Our Demand: Reducing Electricity Use in Victoria Through Demand Management
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Our demand: reducing electricity use in Victoria through demand management Akaash Sachdeva and Philip Wallis Report 10/4 August 2010 OUR DEMAND: REDUCING ELECTRICITY USE IN VICTORIA THROUGH DEMAND MANAGEMENT Akaash Sachdeva and Philip Wallis Page i Produced by the Monash Sustainability Institute The Monash Sustainability Institute (MSI) delivers solutions to key sustainability challenges through research, education and action. For government, business and community organisations, MSI is a gateway to the extensive and varied expertise in sustainability research and practice across Monash‘s faculties and research institutes. Our research covers the many areas of water, energy, climate change, transport and urban design and biodiversity as solutions are found in a cross-disciplinary approach of the social sciences, economics, law, health, science and engineering. August 2010 ISBN: 978-0-9806387-7-6 © Monash Sustainability Institute, 2010 To be cited as: Sachdeva, A. and Wallis, P. (2010) ‗Our demand: reducing electricity use in Victoria through demand management‘. Monash Sustainability Institute Report 10/4, Melbourne. Monash Sustainability Institute Building 74, Clayton Campus Wellington Road, Clayton Monash University VIC 3800 Australia Tel: +61 3 990 58709 Fax number +61 3 990 59348 Email: [email protected] www.monash.edu/research/sustainability-institute DISCLAIMER: Monash University disclaims all liability for any error, loss or consequence which may arise from you relying on any information in this publication. Page ii Acknowledgements The authors greatly appreciate the contribution of the many people who participated in our consultations for this project. These include the Essential Services Commission; the Consumer Utilities Advocacy Centre; the Californian Public Utilities Commission; and ClimateWorks Australia. Thanks also go to a large number of people with whom the authors had informal conversations about energy efficiency and demand management. Thanks go to Professor Graeme Hodge and Dr. Diana Bowman for early contributions to this project. The authors thank Peter Eben and Patricia Boyce of Seed Advisory for reviewing this report. The authors also acknowledge the support and contribution of Professor John Langford of Uniwater, Professor Dave Griggs and Dr Janet Stanley of the Monash Sustainability Institute and Anna Skarbek of ClimateWorks Australia. Page iii CONTENTS PART A. INTRODUCTION AND RECOMMENDATIONS ....................................... 1 A.1. Summary .................................................................................................. 1 A.2. Recommendations and targets ................................................................. 3 A.3. Introduction ............................................................................................... 5 A.4. Detailed recommendations ....................................................................... 9 PART B. DEMAND MANAGEMENT MEASURES ................................................ 14 B.1. Summary ................................................................................................ 14 B.2. Demand management strategies, methods and techniques ................... 15 B.3. Pricing..................................................................................................... 17 B.3.1. Pricing structures ................................................................................. 17 B.3.2. Consumer incentives ........................................................................... 22 B.4. Smart operating systems ........................................................................ 26 B.4.1. Metering ............................................................................................... 26 B.4.2. Direct load control ................................................................................ 27 B.4.3. Power factor correction ........................................................................ 28 B.5. Regulation .............................................................................................. 30 B.5.1. Utility incentives ................................................................................... 30 B.5.2. Efficiency ............................................................................................. 34 B.6. Behaviour change ................................................................................... 36 B.6.1. Influences on behaviour ....................................................................... 36 B.6.2. Strategies for behaviour change .......................................................... 37 B.6.3. Consumer information .......................................................................... 39 B.7. Conclusion .............................................................................................. 41 PART C. THE VICTORIAN CONTEXT .................................................................. 43 C.1. Summary ................................................................................................ 43 C.2. The Victorian electricity situation ............................................................ 44 C.2.1. History of economic reform in the Victorian electricity sector ............... 44 C.2.2. The current Victorian electricity situation .............................................. 45 C.3. Stakeholder analysis .............................................................................. 46 C.3.1. Industry ................................................................................................ 46 C.3.2. Victorian Government .......................................................................... 51 C.3.3. Federal Government ............................................................................ 52 C.3.4. Supporting and interest groups ............................................................ 53 C.4. Policies, Programs and Projects to reduce electricity use ...................... 55 C.4.1. The Victorian Energy Saver Incentive Scheme .................................... 55 C.4.2. Advanced metering infrastructure rollout .............................................. 58 C.4.3. Victorian Climate Change White Paper ................................................ 58 C.4.4. Emissions trading ................................................................................ 58 C.4.5. National Strategy on Energy Efficiency ................................................ 60 C.4.6. The National Framework for Energy Efficiency (NFEE) ....................... 60 C.4.7. Energy Efficient Homes Package ......................................................... 61 C.4.8. Green Loans Program (Green Start) .................................................... 62 C.4.9. Australian Carbon Trust ....................................................................... 63 C.4.10. COAG Agreements ............................................................................ 63 C.5. Institutional barriers ................................................................................ 65 C.5.1. Market failures limiting energy efficiency investment ............................ 65 C.5.2. Barriers to installation of energy-saving devices in households............ 65 C.6. Conclusions ............................................................................................ 66 PART D. REFERENCES AND GLOSSARY ......................................................... 67 Page iv Preface This research enquiry into demand management began as a project that linked the water, transport and energy themes of the Monash Sustainability Institute (MSI). MSI was invited to submit a working paper on demand management to the Australian Davos Connection Infrastructure 21 Summit, held in October 2008. The paper advocated a whole-of-system approach to managing demand in water, transport and electricity sectors, and proposed a set of demand management principles that drew on experience from the three sectors. Our main realisation was that the electricity sector has not yet made significant progress with demand management or efficiency, compared to the water and transport sectors, and would benefit greatly from development of a comprehensive strategy to reduce electricity consumption. This project received funding from the Helen Macpherson Smith Trust (under the title ―Improving the efficiency of electricity and water use in Victoria‖) in order to: 1) review best- practice demand management and efficiency measures in the electricity sector both in Australia and Internationally; 2) evaluate the ‗situation‘ in Victoria relating to electricity regulation, policy and industry structure; 3) to develop a program of electricity demand management measures for Victoria; and 4) to facilitate the uptake of this program. The scope of this project was originally to consider ‗improving the efficiency of electricity and water use in Victoria‘. Through our research we found that Victoria‘s urban and rural water sectors have become significantly more efficient over the past decade, and are on a trajectory to achieve even greater efficiency gains, simply because there have been strong incentives to save water. The factors driving this have included on-going drought, increasing population, an increase in water allocated to the environment and the threat of further reduced water availability due to climate change. The challenges facing Melbourne‘s water supply situation are detailed in a 2009 report published by the Monash Sustainability Institute, which includes recommendations