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Has the death spiral for Australia’s electricity market begun?

If you wonder why there is so much antipathy towards the Renewable Energy Target from the electricity utilities, all you need to do is look at what is happening to demand for poles and wires electricity.

Across the eastern seaboard served by the National Electricity Market (NEM) demand is collapsing and heading towards territory not seen since the last millenium. Another few years on current trend and the industry will be in chaos. The last thing utilities want now is new capacity enforced by government regulation into an already grossly oversupplied market.

Average electricity demand on the mainland sector of the NEM, expressed in gigawatts by financial year. Red circles are historical demand data. Grey squares are trend projections for the death spiral scenario (demand collapses to zero in 10 years). Blue circles are 3% p.a. decline on 2014 levels. Image by Mike Sandiford. Data from AEMO 30-minute aggregated price and demand datasets.

The 2013-14 financial year is the fifth consecutive year to see negative demand growth on the NEM. And the problem for the electricity utilities is that the demand is falling more sharply with each passing year. In 2013-14 demand fell almost 3%. The trend is really quite alarming.

Annual percentage change in electricity demand on the mainland sector of the NEM. By financial year. Image by Mike Sandiford. Data from AEMO 30-minute aggregated price and demand datasets.

Predicting energy demand is proving to be a mug’s game. Just ask the Australian Energy Market Operator (AEMO).

As recently as 6 years ago, growth in demand for poles and wires electricity could be counted on with certainty. Then demand grew at an average of a touch over 2% each year, varying between 1 and 3.5% depending on the economic cycle and seasonal weather variability.

Projected demand scenarios for the mainland sector of the NEM, expressed in gigawatts by financial year. Brown - 2.2% annual growth on 2000 to 2007 levels. Red - 2.2% annual growth on 2014 levels. Green - 0.5% annual growth on 2014 levels as assumed in the RET review analysis by ACIL Allen. Blue - 3% annual decline. Black - on trend death spiral scenario. Image by Mike Sandiford. Data from AEMO 30-minute aggregated price and demand datasets.

It all made sense. With an implicit assumption that demand for electricity is inelastic, in an expanding economy, with a rising population, it has been a given for industry and government that demand must rise. And since poles and wires electricity seemed the only way of servicing that demand, growth was assured.

But since the GFC, the growth in demand has collapsed, initially flat lining before falling into negative territory where it has been for the last five years. In fact, compared to the forward projections of 2007, when 2.2 % annual growth seemed assured, demand is now down some 6 gigagwatts, or almost 25%.

Projected demand scenarios for the mainland sector of the NEM, expressed as percentage departure on the 2.2% annual growth from 2000 to 2007 levels. Red - 2.2% annual growth on 2014 levels. Green - 0.5% annual growth on 2014 levels as assumed in the RET review analysis by ACIL Allen. Blue - 3% annual decline. Black - on trend death spiral scenario. Image by Mike Sandiford. Data from AEMO 30-minute aggregated price and demand datasets.

Since the GFC many things have changed. The take-up of distributed technologies have greatly reduced demand for poles and wires electricity. And poles and wires electricity is no longer the only game in town due to the phenomenal cost reductions in solar photovoltaic. Contrary to perceived wisdom, electricity demand has proved to be anything but inelastic.

The reduction in demand has clearly blindsided both industry and government, which continue to operate as though demand growth must inevitably return. Even the market operator, AEMO, has found the downturn difficult to comprehend. Each year for several years in a row, AEMO has been forced to revise down its electricity demand forecast.

In fact, the idea that energy demand growth is essential for a growing economy is so ingrained in industry and government thinking, that we might question their collective sanity. The idea that Australia might be in for a sustained period of falling consumption for poles and wires electricity seems almost impossible for industry and government to comprehend. In the recent RET review, ACIL-Allen assume long-term growth of 0.5% per annum.

In face of the current trend, this seems to be delusional at best, utter madness at worst. A more sensible assumption might be to presume that demand for poles and wires electricity will continue to decline. A more pertinent question might be “when will we no longer need transmission?”. On current trend, we might be guessing that could be frighteningly soon.

With average demand dropping almost 600 megawatts in the last financial year, and large electricity consumers such as the aluminium sector already exiting the industry, it is hard to imagine anything but further reductions.

And that will put upward pressure on costs of distributing poles and wires electricity, which in turn will further encourage energy efficiency measures and distributed generation.

It makes for challenging times for our energy utilities, who continue to want to operate a business model that involves servicing our need for the benefits of energy (heating cooling, lighting, communication etc.) by supplying more and more energy across the grid.

With the costs of distributing poles and wires electricity consuming a larger and larger proportion of the retail bill, it is time to step back and reconsider what we want from our energy system, and how we get there. With concerns growing over how the bleak demand outlook will impact the viability of the electricity grid, we could do well to ask “why do we continue to promote two energy grids (gas and electricity) to provide essentially the same energy service.”

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Join the conversation

62 Comments sorted by

  1. Michael Quinlan

    logged in via LinkedIn

    Another great article Mike and you identified the decline in power consumption/demand quite early. The future of centralized power production looks to be essential although it is likely to be in a much more limited/reduced capacity.

    The massive efficiency gains in power production have not even started. In 2003, 17.2 million tonnes of coal was excavated by International Power Hazelwood for use by the plant which generated 12,000 gigawatt-hours (wikipedia). 17 million tonnes of lignite contains a…

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    1. Russell Y

      Financial planner

      In reply to Michael Quinlan

      Great reply, for an excellent article. Another example that electrical storage is advancing much quicker than the generation sector seems to realise is the expansion of cordless light tools with lithium batteries. Chainsaws, lawn mowers and trimmers are now available in a widespread fashion. This is driving down the price of storage and is pouring corporate research dollars into it. It seems the death spiral is starting to advance in Queensland with WA likely to follow. Seems the political settings have no idea how to deal with rapidly advancing problems. It would be funny in many ways to watch as the conservative governments keep putting fingers in the dikes to hold back technological change but the results are will probably hit the low income families such as mine very hard.

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    2. Ross Barrell

      Aikido Student

      In reply to Russell Y

      Hi Russell.

      Yup. Seems to me we have a horse and buggy government in a motorcar society. Time will tell. :)

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  2. Peter Redshaw

    Retired

    "With the costs of distributing poles and wires electricity consuming a larger and larger proportion of the retail bill....."

    But, hasn't that been the problem. The heavily subsidised investment where the electricity companies are guaranteed a 10% profit margin on their investment has been the problem. It has meant that these electricity companies have continued to invest in the polls and wires and in the process substantially push up the price of electricity. And low and behold what do electricity…

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    1. Ross Barrell

      Aikido Student

      In reply to Peter Redshaw

      According to a local solar installer we were informed that, from dead start it costs between $25k to $35k to set up your household off the grid. Seems to me, if you have already invested substantially in solar roof panels, you are looking at an additional $15k to go solo. New and cheaper storage technology is coming online all the time.

      Take into consideration the fact that you normal rooftop PV user is using the grid as a free battery backup for night and cloudy day use. If the Poles and wires providers charge too much for use of their infrastructure we could well see thousands of households divesting themselves of the need for network connection. Then you might see the death spiral. Then what?

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    2. Greg North

      Retired Engineer

      In reply to Ross Barrell

      More accurately Ross, the grid is used just as it is and that is not as a battery though you could say consumers would either need a storage system or rely on the grid.
      We might get some thousands of consumers going off grid though I suspect there will remain many if not hundreds of thousands consumers on the grid for a few life times yet.

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    3. Ross Barrell

      Aikido Student

      In reply to Greg North

      "More accurately Ross, the grid is used just as it is and that is not as a battery though you could say consumers would either need a storage system or rely on the grid."

      Agree. Though, on second thought it is hardly "free" backup for cloudy days or night time - unless, of course you are getting a 44 cent input tariff (which I think is ludicrous). The power utilities charge much more for power than they pay.

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  3. Trevor Kerr

    ISTP

    Evident antipathy to RET by Abbott Govt suggests the challenge to Abbott is likely to be grounded in support for renewables. That's another way of saying that no challenge to Abbott will get up unless it is centred around renewables. That challenge could get some headway by exposure of the risks to our economic futures posed by failure of Govt to sponsor both innovation in that domain and transfer of technology to industry. This article suggests there is the ability to put that information in a form that's accessible to the public. (The Abbott Govt is as likely to provide that information as it is to highlight the success of Plain-packaging.)
    [Disclosure: http://www.daposy.com/fuel-cells]

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    1. Ross Barrell

      Aikido Student

      In reply to Ross Barrell

      And if this is, indeed, true, what's the fossil fuel industry going to do now?

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    2. Ross Barrell

      Aikido Student

      In reply to Diogo Marzo

      And here's this.

      auto.ndtv.com/news/mahindra-will-review-tesla-patents-for-its-electric-vehicles-564932

      I just did a quick Google on "tesla motors open source patents" and found a couple of interesting liinks near the top. Heree's Forbes:

      www.forbes.com/sites/briansolomon/2014/06/12/tesla-goes-open-source-elon-musk-releases-patents-to-good-faith-use/

      And this is part of it's lead article:

      "Of course, there may also be a silver lining for Tesla. Musk says “the world would all benefit from a common, rapidly-evolving technology platform.” This may be true — but it could also aide Tesla’s rate of adoption. It may encourage other companies to start building charging stations and other products that would support Tesla’s growth."

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    3. Diogo Marzo

      logged in via email @hotmail.com

      In reply to Ross Barrell

      Makes sense. Right now it's a David vs Goliath market. If consumers begin seeing a variety of electric vehicles out and a good enough network of charging stations then tesla may be in position to lock up patents again. For now it gives everyone with a little capital and some courage to start taking potshots at the petrol car market. Whether the move is altruistic or not it may work in everyone's favour. Gives me reason for hope, even if it's of the cynical variety... And maybe one of these days some solar panels and a good battery so when the power company decides to offer me a pittance of what they charge for electricity I'll be able to say, "no thanks, I'll just use it myself later".

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  4. John Newlands

    tree changer

    A possible explanation for declining electricity demand is looming recession with modest belt tightening as the first phase. GDP has held up so far perhaps due to strong commodity exports. If they wane we'll be left with a weak services economy.

    I suggest there is a minimum grid power requirement akin to resting metabolism in biology which will put a lower limit on capacity. To continue the biological analogy that may not gives us enough muscle strength to cope with an emergency. For example suppose Adelaide and Melbourne both experience 50C heat in the same week with desals and aircons flat out. If the NEM needed say 40 GW of power then 3.5 GW of solar (whatever it is these days) won't be enough. We'll have to keep all those old coal and gas plants on standby and wear the cost.

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    1. Greg North

      Retired Engineer

      In reply to John Newlands

      And therein lies a few problems John for even with a power plant on standby, their reliance on many different but related functioning of plant will not mean that generation back-up would reliably be available.
      Even with everything working faultlessly, it does take time as in several hours at minimum if not days to get a coal fired boiler raising steam at the required temperature/pressure for turbines and then of course there will be the start up procedure for turbines themselves to avoid shock loading and metal fatigue etc.

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  5. Peter Ormonde
    Peter Ormonde is a Friend of The Conversation.

    Farmer

    Another excellent piece Mike, many thanks.

    Economic growth without energy, growth without jobs... all the old truisms seem to be failing us of late.

    Here at least where we continue to "de-industrialise" at an accelerating rate. Less so in China and elsewhere where they are doing the exact opposite... the places where we now ship our coal instead of burning it ourselves.

    Strange days indeed.

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    1. Greg North

      Retired Engineer

      In reply to Peter Ormonde

      It is called international competition Peter and you would have heard well before now of the cost of doing business in Australia, much as it can be in many countries in comparison to cheaper labour countries and there are quite a few of those about.

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    2. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Greg North

      Oh - I thought it was because Australians were too lazy and slow to be worth a decent wage... that too many sheilas in Parliament had wrecked the joint... that the Greens and the slavering socialists had tied the place up with red and green tape ... that we were "entitled" rather than lifting.

      It amazes me that economics is all so simple and obvious really.... makes one wonder how anyone could write a whole book on it let alone fill a library.

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    3. Chris Saunders

      retired

      In reply to Greg North

      Greg it's not all about labour costs as you would surely have realised by now. It's also about avoiding the race to the bottom. It's about sensible entrepreneurial investment in productivity increases, it's about being smarter. Can't see it at all in our captains of industry, can you?
      Now that the managers are in charge they want the easy ride of property investment, pre government owned monopolies and mining licenses and a government willing to supply them with just that.
      What we really need are risk takers and visionaries. Have you any of those you could trot out Greg?

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    4. Greg North

      Retired Engineer

      In reply to Chris Saunders

      It may not all be about labour costs Chris but it is cheaper labour countries where manufacturing heads to, even from northern Asian countries to Vietnam, Thailand, Malaysia and Indonesia and others to the west.
      Our Captains of industries recognise what is occurring and you may feel entrepreneurial investment is a solution and indeed it is for smaller manufacturers where international competition is not likely to occur to any great extent.
      Cheaper labour countries could also have less regulations on all sorts of industrial practices, enough being reported on from time to time.
      You could say that we do have visionaries who are realising that within their lifetime it is likely that they will do best in the resources sector and they get condemned for their risk taking.

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    5. Chris Saunders

      retired

      In reply to Greg North

      Another way of looking at it Greg is that higher profit percentages and lowering of tariffs leads to manufacturing heading off to other countries. Easy to blame low wages of poor countries, but when you are not a poor country, you look to other ways unless you have some vested interest to do otherwise.
      Our captains of industries saw this happening a long time ago and welcomed it each for their own reasons: too hard. Not true about smaller manufacturers, international competition impacts them.
      Yes…

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    6. Greg North

      Retired Engineer

      In reply to Chris Saunders

      It is not so much blaming the low wages of poor countries Chris but more accepting it as what is and will continue to happen with the international scene as it is.
      You might say it is not true about smaller manufacturers and yes there will be many caught up with the demise of auto manufacturing here in Australia though I was thinking of those smaller manufacturers not directly associated with larger ones; it quite possible that lots of smaller miscellaneous hardware already imported will remain to be imported but when you start talking of things like tanks, trailers, fencing and many other such areas which can be thought of as smaller manufacturers, importing is less likely though that could change with medium size fabricated items.
      Some peak oil claimants might subscribe to life including manufacturing being turned on its head once we have passed peak oil and are on a steep down slope, transport including international transport likely to be very affected.

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    7. Chris Saunders

      retired

      In reply to Greg North

      Not sure that it is the right path to just accept as what is, or rather what others are making of it and seriously wonder if they have the right justification for their actions and policies. I'm not sure that the present powers that be are on the same page as the rest of us, and certainly don't feel confident that they know better. There are always alternatives.Thanks Greg, interesting view, food for thought in all that.

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    8. Greg North

      Retired Engineer

      In reply to Chris Saunders

      You could be right about the present powers Chris and we need to look further than just those of our country for the whole movement of manufacturing is occurring because of WTO basics, the level playing field and all that even if it is decidedly unlevel.
      Australia has the option of placing massive tariffs on imports like we did many years ago to maintain local industries and then be ostracised by the international community or go with the flow and accept cheap imports and less employment opportunities…

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    9. Chris Saunders

      retired

      In reply to Greg North

      I wouldn't worry overly much about being ostracised by the international community, they seem to need us (or at the very, least our goodwill) at this moment of time more than we need them.
      I'm glad the previous government refused to go with the flow (Hayekian economics?) when the GFC hit
      Government policies which allow completely open access to global markets as in the gas industry can only push the price of gas up to world prices when countries like the US and China and our own little WA keep prices…

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  6. Greg North

    Retired Engineer

    Mike, re third graph, perhaps a reference to 2104 should be 2014 as elsewhere in the article.
    That aside, I do wonder whether the thought of a death spiral or as in " all you need to do is look at what is happening to demand for poles and wires electricity." is a little misconstrued.
    Is it not so much poles and wires electricity that has dropped off due to various demand issues but also the increased uptake of renewables and particularly home PV units that are supplying homes which will result in…

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  7. ernest malley

    farmer

    I never cease to be amazed at how our new toys eat so little of that lekricity stuff. Apart from a digital TV compared to a gargantuan CRT ("..breeding ignorance and feeding radiation.." thanks to GrandMaster Flash), I cannot off hand think of a single appliance or tool that doesn't usual use significantly less.
    In this vein, why do so many, if not all, of our toys, laptops, phones, those 'i' thingies etc need a transformer to step down 240v to 12 of less?
    Even lighting using 12 or 24v is adequate…

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    1. Greg North

      Retired Engineer

      In reply to ernest malley

      You will find ernest that step downs for appliances are for the smaller and/or mobile ones, there still being the larger energy users that will have the 240V .
      You could have a niche market though to wire up a house on 12or 24V and so why not try it?
      The one thing that does need to be remembered though is that whereas an energy load rating or demand is in watts and watts = volts by amps, you had better consider that too for with a low voltage and all those amps required, it could be the copper wire manufacturers that will love you.
      Yes, the Snowy and other hydro systems are good for storage even if the energy for pumping has to be obtained from somewhere and needs to be taken account of along with efficiency of pumping etc.

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    2. ernest malley

      farmer

      In reply to Greg North

      I specified 'toys', Gorg Nerth - all that new-fangled stuff so apparently indispensable to modern life.
      Of course I run my 8 bar heaters, halogen paddock lighting and blacksmiths forge off batteries.
      Why wouldn't I, after all they only cost a couple of bucks and can be bought in any convenience store or wait for them to be on speshal at the supamarts when one may acquire wholes cards of them even more cheaply, AAAs are my favs.

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  8. John Newlands

    tree changer

    On the two grids issue Sydney was at one stage enamoured with gas fired trigeneration
    http://www.smh.com.au/nsw/city-of-sydneys-lowemission-energy-plants-reckless-inquiry-20140328-35na2.html
    whereby heat, absorption chilling and electrical power were produced in a building basement. CSIRO were developing ceramic fuel cells for this application. Germany proposes rather than curtailing excess wind power that it is used to make synthetic 'green gas' via water electrolysis and methanation to go into the gas grid. That would be one form of renewable energy storage though perhaps wasting 80% of the primary input.

    We'll always need gas to fire bricks, cook in Chinese restaurants and fuel peaking power plant. Shame we're selling most of it overseas.

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    1. Greg North

      Retired Engineer

      In reply to John Newlands

      It could be about thirty years or longer ago now that BHP House in Melbourne, about twenty stories or so was constructed with its own energy generation such that if I recall accurately it was designed to be off grid though much dependent on gas
      A little bit on it here - https://urbanmelbourne.info/forum/former-bhp-house
      And I was being conservative for it was construction was finished in 1972 and should have known that for it would have been about then that I was with a group doing a tour, also 41 floors.
      http://www.walkingmelbourne.com/building468_bhp-house-140-william.html

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  9. Craig Myatt

    Industrial Designer / R&D

    I like this article...these are fantastic questions.

    My theory is this: we should be looking at three things:
    1. European models where network providers make money from promoting (not stifling) energy efficiency or distributed generation;
    2. Updating old coal fired plants as they have in Kogan Creek with solar thermal boosters, prolonging their lives. Possibly integrating new CSIRO supercritical steam from solar thermal technology;
    3. If Government actually own grids as they do in Qld, why not redesign them to adapt where the grid facilitates and compliments the shift to renewable energy, using smart grid technology, and where consumers can just connect to obtain "top up" power.

    CSIRO technology: http://www.energymatters.com.au/index.php?main_page=news_article&article_id=4338

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    1. Greg North

      Retired Engineer

      In reply to Craig Myatt

      There are already energy efficiency programs being run by various entities Craig, a lot of effort having occurred in areas like basic housing designs for efficiency, insulation, and well before the Pink Batts program there were taxation deduction programs for buying insulation materials and then you only have to have a look at appliances to see how they are all rated for efficiency and I can recall there have been subsidies offered for more efficient applianc es from time to time and more recently…

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    2. Craig Myatt

      Industrial Designer / R&D

      In reply to Greg North

      This is the type of smart grid I was thinking of:

      http://www.danishenergyassociation.com/Theme/SmartGrid2.aspx

      Identifying "efficiencies" like low wattage lights, insulation, etc is good, but the floated Danish model goes a number of steps further, creating new "roles" in electricity markets where customers can supply power, special new market players manage energy flows, and smart grid connected equipment (cars, buildings, generators) can respond in real time to fluctuating energy availability/demand. We have very immature thinking in the area of how to manage energy, and I think we should learn fast and look to implement some of their ideas...

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    3. Greg North

      Retired Engineer

      In reply to Craig Myatt

      Had a bit of a look at that Craig and whilst proposals and plans, identifying various issues etc. are fine as is rolling it all into a master plan if you like, take out much of what is mentioned and you will find that it is already happening to one extent or another in our different states.
      The opening paragraphs of the Danish report has comments such as
      " With the establishment of a Smart Grid concept
      comes an invitation to suppliers and other players to
      develop new solutions and products to support…

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    4. Craig Myatt

      Industrial Designer / R&D

      In reply to Greg North

      We do have disparate entities in the NEM. Perhaps that is a reason to keep some level of government control over the power system, as in Qld. My idea of citizen's benefiting from their own Grid, would literally be to adapt that grid so that the interests of the owners, say Queenslanders, were served by the design of the grid. What we are seeing, however, is what appears to be governments "fattening up" the grid (at least in qld) for what is likely to be asset sales. Seeing the grid as a source of income, rather than a public good to be exploited, is I think the difference between the Australian grid and the Danish grid: I get the strong sense that the Danes know and understand how to adapt the grid to exploit it for social purposes...exactly what government is designed to do.

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  10. Stephen James Rodgers

    Lawyer

    Fascinating Mike. I am surprised that the highly paid owners and managers of the Power and distribution companies could have failed to see this coming. I think one way that the power and distribution companies could protect themselves from the looming private storage led death spiral is to allow distributed producers to deliver power to the grid when their electricity usage falls below their production. They could draw delivered surplus back from the grid when their production falls below their usage…

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    1. Greg North

      Retired Engineer

      In reply to Stephen James Rodgers

      Not too many owners/managers have crystal balls of the quaklity you may envisage Stephen and if they did, they would likely be much richer.
      Owners btw do vary from state to state, with Victoria having fully privatised, and other states partially so.
      The power in power out arrangement you describe is much as it has been set-up for household PVs and for other producers and again the value placed on generation does vary from state to state re feed in tariffs and when they were established.
      The grid…

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  11. Steve Hindle

    logged in via email @bigpond.com

    A future trend that may save the NEM from the "death spiral" in prices may be the increased use of electric vehicles. It may take some time for this to have an effect as these vehicles are currently only a tiny percentage of the national car fleet however the technology is developing fast, as Tesla's new models demonstrate.
    Increasing our electricity usage by replacing fossil fuelled vehicles with electric vehicles will reduce our GHG emissions. This is still the case even when the electricity is generated by coal if it is taken at off peak times when the plants efficiency would otherwise be low. (Of course electricity produce from low CO2 sources would be far preferable)

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  12. David Martin

    Naturally talented sleeper and eater

    Hi Mike,
    What I don't understand is how are we saving all this electricity. Surely not from efficient light bulbs/LCD tele's instead of plasma's/solar PV's.
    Is it just that business, manufacturing in particular, is saying toodle-oo and heading off-shore or just quietly passing on?
    Is the NEM just the canary in the mine of the industrial/manufacturing/jobs landscape of future Australia?

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    1. Greg North

      Retired Engineer

      In reply to David Martin

      It's likely a combination of all you say David from pensioners huddling under blankets because of the cost of electrical heating, right through to industries going offshore though that has been occurring for a few years now and of course all that PV power being used by homeowners.
      I agree that the manufacturing industries outlook for Australia is rather bleak.

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  13. Erich Heinzle

    logged in via email @internode.on.net

    Governments are elected to manage issues of fundamental importance to public welfare and freedoms, such as the justice system, legislative systems, and to reduce collective risks to the population, with defence, sanitation, essential services and regulation of activities with the potential to harm society and the environment.

    As an economist would say, governments are elected to function as agents of the people who are, in effect, the principal.

    What we have seen of late is what seems to be an…

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  14. Alan Pears AM

    Sustainable Energy & Climate Researcher at RMIT University

    Mike, as usual an informative article. In the past, having gas as well as electricity created some competitive pressures: so hot water pricing was cheap. Also, electric technologies for space heating and cooking were unsatisfactory and often expensive. Now reverse cycle airconditioners (especially if there is a cooling requirement as well as heating), induction cooking and heat pump hot water allow electricity to outperform electricity from a user and cost perspective. PV, storage and energy efficiency…

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  15. Garry Baker

    researcher

    Interesting read, however it really doesn't get at the truth. To begin, there is no competition with electricity providers, neither at the wholesale level or at the retail end of supply. Consequently the long held notions of supply and demand driving prices, and the competition that should go with it are foolish assumptions, given the sky high prices for electricity these days . Indeed, untrammeled price hikes are the norm in a rigged market - Yes rigged

    THE electricity market is a complete…

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    1. MItchell Lennard

      Researcher - Distributed Energy Systems

      In reply to Garry Baker

      Thanks for another concise clear summary Mike.

      Firstly to the so-called 'death spiral'.

      The term death spiral is an interesting bit of corporate spin, created by the electrical supply industry to try and build a position with an inept , ill-informed government.

      Taking a step back there are two classes of businesses that are presently suffering. Firstly we have the owners of old cola fired thermal plants. They are suffering because they have increasing maintenance costs for ageing plant but their…

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  16. John Moore

    Engineer

    In Spain and Chech, they have legislated a solar (sun) tax to put back the lost funding to the grid and I'm guessing this is the logical next step for any country which has a large domestic solar base. But this tax then kills off the demad for solar.

    Iink...
    http://reneweconomy.com.au/2013/czech-follows-spain-in-deciding-to-tax-output-from-solar-power-49694

    There is a solar conundrum in the making !

    I think we need far more public debate on how we want this to play out. Energy policy which is driven by green ideology may have a worthy cause, but sometimes falls short of the idiot test. Unfortunately we seem to be running ongoing sessions of this test nowdays.

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  17. stib

    logged in via Twitter

    Sorry, no matter how good the article is, when I see graphs like the first one, I instantly become suspicious. That looks very convincing, in fact if you glance at it it looks like only a few years from now we won't need any power grid at all because the demand will have dropped below zero. But the data is not being represented truthfully, the size of the decline is being massively exaggerated by not starting at zero on the y axis.

    It should look like this. Much less dramatic, but this one is free of distortion: http://is.gd/orxlHj Now the "death spiral" looks like it could be part of normal variation. Make up your own mind without the deliberate manipulation.

    Massaging the facts to suit your hypothesis doesn't support your case, it just makes you look like a fraud. Please, don't insult our intelligence by fudging your figures.

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  18. Teresa Lennie
    Teresa Lennie is a Friend of The Conversation.

    Educator

    Doesn't this decline in electrical energy demand also reflect the significant reduction in the manufacturing sector in Australia over the last few years, not just the growth in domestic solar installations? Closing a smelter is a big reduction in demand that isn't replaced by anything else. Households are becoming more energy efficient, but we often displace the savings elsewhere in the home - think older lighting styles versus halogen down-lights and an expectation of brighter working/living areas after dark (not just reading by the light of a few candles anymore!) One older, relatively expensive to buy/run fridge versus several cheaper to buy/run fridges/freezers etc.

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  19. Chris O'Neill

    Retired Way Before 70

    "With average demand dropping almost 600 megawatts in the last financial year"

    But poles and wires aren't in the business of supplying average demand, they're in the business of supplying peak demand. So their charging ought to be based on peak demand. They are prevented from doing this by the spectre of the "old age pensioner with the air-conditioner".

    It's an interesting piece of imagery, the death spiral caused by the old age pensioner with the air-conditioner.

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    1. Greg North

      Retired Engineer

      In reply to Chris O'Neill

      An interesting belief that Chris though poles and wires are the connectors of the grid, there being much more to it btw and referrals to average or peak demands are really neither here nor there for it does not really matter what the demand level is at any given time, for without the grid no demand would be met.
      Regardless of demand and supply, the grid will always need operation and maintenance, overheads if you like that need to be met by consumers and then of course there will be expansions for load growth in particular areas if not totally as well as new infrastructure for renewables, those costs also ultimately to be met by consumers.

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    2. Chris O'Neill

      Retired Way Before 70

      In reply to Greg North

      "without the grid no demand would be met"

      So what does the "death spiral" mean if people still want to be connected to the grid? I'm sure the owners of the grid are not charities so if people want to keep using it then they still have to pay to use it one way or another.

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  20. Edwin Crump

    Masters Student in Public Policy at University of Sydney

    The electricity sector is starting to look like the post office when the internet started.

    I would love a way to decentralise power generation in rental/temporary properties. Small changes in lightbulbs, more efficient appliances and lifestyle can help, but significant change starts with inputs.

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    1. Greg North

      Retired Engineer

      In reply to Edwin Crump

      " The electricity sector is starting to look like the post office when the internet started. "
      There;s a bit more to electrical generation, distribution and use than a postman delivering letters to be opened Edwin.

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  21. Marc Personeni

    Renewables Enthusiast

    Great article,

    I would like to see it from another angle.
    What follows might be a bit controversial, so I like to say before hand that I put my actions where my thoughts are. I have always wanted renewables, so I did stop my career as nuclear engineer in France after just enough time to save money to study something else.

    If you check the Australian historical average prices here => http://www.aemo.com.au/Electricity/Data/Price-and-Demand/Average-Price-Tables,
    then it seems consumption decline…

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    1. Greg North

      Retired Engineer

      In reply to Marc Personeni

      Not too sure on your interpretation from those tables Marc for in most states after a step movement from 2005/6 to 2006/7 there is a bit of fluctuation down and up before a declining trend for a few years before an increase again.
      Those values are for generators I suspect as it mentions spot prices and they will vary more randomly than what our retail prices rise at.
      In 2014, electricity is more or less twice as expensive at it was in 2006.
      That may be true just as there is little connection to introduction…

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  22. Sean Douglas

    logged in via email @hotmail.com

    "The reduction in demand has clearly blindsided both industry and government,..." that's funny!!! Hadn't there been some talk for many years about the national plan to reduce carbon emissions (especially coal fired electricity) and increasing renewable energy use?

    I read a few months back a NEM report via TC of the impact of the carbon price on electricty use going down, ~3% or so, since it started and of course the ongoing take up for home solar systems & solar HW with big govt subsidies, and…

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  23. Timothy Walsh

    logged in via Facebook

    Nice article Mike,

    However, it would be good to see some more historical data to put the current "peak" into context. Also average demand per capita and per unit of GDP would make a more compelling case that this really is "peak electricity" in Australia.

    Cheers,
    Tim

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