It’s not carbon taxes but peak demand that has caused electricity tariffs to increase.

Politically, the electrical transmission and distribution sector was accused of ‘gold plating’ – without recognition that without the ‘gold plating’ power quality would deteriorate. And now you’re paying for it; however, a power quality check-up can materially reduce your electricity bill.

Saving on energy we all understand – limit the kilowatt-hours and lower the electricity cost. The means for reducing consumption have been well documented.

No rocket science is involved – LED lighting, people movement detectors, building management systems (BMS), reducing stand-by power and engineering examples like make-up air in HVAC (heating, ventilation and air-conditioning), preventive maintenance on compressors, condensers and more all help.

So let’s assume all the above measures have been undertaken or are in the process of being actioned. What more can be done?

The answer is plenty – and not necessarily immediately involving capital expenditure (CAPEX). Next, we’ll get to the interesting relationship between power quality, energy and the cost of electricity.

Irrespective of the percentage of cost or profit margin electricity represents in a business, any future proofing strategy you may pursue must take the facts shown in this graph into account.

The graph shows demand in gigawatts for Australia in summer (orange) and winter (blue) for the past 17 years. The fact is that the gigawatt-hours have been close to flat lining because of the closure of industries, as well energy saving measures, and the influence, albeit modest, of solar and wind power.

Demand, the instantaneous stuff as shown in the graph, has peaked but even though lower since 2008/2009, it is still a big headache for poles and wires folk. That is because they need to spend big CAPEX dollars to maintain reasonable power quality (in the first place think of voltage) in the face of peak demand – and peak demand has continued to grow.

Note that the graph shows average values over winter and summer periods and not what happens when, for instance, within minutes extra HVAC switches in. Again, it’s not carbon taxes but peak demand that has caused tariffs to increase.

The cause may have been politically ascribed as ‘gold plating’ by the transmission and distribution industry, but that was without recognition that with no ‘gold plating’ power quality would deteriorate.

What does energy in kilowatt-hours have to do with peak demand and power quality?

So your electricity meters are racking up demand charges that are not necessarily yours. Therefore, we will short circuit the electrical engineering and head for the meter room. You will note that the meters are electronic – no more revolving discs. These meters not only measure your kilowatt-hours, but also your demand in 15-minute blocks in kilovolt-amps (kVA) and this appears on your bill as a separate monthly charge.

The kVA tariff is there to help the poles and wires company amortise its ‘gold plating’ investment. If you can get your kVA down to equal the kilowatts, the chances are you will not cop an additional charge. In practice, however, that is not possible – on the other hand, reduction of demand is entirely possible.

Next is your power quality, which I have already mentioned as having constant voltage. Again avoiding lots of technical babble, back in the 1950s and earlier there was a thing called ‘voltage distortion’, which was close to a meaningless term – not so these days.

Also, back then, the days of bar heaters under desks, the current drawn by a typical consumer, was also without much distortion, if any. Distortion, or harmonics, increases the kVA demand, and it is a critically important factor of power quality. Modern meters do a good job on the task.

Today, though, the current drawn by your building can have significant distortion.

Power quality is affected by useless ‘froth’

This can cost your organisation even though you are not the cause. You can think of distortion, which is caused by just about anything that is plugged in, as useless froth on your drink, but you pay for it nevertheless. That is to say, you pay for it as a result of the meters being able to measure it.

This was not the case 30 years ago. The only kVA demand measured then was basically the additional kVA that had to be catered for because of loads like electric motors.

But there’s more. Your neighbours – and even the poles and wire people themselves depending on where you are located – are preventing you from getting voltage without much distortion.

The result is that the meters in your premises increase the demand kVA, not only by the distortion ‘froth’ your installation creates, but also the stuff that you are not able to do anything about because it is being supplied to you.

What to do?

The short answer is that if you have significant power bills, spend a few dollars to have a proper, extensive power and power quality analysis done. It’s a necessary condition for saving more on power than you are already doing.

It is the only way to have a meaningful chat with your electricity supplier and to get relief on tariffs, but – and it’s a big but – you need hard facts. The power and power quality analysis will also reveal where investment in hardware with good pay-offs in terms of reduction in energy bills can be made – no guesswork but a solid base for future-proofing investments for your business.

Melbourne University undertakes voltage optimisation » Energy and Power Voltage StabilisationThe University of Melbourne has installed a 1150-kVA (kilo volt ampere) voltage optimisation unit for the mechanical services supply of its Law Building.

The decision was taken after the university conducted 100 hours of research into voltage optimisation (VO). The expected savings from VO arise from the fact that voltage levels can vary by as much as 30 volts a day, which results in excessive energy consumption and higher than necessary electricity bills.

Harry Troedel, sustainability manager Implementation, Property and Campus Services at the University of Melbourne, says the electricity savings gained could be more than 12 percent per annum.

“The energy efficiency of VO systems means that because we are consuming less energy, we are reducing our carbon footprint and carbon dioxide emissions, which is good news for the planet,” he says.

The system installed would supply voltage at a constant level regardless of input instability.

“So even if voltage to the site fluctuates dramatically, which could lead to equipment failure, it will ensure the electricity supply remains at a stable and secure level plus or minus 1.5 volts,” he says.

“This minimises the risk of equipment failures, a benefit not offered by simple VO systems. Also the voltage can be adjusted at any time if required.”

The VO system also provides exceptional stability to protect against spikes and surges, which also eliminates harmonic distortions and thus provides added protection and improved power quality.

This can result in an improved life expectancy of site equipment and reduced maintenance costs.

With Australian electricity prices amongst the highest in the world, more and more households are going solar. The big power companies say the Renewable Energy Target is undermining their businesses and they want it wound back. The federal government agrees, so who is to blame for the high price of power? Jess Hill investigates.

Never has it been more expensive to turn on our appliances. In the last few years, our power bills have doubled, making Australia’s electricity prices some of the highest in the developed world.

Prime Minister Tony Abbott blames two things: the carbon tax and the renewable energy target. He says the government’s review of the target will look at its impact on bills, because ‘renewable energy targets are significantly driving up power prices right now’.

From the coal-fired power station point of view, you couldn’t have a worse competitor, because solar is at its best when the market is at its most profitable.

Richard Denniss, executive director of the Australia Institute

But Mr Abbott’s claim that the renewable energy target is expensive is not supported by the data. The Australian Energy Markets Commission says the renewable energy target adds four per cent to the average electricity bill. For an average household, that’s about a dollar a week.

‘For all of the attention that carbon price has got, from the increasing attention the renewable energy target’s got, the main reason that electricity has been getting dearer is the overinvestment in poles and wires, and the fundamental inefficiency in the way that the national electricity market’s working,’ says Richard Denniss, executive director of the Australia Institute.

Federal Treasury estimates that 51 per cent of an average household bill is spent on network costs. Most of that is going towards paying off the $45 billion network companies have spent on updating our poles and wires over the last five years.

This investment was justified by the network companies’ own data, which showed that Australia’s energy demand was going to increase dramatically. But in 2009, just as they were beginning to spend, something unprecedented happened. Energy demand in Australia didn’t go up—it went down. And it’s continued to go down every year since.

Despite the clear reality of falling demand, the network companies insisted that demand was rising, and they carried on investing billions of dollars into the grid. Every dollar of that investment is now being recovered from consumers, via our power bills. Every dollar, plus ten per cent—a guaranteed return granted to them by the regulator.

In 2012, three years after the spending began, the Senate held an inquiry into electricity prices. It was chaired by Labor MP, Matt Thistlethwaite.

‘What we found was those network businesses—that earned the most profits were the ones that invested the most,’ he says. ‘So there was a perverse incentive in the system for an overinvestment in the poles and wires, and that led to dramatic profits for those businesses, but of course it was the consumer that paid for that cost of that additional capital.’

Mr Thistlethwaite says that the inquiry was presented with many examples of infrastructure being built where it wasn’t needed. ‘We discovered a network business that had invested $30 million in a substation in Newcastle, and I actually visited the substation. It wasn’t connected to the grid. The reason why it wasn’t connected to the grid; when the decision was made a couple of years ago to invest in this particular piece of infrastructure, it was projected that the demand would be there. But the demand didn’t eventuate.’

Energy analyst Bruce Mountain from Carbon Market Economics says that although some old infrastructure needed updating, the amount of money wasted on the poles and wires was substantial. ‘I would estimate as an aggregate across the national electricity market, perhaps at least a half of that total spend was not actually necessary, but it does vary by state.’

The staggering rise in electricity prices brought on by this investment has had a rather unintended consequence. ‘Because the price got so high, it made solar even more competitive from the customer’s point of view,’ says David Leitch, a utilities analyst with UBS. ‘Because when you use the solar in your house, you don’t use the wires and poles in the system, so you’re eliminating half the final price.’

The fact that households with solar can save more than half on their power bills has made solar panels an economic choice, not just an ethical one. There are now 1.2 million households getting their daytime power from solar panels.

‘It’s essentially turning households into competitors of the electricity companies, because all of a sudden households are producing electricity, and they’re deciding what to do with it,’ says Mr Leitch. ‘As opposed to just having a choice of take it or leave it from your friendly electricity retailer.’

This article represents part of a larger Background Briefing investigation. Listen to Jess Hill’s full report on Sunday at 8.05 am or use the podcast links above after broadcast.

Solar rooftops are wreaking havoc on the traditional power industry, says Mr Denniss, because they produce the most amount of energy at the time of day when the power industry makes the most money.

‘Solar panels have got this great trick, they make lots of electricity when the sun is shining; that’s when we like to turn our air conditioners on,’ he says. ‘When everybody turns their electricity on at four o’clock on a hot Thursday afternoon, we have enormous demand for electricity for these short periods of peak demand. And that’s when solar panels are at their best.’

‘Solar panels are actually pumping quite a large amount of energy in during these periods of peak demand, and that’s pushing down the peak price. Now that’s great for everybody, except the so-called baseload power stations. Because the baseload power stations used to be able to sell their electricity for a much higher price at four o’clock on that hot Thursday afternoon. From the coal-fired power station point of view, you couldn’t have a worse competitor, because solar is at its best when the market is at its most profitable.’

What that means is that the big coal-fired power plants are earning less for the energy they produce. That’s because Australia has more electricity than it can use.

That’s a big problem, says the federal industry minister, Ian Macfarlane. ‘We’re facing an enormous challenge in terms of an excess generating capacity in electricity in Australia. To be adding large quantities of generation into that situation has to be questioned. The review process will go through those things.’

With energy demand going down, and renewable energy supply going up, Australia simply doesn’t need as much power from fossil fuels anymore. In the last few years, several large coal-fired power stations have been shut down or mothballed.

‘Australia doesn’t need more generation; if we have more wind at the moment, it will displace some other form of generation,’ says Mr Leitch. ‘So no-one wants to be displaced in this world, and we can all understand that.’

That’s one of the reasons why the conventional power industry is lobbying the government to wind back the renewable energy target—known as the RET. The Energy Supply Association of Australia, which speaks on behalf of the conventional power industry, says that now demand has gone down, 41,000 gigawatt hours will represent around 30 per cent of Australia’s energy supply, rather than 20 per cent.
‘The conditions under which the RET was designed no longer exist, and we think the RET is broken and can’t work in an oversupplied market,’ says Matthew Warren, the ESAA’s CEO.

But there has already been a review. At the end of 2012, the Climate Change Authority reviewed the target and recommended that it be maintained. Their review was supposed to provide certainty to the renewable energy industry.

The chair of the Climate Change Authority is Bernie Fraser, a former Reserve Bank governor. He says that just by holding another review, the government has ensured that the 41,000 gigawatt-target won’t be met. ‘Investment is actually being cut back and delayed, and I think because of that, I think it’s apparent now that the 41,000 gigawatts for large renewable energy power plants, is not going to happen. It’s going to be a lesser figure and I think that’s what the opponents, the critics of renewable energy want to see.’

‘Policymakers need to look beyond short-term economic considerations in the interests of some of the big companies to longer-term community interests. And that’s what governments are supposed to do, but unfortunately it’s not happening at the present time,’ he says.

So it’s a bit… well, it’s more than a bit, it’s very disappointing that we’re falling behind, and we are falling behind what many other countries are doing.’