Distributors encouraged to invest in demand management technology in $1 billion scheme

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The Australian Energy Regulator has launched a new $1 billion demand management technology incentive scheme, aimed at reducing the strain on the grid and driving down prices.

The AER wants electricity distributors to invest in demand management rather than pumping billions into expensive poles, wires and substation upgrades which have sent bills around Australia skyrocketing.


Demand management technology will allow users to scale back on energy use

Network costs account for about half the total spend on power bills. The scheme, which will come into effect in 2019, also provides incentives to minimise air conditioning use at times of peak demand, and will be used to encourage more solar, more battery storage, and the creation of mini and micro-grids rather than building or replacing poles and wires.

The use of air-con was behind the wayward forecasts of a huge increase in peak demand that justified the $50 billion network binge that pushed consumer bills so high. The uncontrolled use of air-con has created a cross subsidy of $700 a year from those who don’t use it.


Energy users can opt in to demand management schemes by retailers

Electricity customers will be able to opt in to a demand management scheme offered by their energy retailer. The increased investment in smart technology by distributors will help people manage usage and make better use of rooftop solar systems.

Demand response is the voluntary scaling back of power consumption at times of peak demand in return for financial compensation or discounts on bills. Rather than relying on generators, a network of distributors and households would regulate electricity flow through smart technology.

Increased take up of demand management measures by electricity network businesses and consumers will lead to a reduction in the need for costly infrastructure spending and accordingly put downward pressure on prices.


Demand management will reward energy users

Price signals or financial incentives can reward consumers for using electricity in a way that allows network businesses to keep their costs down. These signals or incentives may come in the form of things like cost-reflective tariffs, congestion pricing, and rebates. Enabling technology often complements price signals by empowering consumers use electricity in a way that allows network businesses to keep their costs down.

This technology may include things like advanced metering technology, demand response enabling devices, and energy monitoring apps.

AER board member Jim Cox explained: “Australians are concerned about their power bills and at the same time are investing more and more in technology to allow them to better manage their electricity use like rooftop solar, home batteries and tools that can monitor and control appliances.”


Demand management will lead to reduced use at peak times

He said the scheme allows consumers the choice to work with their electricity distributor to reduce their own usage at times of high demand, which not only lightens the load on the network, but also decreases the need for expensive investment in infrastructure.

Practical examples of demand management technology include Virtual Power Plants (VPPs) which can group together batteries from across customers’ homes, and schemes whereby consumers can agree with their distribution businesses to reduce the amount of energy used by appliances such as air-conditioners during periods of peak demand without noticing any reduction in comfort levels.

Transmission and distribution network costs make up about half of all household power bills, and the AER said it is continually working to ensure that consumers pay no more than necessary for safe, secure and reliable power supply.

“Our stakeholders have helped us to shape this new incentive scheme. Network businesses are demonstrating genuine interest in better integrating demand-side solutions into their business practices. Consumer groups have supported electricity distribution businesses doing more,” Mr Cox said.


Similar scheme was proposed in 2002

While the scheme has been welcomed, some experts have said that it comes a decade too late. The new rules will kick in in 2019, but the need for such as scheme was first identified in 2002 by the Independent Pricing and Regulatory Tribunal of New South Wales.

The idea fell by the wayside and money was poured into the upgrading of the energy infrastructure instead, which was one of the main causes of the doubling in the price of energy bills.

Chris Dunstan, from the Institute of Sustainable Futures, said that if such incentives had been in place, then network spending could have been minimised, electricity bills could have stayed low, and the current political divide over energy prices that has stymied policy and action on climate and clean energy could have been avoided.

The announcement comes as the Australian Energy Market Operator said that it had unlocked an extra 900 MW of power for its summer readiness plan.

You can read all the relevant documentation issued by the AER here.


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