Energetics' submission on the draft Energy White Paper

02 Apr 2012Archived News Publications

Energetics welcomes this opportunity to comment on the draft Energy White Paper (EWP). 

We are a specialist management consultancy with over 25 years experience in energy and carbon management. Energetics delivers measurable outcomes to address key business needs in areas including mitigating climate change risk and meeting compliance obligations, identifying and developing business opportunities, reducing costs and improving productivity. We have a national multi-disciplinary team of over 100 professionals in five offices across Australia.

We believe that Australia’s sustainable energy future is secured through the efficient operation of the energy markets and well designed market based mechanisms to address externalities such as greenhouse gas emissions. Energetics therefore broadly supports the themes of the EWP. We would however like to address a few additional points.

The EWP acknowledges the need for all levels of government to seize the opportunity to set a clearer path for better functioning energy markets by addressing several critical reform issues. Energetics supports this, and would like to see special attention paid to implementing an improved energy productivity (demand side) framework to efficiently reduce electrical peak demand growth and provide an enhanced set of options for consumers to better manage their energy use and costs.

Better management of peak electricity demand is essential if Australian industry is to maintain the competitive advantage provided by relatively low electricity prices.

The EWP notes the rapid growth in peak demand relative to a slow growth in overall consumption which has lead to the investment that is driving  electricity price rises.

Energetics believes there are significant opportunities to reduce the growth in peak demand through

  • take-up of energy efficiency and demand side response measures across all sectors of the economy;
  • targeted deployment of distributed generation; and
  • cost reflective pricing.

The draft EWP examines the market failures have led to the failure of pricing to drive the efficient use of resources. Energetics believes that a more general deployment of time-of-use and critical peak pricing would help address these distortions.

As an essential first step, we believe that an extensive rollout of smart power meters is required. State planning law could have a role to play by requiring the installation of a smart meter whenever work requiring development approval is done on a building.

The deployment of an Advanced Metering Infrastructure as well as technologies enabling switching or cycling of appliances or equipment offers load control options for customers. Energetics sees the adoption of Smart Grid technologies and the deployment of Demand Side Management activities as enablers of a greener Australia: they will facilitate a high penetration of intermittent renewable energy sources and generate savings by avoiding expensive investments in infrastructure upgrades and back-up peaking plants.

We note that several international jurisdictions such as California have achieved ongoing success with demand management program, and further that the utilities in California and elsewhere are far more vertically integrated than is the case in Australia. This presents governments in Australia with opportunities for selective intervention to address the non-market barriers that stem from Australia’s more fragmented electricity industry.
In particular, market based incentive schemes to drive investments in demand management should be discussed in the EWP.

Coupled with this would be a change in the network tariffs to place more emphasis on charging for capacity rather than charging for consumption.

A broader application of demand or capacity charge based on apparent power drawn (in Volt-Ampere) rather than real power (in Watts) could also be considered for commercial and industrial customers.

Risk-reward incentive mechanisms for the transmission and distribution network providers could encourage these utilities to invest in energy efficiency the same way they would invest in network infrastructure upgrades. Energy efficiency has a major role to play in better management of demand. Further, it addresses most of the core priorities of the EWP. We see energy efficiency as one of Australia’s energy resources, and one that has not been exploited to the extent seen elsewhere in the world. Therefore, Energetics believes that the EWP should pay more attention to energy efficiency – the opportunities that are on offer, the non-market barriers that prevent the more widespread adoption of energy efficiency and the role of market based mechanisms to address these barriers.

Thank you again for giving us the opportunity to comment on the EWP and we look forward to reading the final version.

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