THE STORY OF ELECTRICITY AND THE PART YOU PLAY.

THE ‘BIG PICTURE’ OF THE ELECTRICITY SUPPLY SYSTEM, ITS CHALLENGES AND POTENTIAL SOLUTIONS.

Introduction Electricity underpins everything we do. It is essential to our daily lives and supports our economy. It is something we cannot do without, but is also something we sometimes take for granted. The electricity supply system is large and considerably complex, and is facing challenges in ensuring that supply meets demand in ways that are efficient and cost-effective. As electricity users we all benefit from the system, but we also impose upon it and contribute to the challenges it faces. We look forward to a future where new technologies enable improvements to the electricity supply system and provide greater choice and control in the ways we all interact with it, to ensure a system that is affordable, and environmentally and socially responsible.

Contents Essential Energy has compiled this booklet to deliver the ‘big picture’ about the electricity supply system, broadly outline the challenges facing it, and begin to engage customers in considering potential solutions to those challenges. The booklet contains the following modules: Module Module Module Module Module Module

1 2 3 4 5 6

– – – – – –

How is electricity supplied? How do we measure electricity? How do we use electricity? What is the key challenge for our electricity supply system? How can we address the challenge? What do we do now?

Each module includes ‘go-to’ resources for further information and suggestions of things you can do now.

Comments To provide comment on this booklet, email [email protected]

The material contained herein is considered by Essential Energy to be generic in nature, rather than specific to Essential Energy’s distribution network. The information is provided for information purposes only and solely on the basis that readers will be responsible for making their own assessment of the material presented. Essential Energy will not be responsible for any cost or loss incurred as a result of reliance upon the information contained herein.

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Module 1: How is electricity supplied? Electricity and water are alike It can help to understand how electricity is supplied, if we compare it to the supply of water. Water flows through pipes; electricity along powerlines. The amount of water that can flow is determined by the size, or capacity, of the pipe. Similarly, the amount of electricity that can flow is determined by the size, or capacity, of the powerline. The flow of water is referred to as ‘current’, as is the flow of electricity. ‘Voltage’ is comparable to water pressure – the force that’s causing it to flow.

Electricity is generated, transmitted then distributed Generally, our electricity supply system consists of a one-way flow of electricity from the generation source, through transmission and distribution lines, to the user.

Retailer

Generator

Transmission Network

Distribution Network

Consumer

Most of the electricity used in New South Wales (NSW) is generated in large coal-fired power stations. These are slow to start-up and operate continuously to supply our minimum needs. Much of the remaining electricity we use comes from gas-powered and hydroelectric generators. These can be started up at shorter notice and tend to operate when our need for electricity is higher. The remainder of our electricity is generated from renewable energy sources, like wind and solar. Electricity supplied from these sources is growing in response to government policies designed to encourage clean energy development. Supply relies on weather conditions (and daylight in the case of solar) and so can be intermittent and not necessarily align with when we need it.

Thinking again about water… The amount of water that can be supplied depends on the number and size of our dams and the amount of rainfall we receive. Similarly, the amount of electricity that can be generated is determined by the number and size of our power generators and the availability of the fuel source. Dams are ideally located where large amounts of water will collect. Likewise, the location of large power generators is determined by the availability of the fuel source – coal-fired power stations are located in the Hunter Valley; hydroelectric power stations in the Snowy Mountains; wind and solar farms where these natural resources are prevalent.

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The high voltage transmission system takes electricity from generators to distributors As power stations are usually located a long way from most electricity consumers, we use a high voltage transmission system to transport the electricity to us. The higher voltages allow more electricity to be transported. The high voltage transmission lines are the ‘big pipes’ of the electricity supply system, carrying electricity in bulk from the power stations to the point where distributors take supply.

The lower voltage distribution system supplies electricity to customers The higher voltages of the transmission network are progressively stepped down by transformers as electricity flows into the lower voltage distribution system. The familiar ‘poles and wires’ we see down our streets are the ‘smaller pipes’ of the lower voltage distribution network. This network carries electricity to our homes, schools and workplaces stepping it down to the 240 volts that we require to run our appliances. There is considerable expense in building and maintaining transmission and distribution networks and therefore a single network is built by one company in each region. It would be too expensive for a number of companies to build duplicate networks and then compete for customers. The costs would be higher overall for everyone. The companies that build and maintain these networks are, therefore, monopolies and their activities are highly regulated to ensure fair and equitable outcomes.

A choice of electricity retailers to deliver better value Electricity retailers are the final link in the electricity supply chain, demonstrated in the diagram shown earlier in this module. On behalf of their customers, they purchase electricity in bulk from generators and sell that electricity to their customers. Competition in electricity retailing is being actively encouraged by both Federal and State Governments to help lower costs and deliver better value for consumers. Retail competition means that, as consumers, we have a choice of many electricity retailers for our electricity needs and have the freedom to select an offer that best suits us as individuals. 4

In summary • T he supply of electricity can be likened to the supply of water, with electricity flowing through powerlines, much like water flows through pipes. • T he electricity supply chain is made up of generators, transmission networks, distribution networks and retailers. • Our  electricity comes from coal-fired, gas-powered and hydroelectric generators, and renewable sources such as wind and solar. • Large power generators are located close to their fuel source. • The transmission and distribution networks carry electricity from generators to consumers. • As consumers, we can choose our electricity retailer on the basis of which offer best suits us.

Further information: State of the Energy Market 2012 Australian Energy Regulator www.aer.gov.au/state-of-the-energy-market

Things you can do 1. T hink about how your electricity gets to you. What is the likely generation source? Who is your electricity distributor? Who is your electricity retailer? 2. Visit: www.energymadeeasy.gov.au to compare offers from electricity retailers.

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Module 2: How do we measure electricity? Kilowatts measure power, kilowatt hours measure energy A common household appliance like a small heater might typically be rated at 1000 watts, meaning that it requires 1000 watts of power to run the appliance. 1000 watts (W) = 1 kilowatt (kW) If a 1000 watt, or 1 kilowatt, heater runs continuously for one hour, it will have consumed one kilowatt hour (kWh) of energy. 1kW of power x 1 hour = 1kWh of energy The table below provides examples of the power required by, and energy used by, some common appliances. Appliance

Power (watts, kW)

Usage (hours)

Energy Consumed (kWh)

Small Heater

1,000 (1 kW)

1 hour

1 kWh

Clothes Dryer

2,000 (2 kW)

1 hour

2 kWh

Ducted air conditioner

5,000 (5 kW)

4 hours

20 kWh

Dishwasher

1,600 (1.6 kW)

1 hour

1.6 kWh

Adding up the kilowatts of power required by all of the appliances that are ‘on’ at a premise at a particular time, gives the total kilowatts of power required by that premise at that time – the premise’ demand for power. As appliances are turned ‘on’ and ‘off’, the demand for power rises and falls. Over time, the premise consumes energy. The demand for power, in kilowatts (kW), is multiplied by the amount of time it is demanded (in hours) to measure the amount of energy consumed in kilowatt hours (kWh). The measurements described above generally apply to households and small businesses. For larger premises that use more electricity, like factories and shopping centres, the measurements convert to megawatts and megawatt hours to make the larger numbers easier to deal with. 1000 kW = 1 MW 1000 kWh = 1 MWh All these measures apply not only to electricity consumption, but also to electricity generation. In recent times, many households have installed solar panels on their rooftops. Many of these installations are rated at 1.5 kW meaning that, if the sun is shining, they are able to produce up to 1.5 kW of power. If the sun shines continuously for an hour and the solar panels produce electricity at their maximum capacity, they might generate 1.5 kWh of energy.

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As we saw in the previous module, much of the electricity generated in NSW comes from large, coal-fired power stations. They have a much, much larger capacity for generating electricity than household solar panels. The power capacity of a large electricity generator in NSW might be 2,000 megawatts (MW). Over a year, the power station might generate 10,000 gigawatt hours (GWh) of energy.1 (A gigawatt hour is equal to 1,000 megawatt hours.)

Measuring power and energy is critical Measuring power and energy is critical for a reliable electricity supply system. The electricity industry needs to know what level of power and energy will be required by all users in the system, to ensure the system has the capacity to supply it. This is relevant to both the demand for power at any point in time, and energy requirements over time. Maintaining a complex electricity supply system costs a substantial amount of money – a cost spread across the large number of users of the system. Energy consumption, and sometimes the demand for power, is measured at an individual user-level to determine each user’s share of the cost. Household and small business energy consumption is measured by an electricity meter in kWh and charged to the user at a price in cents per kWh. There is also a ‘daily supply charge’ for being connected to the electricity distribution network. These costs are presented to the user on their quarterly bill. The costs cover electricity generation, its transportation through transmission and distribution networks, the provision of services by an electricity retailer, and a contribution to carbon-saving and renewable energy programs. The composition of a typical household energy bill is shown below. Indicative composition of residential electricity bills, 2012–132

Note: Based on standing offer prices in Queensland, New South Wales, South Australia, Tasmania and the ACT. Comparable data are not available for Victoria. Source: AER

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In summary • Electrical power is usually measured in watts (W), kilowatts (kW) or megawatts (MW). • Electrical energy is usually measured in kilowatt hours (kWh) and megawatt hours (MWh). • We  measure electricity at a system-level to enable us to match the ability of the system to supply power and energy, with the demand for power and energy from all users. • We  measure electricity at an individual user-level to enable each user of electricity to contribute to the cost of the system they use. • Electricity  consumption for households and small businesses is measured in kilowatt hours (kWh) and charged at a price per kilowatt hour (kWh) consumed. • A  typical household electricity bill includes costs for the generation of electricity, its transportation through transmission and distribution networks, retail services and climate change policies.

Further information: Your power use–what it means and how it adds up Save Power, NSW Government www.savepower.nsw.gov.au/get-the-facts/your-power-usage.aspx Electricity bills and meters Save Power, NSW Government www.savepower.nsw.gov.au/households/downloads-and-resources/save-power-fact-sheets/ electricity-bills-and-meters.aspx

Things you can do 1. F ollowing the table above, determine the wattage of your appliances, the number of hours you use them and the likely amount of energy they consume per day. 2. Using Essential Energy’s Appliance Fact Sheet, found at www.essentialenergy.com.au/content/general-tips, estimate what your appliances are costing you to run. 3. S  ee if your local library has electricity measurement kits available for borrowing, or purchase an appliance power meter from your local hardware or electronics store. Use it to assess the demand for power and energy consumption of your appliances. 4. If you have an IN-Home Display linked to your electricity meter, use it to see the power you are demanding in kW, and the amount of energy you have consumed in kWh. Turn appliances on and off to assess their energy intensity. 5. C  ompare your electricity use to that of other households of a similar size at, www.energymadeeasy.gov. au/energy-efficiency/what-is-average-electricity-usage

References: 1 Macquarie Generation, Liddell Power Station, viewed 11 February 2013, www.macgen.com.au/Generation-Portfolio/Liddell-Power-Station.aspx 2 Australian Energy Regulator (2012) State of the Energy Market 2012, p.5

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Module 3: How do we use electricity? The amount of electricity we use varies at different times In our homes and businesses, we use or demand different amounts of power at different times of the day and on different days of the week. Days and times affect what activities we habitually undertake and, therefore, how much electricity we require at a given time. The graph below shows the demand for power for a typical household over the course of a day, measured in kilowatts (kW). We often refer to a graph such as this as a load profile. The load profile suggests that this household prepares for the day from around 7am, with their demand for power increasing as a result of, perhaps, cooking breakfast, getting ready for work and school and watching TV. It drops during the day, while the occupants of the house are away and increases again as they return home to prepare dinner, use computers and televisions and, perhaps, wash and dry clothes. The demand for power falls again as the household settles down to sleep.

The demand graph, or load profile, for a typical business would generally reflect their hours of operation and the activities they undertake during those hours. Interestingly, many households and businesses operate similarly and so their demand for power rises and falls at similar times. If we add all these together, we get a load profile for a community, or the electricity system as a whole, which often looks similar to that for individuals – similar peaks and troughs.

Baseload refers to the amount of power that is always required The load profile above illustrates the idea of baseload. It is the minimum amount of power that is always required, as a result of appliances in the home or business that are always ‘on’. It is power demanded by your home or business even when you’re asleep or absent. For our electricity system as a whole, baseload refers to the total amount of power that needs to be generated and distributed to meet the minimum demands of the community at any given time.

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Peak demand is the highest amount of power required The highest spike on our load profile illustrates the concept of peak demand. It is the highest amount of power required by the household or business, occurring when many appliances are ‘on’ at the same time. Peak demand on the electricity system is the highest amount of power required by the whole community. It is driven by many people, in households and businesses across the community, running additional appliances at the same time. Peak demand generally occurs on a weekday between the hours of 5pm and 8pm.

Peak demand is influenced by climate and weather Demand for power also varies, sometimes dramatically, by season and in response to weather conditions. We demand more power in summer and winter to cool and heat our homes and workplaces, than we do in autumn and spring. Even throughout summer and winter, the weather can be more extreme on particular days. Our use of cooling or heating appliances increases, and our demand for power spikes. When daily peak demand aligns with extreme weather, we see even higher peak demand than usual, as illustrated below. Clearwater Crescent, Port Macquarie Peak demand, February 2011

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In summary • O  ur demand for power varies greatly depending on the time of day, the day of the week and the activities being undertaken in our homes and businesses. • The graph of our power demand is referred as our ‘load profile’. • B  aseload is the minimum amount of power that is always demanded either by individual households and businesses, or the community as a whole. • Peak demand is the highest amount of power demanded either by individual households and businesses, or the community as a whole. • The level of peak demand is influenced (increased) by the seasons and extremes of weather.

Further information: Seasonal peak demand occurrence (region) Australian Energy Regulator www.aer.gov.au/node/12051

Things you can do 1. T hink about your household or business. What would your load profile look like? When would your peak demand occur? Would it be the same as your neighbours? Your community? 2. A  ssess the baseload of your household or business to identify areas of electricity waste. Reducing your baseload can often be easy and cost-effective. 3. If you have an IN-Home Display linked to your electricity meter, use it to see the power you are demanding in kW. Turn off as many appliances as you can before leaving your premises or going to sleep to reduce your baseload.

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Module 4: What is the key challenge for our electricity supply system? We need to supply enough power for everyone at all times It goes without saying that we need to supply enough power to meet the demand from all consumers at all times. As it’s not economical at present to store electricity for use later, the electricity supply system has to be ready and able to meet peak demands instantly, even when they are unexpected or unprecedented such as in extreme weather events. The electricity industry has, therefore, built generation and distribution assets that are capable of delivering the highest amount of power drawn by all consumers at any moment. The load profile below illustrates the concept of distribution network capacity built to deliver peak power demand.

Peak demand drives network investment As can be seen, it is peak demand that determines how ‘big’ the electricity distribution system needs to be and, therefore, how much money needs to be invested in building it. Consequently, it is peak demand that is driving the prices we all pay for electricity. It can be seen, too, that for most of the time we don’t require a system quite so ‘big’. There is a substantial amount of time where we don’t use the capacity we have built.

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Maximum peak demand is reached only a few times per year To complicate things, maximum peak demand rarely occurs – only when daily peaks combine with seasonal and extreme weather peaks. For the rest of the time, some of our distribution capacity is underutilised but it still has to be built so we can meet the maximum demand for power from consumers, even if it’s rarely used. It’s a lot like building a four lane highway, where two lanes are only used on long weekends and sit empty the rest of the time. That might seem extravagant and a preferred option might be solutions for better managing traffic flow on long weekends rather than spending money on the extra two lanes. It is estimated that electricity system capacity that caters for less than 40 hours per year (or less than one per cent of the time) accounts for approximately 25 per cent of electricity bills.1 There must be a better way to manage the demand for power too.

Peak demand has been steadily increasing As shown below, maximum peak demand in NSW has grown steadily over the past decade or so, and is forecast to grow an average of one per cent per year to 2022-2023.2

Data source: Australian Energy Regulator (2013) Seasonal peak demand (region), viewed 15 February 2013 www.aer.gov.au/node/9767

The main contributor to peak demand growth has been the increased use of air conditioners. We tend to turn them on to cool or heat our homes when we return home from work and school. Electric vehicles – the way of the future – could have a similar impact on the electricity distribution network once they become commonplace. We will return home and plug them in to charge during peak demand periods. We can expect to see even higher peak demand spikes in the future if we don’t find better ways to manage our demand for power.

Our options to address the challenge of increasing peak demand include… We could keep building a ‘bigger’ electricity distribution network to meet increasing peak demand spikes, as we’ve done in the past, but that investment will mean higher prices for all electricity users and further underutilised assets. We could risk peak demand spiking to a level that is higher than the system’s capacity to supply, but that would mean reduced reliability and more power outages. Clearly, neither of these options is acceptable in the long term.

The answer is to flatten peak demand To make better use of the electricity supply system we already have we need to spread our demand for power over time to flatten peak demand spikes and improve utilisation of the system’s current capacity. This would delay the need to spend money on building a ‘bigger’ distribution network, reducing the rate of price increases and improving reliability of supply.

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In summary • T he electricity supply system needs to be capable of delivering the highest amount of power demanded by all consumers at any moment. • Peak  demand determines how much money needs to be invested in the electricity supply system and the prices we pay for electricity. • Maximum peak demand occurs for only a few hours per year. • Maximum peak demand has been steadily increasing and we can expect it to continue to do so. • We  need to work together to better utilise the capacity of the electricity supply system by flattening the peak to save money and maintain reliability.

Further information: Electricity Network Regulatory Frameworks – Report Volume 2, Chapter 9 – Peak Demand and demand management Productivity Commission www.pc.gov.au/projects/inquiry/electricity/report Fact Sheet, Electricity Prices Australian Government, Department of Resources, Energy and Tourism (August 2012) www.ret.gov.au/department/documents/clean-energy-future/electricity-prices-factsheet.pdf

Things you can do 1. Think about the appliances you use during peak demand periods. Do you need them all on at once? Could you defer some electricity use to help flatten the peak? 2. If you have an IN-Home Display linked to your electricity meter, use it to determine what your peak demand is and when it occurs. Turn off appliances that aren’t in use or defer some electricity use, if you can, to help flatten the peak.

References: 1 Productivity Commission (2013) Electricity Network Regulatory Frameworks, Report No. 62, Canberra, p.335 2 AEMO (2013) National Electricity Forecasting Report, p. viii

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Module 5: How can we address the challenge? Engaging customers in Demand Side Participation Traditionally, businesses involved in the electricity supply system – generators, transmission businesses, distributors and retailers – have managed the supply-side of the electricity demand-supply equation. As customers have demanded more power, the industry has built a bigger system to supply it and the cost for doing this has been shared amongst all consumers in the form of higher prices. To address the challenge of increasing peak demand spikes and rising electricity prices, the industry needs to engage consumers in managing the demand-side. Having customers actively involved in managing the demand for power – to balance it with supply – is known as Demand Side Participation (DSP). We all recognised some time ago that there are limitations on our ability to supply water and so, we have changed the way we use it. We can, and need, to do this with electricity too. We need to decide what we value – spending money on a bigger electricity supply system or changing how we use electricity to save money over the longer term.

Everybody values things differently The idea of value in our world today is often represented in monetary terms – we are often willing to pay more money for what we value more. Likewise, we don’t buy something if the price doesn’t represent good value. Sometimes the value of a particular product or service is related to the timing of its use. Having different prices for using a product or service at different times is very common. We are familiar with the idea of prices for a product or service varying depending on when we want to use it. If we want to book a hotel room or take a plane flight, we save money if we are willing to go at off-peak times. We can take advantage of cheaper cinema tickets on traditionally quieter Tuesday nights. Our decisions depend on what we value. This system helps spread out the demand for hotel rooms, plane seats or cinema tickets to make better use of the limited number available. Time of day tolling on roads such as the Sydney Harbour Bridge or Tunnel, provides incentive and benefit for people to travel outside of peak times, reducing congestion on those roads for everybody. But this doesn’t happen with electricity. Generally prices are the same regardless of the timing of our use. There is little incentive to help spread the demand for power, and this is why peak demand is so pronounced. As we saw in earlier modules, peak demand puts pressure on our generation and distribution assets, and contributes to higher electricity prices. All electricity users pay these higher prices even if their electricity use doesn’t contribute to increases in peak demand. For example, if a household installs a new 2kW air conditioner, it might cost them $1,500, but it costs all electricity users approximately $7,000 to pay for the extra electricity infrastructure required to meet the extra 2kW of demand placed on the system.1 All electricity users are subsidising the household who installed (and presumably uses at peak times) the air conditioner. Some would say that’s unfair. That’s not to say that we shouldn’t use air conditioners. On really hot or cold days we need them, but the demand from air conditioners at peak times could be offset by reducing demand from other appliances at that time.

Time of use tariffs are part of the solution Electricity prices based on time of use will help to spread the demand for electricity. Customers will be able to choose what’s of value to them – using electricity at a certain time of day or benefitting from the financial incentives for not doing so. Those who contribute less to peak demand will be rewarded, including those who already don’t use much electricity at peak times and those who shift some of their use away from the peak.

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A pricing structure, where electricity prices vary depending on the time of use, is known as a Time of Use (TOU) tariff. TOU tariffs will help determine what we value as a whole community – whether we value spending money on building a bigger electricity supply system to cater for peak demand or changing behaviour to reduce peak demand. They will help ensure we only build what is truly valued. Choosing a TOU tariff will see many customers better off even without a change to the timing of their electricity use – they’d be better off regardless. With changes to their electricity use, they could save even more money.

Save a bit with energy conservation and energy efficiency Many customers have already adopted energy conservation and efficiency measures to reduce their electricity bill. Energy conservation, like water conservation, is becoming second nature. We hang our clothes on the line to dry rather than using the dryer, in much the same way we use a broom to sweep hard surfaces instead of hosing them down. We turn off lights when not in use, like we turn off the tap while we brush our teeth. Energy efficient appliances are saving us electricity just like mulching the garden is saving us water. These are good first steps but they tend to reduce electricity consumption at any time and don’t really address the problem of peak demand. We still require a system ‘big’ enough to meet peak demand even though much of it is underutilised at most other times, as illustrated below. It’s important to note that reducing energy consumed overall, without also reducing peak demand, actually puts upward pressure on prices. This is because the cost of maintaining sufficient capacity to meet peak demand and maintain the network in general is spread over a smaller number of kilowatt hours used – the price per kWh has to go up.

Save a lot with peak shifting As peak demand is the main driver of investment and costs, shifting peak demand could save lots of money in the long term. Peak shifting involves moving some electricity demand away from peak periods to other times, spreading the demand for electricity more evenly throughout the day. We still end up using the same amount of electricity, just at a different time. 16

Changes as simple as putting the dishwasher on before going to bed rather than straight after dinner can have a positive impact, as can programming pool pumps to run outside of peak times. If we engage in peak shifting as a community, we can reduce the peak demand for power to a level that remains within the capacity of our existing system, delaying further investment and easing pressure on electricity prices. An additional benefit of peak shifting is improved reliability and less chance of power outages associated with a constrained system. TOU tariffs encourage peak shifting. It’s just like buying your movie ticket on ‘cheap Tuesday’.

Power (MW)

Capacity

0

7am

9am

5pm

8pm

Midnight

Time of day

Electricity companies could pay you for reducing peak demand The benefit of reducing peak demand is so great that some electricity companies are trialling programs where they pay customers for demanding less power during peak times. New technology is allowing this to happen automatically so, once details are agreed with customers, they don’t have to think about it again. This is referred to as Utility Load Control. Customers get paid real dollars for agreeing to allow electricity providers to occasionally remotely control appliances such as pool pumps and air conditioners. The conditions under which the electricity provider can do this are agreed with the customer (usually only a few times per year when critical peak demand is reached) and the customer is paid for agreeing to it. Customers can choose whether to participate in programs such as these or not. It’s all about what individual households and businesses value. Many electricity providers already control electricity supply to hot water systems, allowing them to heat overnight at heavily reduced prices with what is traditionally referred to as ‘off-peak’ hot water. New technologies enable something similar for other appliances too. In most cases, as with the control of hot water systems now, any impact on customers’ lifestyles and comfort is virtually non-existent.

Small-scale renewable generation could help reduce peak demand The number of small-scale renewable generators, particularly solar panels on rooftops, has grown dramatically in response to government programs encouraging clean energy development. Not only will they be good for the environment in the long term, they also have the potential to help address the challenge of peak demand in the future. At present there is a mismatch between when solar panels are generating the most power (in the middle of the day when the sun is shining) and when peak demand occurs (in the evenings as the sun is setting). In the future, new technology should help re-align generation and demand, including the ability to store electricity generated in the middle of the day for use later, contributing to a flattening of the peak.

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In summary • T he electricity supply industr y has traditionally managed the supply-side of the electricity demand-supply equation. • Engaging customers in managing the demand for electricity is known as Demand Side Participation (DSP). • Electricity  prices based on Time of Use (TOU) will help spread the demand for electricity and could save everyone money in the long term. • Peak  demand shifting is the key to better utilising the electricity supply system we have now, rather than building a bigger system. • Utility  Load Control could see electricity companies paying customers for reducing their demand for power at certain times. • Small-scale renewable generation could help reduce peak demand in future.

Further information: Energy White Paper 2012 Department of Resources, Energy and Tourism www.energywhitepaper.ret.gov.au Power of Choice Review Australian Energy Market Commission www.aemc.gov.au

Things you can do 1. Investigate whether Time of Use pricing is available to you. Would you be better off? 2. What electricity use could you shift away from peak demand periods? Your dishwasher? Washing machine? Swimming pool filter? Could it save you money? 3. Use Essential Energy’s Efficiency Tips Fact Sheet, found at www.essentialenergy.com.au/content/general-tips, to help you save.

References: 1 Department of Resources, Energy and Tourism (2012) Energy White Paper 2012, Canberra, p. xiv

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Module 6: What do we do now? We need to plan for the future The electricity supply system is big and complex, and building projects take time and require significant investment. We, therefore, need to anticipate electricity needs decades into the future and plan for them now to ensure they can be met when they occur. If we wait for a need to arise, there will be insufficient time to develop the system to meet it. In earlier modules, peak demand and system capacity were discussed in terms of the whole system but these can vary substantially across different parts of the electricity distribution network. The ‘height’ of the peak demand spike and the ‘size’ of the powerlines varies in different geographical areas. This means that the reliability of the power supply can also vary across the network – as the local peak approaches local capacity. We need to identify areas where peak demand will approach network capacity in years to come and prioritise investment on that basis – either in building a bigger network, engaging customers in Demand Side Participation, or a cost-effective combination of both.

Giving customers more choice and control As we saw in the previous module, Demand Side Participation (DSP) involves customers in managing the demand for electricity – giving them choice and control over their electricity consumption and the ability to make consumption decisions based on what they value. We are all individuals with different needs, environmental concerns and financial positions. While we will make decisions about electricity consumption individually, the sum of all those decisions determines what we value as a community. This is why the solution (and part of the challenge) is to empower customers to make these choices. It is choice and control that will ensure customers lead the way in determining how we address the challenges facing the electricity supply system. Governments and industr y are working to give customers more choice and control, while ensuring protections for vulnerable customers. Essential Energy supports the concept of customer choice. Our future planning and Intelligent Network Community trials are about finding solutions that benefit customers, the community, and the network. DSP can involve providing customers with much more detailed information about their personal electricity usage patterns – their load profile, incentives for them to reduce peak demand, and tools to control their electricity use to take advantage of the incentives should they choose to do so. Being able to do these things requires the introduction of new technologies.

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Developing and utilising new technologies New technology has been introduced in many industries to give customers greater choice and control. In telecommunications, wireless and mobile technologies have revolutionised phone networks allowing us the convenience and productivity of being ‘connected’ on-the-go. Television transmission has moved from analogue to digital and we now have access to a better quality picture and the choice of more channels. Just as television and phone networks have moved into the digital age, so too can electricity. New technology in the supply of electricity will enable better services and greater choice for customers.

More information for customers Replacing an old analogue electricity meter with the latest digital metering technology opens up a range of possibilities for customer choice. New meters can record electricity consumption more frequently and communicate this information wirelessly to a display inside the home or business, or to an online energy portal. Customers can see how much electricity they are using, as they are using it, at any time of the day or night. Some displays and portals allow alerts or alarms to be set to notify you when your electricity consumption reaches a certain level. Instant feedback like this makes managing electricity use much easier. It is expected in the future that smart appliances will be able to communicate wirelessly with the digital electricity meter. Customers will be able to ‘set-and-forget’ their electricity use preferences and have appliances like pool filters, water pumps and perhaps dishwashers and washing machines turn on automatically when electricity is cheaper. Some online energy portals will allow customers to turn appliances on and off remotely using their smartphone – the air conditioner, for example, if you forget it and leave it on. You may also be able to turn off most of your appliances with one ‘button’ when leaving to go to work or on holidays. These new technologies will help customers make decisions about how much electricity they want to consume and when.

Storage of electricity is coming Advances in batter y technology are helping us to develop efficient ways of storing electricity. This would allow electricity to be generated and distributed at times when the electricity supply system is usually underutilised, then stored by households and businesses, and drawn on later during peak demand periods. Households and businesses could also, in future, charge batteries during the day with electricity from their rooftop solar panels and store it for use later during the peak. Batter y technology will help even out the mismatch between times of renewable energy generation and peak demand periods, discussed in the previous module. It will help to flatten peak demand and ease network congestion at those times. Stored electricity could also be used in emergencies or following bad weather events when the electricity network is compromised. Capitalising on these opportunities will require the electricity network to be upgraded to transform it from the traditional system of a one-way flow of electricity from generator to consumer, to a system that allows for an intermittent two-way flow. New technology generally needs to be in place before we can deliver the benefits to customers. Essential Energy and the electricity industry have been conducting trials of these, and other new technologies, for some time to assess what works best for customers, the community and the electricity supply system.

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Responsibilities for all of us As electricity users, we all benefit from the electricity supply system but we also impose upon it and contribute to the challenges it faces. Consumers, governments, and the electricity industry need to work together to deliver the most efficient and cost-effective solutions. We all have a part to play.

In summary • Given the size and complexity of the electricity supply system, and the time and investment required for building projects, we need a long planning horizon to ensure future needs can be met. • Governments  and industry are working to give customers more choice and control over their electricity use, while ensuring protections for vulnerable customers. • New  technologies in the electricity supply system are necessary to enable better services and greater choice for customers, and help address the challenges of peak demand and electricity price pressures. • T he future of electricity will be shaped by cooperation between governments, the electricity industry and, most importantly, electricity users.

Further information: Essential Energy www.essentialenergy.com.au Towards Australia’s Energy Future: The enabling role of smart grids Smart Grid Australia, October 2012 www.smartgridaustralia.com.au

Things you can do 1. You can provide feedback and comment on the information contained in this booklet by emailing [email protected].

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