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Breath of fresh air to peak power problem

<i>Illustration: Kerrie Leishman.</i>

Illustration: Kerrie Leishman.

Only an idiot would turn off the airconditioner during near-record heat. But the economics of electricity mean that's what we'll have to do if we want our power bills to stop rising.

Last week's extraordinary heat was unusual. One estimate says Melbourne hasn't had a run of days like it for 100 years. But the generators and the cables had to be built to handle it (they nearly failed).

Rarely has there been a problem in economics to which so many inappropriate solutions have been offered. 

In NSW the rare spikes of extreme electricity use last for just 40 hours a year when added up. That's a mere half of 1 per cent of use each year. But the Productivity Commission says the cables, substations and generators built to handle them account for about 25 per cent of each electricity bill.

It's a financial cost that dwarfs the carbon tax. And the physical cost of generators we otherwise wouldn't need and the rarely needed maximum strength cabling is enormous. Sometimes the peaks last just minutes.

Twelve years ago extreme peaks were only an emerging problem. Australia had half as many airconditioners as it does now. In NSW 65 per cent of homes are airconditioned, in Victoria and Queensland about 75 per cent, in Western Australia 86 per cent and in South Australia more than 90 per cent.

Queensland estimates suggest each two-kilowatt airconditioner imposes a cost of up to $7000 on the entire system. This isn't the cost of running it. It's the cost of building otherwise unneeded capacity to be able to run it on those rare occasions when nearly everyone else is running theirs.

The Productivity Commission says the $7000 figure is an overestimate. Many new airconditioners simply replace older ones. And they are getting more efficient (although more powerful).

Its calculation, allowing for the fact that even in peak periods some airconditioners are not fully used, is a one-off cost of $2500. It says that amounts to an extra cost of $350 a year for each airconditioner, paid by all electricity users, whether or not they cool their homes.

It's even more unfair than it seems. It isn't just the few Australians without airconditioners who are paying money they need not to build up the system for those with them, it is also Australians with only small airconditioners who are paying far more than they should to support houses with huge three-phase ducted systems.

Rarely has there been a problem in economics to which so many inappropriate solutions have been offered.

A decade back, South Australia imposed a higher electricity charge in summer than it did in winter. It was meant to impose greater costs on users of airconditioners. But all it did was impose greater costs on everyone in summer, even those who couldn't afford to or didn't need to cool themselves.

The Electricity Supply Association suggests imposing a larger fixed supply fee on those households with double the usual electricity consumption (typically those houses with lots of airconditioning). But the main effect would be to lumber them with a fairly inescapable cost. Already being liable for the fee, they would have every incentive to run their systems at full bore in extreme heat.

In December the federal government issued an issues paper proposing greater time-of-use pricing. The idea is that high prices at times of high use would encourage people to move their use to other times, as happens with variable road tolls.

It's an idea that seems to have promise because Australians are indeed price sensitive when it comes to electricity. Energy analyst Hugh Saddler of pitt&sherry says that, as electricity prices took off from 2008, household electricity use steadied. As prices soared still higher from 2010, household electricity use fell for the first time in a century. Houses use less electricity now than they did five years ago.

But that doesn't mean they will use less in a heatwave.

''No one is going to avail themselves of time-of-use pricing on a 45-degree day,'' Mr Saddler says. ''No one is going to turn off their airconditioner when it gets extremely hot just because of time-of-use pricing. The only time you would need them to respond to time-of-use pricing is the time they won't.''

Economists, conditioned to believing prices always change behaviour, find this hard to accept, unless they themselves have been locked inside a building during five straight days with the temperature more than 40 degrees.

The economic problem of finding a way to avoid huge infrastructure costs brought on by mere days or hours of extreme peaks is probably best solved by turning away from economics.

Queensland is showing the way. The government-owned Energex offers customers cheaper electricity if they install ''PeakSmart'' airconditioners. PeakSmart means remotely controlled. As peaks approach, the electricity supplier sends a ''ripple'' down the line that can switch the cooler off or into a less cold method of operation (the fan stays on so it still feels cool).

At test sites in Perth and Adelaide, most of the users couldn't tell the difference. The switch-off may last just minutes, not much longer from what happens automatically when the system is operated by a thermostat. But because different suburbs are powered down at different times, PeakSmart can eliminate extreme system-wide peaks.

Eight manufacturers are already providing machines that are PeakSmart ready. You may have bought one yourself without even knowing. Australian ministers will meet soon to decide whether to make PeakSmart readiness compulsory. After that it'll be up to us and whether we are prepared to have our machines turned off remotely.

It's less scary than it sounds, extraordinarily simple, and the least-worst alternative.

Ross Gittins is on leave.

33 comments

  • I remember working in an office in Riyadh about 30 years ago, where each room had its own airconditioner. Unfortunately there was only enough power allocated to us to run two at a time. If you left a room without turning off the airconditioner and then turned on another, you lost all power for 30 minutes! As it was about 48 degrees, you learned quickly. How about we try this here?

    Commenter
    Johnjay
    Location
    Annandale
    Date and time
    January 22, 2014, 11:57AM
    • Not a bad idea but I think an air conditioner in every room in every building in Australia could get a bit expensive

      Commenter
      WotTha?????
      Date and time
      January 22, 2014, 2:44PM
    • That is exactly what is being suggested except the turning off and on is not a manual thing that people need to remember to do. It's automatic so it can be co-ordinated accross multiple houses/suburbs.

      Let's be thankful that solar energy continues to get more a more effecient.

      Commenter
      Douglas
      Location
      Sydney
      Date and time
      January 22, 2014, 2:53PM
    • Isn't it modern miracle that the roof top solar scheme places infrastructure that supplies peak amounts of electricity at just the right time on sunny summer days. Just when the well to do people start reaching for their air-conditioning remote. Does this mean the LNP will now stop attacking the renewable energy industry? So we can have cheaper power bills. Will the Fossil Fuel Incumbency let them?

      Commenter
      Urban Off-gridder
      Date and time
      January 22, 2014, 3:50PM
    • How could a blog like this in 2014 not mention the serious issues surrounding the burning of coal for energy?!

      For reasons only known to himself and his party, our current PM is anti-renewable energy - indeed that is a gross understatement. In terms of the nation gearing up for solar etc., we should consider the next three years a complete write off.

      Australia, one of the sunniest and hottest nations on earth, should be taking a lead on solar, etc. Unfortunately we have become an international embarrassment. Per capita one of the world's biggest polluters and no government-endorsed science or investment in non-fossil fuel energy.

      Commenter
      Wasted energy
      Date and time
      January 22, 2014, 8:07PM
  • Sounds a very sensible idea. The technology has been around for ages, I remember ripple control being used in NZ in return for cheaper power at least 20 years ago if not longer. In that case it was for managing peak winter demand by switching off hot water cylinders remotely.

    Commenter
    Sam
    Date and time
    January 22, 2014, 11:57AM
    • The amazing thing about energy suppliers is that they always state that the consumer has to pay more because they can't afford infrastructure here or infrastructure there.
      They never say, "we will take 50% of our profits and update the system so that it can handle what our customers want". Have you ever heard them do that? No, never.
      If an energy company has 1000 customers and they all pay $500 a year for the supply of service, then that is what the service costs. The energy company obviously makes money out of that otherwise it would cost more.
      Now, if the energy company wants to sell their service to another 1000 people, then the present customers shouldn't be asked to pay more, the energy company should upgrade their service to reflect 2000 customers (using their profit if needed) and everyone should pay $500. If they can't upgrade their service, don't sell it to any more customers until they can.

      Commenter
      PB
      Location
      Sydney
      Date and time
      January 22, 2014, 12:15PM
      • But you're being logical and fair minded!

        Commenter
        Tin
        Date and time
        January 22, 2014, 2:38PM
      • Ooops, sorry.

        Commenter
        PB
        Location
        Sydney
        Date and time
        January 22, 2014, 4:00PM
    • We recently recieved an electricity bill of $500 for the last quarter. Our household is only a very small 2 bedroom unit. Standard appliances, hot water system, fridge, oven (rarely used) energy efficient washing machine, computer and television. No air conditioning, and almost all devices are switched off at the wall when not in use. How is that possible? Small family of four, two adults, and two kids. Think we are getting ripped off, our usual bills are around $250 per quarter!!

      Commenter
      Adzzz
      Date and time
      January 22, 2014, 12:24PM

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