project 4: institutional barriers, economic modelling and...
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Project 4: Institutional Barriers, Economic Modelling and Stakeholder Engagement
Intelligent Grid Cluster Researchers Meeting Brisbane, 14 April 201
Chris Dunstan, Research DirectorInstitute for Sustainable Futures, UTS
(With thanks to Ed Langham)
Components of P4
1. Cost and potential of Distributed Energy (DCODE)
2. (Network) Benefits of Distributed Energy (DANCE)
3. Institutional Barriers to DE
4. Policy tools: How to facilitate DE?
5. Distributed Energy Roadmap
DE Technology Assessment:
Costs, Scale, LimitationsInstitutional Barriers
What obstructs cost-effective DE?Status
(current and progress)
Simplified Roadmap Components
Policy Instruments
Can institutional barriers be effectively overcome?
Avoidable Network Costs(time and place)
Potential(current and
future)
Policy Palette
(Working Paper 4.2)
DCODE Model
(Working Paper 4.3)
Assumptions &Scenario Analysis
Optimisation & Outputs:Costs, Prices, Emissions
DANCE Model(Working Paper 4.4)
Recommendations
Proposed Distributed Energy Roadmap
Barriers Analysis
(Working Paper 4.1)
Roadmap Report
(Working Paper 4.5)
DE Technology Assessment:
Costs, Scale, LimitationsInstitutional Barriers
What obstructs cost-effective DE?Status
(current and progress)
Simplified Roadmap Components
Policy Instruments
Can institutional barriers be effectively overcome?
Avoidable Network Costs(time and place)
Potential(current and
future)
Policy Palette
(Working Paper 4.2)
DCODE Model
(Working Paper 4.3)
Assumptions &Scenario Analysis
Optimisation & Outputs:Costs, Prices, Emissions
DANCE Model(Working Paper 4.4)
Recommendations
Proposed Distributed Energy Roadmap
Barriers Analysis
(Working Paper 4.1)
Roadmap Report
(Working Paper 4.5)
Peak Load Management
What is Distributed Energy (DE)?
Energy EfficiencyDistributed
Generation
Cogeneration
Interruptible loads
Efficient motors & chillersEfficient LightingEfficient showerheadsEfficiency Retrofits
Power factor correction
Gas Chillers
Ice Storage
Electric to Gas Hot Water
Standby Generation
Time of Use tariiffs
Biomass GenerationSmall Gas GenerationSolar Photovoltaics
Behaviour change
Battery Storage / EVs
Cost and Potential of Distributed Energy
See Working Paper 4.3
www.igrid.net.au
Description and Cost Of Distributed Energy(D-CODE Model)
Description and Cost Of Distributed Energy(D-CODE Model)
Potential Benefits of Distributed Energy
Lower costs Lower greenhouse gas emissions Increased reliability Managed peak load Enhanced social equity and access Avoided generation costs Avoided network costs
- See Working Paper 4.4 (forthcoming)
Source IPART Review of Regulated Retail Tariffs 2010-13 (March 2010)
11Source: Rod Sims, ‘Energy market outlook’ (Presentation to the Multi-Party Climate Change Committee, 10 November 2010)
“Residential electricity prices have increased by about 40 per cent over the last three years and are forecast to increase in the order of 30 per cent in the next three years to June 2013.”
- Martin Ferguson, Weekend Australian, 2 April 2011, p.4
A $20 per tonne carbon price is forecast to increase electricity prices by 10% (and petrol by 4%)
© Institute for Sustainable Futures, UTS 12
Network Investment: >$45 Billion by 2015(bigger and sooner than National Broadband Network)
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$m Network Capital Expenditure (>$9b p.a.)
NSW
Qld (draft)
Vic (prop.)
WA
SA (draft)
1
Regulated Retail Tariff (up 21%)
0
2
4
6
8
10
12
14
16
18
08/09 09/10 10/11 11/12 12/13 13/14
Ele
ctrc
ity P
rice
(cen
ts/K
Wh)
Year
Network Prices Domestic
Low Voltage Business
[1]Energy Australia, Revised Regulatory Proposal and Interim Submission, January 2009, p. 190
Energy Australia Indicative Network Charges
... pushing power prices up steeply
Where, when and what is the network value in Distributed Energy?
2009
MONTHLY DEFERRAL VALUE
HOURLY DEFERRAL VALUE
Status of Network DM
• Survey of Electricity Network Demand Management in Australia (SENDMA) commissioned by the Australian Alliance to Save Energy (A2SE)
• ISF/UTS with Energetics, Climate Works and Energy Futures Australia
• Funded by DECCW (NSW), DPI (Vic), NEM Consumer Advocacy Panel in conjunction with IGrid
• SENDMA is part of Stage 1 of a larger research project on DM and Networks
DE Technology Assessment:
Costs, Scale, LimitationsInstitutional Barriers
What obstructs cost-effective DE?Status
(current and progress)
Simplified Roadmap Components
Policy Instruments
Can institutional barriers be effectively overcome?
Avoidable Network Costs(time and place)
Potential(current and
future)
Policy Palette
(Working Paper 4.2)
DCODE Model
(Working Paper 4.3)
Assumptions &Scenario Analysis
Optimisation & Outputs:Costs, Prices, Emissions
DANCE Model(Working Paper 4.4)
Recommendations
Proposed Distributed Energy Roadmap
Barriers Analysis
(Working Paper 4.1)
Roadmap Report
(Working Paper 4.5)
Why Survey Network DM?
> To understand current practice:– What is happening, what is it delivering, what
does it cost > To share experience and lessons> To raise awareness of potential, barriers and
solutions:– among policy makers, utilities and community
> To establish a baseline and test an approach
> You can’t manage what you don’t measure.
Survey Responses Utility Response Utility Response
ActewAGL Received SP Ausnet ReceivedCitiPower Received Transend Received
Country Energy Received NT Power & Water Received
Electranet Received ETSA Received (2010 only)Energex Received Jemena ReceivedEnergy Australia Received Ergon Received
Horizon Power Received United Energy ReceivedIntegral Energy ReceivedPowerCor Received Aurora Energy Not yet receivedPowerlink ReceivedTransgrid ReceivedWestern Power Received
Caveats
> This is incomplete data– Not all network businesses have responded– Not all current projects reported– Not all projects have reported complete data
> There may be errors> Part of the point is to start the analysis. We expect it to be
imperfect.
0
5000
10000
15000
20000
25000
30000
35000
40000
MW
Pea
k D
eman
d
Year
US Utility Demand Management (DM)- Actual Peak Load Reductions
Energy Efficiency
Peak Load Management
Total Aust. NEM Summer Peak Demand
(Sources: US Energy Information Administration & AEMO)
= 4.4% of US Peak Demand
0
10
20
30
40
50
60
08/09 09/10 10/11
Ener
gy S
aved
(GW
h)
Financial Year
Residential
Commercial
Industrial
Mixed
0
10
20
30
40
50
60
08/09 09/10 10/11
Ener
gy s
aved
(GW
h)
Financial Year
TAS
ACTNT
VIC
WA
SA
QLD0
10
20
30
40
50
60
08/09 09/10 10/11
Ener
gy s
aved
(GW
h)
Financial Year
DG
EE
LM
Energy Savings (and Generation)
Note that energy generation was reported for 2 NSW DG projects in 08/09, but not in subsequent years.
= 0.01% of Energy Use
By technology By state
By sector
0
50
100
150
200
250
300
350
08/09 09/10 10/11
Peak
Dem
and
Redu
ctio
n (M
W)
Financial Year
Residential
Commercial
Industrial
Mixed
0
50
100
150
200
250
300
350
400
08/09 09/10 10/11
Peak
Dem
and
Redu
ctio
n (M
W)
Financial Year
TAS
ACT
NT
VIC
WA
SA
NSW
QLD0
50
100
150
200
250
300
350
400
08/09 09/10 10/11
Peak
Dem
and
Redu
ctio
n (M
W)
Financial Year
Peak Demand Reduction (DG)
Peak Demand Reduction (LM -Summer)
Peak Demand Reduction
= 0.1% of Peak Demand
By technology By state
By sector
0
50
100
150
200
250
08/09 09/10 10/11
$M p
er a
nnum
Financial Year
NSW FIT
Residential
Commercial
Industrial
Mixed
NSWNSW
NSWQLD QLD
QLDWA WA WAVIC VIC VIC
NSW FIT NSW FIT
NSW FIT
0
50
100
150
200
250
08/09 09/10 10/11
$M p
er a
nnum
Financial Year
NSW FITTAS
NT
ACT
VIC
SA
WA
QLD0
50
100
150
200
250
08/09 09/10 10/11
$M p
er a
nnum
Financial Year
NSW FITDG
EE
Expenditure on DM with NSW FiT
Note: NSW FIT expenditure estimates for 10/11 were included here only
= 1% of Capex
By technology By state
By sector
0
10
20
30
40
50
60
08/09 09/10 10/11
$M p
er a
nnum
Financial Year
Residential
Commercial
Industrial
Mixed
QLDQLD
QLDNSW
NSW
NSW
SA
SA
WA
WA
WA
VIC
VIC
VIC
NT
NT
NT
0
10
20
30
40
50
60
08/09 09/10 10/11
$M p
er a
nnum
Financial Year
TAS
ACT
NT
VIC
WA
SA
NSW
QLD
0
10
20
30
40
50
60
08/09 09/10 10/11
$M p
er a
nnum
Financial Year
DG
EE
LM
Expenditure on DM
Figures shown here are without estimated NSW FIT expenditure estimates for 10/11
= 0.1% of Capex
By technology By state
By sector
Deferral and savings from DM
Annualised Capex savings calculated using a 7.5% Weighted Av. Cost of Capital (WACC) and 40-year straight line depreciation = 10% p.a.
0
10
20
30
40
50
60
70
08/09 09/10 10/11
$M c
apit
al d
efer
red
Financial Year
By technology
DG
EE
LM 0
10
20
30
40
50
60
70
08/09 09/10 10/11
$M c
apit
al d
efer
red
Financial Year
By stateTAS
NT
ACT
VIC
WA
SA
QLD
0
10
20
30
40
50
60
70
08/09 09/10 10/11
$M c
apit
al d
efer
red
Financial Year
By sector
Residential
Commercial
Industrial
Mixed
Cost Effectiveness - energy
$/MWh figures only provided for projects which had relevant data
1
10
100
1,000
10,000
100,000
1,000,000
1 10 100 1000 10000
$/M
Wh/
year
Scale of Project ($k pa)
LM-NSW
LM-QLD
LM-SA
EE-QLD
EE-WA
DG-WA
By technology and state
0
10,000
20,000
30,000
40,000
50,000
60,000
08/09 09/10 10/11
$/M
Wh
Financial Year
By sector
Mixed
Industrial
Commercial
Residential
Cost Effectiveness - demand
$/kW figures only provided for projects which had relevant data
0
1
10
100
1,000
10,000
100,000
0 1 10 100 1000 10000 100000
$/kW
/yea
r
Scale of Project ($k pa)
LM-NSW
LM-QLD
LM-SA
LM-VIC
LM-WA
EE-NSW
EE-QLD
DG-NSW
DG-WA
By technology and state
0
10,000
20,000
30,000
40,000
50,000
60,000
08/09 09/10 10/11$/kW
Financial Year
By sector
Mixed
Industrial
Commercial
Residential
0.01
0.10
1.00
10.00
0 1 10 100 1000 10000
Cost
Ben
efit
Rat
io
Scale of Project ($k)
LM-NSW
LM-VIC
EE-NSW
EE-QLD
DG-NSW
Cost Benefit Ratio
Cost benefit ratio figures only provided for projects which had relevant data
By technology and state
0.0
1.0
2.0
3.0
4.0
5.0
6.0
08/09 09/10 10/11
$ co
st/$
ben
efit
Financial Year
By sector
Mixed
Industrial
Commercial
Residential
Projects Summary
Expenditure vs. savingsNumber of projects by stateTAS, 0
ACT, 0 NT, 2 VIC, 5
QLD, 15
WA, 7
SA, 27
NSW, 51
TAS
ACT
NT
VIC
QLD
WA
SA
NSW
0
5
10
15
20
25
30
35
40
08/09 09/10 10/11$M
per
ann
umFinancial Year
Expenditure
Savings
> Future Surveys:– Systematic, consistent, regular?– Who to manage?
> The Future of DM and Networks:– Core or marginal activity ?– Obligation, business opportunity or neither?– Cost or profit centre?
Perceived Barriers to DM Survey
> To reality check proposed barriers from analysis – Do stakeholders agree these are barriers?
> To assess perceived relative importance of barriers.> To improve understanding of different stakeholders
perspectives
Barriers
Technical Institutional
Current Technology
Current Costs
Regulatory Failure
Inefficient Pricing
Payback Gap
Split Incentives
Lack of Information
Cultural Barriers
Classifying Barriers to Distributed Energy
Institutional barriers are crucial
What it does
What it costs
What slows it down
Institutional barriers
Survey Respondents
Survey Respondents Category Respondents No. of Respondents
Utilities Energy Utility – NetworkEnergy Utility – RetailerEnergy Utility – Generator
2951
Government Government Agency – Federal Government Agency – State Government Agency – Local
2208
End User Energy Consumer – Commercial Energy Consumer – Industrial
122
DM Provider Demand Management ProviderDemand Management ConsultancyEnergy Supply Consultancy
81714
Other Environmental organisationConsumer organisationIndustry organisationRegulatorResearch InstitutionOther
168322628
I1 Limited experienced / skilled DM service providersI2 Lack of data on costs, reliability, potential from DM precedentsI3 Lack of information about network constraintsS4 Competing priorities in utilities limit consideration of DMS5 Disaggregated electricity market - DM benefits hard to captureS6 Landlord-tenant relationshipG7 Lack of capital, financiers, funds for DM project proponentsG8 Consumers / utilities want shorter DM payback than for supplyG9 Utilities have easier access to finance than DM providersP10 Lack of carbon priceP11 Local peak / network constraints not reflected in power pricesP12 ToU tariffs don't represent time / location cost of energyR13 Electricity suppliers profit from electricity sold, DM cuts profitsR14 Networks don't invest in DM unless constraint is imminentR15 Regulatory processes (security, reliability ) don't consider DMR16 Regulatory Test (RIT) limits assessment of DMR17 High $ threshold of Regulatory Investment Test restricts DMB18 Lack of state / national government consideration for DMB19 Utility bias towards centralised supplyB20 Electricity suppliers lack expertise / experience with DMB21 Absence of DM / environmental objective in National Electricity LawB22 Electricity consumers lack interest in saving energyB23 Consumers want to use power when & how they chooseB24 Electricity suppliers prefer CAPEX to OPEX, DM is OPEXC25 Coordinated approach lacking at state / national level
Institutional barriers
Extent of Agreement
Extent of Agreement
Policy Tools to Move the Market
Push PullLi
ft
Regulation Incentives
Information
The Policy Palette
Primary Instruments
Facilitation
Pricing
Targets
Regulation Incentives
Information
Facilitation
Pricing
Targets
Regulation Incentives
Information
The Policy Palette - “PIRFICT”
Coordination
20 Policy Tools for DE
Information
Regulatory Reform
Incentives
Information
Facilitation
Pricing reform
Targets
1
Coordination
1: Decouple electricity sales from network profits
2: Reform National Electricity Rules
3: Streamline DG Licensing4: Carbon Price 5: Cost reflective pricing6: Network support payments 7: Distributed Energy Fund8: Reform feed-in tariffs9: Public recognition & awards10: Streamline network
negotiation process11: DE Ombudsman 12: Annual DE Review13: Training & skills
development14: Energy audits & technical
support15: Network planning info16: DE handbook & advisory
service17: Resource assessments &
case studies18: Extend retailer EE targets19: DE targets & reporting20: DE Coordination Agency
23
4
56
7
8
9
10 11
12
13
1415
16
2019
18
17
20 Policy Tools for DE
Information
Regulatory Reform
Incentives
Information
Facilitation
Pricing reform
Targets
1
Coordination
1: Decouple electricity sales from network profits
2: Reform National Electricity Rules
3: Streamline DG Licensing4: Carbon Price 5: Cost reflective pricing6: Network support payments 7: Distributed Energy Fund8: Reform feed-in tariffs9: Public recognition & awards10: Streamline network
negotiation process11: DE Ombudsman 12: Annual DE Review13: Training & skills
development14: Energy audits & technical
support15: Network planning info16: DE handbook & advisory
service17: Resource assessments &
case studies18: Extend retailer EE targets19: DE targets & reporting20: DE Coordination Agency
23
4
56
7
8
9
10 11
12
13
1415
16
2019
18
17
Towards an effective policy package for DE
> Reducing upward pressure on electricity prices via:
> An Energy Savings Partnership with electricity networks• Focus on reducing peak demand • Collaborative targets and regular performance reporting• Partnership fund to incentivise energy savings actions
and Demand Management
55
• Recognition that a permanent research ‘centre of excellence’ for Energy Efficiency and Decentralised Energy is warranted, given the opportunity
• Building on A2SE’s networks and ISF’s capabilities
• International linkages and networks
• ACCEDE prospectus now available for comment and foundational financial supporters being sought
Proposal for ACCEDE
DE Technology Assessment:
Costs, Scale, LimitationsInstitutional Barriers
What obstructs cost-effective DE?Status
(current and progress)
Simplified Roadmap Components
Policy Instruments
Can institutional barriers be effectively overcome?
Avoidable Network Costs(time and place)
Potential(current and
future)
Policy Palette
(Working Paper 4.2)
DCODE Model
(Working Paper 4.3)
Assumptions &Scenario Analysis
Optimisation & Outputs:Costs, Prices, Emissions
DANCE Model(Working Paper 4.4)
Recommendations
Proposed Distributed Energy Roadmap
Barriers Analysis
(Working Paper 4.1)
Roadmap Report
(Working Paper 4.5)
Chris Dunstanchris.dunstan@uts.edu.au
Tel: 02 9514 4882
Thanks to: Ed Langham, Chris Cooper, Katie Ross, Nicole Ghiotto, Nicky Ison, Jay Rutovitz,
Stuart White, Lou Boronyak
Thanks
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