Sunrise or sunset for electricity networks?

There has been quite a bit of talk among Australasian electricity network businesses about falling demand.  Energy demand per residential customer seems to be falling everywhere – the impact of more efficient appliances, better-insulated dwellings and roof-top solar PV.  In many places aggregate demand is falling too. 

The most pessimistic commentators foresee a death spiral whereby ever falling demand requires ever higher per-unit network charges which, in turn, makes more energy efficiency and consumer generation projects profitable.  For the record, I’m not in that camp.

Even more optimistic folk think that significant value could be eroded away.   It seems that New Zealand’s Minister of Finance supports that view.

But true network optimists are looking to electric vehicles (EVs) as saviours of network businesses.  A typical daily commute could be 6kWh to 12kWh, adding 10% to 50% to a residential customer’s demand. 

And then you have batteries.  Some people argue that consumer batteries will facilitate mass disconnection from networks, allowing customers to store solar (and other consumer generation) energy for later use.  But inter-customer diversity, the economies of scale associated with batteries and technical expertise of utilities means that it’ll likely be more efficient for your network company to own and operate a neighbourhood battery.  Personal or neighbourhood batteries would help solve many of the stability and solar export problems that are causing angst in some quarters.  So I don't know whether batteries are part of the problem or the solution to network commercial viability.

I’ve been thinking about this for most of the year, prompted by various engagements in several different businesses.  I’ve listened to divergent views of industry CEOs, academics, entrepreneurs, industry commentators, consultants of all stripes and distribution engineers.  There is no consensus.  So I have little confidence in anyone’s vision of the future, including my own vague ideas.  In an industry that has been pretty much unchanged for a century, I think that’s exciting.

On the whole, I’m in the “sunrise” camp: customers value a reliable electricity supply more than ever and they want simplicity and certainty.  In industries where regulators do not get to mandate tariff structures we’ve seen the rise of the subscription model: Netflix et al have a smorgasbord of TV for $10/month, Spotify and other streaming services offer the same model for music, uncapped broadband and telecommunications plans are increasingly common, we now pay $5/day for international mobile roaming rather than seemingly random but exorbitant call charges, etc.  The future for energy cannot be each customer operating and maintaining his/her own internal utility and constantly fretting over the instantaneous cost of capacity.

What I do know is that the current pricing and regulatory regimes are very poorly placed to cope with any of this: falling demand, mass market consumer generation, storage of bidirectional flows, off-peak EV charging loads.

For example, in response to changes in regulations related to signalling the marginal cost of network capacity, Victorian distributors are introducing mass-market peak period demand charges.  But demand is falling so you can make a case that peak period demand is less relevant now than in any time in the last two decades.  And roof-top solar, batteries and EV charging might significantly change the peak period in Victoria over the next decade.  The regulator is “fixing” the 1990s air-conditioning boom pricing problem, 20 years after the fact.

A complete re-think of commercial arrangements is required.  I’ll write something about what those arrangements should look like, just as soon as I have any clue!

Paul Webber