PRICING AND INCENTIVES

 

According to the Roadmap

 

“Increased penetration of customer owned generators and electricity storage systems which, if left unmanaged may impact the supply and demand balance in distribution networks, increasing the risk of inefficient duplication of energy investments.”

 

It is not clear why the increase in customer owned generators (i.e., rooftop solar generators) and electricity storage systems (i.e., batteries) needs to be managed or whether energy investments (i.e., electricity networks) need to be better managed. It would appear that there has been over-investment in electricity networks, driven by guaranteed return (through captive electricity consumers) on these investments. Electricity network owners have done well at the expense of consumers. Now that consumers have a choice then it is the electricity networks that must take responsibility for their investments.

 

The Roadmap expresses concern about customers’ tardiness to opt-in to a fairer system of prices and tariffs:

 

“A fairer system of prices can only be achieved in a reasonable timeframe with changes to tariff assignment policy.”

 

 

  1. CARBON AND RENEWABLE POLICY OPTIONS

 

In considering the effect of policy on household electricity bills, the Roadmap considers three scenarios:

 

  • Continuing present policies involving setting abatement targets (‘business as usual’)
  • Adjusting present policy so that it does not favour renewable (‘technology neutral’)
  • Present policies are replaced by a carbon price on all emissions (‘carbon price’)

 

Although not mentioned explicitly, the implication is that a key feature of ‘business as usual’ is setting renewable energy targets rather than greenhouse gas abatement targets. It is the renewable energy target (RET) scheme that has delivered large decreases in carbon emissions from electricity generation.

 

The Roadmap finds that the lowest household electricity bills occur in the ‘technology neutral’ scenario, which produces negligible increase in bills for six years, followed by a slow increase by 2030. By contrast, the ‘business as usual’ and ‘carbon price’ scenarios produce an abrupt 20% increase followed by a slow increase to 2030. The comparatively low cost for the ‘technology neutral’ scenario arises because

 

“It does not impact on gas bills as there are no changes to wholesale gas prices between the scenarios.”

 

Apparent errors in Figure 9 of the Roadmap makes this section particularly puzzling.

 

A key cost included in ‘business as usual’ appears to be “retirement costs of plant being removed from the system”.

 

“A lower resource cost is required in other scenarios as they allow more efficient use of existing infrastructure.”

 

So far, most of the plant being removed from the system is very old, unreliable, coal-fired power stations such as those at Port August in South Australia and Hazelwood in Victoria.

 

 

  1. EFFICIENT CAPACITY UTILISATION

 

The Roadmap does not make a clear distinction between grid electricity consumption and electricity consumption in general (including rooftop solar); for example, when it refers to “a flat or declining outlook for electricity consumption”, which is the present trend for grid electricity consumption. Poor planning, especially in the electricity network, now means

 

 

 

 

 

 

 

 

 

 

 

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May 20, 2017 - Posted by | AUSTRALIA - NATIONAL, energy

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