Victoria’s electricity consumption has dropped and in real terms peak demand has been stagnant over the last four years (see https://carbonetix.com.au/gallery/a-surprising-analysis-of-victorian-electricity-consumption-demand/). Yet over this time electricity prices have increased.
One local government client cut its energy consumption by 34% between 2006 and 2011 at one of its larger sites, yet the amount it paid for electricity increased by 7%. Its average tariff went from 8.6 cents to 13.9 cents/kWh.
At the same time the average spot price for electricity on the wholesale market dropped from 3.4 cents/kWh to 2.9 cents/kWh. Renewable scheme energy charges (SRET, LRET) went from 0.09 cents/kWh to an estimated 1.3 cents/kWh.
The price increase and the components of this price increase are shown in the graph below. The sum of retailer and distribution charges has risen by 87%, and now comprises over 2/3rds of the charges.
Where price increases subsidise energy efficiency in buildings or more sustainable forms of energy generation I am in favour of such price increases, as this hastens our transition to a low carbon economy.
Higher prices can also be a driver for consumers to reduce their energy use, saving electricity. And when implementing an Energy Performance Contract higher prices mean that larger savings can be achieved within a given payback.
However the price increase added to electrons between the generator and the power point is extraordinarily high. The main argument for this is that the distribution businesses have needed to invest in more assets to cope with increasing peak demand. But weather-adjusted peak demand appears to be stagnant. So any investment has been into assets that may not be used, and may never be used as we now appear to be on a trend of decreased consumption and flat and potentially decreasing peak demand.
The Australian Energy Regulator needs to address this, and review the need for planned investments in network infrastructure. The billions that are being ploughed needlessly and inefficiently into network infrastructure that is unlikely to be used could instead significantly hasten our transition to a low carbon future.
In the meantime, what can be done about the high prices? Reducing energy use will reduce your electricity costs.
To reduce energy use mid to large sized energy users could consider implementing an Energy Performance Contract (EPC). You can typically expect to achieve guaranteed savings of 30% to 50% on a seven year payback. Smaller energy users could have an energy audit or energy assessment undertaken then take action on the audit, and also get very good savings. A valuable precursor to either of these actions would be to develop an energy management plan in order to get the corporate commitment necessary to make the investment needed to achieve substantial savings through energy efficiency.