The amount of energy Bethany James and Michael Basson use in their Melbourne home increased markedly six weeks ago after the birth of their son Rowan.
- Customers participating in “demand response” are asked to reduce their electricity usage at times of peak demand
- Demand response is being used during heatwaves to prevent blackouts
- Participating customers save money by using less energy, as well as getting paid to switch off
“We’ve really noticed the electricity bills have gone up with the increased heating, because obviously he needs to stay warm,” Ms James said.
“And a fair bit more washing with the rate he’s going through outfits,” Mr Basson added.
But they are both making an effort to save electricity, and money.
Whenever possible, the family is participating in what is known as “demand response”, where their energy company asks them to cut their usage at peak times to reduce their bills and gain cash credits.
“We get a text message from Powershop saying one [peak period] is coming up, giving you a bit of a time frame of when it might occur,” Mr Basson explained.
“You then get another text message later on saying that it’s started, when to start curbing your power, and then a third text message that says it’s over, and they let you know in a day or two if you’ve achieved your goal.”
It is part of a series of trials to test the potential of different kinds of demand response in the national electricity market.
The trials are part-funded by Australia’s renewable energy agency, ARENA.
Ms James said being given the opportunity to “make a difference to your life for just those two hours [is] a really great thing”.
“It means you save money and it reduces the stress on the grid, so hopefully it means there are no blackouts,” she said.
But demand response has become the latest front in the behind-the-scenes battle to determine the future of Australia’s energy market.
‘Let’s unleash competition’
Under the current rules governing the national electricity market, only energy retailers are allowed to offer demand response.
But the Australia Institute’s Dan Cass says the ARENA demand response trial has been a big success, and he now wants a rule change to allow specialist demand response providers to compete directly with energy companies in the wholesale market.
“Let’s open it up as a market option. So let’s unleash competition with demand response competing against generation … to lower prices for all consumers,” Mr Cass told 7.30.
Mr Cass says this would help bring prices down by cutting demand at peak times.
“Few people realise we pay a lot for electricity during the heat waves of summer,” he said.
“Generally, wholesale energy is about $100 a megawatt hour. During summer, it goes up to $14,500 a megawatt hour, and we all pay for that.”
But the Australian Energy Council, which represents the country’s biggest energy companies, says changing the rules of the market would be complex and expensive — and that cost would ultimately be borne by consumers.
“We don’t see that there is any need for demand response to be delivered by anyone other than retailers and their customers,” Energy Council chief executive Sarah McNamara told 7.30.
“That direct contractual relationship has worked very well …We see no reason to break up that relationship by introducing more parties into the demand response market.
“We believe that in the coming years, we will be able to continue to expand demand response. And that’s very good news for consumers. And it’s good news for our electricity system.”
But Mr Cass says big energy companies are trying to prevent competition and preserve the profits from expensive forms of peak generation, such as gas-fired power plants.
“They know it means competition, and competition means lower profits. It’s that simple. It will benefit their consumers if we get this reform, and they are standing in the way,” he said.
‘Electricity prices are a huge problem for us’
Drew Martin grows almonds near Renmark in South Australia.
He says electricity prices have been growing at a crippling rate for many farmers, particularly those who like him rely on irrigation to grow their crops.
“Electricity prices have been a huge problem for us. It is a significant cost to our business. It is equal to water prices and labour costs and fertiliser,” he said.
“It is up there now as one of the biggest inputs to running an irrigation company.”
In an effort to take back some control over his rising energy costs, Mr Martin has built a 200 megawatt solar farm on his property and installed a diesel generator.
These investments have meant he has been able to hold his electricity bill to about $250,000 a year.
Another benefit of the solar farm and generator is that he is now occasionally able to take advantage of demand response technology.
“We always put the crop first,” he said.
“But if there is an opportunity to power-shed then we can turn off.
“[If the almond trees] have got plenty of water we can turn off in those hours when we are required to turn off.
“And then the solar takes over and we will feed into the grid.”
Mr Martin is urging the Australian Energy Market Commission to approve rule changes that would open up the demand response market to new players.
“I think it is time that the commission really listens to business owners and fights for us,” he said.
‘It helps the bottom line’
It is not just households and farmers participating in demand response.
One company that has saved hundreds of thousands of dollars by participating in the ARENA trial is Australia’s biggest cold storage facility, Oxford Cold Storage, in Melbourne’s west.
Last year the company saw its electricity bills go up by almost $4 million.
Engineer Gabor Hilton says reducing their power use for short periods with demand response has taken about 10 per cent off those bills.
“I think it’s fantastic. I think it helps stabilise the grid, and it also helps the bottom line,” he said.
Energy Australia warns changes could be expensive
One of Australia’s biggest power companies, Energy Australia, has also been trialling demand response with its customers.
Energy Australia executive Ross Edwards says about 10,000 customers have taken part in its trial for households.
“We’re very supportive of demand response,” he said.
“What we found from our trials … is it needs to be simple and affordable for customers.”
Mr Edwards says the proposed rule change to let new players into the wholesale market could cost tens of millions of dollars to implement, and there has been little cost-benefit analysis to see if the new rules would actually benefit consumers.
He also says the costs of implementing new rules in the national electricity market can blow out into hundreds of millions of dollars — and these costs are passed on to energy customers.
“When we look at some of the proposed rules, they look complex and expensive,” he said.
“So we’re not sure they’re going to work in customers’ interests.”
Energy Australia also owns some of the expensive gas power plants that are fired up to provide energy at peak times.
“The key drivers on the costs for gas peakers is really the fuel,” he told 7.30.
But he says if demand response proves to be reliable, as well as cheaper than gas-fired power, that will be good for business.
“So for us, if we can find an opportunity to provide that reliable system at a lower price, we see that as an opportunity.”
Australia lagging behind, energy boss says
There are new players in the Australian demand response market trying to disrupt Australia’s current market system.
US-based company Enel X is expanding its presence in Australia, providing a demand response product to a growing list of companies.
“I think there are the some players in the market that view demand response categorically as a threat,” Jeff Renaud, Enel X’s head of Asia Pacific said.
“I think it’s about there being an increased competition in the market, which drives down prices in certain respects, which certainly on some level will always harm incumbent players.”
He says Enel X has been allowed to participate in the frequency control (FCAS) market for the past 18 months, and it has had a big impact on prices.
South Australia’s Hornsdale battery farm has also been bidding in the FCAS market over that time, during which prices have dropped by more than 50 per cent.
Mr Renaud says demand response technology accounts for up to 10 per cent of the energy market is some countries overseas, and Australia is lagging.
And he points to Australia’s regulatory framework as the reason for the sluggish growth of demand response locally.
“The technology is proven. The customer willingness to provide the resource is proven. The kit is already out there,” he said.
“The nice thing about demand response [is] we’re talking about using equipment that already exists: pumps, compressors, generators, industrial equipment that is already being used by customers.
“We’re just using it in an additional way to deliver value to consumers.”
Watch Liz Hobday’s story tonight on 7.30.