REWARD BASED TARIFFS TRIAL SUMMARY REPORT MARCH 2014 0 positive energy 1. The challenge Electricity costs have risen steadily in recent years. KEY FINDINGS A contributing factor to these increases is growth in • Participants reduced their usage during peak electricity demand at peak times, which was strong periods by an average of 19% on event days, over the period 2001 to 2006, but has stabilised with a slightly weaker response on the second in recent years. In proportional terms, demand day of consecutive events. has increased significantly more than energy consumption. This is illustrated for South East • Trial tariffs provided reductions of around Queensland in Figure 1. 0.2kW to 0.4kW per household. These reductions were in addition to those achieved Household consumption accounts for less than from load control via retail economy tariffs. one-third of total electricity use but has important implications for peak demand mainly owing to the • Participants did a range of activities to growth of residential air conditioning. respond on event days - they were generally more careful about their electricity use and commonly shifted consumption to after 8pm. Demand management is one of • Reductions came from households of the mechanisms being used to all demographics, incomes and energy address this challenge. consumption bands. • Response to time-of-use under the Demand management involves using price and non- Consumption tariff was small - the greatest price measures to reduce customers’ use of electricity increase in proportion of night time use was during peak demand periods. Currently there are over 4% in Cairns. one million customers, both residential and business, • The majority (89%) of Participants reported an participating in Energex and Ergon Energy’s long understanding of peak demand, and a small running hot water load control programs. Other active reduction (1.8%) in peak period usage was residential demand management initiatives include observed even on non-event days. pool pump and air conditioning load control programs. • Most participants easily understood the tariffs A number of international and national studies have and favoured state-wide implementation. identified that time varying tariffs can be an effective tool in managing electricity demand at peak times. However, the question remained, were these findings applicable to the Queensland situation? Would Improving the utilisation of someone experiencing winter in Toowoomba respond network assets and the in the same way as someone living through the affordability of electricity for tropical Cairns summer? customers is the challenge ahead for distributors. FIGURE 1: SOUTH EAST QUEENSLAND PEAK DEMAND GROWTH (ENERGEX) 60% 50% 40% 30% 20% Percentage Growth 10% 0% Year Energy Sales Growth Recorded Peak Demand 1 Reward Based Tariffs Trial – Summary Report March 2014 2. The trial To find out, Energex and Ergon 2.1 Objectives of the trial Energy conducted the most The RBT trial had five core objectives: comprehensive tariff trial 1. Create community awareness and discussion in Queensland. around alternate electricity pricing models. 2. Improve understanding of customer attitudes towards alternate electricity pricing models. Commencing in January 2011 and running for 27 months, around 3,700 households in three different 3. Understand the actions taken by participants in climate zones volunteered to be involved in the response to the alternate price signals. Reward Based Tariff (RBT) trial (refer to Figure 2). 4. Use trial findings to guide Queensland distribution network policy development regarding further network pricing models. 5. Estimate the network benefits that can be attributed to new models. This report meets the first four objectives. The analysis required to meet the last objective is outside the scope of this report. FIGURE 2: MAP OF TRIAL AREAS 200km 1---1 •CAIRNS l'OIJW00!.1&11. -, Si!J □ 'I' AID, TOOWOOMBA • •BRISBANE March 2014 Reward Based Tariffs Trial – Summary Report 2 2.2 Trial design Event days To ensure confidence in the trial findings, expert Event days were the days each year on resources were consulted for both the trial design which participants were asked to respond and statistical analysis. Queensland University of by reducing their electricity consumption Technology (QUT) was engaged to provide the between 4pm-8pm. A total of 15 event days experimental design for the project, ensuring internal were called per year and participants were and external validity of results. Deloitte was engaged notified a day in advance. Event days were to provide advice on the appropriate statistical SUMMARY called based on temperature, with hotter analysis as well as verification of the results reported. than average days called in summer and colder than average days called in winter. At commencement, a total of 3,104 households were enrolled in the trial. Additionally 611 2.3 Consumption group households were used a The Consumption group trialled a combination time- of-use (TOU) and dynamic peak pricing (DPP) tariff Control group. that consisted of a day rate, a 20% cheaper night rate and a peak rate. The day rate was the same as the For the trial, households across the regions were default residential tariff. The peak rate only applied randomly allocated to three groups, the Consumption on event days. On event days, the peak rate applied group, the Capacity group and Control group. if their electricity usage exceeded a threshold during The trial locations were chosen to represent the the 4pm-8pm period. Three different peak rates were more extreme climate zones in Queensland and trialled. These ranged from 5 to 8 times the usual households were recruited to ensure the trial sample electricity rate. Refer to Figure 3. was representative of the general population. In The group started the year with a performance bonus this report the Consumption and Capacity group of $75 that was increased to a maximum of $125 or collectively are referred to as participants. decreased to a minimum of $25, depending on their performance against the trial tariffs. FIGURE 3: CONSUMPTION TARIFF STRUCTURE Event Days - Dynamic Peak Pricing HOURLY KWH CONSUMPTION TARIFF RATES (24 HOURS) Multiplier x T11 4.5kWh MIDDAY 4PM Multiplier x T11 Day T11 rate 2.7kWh Peak T11 rate 8AM 8PM Night 20% discount 0 4 - 5pm 5 - 6pm 6 - 7pm 7 - 8pm 4AM MIDNIGHT The DPP rate that applied beyond the threshold • 2 tier low – Each hour where the total hourly varied as follows: consumption exceeds 2.7kWh is charged at 5 times the Tariff 11 rate. • 2 tier high – Each hour where the total hourly consumption exceeds 2.7kWh is charged at 8 • 3 tier high – Each hour where the total hourly times the Tariff 11 rate. consumption exceeds 2.7kWh is charged at 5 times the Tariff 11 rate, or 8 times the tariff rate if hourly consumption exceeds 4.5kWh. 3 Reward Based Tariffs Trial – Summary Report March 2014 2.4 Capacity group Capacity tariff The Capacity group was asked to limit consumption In the first period after Kate entered the below a threshold between 4pm-8pm on event days. RBT trial, there was one event day. On this At all other times the default residential tariff applied. day Kate's consumption between 4pm-8pm The group started the year with a performance exceeded the threshold of 4.5kWh for two bonus of $75 that was progressively reduced (to a of the four hours. Her performance incentive minimum of $25) if they exceeded the threshold on at the end of the period is calculated as: an event day. Refer to Figure 4. SUMMARY $75 - ($2.50 x 2 hours) = $70 FIGURE 4: CAPACITY TARIFF STRUCTURE 350 DAYS OF THE YEAR 15 MAXIMUM DEMAND DAYS PER YEAR USAGE USAGE Unlimited demand – Threshold limit applies 4pm-8pm No restrictions on usage If customer exceeds threshold, incentive is reduced threshold limit 4.5kWh 8am 8pm 8am 4pm 8pm “ON PEAK DAYS WE’VE COME IN UNDER THE LIMIT BY CHANGING OUR HABITS.” March 2014 Reward Based Tariffs Trial – Summary Report 4 2.5 Control group Analysis was only conducted on those households that completed the entire trial and for which there Control groups were enrolled in each region to was a complete demographic data set (2,228 provide a benchmark to compare the response from households).1 The trial analysed consumption on the the Consumption and Capacity groups. Following default residential retail tariff (Tariff 11) only, and did installation of the meter and payment of their sign- not look at consumption on retail controlled load tariffs on incentive no further contact was made with these (Tariff 31, 33). Households with solar photovoltaic households during the trial. (PV) systems and customers with a medical condition that required the use of life support equipment were 2.6 Trial operation excluded from the trial. Remotely read advanced electronic meters were FIGURE 5: DATA SOURCES FOR ANALYSIS installed in all homes. These installations were required as interval meters for residential customers Electricity Participant Climate are not commonly used in the Queensland market. Consumption Data Cumulative pre-trial data Information Bureau of & interval data during Enrolment data Meteorology Participants were issued with trial performance trial by National Metering Annual survey data forecasts statements throughout the year to help them track Identifier (NMI) their usage, and a performance cheque was given at the end of each year. Refer to Image 2. The value of the performance cheque varied based on their RBT Trial performance against the trial tariffs. These were Data set issued separately to their normal electricity bill which was issued by their electricity retailer. A range of statistical tests and analytical methods A survey was conducted at the end of the first and were used to determine participants’ response and second year of the trial. The survey provided insights how this varied with weather, demographic attributes into what participants did as well as their perceptions and location.