Electricity network operators are the whipping boys of the industry, with some justification. But how could networks become part of the solution instead of part of the problem?
At present, the core business of an electricity network is seen as ensuring reliable and safe supply of electricity to consumers from large power stations and measurement of electricity use for billing purposes. They have no direct links to consumers and their culture is based on building and maintaining poles and wires.
Regulators treat networks effectively as regional monopolies – although this is incorrect, as they compete with distributed generation, energy efficiency, fuel switching and demand management – so they are able to exert unfair market power. Networks are also paid based on the size of their assets and the amount of electricity supplied through their wires.
The main risk networks now face to their businesses is that use of their capital-intensive networks will decline, while peaks become more significant. Unless regulators agree to them extracting higher charges from consumers or separating payment from electricity flows, this will reduce their profitability.
So if I ran a network, I would broaden its activities into the competitive areas of the energy markets, both wholesale and retail, as well as the energy services market.
I would install regional electricity storage systems, which I could use to store low cost electricity and sell it at premium prices. This technology could be located strategically to also store exports from PV and other distributed energy systems locally, before they complicate the operation of the main network. This would allow ‘smart’ consumer technologies to interact better with existing ‘dumb’ grids, reducing the need for high risk investment in networks.
I would seek a licence to bid demand management into the wholesale electricity market and set up a subsidiary business to develop this market capacity.
I would minimise additional investment in the existing network so that depreciation and other allowances in tax rules would allow reducing returns from them to be managed.
I would set up another subsidiary business to sell in-home and in-business displays and smart controls, on-site electricity storage, PV and stand-alone power systems, initially for fringe-of-grid customers, people in high fire-risk areas and where networks are under stress. This would include allowing consumers to share use of backup generators and storage within local areas. This could include leasing these technologies and providing ongoing fee-based maintenance and monitoring services, so that those with on-site equipment need not be deeply involved in running their energy systems. It might also incorporate the use of under-utilised grid capacity to provide low cost backup.
For the existing business, I would develop more sophisticated network pricing schemes so that PV, other distributed generators and energy efficient consumers gain benefit from avoiding demand or exporting electricity at times and places of most use to the network. This would encourage PV owners to consider orienting their panels to generate more in the afternoon or to install storage to allow them to complement the grid. This might be done through adding to existing feed-in tariffs at certain times of day or by offering rebates on energy bills based on actual avoided peak demand/exports at critical times.
Remote management of specific equipment such as pool pumps and air conditioners and voluntary limits on peak demand, in exchange for discounted prices, could also be part of the new business model.
Partnerships with welfare groups, community groups and other businesses, as well as separate subsidiary businesses, will be necessary to overcome lack of consumer trust in network operators, cultural barriers and limited internal marketing and sales skills within the network business.
Some elements of this model depend on changes to energy market rules. But government policymakers should be supportive, as the alternative is higher consumer energy costs and potential business failures among network operators.
Alan Pears has worked in the energy efficiency field for over 20 years as an engineer and educator. He is Adjunct Professor at RMIT University and is co-director of environmental consultancy Sustainable Solutions.
This article was originally published by ReNew magazine.