RAJ REPORT

Electricity PRIVATISATION—-Peak demand is the cause of high electricity prices——Federal Government will decide how to improve electricity pricing—Peak demand 3.22 The committee noted information suggesting that peak demand has increased due to a greater deployment and use of air conditioners and other appliances in recent years requiring more transmission and distribution capacity that is only used a small fraction of the time.[21] The Productivity Commission noted that ‘some 25 per cent of retail electricity bills are required to meet around 40 hours of critical peak demand each year’.[22] The problems of peak demand were echoed by the Alternative Technology Association (ATA): The current state of rising electricity prices is primarily driven by a failure to manage peak demand, both at a network and a generation level. The inability or reluctance to properly engage the demand side of the market has led to over investment in and inefficient operation of the electricity system as a whole.[23] 3.23 Other submitters and witnesses stated ‘[p]eak demand is a real issue'[24] and: Our key messages are that network costs and costs of peak demand are the single biggest drivers of rising electricity prices—we recognise that—and that energy consumers, from our point of view, and business consumers want reform.[25] [Another] driver is the cost of supplying power for what we call peak demand, which is those five to 10 days a year. On the mainland of Australia they are the hot days; the summer peaks are the clear peaks. Around 20 to 25 per cent of the generation and transmission infrastructure is designed to supply power for those peak days. Bringing those peaks down is a critical opportunity to reduce the cost of energy to households and businesses in Australia.[26] Peak demand has surged in recent times with the dramatic growth in air conditioning load driving network companies to invest for the short summer peak…[27] 3.24 While investment in networks to support peak demand is a glaring issue, the committee was informed that some care is needed in assessing the impact of both generation and network investment as indicated by Grid Australia: It is possible you could increase generation capacity by 25 per cent and have no transmission increase if that generation is located at points where there is spare capacity in the network. If somebody wants to make a development and pay for a development that is, for example, remote or where there is limited capacity and you need to increase it, then that may drive costs. It really depends on where the generation connects and what sort of capacity there is at any point in the network. It is quite a complex answer.[28] 3.25 Another impact of peak demand is the need for generation systems that can switch on quickly and be available to meet rapidly rising demand on a given day, however a downside is that those systems may then be idle and not directly earning a return for significant periods: While difficult to quantify with precision, the increase in peak to average demand between 1997 and 2010 is estimated to have required an additional 6 300 MW of (peak) generation capacity, compared with what would otherwise have been the case…The additional peaking capacity represents around 13 per cent of current generation capacity, and while it is critical in terms of meeting peak summer demand during extremely hot periods, it sits idle for the majority of the year. (It represents an investment of around $6.2 billion, which is around 6 per cent of total capital investment in Electricity supply over the period.

Leave a comment


 

Peak demand

3.22      The committee noted information suggesting that peak demand has increased due to a greater deployment and use of air conditioners and other appliances in recent years requiring more transmission and distribution capacity that is only used a small fraction of the time.[21] The Productivity Commission noted that ‘some 25 per cent of retail electricity bills are required to meet around 40 hours of critical peak demand each year’.[22] The problems of peak demand were echoed by the Alternative Technology Association (ATA):

The current state of rising electricity prices is primarily driven by a failure to manage peak demand, both at a network and a generation level. The inability or reluctance to properly engage the demand side of the market has led to over investment in and inefficient operation of the electricity system as a whole.[23]

3.23      Other submitters and witnesses stated ‘[p]eak demand is a real issue’[24] and:

Our key messages are that network costs and costs of peak demand are the single biggest drivers of rising electricity prices—we recognise that—and that energy consumers, from our point of view, and business consumers want reform.[25]

[Another] driver is the cost of supplying power for what we call peak demand, which is those five to 10 days a year. On the mainland of Australia they are the hot days; the summer peaks are the clear peaks. Around 20 to 25 per cent of the generation and transmission infrastructure is designed to supply power for those peak days. Bringing those peaks down is a critical opportunity to reduce the cost of energy to households and businesses in Australia.[26]

Peak demand has surged in recent times with the dramatic growth in air conditioning load driving network companies to invest for the short summer peak…[27]

3.24      While investment in networks to support peak demand is a glaring issue, the committee was informed that some care is needed in assessing the impact of both generation and network investment as indicated by Grid Australia:

It is possible you could increase generation capacity by 25 per cent and have no transmission increase if that generation is located at points where there is spare capacity in the network. If somebody wants to make a development and pay for a development that is, for example, remote or where there is limited capacity and you need to increase it, then that may drive costs. It really depends on where the generation connects and what sort of capacity there is at any point in the network. It is quite a complex answer.[28]

3.25      Another impact of peak demand is the need for generation systems that can switch on quickly and be available to meet rapidly rising demand on a given day, however a downside is that those systems may then be idle and not directly earning a return for significant periods:

While difficult to quantify with precision, the increase in peak to average demand between 1997 and 2010 is estimated to have required an additional 6 300 MW of (peak) generation capacity, compared with what would otherwise have been the case…The additional peaking capacity represents around 13 per cent of current generation capacity, and while it is critical in terms of meeting peak summer demand during extremely hot periods, it sits idle for the majority of the year. (It represents an investment of around $6.2 billion, which is around 6 per cent of total capital investment in Electricity supply over the period.

 

 

Part II – Parliament of Australia.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s