Keeping our cool, at a cost

Billions of dollars have been already been sunk in to electricity network infrastructure in Australia to cope with peak demand -- and the costs will continue to be passed on.

Clearly a niche business to be in is selling and installing air-conditioning.

Research undertaken by the electricity industry tells us that there are now 6.7 million Australian households – out of 9.3 million residential accountholders – with air-conditioning, and many of them will have more than one unit installed (I have two and I know some families who have four).

This translates in to an estimated 9.2 million units, three times as many as we used in 1995.

What’s more, work done by Ernst & Young for the Australian Energy Market Commission in 2012 forecasted that our household air-con stock will hit 12 million units by 2020.

Now, as every galah in the energy petshop knows, how we use these coolers in the sweltering days of summer is a big factor in how much infrastructure the electricity networks need to cope with peak demand – and this eventually feeds in to the power bills we love to hate.

When you consider that being ready for peak demands has accounted for 25 per cent of current network capital investment and our need to be cool has translated in to billions of dollars worth of infrastructure that is not actually needed most of the year, this is no small matter.

No one seems to have come up with a number in terms of end-user bills but Orchison’s back-of-the-envelope modelling suggests it could be north of a half billion dollars a year. You can buy a lot of cappuccinos for that.

What’s more the efficiency of these air-con units is important; how many of them do you reckon are now 10 years old and how much less efficient are they than the best available today? Lots would be a quick answer.

And how many of the recently-bought ones have a poor efficiency rating?

The Energy Supply Association has now published a short report – it’s just nine pages – on heatwaves and electricity supply.

It shows that, in Victoria for example, where the overall power capacity requirement on a ‘typical’ summer day – the rest of us could have fun discussing what a ‘typical’ day is in Melbourne, weather-wise – is 6,643 megawatts, four days of horrid heat will shove demand beyond 10,300 MW.

Reflecting the disparities in population, the 2013-14 capacity peak requirement for New South Wales was 12,027 MW, while it was 8,374 MW in Queensland and 3,281 MW in South Australia.

Chilly Tasmania has a winter peak – consistently a bit over 1,300 MW for the past six financial years – and it is heaters, not coolers, that bring it on.

Working out mainland power peaks today is complicated by the relatively recent uptake of solar PVs by large numbers of households.

ESAA reckons last year’s heatwaves saw rooftop solar account for 2.4 per cent of demand in Victoria and 4.5 per cent in South Australia.

Put another way, it says, the 2014 total peak demand in these states was almost certainly an all-time high even as the penetration of solar kept the utility capacity requirement below the official records set in 2009.

Contrary to popular belief, the answer to what happens to supplier unit power prices in heatwaves is nothing – because the charges they levy on us have already factored in wholesale electricity price volatility. The bills for summer on the mainland are expensive because of how much power we use not because there are games being played behind the scenes.

All the above is about households and air-conditioning. As with so much else in the energy space, that’s far from the whole story. Seventy per cent of energy use in commercial buildings across Australia is attributable to heating, cooling and ventilation.

For householders, however, focused on their bills, the main story is how to save.

In one sense, it’s too late: billions of dollars have been sunk in to network infrastructure to cope with peak demand and the costs will continue to be passed on. The data published by ESAA deals with the shibboleth that this spending was hugely unnecessary.

In another sense, Australians have the opportunity to resolve some of their electricity budget problems themselves in terms of what they are using (how old and efficient the air-con system is) and how they use it.

Despite all the complaints about the size of power bills and all the prating about caring for the planet, how many of the tens of thousands who have bought new air-con systems in the past 12 months opted for the most energy efficient rather than the least expensive (mostly made in China)?

Come to think of it, a similar question could be asked of those buying solar systems.

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