Short-circuiting an electric price surge

The answer to our electricity price problem begins with upgrades of Australia’s four million inefficient old air conditioners, which would reduce the need for a $42 billion energy infrastructure investment. With cost savings and emissions reductions, what are we waiting for?

According to energy minister Martin Ferguson, our electricity infrastructure will undergo a $42 billion upgrade over the current five-year regulatory period.

At around $6000 per household, these grid upgrades are the biggest contributor to recent and forthcoming electricity price rises.

Much of that is chasing our tail, upsizing the grid to meet ever growing peak air conditioning demand.  Rather than building new poles and wires at such huge cost to electricity consumers, reducing electricity demand is one of the solutions.

In the year 2000, Australia had approximately four million air conditioning systems with an average rated cool value of 4kW (real-time maximum output not electrical input).

This figure doubled by 2011 – we now have approximately eight million air conditioning units throughout Australia.

Co-efficient of Performance (COP) figures are used to determine how energy efficient a heating or cooling system is.  COP is a measure of the energy multiplier that is achieved by concentrating and moving (or removing) ambient heat through the refrigeration cycle. Refrigeration, derived from the compression and expansion of gases, is what drives reverse cycle air conditioning heat pumps. With this system, the heat energy harvested (or removed) is a multiple of the electricity used.

The most common units installed in homes are split systems.

Modern split system air conditioners can achieve cooling COP figures of up to 5.1 for a 2kW unit and 4.1 for a 4kW unit.  Older air conditioners are estimated to have an average COP of at best 2.0, a highly inefficient rating. This means they use twice the electricity for the same cooling capability as new modern high efficiency units that are available from a number of leading manufacturers.

Since about half the nation’s air conditioners were installed prior to 2000, equating to around 16,000MW of peak output capacity (according to data from the Department of Sustainability & Environment), there is a significant untapped energy efficiency and financial saving to be made. At COP 2.0 that 16,000MW is using 8,000MW of grid capacity.

Just as incentives have been used (for example) to replace old, water-wasting shower heads, a rebate for the replacement of old and inefficient air conditioners would help reduce Mr Ferguson’s $42 billion figure.

During extreme peak network events, transmission losses rise from their average (9 per cent in NSW, 7 per cent Victoria etc) to around 20 per cent. So for every 1,600MW of COP 4.0 rated replacement air conditioning units, 1,000MW of generation and most importantly distribution is avoided.

Basically, if we were to replace all of those old inefficient units with new ones with at least double the COP factor, we could lower peak network demand by up to 4,000MW.

According to the federal government’s Draft Energy White Paper, a new 2kW (electrical input) reverse‐cycle air conditioner imposes costs on the energy system as a whole of $7000 when adding to peak demand.

Under the proposed efficiency scenario, for every two old air conditioners retired, an equivalent $7,000 would be saved, because 2kW of demand would be removed from the peak demand profile.

The average cost of a high quality 2kW to 4kW split unit is around $1,200 and for about $4.8 billion we could replace the old machines to avoid billions more in network upgrade costs.

By issuing an energy efficiency certificate for each unit replaced, effectively providing a 50 per cent discount off the cost of a new unit, the bill-paying public will be saving $2900 in network costs, plus the flow-on generation cost savings, merit order savings, and the resultant energy bill savings for the new air-conditioner owner, who is paying for less electricity.

Even if 100 per cent of the cost of new air conditioners was subsidised, this would still save consumers around $2,300 for every air conditioner installed.

Of course any unit that was replaced would need to have its refrigerant gases (which are powerful greenhouse gases) captured to ensure they didn’t further add to global warming. In the future we could look at retiring air conditioners from 2000-2006, raising the minimum COP rating to 4.5, getting further efficiency savings.

Promotion of further energy efficiency measures, such as double glazing, awnings and insulation, would further help ease the burden on our national electrical grid, as well as ultimately our hip pockets.

A replacement program for old, inefficient air conditioners will mean householders end-up with lower bills and new and better air-conditioners, while carbon emissions could be markedly reduced. The only loser will be the energy companies. Perhaps that’s why they would prefer to distract us by pointing at the cost of support for solar PV (which competes against their own generators and lowers wholesale electricity prices), rather than inefficient air conditioners.    

Matthew Wright is executive director of Beyond Zero Emissions.

Beyond Zero Emissions will be releasing the Zero Carbon Australia buildings plan in September. Heat pumps (reverse cycle air conditioners) will play a large part in its recommendations.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles