RESTRUCTURING NETWORK TARIFFS IN THE NEM THE … Bradley_0... · 2015-11-06 · • Centralised...
Transcript of RESTRUCTURING NETWORK TARIFFS IN THE NEM THE … Bradley_0... · 2015-11-06 · • Centralised...
RESTRUCTURING NETWORK TARIFFS IN THE NEM –
THE IMPORTANCE OF GETTING IT RIGHT
JOHN BRADLEY, ENA CEO
EASTERN AUSTRALIAN ENERGY MARKET OUTLOOK
17 SEPTEMBER 2015
ENA
ENA
ENA
Overview
1. What could the Future Grid look like ?
2. Ensuring a smooth transition – the Network
Transformation Roadmap
3. Important choices in network tariff reform
4. Incentivising Efficient Investment
5. The Value Proposition by Networks of the Future
ENA
ENA
Australia’s Great Energy Disruption
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Reported Estimated
Australian solar panel uptake. Source: Australian PV Institute, http://pv-map.apvi.org.au/analyses [accessed 2 July 2015]
Comparison of low, medium and high consumption scenarios to 2024–25. Source: AEMO National Electricity Forecasting Report 2015
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Cost of Lithium-ion battery packs. Source: Nykvist and Nilsson (2015)
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Annual electricity sector Greenhouse gas emissions. Source: Department of Environment (2015) and Pitt & Sherry carbon emissions index
Solar
Emissions
Demand
Storage
ENA
Upending our Energy System
• AEMO: Solar PV capacity
to increase 500% to 2035
- Output ranging from 9.3%
(NSW) to 28% (SA) of
Energy
- Shifting peak to 7.30pm in
SA and Qld
• Within 10 years, Solar PV
output could exceed
Minimum Demand in
South Australia
ENA
Potentially diverse futures for Network Use…
CSIRO Scenario Analysis:
ENA The Network Transformation Roadmap
ENA The Network Transformation Roadmap
ENA The Network Transformation Roadmap
ENA
Traditional Tariffs - a Burning Platform
> Most network customers pay tariffs unrelated to cost.
> Increasingly peaky load profile & diverse network use…
> Widely recognised cross-subsidies
between customers - unintended
and unsustainable
– eg. $683 pa for A/C use at peak;
– $117 pa for north-facing solar PV; and
– $29 pa for west-facing solar PV. (NERA)
AEMC 2014 Residential Electricity Price Trends Report
ENA
ENA supports a National Approach to Key Issues
> A consistent, enduring policy and
regulatory environment without ‘ad
hoc’ jurisdictional intervention;
> A balanced approach to the economic
deployment of smart meters as part of
contestability reforms;
> Better information and decision
making tools for customers;
> Review of options to support
vulnerable customers including
concessions schemes;
> Retail Price Deregulation to encourage
innovation.
ENA
Most customers benefit - Vulnerable customers moreso
Source : Simshauser and Downer (2014) “On the inequity of flat-rate electricity
tariffs” AGL Applied Economic and Policy Research Source : Brattle Group, Architecting the future of dynamic pricing, ACCC Regulatory
Conference, August 2014
ENA
Best Performing Tariffs provide clear benefits to customers
Efficiency
> Incentivise efficient DER
investment, saving customers
$17.7 BN by 2034
Fairness
> Avoid unfair cross subsidies
to early adopters increasing
from $120 pa today to $655
per year.
Lower Bills
> Achieve $250 pa. saving in
av. residential electricity
bills by 2034.
No Price Shocks
> Avoid network price increases
which are 5 times higher than
necessary.
ENA: Towards a National Approach to Electricity Network Tariff Reform
ENA
Long-term risk to Consumers if we stand still…
Analysis of Inclining Block
Tariffs:
> Have Nots: By 2034, 1/3 of Residential customers remain without DER, paying bills up to $3000 pa.
Energeia analysis cited in : Towards a National Approach to Electricity Network Tariff Reform
ENA
Long-term risk to Consumers if we stand still…
Analysis of Inclining Block
Tariffs:
> Have Nots: By 2034, 1/3 of Residential customers remain without DER, paying bills up to $3000 pa.
> Haves: 2/3 of Residential Customers have DER and pay a bill which is $1270 less.
Energeia analysis cited in : Towards a National Approach to Electricity Network Tariff Reform
ENA
Long-term risk to Consumers if we stand still…
Analysis of Inclining Block
Tariffs:
> Have Nots: By 2034, 1/3 of Residential customers remain without DER, paying bills up to $3000 pa.
> Haves: 2/3 of Residential Customers have DER and pay a bill which is $1270 less.
> Cross Subsidy: Half the difference in average bill funds a cross subsidy to Residential customers with DER.
Energeia analysis cited in : Towards a National Approach to Electricity Network Tariff Reform
ENA
Public Policy Scorecheck :
ENA
…and ‘Opt-In’ unlikely to deliver fair outcomes
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Take up low in
Victoria even by
international
standards (0.3%)
Under “opt-in”
customers with flat
load profiles continue
to subsidise peakier
users
Lost Opportunity: Almost 7 million additional solar and storage installations by 2035 – which usually means a smart meter.
Enrolment & retention rates for TOU tariffs – Nth
America
Source : The Brattle Group, Smart by Default, 2014
ENA
CSIRO
Insights from
Behavioural
Economics…
Excerpt from: Dr Karen Stenner | Behavioural Economics & Psychological Insights Team | Grids
& Energy Efficiency Systems Stream
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Victorian Tariff Structures Statements due soon
Demand- based Tariffs
> Gradual phase-in of demand
charge: energy usage and/or
fixed components decline over
time
Some consumer group views on tariff
reform
If this [network tariff reform] is done effectively, it
will create great potential for consumers to take
better control of their energy consumption and
expenditure, potentially allowing many low income
and vulnerable consumers to save money on their
energy bills.
CALC, VCOSS, CUAC , October 2014
“Cost reflective network tariffs are a step toward
showing consumers the true cost of their actions.
Cost reflective tariffs will, ideally, allow those
consumers who use and value network capacity to
pay for it, and those that don’t to save money.”
CUAC, June 2015
ENA
Tariff signals that can be received and responded to…
> TSS Consultation: Networks will engage customers in tariff
design, implementation and transition
> ENA members working with Retailers to address barriers to
‘pass through’ – and simplify language and communication.
Jemena Infographic
ENA
Must haves in Policy & Regulation for Tariff Reform
Welcome:
> Recent progress for fairer, more efficient tariffs:
– COAG Energy Council support;
– AEMC rule change provides benefits in transparency and engagement
Outstanding:
> A contestable metering framework that allows commercial
contracting and risk management.
> Ability to Progress cost-reflectivity in the absence of smart meters.
> Complex reform will require consistent, enduring policy direction
ENA
Efficient Incentives
Demand tariffs
> Technology neutral
Growth in renewable capacity
> Solar installations could
average around 1,100 MW per
year or annual growth of over
11% pa (CAGR) for the next
twenty years.
Growth in renewable energy capacity
with demand tariffs
Source : SGSC, Part 2, The Business Case for Smart Grids in
Australia, July 2014;
Energeia, Network Pricing and Enabling Metering Analysis,
December 2014
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ENA
Economic incentives for storage across supply
chain
Source: Ernst and Young:
Renewable Energy Country
Attractiveness Index June 2015
ENA
Australian Networks undertaking diverse storage trials
ENA
• Ausnet
• Grid Energy Storage System (1 MW /
1MWh) connected to urban 22kV
distribution feeder
• Residential Battery Storage Trial (6.6
kW)
• Citipower /Powercor
• Buninyong 2 MW/2MWh Battery
• Ergon
• Integrating Network Tariffs and
Customer Owned DER
• Centralised Energy Storage System
(CESS)
• Residential Utility Support System
(Ten 6 kVa, 20kWh)
• Grid Utility Support System (25 kW,
100kWh single phase)
• Energex
• Hot Water Storage to absorb PV
Output (Arana Hills)
• Electranet
• Energy Storage for Commercial
Renewable Integration (ESCRI)
• South Australian Power
Networks
• Australian Energy Storage Knowledge
Bank (University of Adelaide)
• Transgrid
• Idemand (400 kWh)
ENA
…and consumer storage is here…
• Price
• Aesthetic & Lifestyle
• Simplicity
• AC Plug and Play
ENA
Beyond the Meter
Services
Distribution Platform
Integrator
Energy Services
“Obligation to
Serve”
“Commitment
to Optimize”
Commodity Delivery
Distributed Energy
Production Services
Information
Services
Intelligent Grid
Operator
Pure-Play
Transport
(Traditional Grid
Model)
Distribution Platform
Integrator & Trader
New Resilience-Building
Business Models
Distributed System Platform Provider*
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2 3
4
A
B
C
Accenture: Future Network Business Models
ENA
Progressive utilities are forging ahead in defining the pace
and depth of platform business model evolution
To move beyond an intelligent grid,
a platform integrator needs to be
able to make decisions on demand
and supply in real-time to optimise
whole-of-grid performance.
Extend key platforms:
Advanced DMS, MDM, OMS.
Further penetration of grid
automation and sensing with
real-time decision engines and
control optimization. DERs fully
integrated into grid.
BUSINESS MODEL ACTIONS
Strategic decisions needed for
scope of role and opportunities for
additional growth in new services
and energy solution.
RATIONALE
Distributed
Platform
Integrator
Distributed
Energy
Production
Services
Significant investment needs to be
made not only in trading system but
also to develop and test pricing
strategies with targeted customers.
Distributed
Platform
Integrator &
Trader
Dynamic integration with
demand drivers (e.g., demand
response, dynamic tariffs) to
enable transactions between
producers and consumers of
energy.
Extend services to include the
provision of DERs such as
solar PV, battery storage
through direct leasing or
partnership arrangements.
NY
State
REV
EXAMPLES
Trade Only – Limited Infras.
A
B
C
4
ENA
New Operating Principles for Progressive Business Models
• Being able to integrate all types of generation.
• Enabling consumers to provide services back to the grid.
• Offering enhanced or optional services, such as microgrid services
and other DER support services.
• Being agnostic about supply.
• Facilitating a retail market for consumers and third-party providers to
buy and sell services.
Foundational operating principles for the traditional grid model
Maintaining a
safe and
reliable grid
Increasing grid
efficiency
Optimizing
asset
utilisation
Support /
implement
public policies
Highly reliable
& resilient
energy
services
Identify most
cost-effective
ways of
achieving
outcomes
Future Business
Model Progressive
principles: