New technology and paying for power

The Electricity Authority (EA) has just issued a new consultation report on the implications of evolving technology for pricing of electricity distribution services, in other words how you pay for your local lines. This isn’t some far-away future: new technology like solar is already changing how we use and consume power and I welcome the conversation because there are real issues to talk about.

Solar panels, electric vehicles, smart appliances, energy efficiency, and batteries are all rapidly changing the electricity system and the industry finds itself at a cross-roads. If they approach it wrong, their customers will desert them. The international research raises the spectre of a “death spiral” as customers drop off the grid like dominoes, leaving the industry with billions of dollars of stranded assets.

The EA’s consultation report is downright gloomy on solar, raising some inaccuracies and red herrings as arguments. The main arguments are the old ones: solar doesn’t produce at the peak demand (think, winter evenings) therefore it’s a wasted investment, lines charges are subsidised by non-solar consumers who use more power, and solar could be detrimental to higher renewable electricity generation.

Before I address these points I’d like to look at the EA’s overall objective from this report and why they are publishing it. The way the report is written is focused more on protecting the industry’s established ways of doing things from changing technology, than it is on the possible benefits to consumers.

It’s clear the old-fashioned electricity industry sees people producing their own power as a threat to their business models and, for lines companies who are distribution monopolies, the billions they have invested in assets and $2.8 billion they earn in revenue. The EA should see their role not as protecting an industry where power is pushed one-way down wires from big centralised generation sources, but to support the transition to a new energy paradigm that sees consumers also as producers, or prosumers, and a smarter two-way power system.

I’ll wager that most people spend a total of five minutes a year thinking of power stations, poles, and wires, but actually dozens a times a day they think of using electricity. No one ever wanted an electricity industry – they wanted reliable and affordable electricity and we should focus on energy as a service and not just energy as an industry.

The EA, like much of the electricity industry, isn’t a fan of solar. Their argument is that solar homes use less or no electricity during the day but still at night and, since they are charged a per unit of electricity rate, they aren’t pulling their weight to pay for the grid at its expensive peak, therefore other consumers are picking up the slack. Now you could say this about anyone who only uses electricity at the peak because their hot water is on a timer, or they turn everything off while they are at work, or that insulation retrofits and energy efficient appliances use less power therefore they are being ‘subsidised.’

The analogy is saying someone who only drives their car on the motorway at peak traffic and bikes the rest of the time is subsidised by other motorists. Calling this a subsidy is an absolute red herring and, frankly, playing politics. It’s not solar customers’ fault the industry picked this pricing model. I’ve called for years for more dynamic, real-time price signals, particularly focused at peak demand times. The industry has ignored this for years but now they suddenly decry solar customers for not following peak price signals.

The EA consultation document goes on to describe solar as an inefficient and wasteful investment because it’s more expensive than large scale hydro, wind, or geothermal. Again, this is comparing oranges and lemons. Sure, solar on a per unit basis is more expensive (not as much as their out-dated calculations say, mind you) than the Manapouri power station but show me a consumer in New Zealand who pays the 8c/kWh average of large scale generation?

Solar has no input costs, and no transmission or distribution costs once installed so to compare apples with apples we should look at the real price consumers pay for grid electricity. That’s around 26c, and significantly higher in some regions, which is plainly more expensive than solar.

Kiwis are going solar in record numbers because of record high power prices and record low solar costs and they want some independence from the electricity industry. They literally are voting with their feet and spending their own money because it is cheaper than the power bill that keeps going up so it’s a red herring to say it’s a wasted investment. It may be uncomfortable for the industry and maybe even inefficient for the big power companies, but for many homes and families it’s a brighter option.

Lastly, the EA argues that solar doesn’t reduce emissions because it doesn’t produce at the peak demand, but this totally ignores the reality on the ground. Currently it’s pretty hard to choose to use 100% renewable electricity in New Zealand, with an average rate around 80% and only one retailer, Ecotricity, offering a fully renewable option. At least with solar you know it’s 100% renewable.

Solar as a clean energy is great for other renewables. It allows hydro water to be stored and saved during the day to be used at the peak, and it wastes less power pushing electricity down the lines, so less needs to be generated.

Research suggests that solar customers change consumption patterns to use less power at peak times. Most solar customers change their usage patterns to do things like heat their hot water or do the washing during the day when the sun is shining so they are actively reducing their peak consumption. Add in the new Tesla Powerwall and battery equivalents and you have solar providing even more grid benefits. This was all ignored in the report. Solar customers should receive bouquets not brickbats from the Authority.

I think it is true that if you connect to the grid and expect reliable electricity, you should pay your fair share. I doubt many people would disagree with this. The peak period in particular needs greater attention because that’s when the highest costs and carbon emissions are created. Currently there are no incentives to reduce demand at the peaks which is where the big national savings are.

Take my family, for example. As a regular consumer it costs the same for me to turn the energy-hungry clothes dryer on when power is cheap as it does at its most expensive during the congested peak time. Encouraging consumers to use more electricity and ignore the peak has helped keep electricity prices high and lines companies gold-plating their assets. Blaming solar for an industry-wide problem isn’t the solution.

Looking at the pricing structure for lines networks in the way this report does, the solution implied is greater fixed costs – a per day, not per unit, electricity rate. This is not the right solution and it sends a terrible message. As electricity consumption declines, be it from insulation, energy efficient appliances, or solar panels, the per-unit charging system brings in less income so the industry would love to move to a dollars-per-day model. If we went down this path there would be little incentive to, say, turn off the lights or reduce consumption, especially at the peak which should be the big focus. Even if someone used less power they’d still be paying the fixed amount and opening similar power bills. Fixed costs keep income rolling in for the industry no matter what actions consumers take but Kiwis want more information, choice and control not less.

A smarter way to think about it would be to give Kiwis the choice of paying the real time price of electricity or per unit rates that vary at different times and could be more expensive during the congested peak, reflecting the economic realities. This way, anyone who reduces consumption from efficiency measures and solar would see the benefits of their personal investment while also contributing fairly to the grid when they use it.

What I care about is cheaper, cleaner, smarter energy for Kiwis not maintaining the asset value of the lines monopolies or super CEO salaries and super profits for the industry.

If the EA wanted to help consumers and reduce prices they should instead ask why we have 29 separate distribution monopolies all duplicating IT, administration, and billing systems or the accounting model that encourages additional infrastructure to boost asset values and therefore costs. If the Authority wants to investigate subsidies they would question the National Government’s law change around providing lines to rural customers. One rural lines company I’ve heard of paid out $800,000 over two years to supply power to a far flung hunting lodge when solar and batteries would have been so much cheaper.

There are some good questions in this report, but very few good answers.

 

31 thoughts on “New technology and paying for power

  1. Radio transmitters in the home, yeah hmmm. That frequencies are we talking about? Cell phones are up there with cigarettes. The health of our pineal glands is not yet on the radar of the scientific establishment. Like the aim of spiritual growth, it’s as if the subject doesn’t yet officially exist.

  2. Before opting in to having a smart meter installed , be aware that they emit radio frequency radiation. If you rely on receiving radio communications then be very wary of smart meters somewhat dirty signals with poor harmonic suppression and filtering. The communicators use in some installations are even worse transmitting EMI or wide band radio frequency emissions. The junk has not been distributed through the country so your neighbours smart meter may interfere with your radio device reception and in some cases completely wipe out signals you wish to receive.

    Also some people appear to be sensitive ( or hypersensitive) to EMI reporting negative health side effects. This aspect of smart meter information is not put out for public discussion. Type approval for transmitting devices like these meters is not done for each meter so initial approval with presented units opens up the way for manufacturers being left to meet those standards. This has been shown to be a conflict of interest situation relying on profit makers to be “regulators” of quality. Hardly likely to work and it doesn’t.

    I have taken this up with local installing agents and found they had no equipment to test the meters and communicators. After presenting evidence of broadband radio interference from meters they withdrew them from the area concerned but nationally the problem is proliferating with the private sector accepting no responsibility for the RF noise produced. It will become a bigger problem as we rely on radio frequency receiving devices for and increasing variety of applications.

  3. If we are to cut back on fossil fuels, we will need to move virtually all of our stationary energy usage onto renewable resources, and the easiest way to do that in many cases is via electricity. We need to stop burning coal, gas and oil for heating and steam. We should also move to electric smelting rather than coal-fired blast furnaces. This means that we will need more electricity generation, but in New Zealand we have the wind resources to do so renewably. We will need a good grid to link those resources to where we need that energy, and good storage to cope with periods of low wind. Fortunately we already have a reasonably good grid and significant amounts of hydro storage, but we will need more peak storage power capability and more transmission lines. The good news is that both have long lifetimes.

    Trevor

  4. Money has become a tool of power through unscrupulous cartels who control Govts like ours and are ruthless in demolishing any suggestion of opposition.
    They rigorously enforce banking as only their domain.

    A simple outline of some basics.

    http://positivemoney.org/issues/democracy/

    Wealth is produced by Labour not financial manipulation which is parasitic.

    Already in NZ the banks have ring fenced all the prise mortgage and other like assets they hold as security, into off shore hands so if the banks go under because of their systematically feeding the wealth they suck out of our society to of shore security out of reach, then all those assets will not be available to cover liquidation processes. Our Govt was warned only months ago but they passed regs allowing this practice.

    Also your bank deposits will be at risk as the Govt will not guarantee them beyond a pitifully small sum and that is open to change with on the spot in house regulation.

    Self reliance for food is a big question. This is a concern for many globally. should / when systems crash, starvation will be real for many because they have been made reliant on a system of trade involving private ownership and control on an unprecedented scale. How does a city get fed.

    Coro you mention spiritual growth and that may be what we all aspire to but most find it hard work amid our present culture with few inspirational models to lead.

    Tinytech is a small Indian company producing simple machinery to support rural harvesting. Suitable for low tech application and with minimal fossil fuel or grid association. India has some noteworthy models for common sense reflection on life. I think there is some relevancy here for us
    .
    http://www.tinytechindia.com/mahatmagandhiviews/oncitiesvsvillades.php

    The cooperative enterprise on a local scale has a greater power to support and nourish that a profit taking system for the benefit of others.
    For example

    http://www.radionz.co.nz/national/programmes/sunday/audio/2358378/ideas-the-cooperative-economy

  5. The Canadian Greens have been toying for years with interest-free banking. This article about the reform group “COMER” may give a guidance. Public Banking is a new technology which would bring more than solar. http://www.globalresearch.ca/the-case-to-reinstate-the-bank-of-canada/5430132

    Policy wise: Smart meters, plus protect market from exploitation by monopolies. (I think that the heart of it right there, as market should solve other issues) Environmental consent support for wind turbines, especially important in next 30 years. Water projects are great, if local play along, but unless we are making aluminum etc, then we don’t need much more electric, until electric vechicles come strong, perhaps in 5-10 years already. Some gas burning for electric is good for stability to our economy and geopolitics. So I’m ok with Huntley on gas for the next 20-30 years.

    Policy to support conversion from petrol, to more liquid compressed gas vehicles in the next five years. To compressed hydrogen vehicles in the next 5-20 years. Hydrogen and electric technology can develop parallel. Water its self offers more potential uses than we recognise in our “school-science” system. Better use of sacred geometry in crystals will bring big on energy storage etc. Especially carbon matrixs with noble metal catalysts in next 10years. Wind and water power will be more important than solar or bio-fuel in NZ. Third generation bio-fuel may be good, but depends a bit how well hydrogen technology develops. “Bio-fuel” is fuel for healthy soils, so might be better in the ground as humus. But algae technology will have a fad probably in next 10 years already, but not sure this will be needed in NZ til later. Fuel our space race 🙂

    So with a plan to get the deck chairs tidy, we can get back to “public banking solutions” You guys are keeping up with Jane Kelsey? Her book Fire Economy outlines the basic situation well. But look to COMER for real policy practicals. Peace, Love n Forgiveness, Brothers and Sisters.

  6. SolarCity is suing a power company in the States for doing what the EA suggests. They call it anti-competitive conduct. SolarCity operates in New Zealand.

  7. The dysfunctional financial cartels haven’t full collapsed yeah, but is this a black swoon event. The World Bank (whistleblower) K Hudes says the deals have already been signed. So there is a replacement currency with gold backing, which now holds up the world system. As the US petro-dollar is obviously on the way out.

    The banks here where creating companies to handle the asset sales for the mass insolvencies, but the new companies haven’t found business. (I think the banks where planning on an October2015 crash, but is was just too well known. The banks have lost control of the demolition! Good guys are winning? The banks must go bankrupt before the companies. This is fair, as then assets can be returned to the people, via state owned transition banks, along with Guarantied Basic Income to stimulate economic growth. Not more global QE, this must end, and good-bye banks 🙂 Death to the European Central Bank… NZ’s central bank too. Where is the money going from our high interest rates? BIS, Switzerland? Have they black-mailed J Key with earthquakes in Chch. Just like they bully Greece into submission with no money for basic medical supplies. TPP is about the post-crash assets remaining with the banks.

    John W sounds on song, but I would be more positive about growth, when it is combined with spiritual growth. I’m only half joking when I talk about Kiwis joining the space programme.

    If our lines companies really are non-profit, (which is news to me – thanks dbuckley), then our situation is ok, but only if we trust the govt to not change the rules toward a “TTPA” world of sorrow.

    How shall we replace our Central Bank? The Canadians have advanced this subject well. Can we follow their lead?

  8. I think long term self sufficient is the key here.
    The problem that most people face is that they don’t know how to start and need to be schooled.
    Does the government do this?
    And then again, this “Living off the grid” thing isn’t for everyone.
    Off-grid systems are practical for energy efficient homes that use less than 500 kWh a month. The battery bank and generator are expensive, require maintenance and have a much shorter warranty period ( avg.10 years) compared to the avg. 25 year warranty for the solar panels. The battery bank also takes considerable space. You cannot store power from the summer for use in the winter (as you can with a grid-tied system and net metering program) so electric and geothermal heating systems are not feasible choices for an off-grid home. Natural gas or propane heating and hot water systems are more practical choices. You can use many standard electric appliances such as a fridge, microwave, and coffee maker but an electric stove uses too much power so a gas range and oven are recommended for off-grid systems.

  9. I just wonder if the EA’s report and statements constitute anti-competitive behaviour. Collusion in pricing in an effort to reduce or eliminate a competitive threat in the marketplace is definitive of one kind of anti-competitive behaviour. It sure seems odd for the EA to pick on solar when there are well-established cross-subsidies already within the distribution sector.

  10. CoroDale asks

    Smart-meter … but do they need internet connection, and is it affordable now? 5 year plan?

    Smart meters do not need an Internet connection, they communicate back to base using radio. Essentially, the lines company puts radio antennas up on existing power poles, every several hundred meters apart. Its cost effective because once installed they can sack the meter readers and dispose of their vans, not pay petrol etc. They are being rolled out across the country, bit by bit. In our parts, Rangiora is being changed over at the moment. Christchurch has been done. In five years,the vast majority of the country will have smart meters.

    Consumers benefit as every meter reading is a “read” meter reading, no more estimates. And this meter flexibility encourages new approaches to electricity billing, see Flick Electric for an example of where by offloading pricing risks from the retailer to the consumer, the retailer is able to give the consumer much better pricing.

    BJ, in the context of it the state not entirely owning the country electricity system, against my comment that “it isn’t going to change back”, argues

    Actually it is.

    Who know, you may be right. But that really will be a case of hell freezing over, I don’t see it. Although I have significant reservations about some aspects of the current model, there is no arguing that it provides more and more highly available power than it did under the days of government ownership.

    There is also no arguing that it costs us all far more than it did. I’d also argue that if the government had spent as much of our money on the power system through taxation as the new operators spent of our money through bills, we’d have had an electricity system no less good. But given that the public are resistant to increased taxation, (yes, they really are), would we have cut the police, or social services, or pensions, or defense, or health services so that money could be redirected to a better power system? Because that is the reality of improved funding for the electricity system. Electricity got its improved funding by simply billing us more, and not impacting other services. Some would call that a “win”.

    John reminds us that

    NZ rates highly as an contributor to emissions and climate change

    Depends how you look at it. Per capita we’re bad, but overall we’re a tiny contributor to the problem. Our electricity system is, in particular, good, in that we are 80% renewable already, and our consumption patterns are almost flat, even with an increasing population.

    Our bad areas are transport, and in particular, agriculture. But we get hard done by for cows burps; most of our milk gets exported, yet we get to keep the emissions penalty for that exported good.

    But the underlying problem remains: infinite growth in a finite world. Until all countries adopt the same measures as China in relation to population control, and countries with no future like Kiribati just stop breeding, then we (as in – the people of Planet Earth) are going to be fucked, and that is that. Population is the problem, everything else is just static.

  11. and it isn’t going to change back.

    Actually it is. The current model is going to be hurled into the trash heap of history and not be resurrected for a thousand or so years… if then. Neo-Liberal economics fails at so many levels and in the long run, in such obvious ways, that it simply can’t survive.

  12. The mortgage is refer to is not a monetary one but is the legacy left for the future by an ignorant or selfish or sociopathic generation presently making decisions about advancing consumerism. pollution, resource consumption while ignoring what are known consequences.

    To put it simply we can’t and won’t carry on the way we are, nor with the current thinking employed in following “market” solutions for investors and consumers convenience or their immediate gratification.

    Continued denial of well established and peer reviewed reports has been a foundation stone of market and business propaganda that most seem to absorb and use for their arguments supporting more of the same.

    The path of harnessing energy over the last century or two has not been without cost both immediate and also consequences for generations ahead – of all species on the planet.

    The simple axiom of “you can’t change one thing” holds true as every change has consequences.

    Energy is a big deal.

    As humans have harnessed energy beyond that available with their labour, we moved to using animals, running water in water courses and wind. Largely low impact if populations remain controlled by natural constraints such as food and climate.

    Fire and wood burning progressed to coal burning, then oil and nuclear. From the sustainable we have progressed to the unsustainable. Taken at a simple level massive pollution seems to be the bad outcome but that is a simplistic analysis.

    Energy harvesting has many other consequences.
    Increased availability of food has resulted in population expansion.
    Harvesting of energy has required exploitation of mineral and other non renewable natural resources which impinge in a multitude of interactions.

    Our soils have lost fertility, forests decimated, wildlife displaced and often eradicated from large areas, land toxified, rapid species extinction through many human actions both deliberate and as a consequence of population expansion.

    That expansion has demanded increased energy harvesting which continues today in spite of acute awareness of consequences and looming disaster. Man’s addiction to energy is like all addictions. Addicts seldom give an objective assessment of their situation.

    Joining the dots is inconvenient and disturbing and so avoided. The short term is easier to deal with so long term is ignored.

    Taking things in isolation and compartmentalising is the common market argument style. Getting bogged down in detail and common discussion about having more or better takes over.

    If you track the increased use of energy by humans and compare that with the rate of increased consumption of non renewable resources then you will see that they track each other.

    Electricity harvesting and harnessing without metals for example would be very limited. Renewable energy sources are not renewable if you cost in the natural resources consumed.
    For example just the dams in NZ have significant quantities of non renewable minerals embedded and need more for ongoing maintenance. Their construction also has a cost of significant emissions and environmental damage. The national grid is an elephant.
    To dismiss that shows ignorance of meaningful perspective.

    Similarly with all energy harvesting non renewable natural resources are consumed. To recycle minerals consumes both energy and more non-renewable.

    Finite has a meaning. This can’t and will not go on. ad infinitum.

    Humans have used somewhere between over half and two thirds of the available non renewables resources so far and the rate of use from say 1800 up until recently, has accelerated alarmingly. Constraints are now becoming evident even though they have been forecast accurately for over 40 years.
    Independent and peer reviewed research points to less than 2% of what was available at say 1800 will remain by 2070. If our trend of usage continues by then our rate of usage will reduce and become a tiny fraction of that today, with beginning of such changes being apparent already. Presently we are creating a growing void of resources with market thinking and rabbit consumption.

    If you don’t see a problem then you may ask why. Certainly future generations will not thank you for flying blind supporting a destructive culture of nihilism.

    If humans don’t matter nor other species, and immediate gratification is paramount, then market forces may be OK for winners. We live in a cocoon both in time a location. Many parts of the world do not consume as we do.

    Not all choose to dwell in that space but constraints to change are real and must be worked around for any better prospect to be possible. The world is finite. Planned stages of down sizing and lowering consumption will mean rethinking how we live. It starts with understanding.

    Pollution is rising still and our emissions, both being symptoms of the havoc humans are creating with their toxic mindset.

    If you want answers then cornucopia is there for the deluded.

    A better analysis could be gained from learning from sustainable communities and also looking at what lifestyles historically were more sustainable. Low energy use stands out as being of paramount indicator. It is generally coupled with low non renewable resource use.

    I would encourage research rather than just argument against more sustainable planning. Electricity is a tool but has a cost far beyond that paid by the consumer. No tax will rebate the environment nor renew the non renewable.

    NZ rates highly as an contributor to emissions and climate change. We also choke our landfills with junk we don’t need to exist. Our mindset is dismissive of changing that. Denial , ignore and justification with ponzi economics our defenses.

    Humans existed long before electricity has generated.

    Free energy would not help.

    We need to use less energy.

  13. We do NOT want to discourage electricity use, just electricity wastage. We need people to switch to electricity from fossil fuels, but the electricity needs to be generated without fossil fuels. The challenge is doing both while meeting our winter morning and evening peak electricity demands, so we need to encourage electricity users to shift their demand to off peak times.

    Smart meters which can signal to smart appliances may be the way to go. Charge more for on-peak electricity usage and provide the means for users to shift some of their demand to off-peak times and some users will do just that, reducing the peak demand. Other users won’t, so they can help pay for the extra generators or storage systems required to meet that peak demand. Users with solar generation won’t receive much credit for supplying power into the grid at off-peak times (such as late morning) and will be charged more for peak power usage when the sun isn’t shining on their panels but if they add batteries, then they may be able to inject some of their surplus power into the grid at peak times and receive more for it.

    Trevor.

  14. Smart-meter (plus fixed cost) is the obvious answer, but do they need internet connection, and is it affordable now? 5 year plan? Introduce on new buildings n big consumers ASAP?

    Yes, we should default on mortgages. Let the banks go state. (Well not all will fall, but if the Australian govt is bankrupt, then all bets are off 🙂

  15. I join you with amusement but probably see a different side.

    The reality is out present thinking is pretty much how we got to where we are.

    The reality is it aint going to stay that way. Growth is not an answer. We already consume much more than the average world citizen and many times more than most.

    How is this sustainable in general terms and under what conditions.

    Arguing over details is engaging but probably not very relevant to what we need to face.

    How we improve our resilience and adjust out expectations and planning very much depends on what we know and recognise as being likely. Continues growth is not only a transient dream but links strongly with a large dose of denial of consequences of our present mortgage.
    How about rising generations and beyond. What is left for them.

    Generally societies that consume mainly what is necessary to survive rely on local resilience and local resources with minimal local damage.

    Long term self sufficiency may be hard to imagine but is probably the best shot.

    The markets don’t want to know but then the markets depend on many unsustainable economic practices and much parasitic accumulation with investor state mentality.

    We have worked out way into a corner and continue along the same path.

    The dead weight of inertia will slow any change in direction.

    Who makes the first move.

    Gareth seems to be giving it a go but in a carefully metered many and is still cried down.

    Finite is not negotiable nor can it be ignored.

  16. Smart-meters are an industry scam! — They help the supply-side maximise profit and blind the consumer.
    The meters should be connected to digital readouts in the kitchen so that the household can see their instantaneous level of energy consumption and have the track of this use over time also conveniently available. This would then enable households to tune their consumption. (What we have is a car without a speedometer and a system that fines/taxes/charges us for the speeding that we didn’t know we were doing.)

    Solar panels connected to household power storage connected to electric vehicles and 12volt looms will be the end of centralised power companies. Wind generation will disappear as well, becasue it needs the distribution network which will suffer a death spiral as distributed solar generation continues to innovate, prices drop and power consumption per gadget/service falls. Also geothermal power is doomed because there are a limited number of geothermal fields, and they are being used at least 10 X faster than they are renewing, and it requires the same threatened power distribution network.

    The EA is merely a PR organisation for the power corporates. It blathers on about helping the consumer where instead they are in the pocket of the established power institutions.

    Selling the doomed power companies was National’s biggest home goal. It inadvertently privatised the risk after the gain has been socilaied – oops! They should sell transpower as well, while it still looks like a golden egg laying goose.

  17. John and BJ, I’m quite amused. If I had my way, the lines companies and transpower would never have been wrested from us, but we are where we are, and it isn’t going to change back. So you can either sulk, or accept reality.

    Of the arrangement that is the New Zealand electricity supply industry, the lines companies, which are, as BJ notes, natural monopolies, and which are regulated by the Commerce Commission, these are the least bad part. My local lines company, MainPower, are a non-profit, and do a damned good job. I suspect other lines companies do too, and the reason is that lines companies have to be engineering-led. If they aren’t then things go badly wrong.

    There are some thongs very wrong with the New Zealand electricity industry, but the lines companies are not one of them. I wish Gareth would actually focus in on real problems, rather than backing fads and activists.

    Anyway, the point of this consultation is how we do fund line companies in a world where just bunging a KWh charge on the bill is becoming obviously broken, and the right approach of totally fixed charges would be seen to be sending the wrong signals. BJs solution of do it from taxes is indeed a possible solution, but I don’t think it is a great solution, as it isn’t “fair”. As an outlier example, Microsoft could build a data centre here, and use a lot of electricity, requiring a lot of provisioning by the local lines company, yet MS pay almost no New Zealand tax, so they don’t actually have to pay for the infrastructure they need.

    Having now read a good chunk of the consultation papers, and having given this some thought, I have a solution that (as far as I know) hasn’t been proposed elsewhere.

    As I noted earlier, there are essentially two elements to the line company cost structure: that of providing an individual connection, a one off capital cost plus occasional meter replacement and maintenance etc, and that of providing the aggregated upstream capacity o get from a consumer to the GXP, and these costs are ongoing, as the maintenance, replacement and upgrading and staff cost never stops.

    So, for part one, every consumer (domestic, commercial and industrial) has a fixed monthly charge for their individual connection, based on contracted capacity. That connection is a private benefit for that connection, so it is absolutely fair that the benefactor pays for that.

    Part two makes use of smart meters. Everyone has a smart meter, or will do soon. Every month the peak current – in or out – is measured. Each month the lines companies systems tot up all the peaks of all the consumers, and divide them up to a proportion to every consumer.

    Thus everyone gets to pay their numerically exact fair share of the combined infrastructure, and everyone has the incentive to reduce their peak loading. Those who are also generators can choose to limit their peak exported generation to be the same as their peak consumption, and thus pay no penalty for generation, or can opt to go for more exports, paying a greater share of the line costs, whilst getting export benefit payments from their retailer.

    There. Everyone wins, and there are the right incentives. Solved. I will submit on this.

  18. yeah sorry, state-owned lines is the starting point. I forgot how far off-track the govrnmt are. And anyway, Kiwi farmers get out-of-bed early to avoid peak-usage, (the Germans here are lazy on that one.) Just mentioning farmers, as Greens… well ya know. Great discussion guys, on track, no worries. Much to do, Just our hands are tied with dead governmnts. Every Christmas more and more find themselves eating factory-farm turkey soup with kosher chop-sticks – that’s life, what can ya do?

  19. Once you fall into the trap of examining all things on a business model then you are thinking and talking about business not infrastructure needs of the nation.

    Some infrastructure and services should never be set aside as profit gathering but should be held in collective ownership with collective responsibility and have long term planning with options open for the best collective social outcomes.

    We need to discourage electricity use not market it. We are a wasteful consumer society.

    Local generation has an important place in a medium term planing model. As natural resources are consumed and the availability of minerals collectively diminishes, the thinking and direction will change and where we are going. By that time our options will be very limited.

    Forget the market and be involved with long term planning now. It is better to plan change than be forced to change without planning.

    Waiting for a magic mushroom is not planning.

  20. Crikey… look at you’se guys… any mug would tink y’ain’t got eyes.

    1. The lines themselves are a MONOPOLY arrangement. You do not have different companies putting duplicated wires up all over the place so they can serve electricity to you. That makes them a NATURAL monopoly.

    2. Everyone pays except the very few people off-grid and there is a social benefit to having a grid and we really don’t want to just give it up and be like those places in Africa that don’t have electric lines or telephone lines. Being forced to build a full off-grid solution wherever you are is not conducive to maintaining our civilization given the current storage options.

    3. The fact that the lines are basic infrastructure, every bit as essential as roads and rails, means that the imbecile notion that privatizing them will make them “more efficient” should not be discarded lightly, but should be hurled away with great force.

    Nationalize the damned lines and pay for them through taxes and stop pretending they are something that they are not.

    As for Solar, it is the WRONG renewable to emphasize for much of New Zealand, which has a hell of a lot of wind, and in winter not a whole lot of sun.

  21. CoroDale asks:

    How can this work for farmers with spikes at milking time? Will farmers always get it hard, without the savings benefits that others will be able to adapted to?

    Farming as an industry, in terms of energy consumption, is not unusual.

    A lot of electricity is used industrially and commercially for stuff like heating, pumping, ventilation and fans etc. In most cases, there is slack in the operation of these systems, so, for example, with heating, there is a tolerance of how far from the setpoint the actual temperature can be, and there is usually inertia present, sometimes very significant inertia, for example, heating a swimming pool. The heat input, the pump or fan speed, often these things can be reduced for a short period of time without something undesirable happening, so put the heating off five seconds, turn the pump VSD down to 85% for twenty seconds.

    Do this on a decent scale, and you can respond the sun going behind a cloud without needing batteries or some other make-up source of electricity.

    Of course, with accepting these variations of power comes a tariff benefit. So for many sorts of industrial and commercial users, and I’d include farmers in this lot, the long term financial benefits of the tariffs associated with flexible electricity use will vastly exceed the almost zero cost impact on day to day operations.

  22. As far as I am concerned, ripple control never went away

    It’s never gone away, but the reason for its existence has changed.

    Today, ripple control is used mainly to control streetlights, and to provide the switching for different tariffs, such as night rate.

    Historically, ie, before the market reforms of the electricity industry, ripple control is was used to manage demand, to perform peak lopping. As has been noted, the electricity system has to be sized for the peak capacity required of the system. So the builders of the New Zealand electricity system did so knowing that by using ripple control they could reduce peak loads, and thus reduce the cost of transmission and the scale of generation required. As the electricity system was government (ie taxpayer) funded, the directive was to build with the lowest cost possible. I lost the reference years ago, but the last 1% of required capacity accounts for 10% of the required investment.

    In summary, ripple control was originally used to reduce the cost of investment required to build the electricity system.

    Once market reforms kicked in, the accountants took over, and upscaled the electricity system to handle the peak without the need for load shedding or shelving. They built us a “better” electricity system. Which is why we have nearly twice the installed capacity of generation as we do load. All at a cost, of course. Which is OK(!), because that cost of financing that improved capacity goes straight onto customer electricity bills. So the turnover of the electricity industry increases to meet these new costs. And, of course, as profit margin for this class of business is relatively fixed, so as not to look greedy, more turnover dollars means more profit dollars for the same margin. Good for shareholders, yes?

    So although we still have the ripple control system, its place now is very different to what it was.

    In the years following the reforms, before there was adequate (or, perhaps, excessive) capacity, there were rows over who should have control over ripple control. Now, the generators and retailers don’t care about load management with ripple control, so its usually the lines company who press the button, under schedules provided by the retailers.

    Which would all be funny, if it weren’t so sad.

    Because grid systems cant store power, they have to have the right amount of generation available to match the load on a second by second basis. We manage this by having most power stations run at their contracted capacity (which is usually flat out) and then other power stations running at an average of 50% output, but varying second by second as the grid load changes, based on keeping grid frequency at as near as possible to 50Hz, these station(s) being called frequency keepers (FK).

    The place that dynamic load management could take providing frequency keeping assistance is the trick that can make intermittent generation (solar, wind) viable without any need for fudging. There is a limited amount of frequency sensitive load (with a matching tariff) in the UK. Hawaii has generation shedding now as a requirement for their solar installations, to stop a solar heavy grid getting way out of control. Dynamic load management in response to frequency is, in my opinion, the missing piece of a sensible electricity system jigsaw. And ours in particular.

  23. Trev notes

    It is also not true that the lines company cost is completely independent of the total power consumption of the users. Users with high average power usage also tend to have high peak power usage.

    Disagree. The lines company provision an agreed supply to a premise based on what is in the contract of connection, which is (or should be) greater than the actual peak consumption. Usually a 40A or 63A connection. There is the capital cost for the provision of such equipment, and once installed, it makes no difference at the individual connection level whether that one consumer uses 0%, 50% or 100% of that available capacity.

    Once one gets past an individual connection, the lines company uses rules of thumb and modelling (“diversity”) to determine how much capacity is needed all the way along the line. and those assumptions get broader the further one gets away from an individual consumer, as the spreading effect of averaging kicks in.

    The other important thing is that capacity tends to come in chunks, in some cases quite large chunks (eg zone substation transformers tend to be installed in several MB increments, to simplify the spares holding situation), and capacity tends to be built to allow for foreseen growth over a period of years.

    So really, there is no link between electricity use at an individual consumer level, and costs. There is a link between overall consumption of a group of consumers (which may be quite a large group) and the scale of capital investment required, but that only becomes an issue over the medium and long term. The rise in the use of electrically pumped irrigation in Canterbury has been such a driver, along with the sheer number of new subdivisions, and it is possible that adoption of electric vehicles may be another. Perhaps surprisingly, the wholesale shift in Canterbury from wood burners to heat pumps has been a minor blip.

  24. There are a number of possible options for reducing peak electricity demand on dairy farms. Identifying the best ones is often a matter of thinking about the whole problem and what is trying to be achieved.

    For example, the cows are milked twice a day morning and evening and this milk needs to be cooled. This can be done with big refrigerators and these would have big electricity demands at milking time. Why not run a smaller refrigerator and freeze some water day and night and let that ice cool the milk? Don’t forget the heat coming off the back of the refrigerator – it could be used to warm or at least pre-warm water for cleaning. Problem with storing warm water due to Legionnaires Disease? Consider ultra-violet lamps shining into the water tanks and/or passing an electric current through the water in the tank to keep the water safe. Think that too much ice would be needed to cool the milk down from blood temperature? Pre-cool the milk using the cold water that you are going to heat up for cleaning, saving a bit more power there too.

    When you start looking at the problems as a potential resource instead, you start seeing more opportunities. The same applies to other areas of the electricity sector and indeed the whole energy field.

    Of course if the farms are milking at peak electricity demand times and the milking machinery draws power that is unavoidable, on-farm batteries might be an option to reduce the peak demand. There is one potential problem though – the machinery usually needs three-phase AC power but batteries only deliver DC, so on the face of it, some big 3-phase inverters are needed. A closer look at the milking machinery may reveal a number of variable speed electric motor drive systems, which take the 3-phase AC and turn it into DC, then turn that DC back into 3-phase AC at a variable frequency and voltage for applying to the motor. Thus there is an opportunity to inject DC power from a battery system into the motor control system without needing a separate 3 phase 50 Hz inverter, which would reduce the conversion losses too.

    Trevor

  25. If Rio Tinto do get put through the receivership laws, then we can celebrate by adding structural aluminium as the favoured material in our building code 😉
    Actually it probably takes lots of wood to balance it out as earthquake safe, but hey, NZ doesn’t have any shortage of wood either 🙂

  26. How can this work for farmers with spikes at milking time? Will farmers always get it hard, without the savings benefits that others will be able to adapted to? Perhaps on farm storage could be worked here, in hot water storage, as the technology may be attached to re-callection from the milk cooling system. But would this be effect enough? Perhaps only if the costs are basement deep. Hay drying is looking economical in europe, in connection to bio-gas heat waste. (higher quality food in of peak milk season, lowers emissions big. But this could be copied in NZ with wood burners with electric capture. Surely the technology will become economical within the foreseeable…

    Hey, if Rio Tinto Alcan are insolvent, then why don’t we just recapitalise it back to the state? Whey should we let that close down. We need uses for our over supply of electricity. This should be a message to investors. Investors should be using that aluminum for NZ made greenhouses for organic veggies, flying flag, on the moon.

  27. Although solar panels do nothing to reduce winter evening peak demand, batteries can be used to reduce these peaks. This may be why Vector are supporting domestic battery systems.

    As far as I am concerned, ripple control never went away. I have been on day-night power for years, with the hot water cylinder heating only on the cheaper night-rate power. Since all my night time power usage is charged at the lower rate, this is when we run the dishwasher as well.

    It is also not true that the lines company cost is completely independent of the total power consumption of the users. Users with high average power usage also tend to have high peak power usage. An inefficient incandescent light bulb is equally inefficient late at night when power demand is lower as it is in the middle of that winter evening peak.

    One simple measure to identify users with higher than normal peak power demand is simply the number of phases that they are connected to. Houses in warmer areas or with gas hot water, gas heating and a gas hob are likely to be connected to a single phase and have lower peak demands (maximum about 14kW). Houses in colder areas with greater reliance on electricity (like myself) are more likely to be connected to 3 phases, and to have higher peak demands (limited to around 40kW).It would make sense to have a flat rate charge based on the peak power level able to be drawn from the local supply (without blowing the pole fuses), but only as one component of the overall charge.

    If a rich household installs solar with battery backup and goes completely off-grid, then they are not being subsidised by other electricity consumers. The ones that are being subsidised are those with installed solar and no battery backup or limited backup, and who still need the grid to keep their lights on in the middle of winter but which don’t need to pay for much power the rest of the time.

    Trevor.

  28. Yes it is the case that the local lines companies have fixed costs that they seek to recover via a variable charge. And that is the problem that the EA are seeking consultations on. As the local lines companies increase their charges to offset falling revenues from diminishing consumption (due in large measure to roof-top solar generators), so the incentive to instal solar becomes more appealing. Which is the lines company “death spiral” talked about.
    The flip side of that coin is that richer households will be the ones installing more solar and ultimately, going off-grid. That will leave poorer households paying higher prices and, in effect, subsidising those solarised households.
    I do not see an easy solution when the EA approach this issue from the perspective of the industry. Were they to turn the focus around and put it on the electricity consumer, then a different solution becomes possible. However, Energy Democracy is not a concept that this neoliberal government will want to consider.

  29. You are right db. Another thing Gareth doesn’t understand is the local network is sized (hence determines the cost) for peak demand. This is usually about 8pm in winter. Solar and batteries will do nothing to reduce this peak.
    If you want to peak clip, bring back ripple control. However, people will then have to go back to large low pressure hot water cylinders. How many people realise what the consequences of that are.
    People don’t need to be on the grid. There is nothing to stop people with solar going off-grid. If it is as good as made out, I’m sure there would be a rush of people doing it.

  30. I have downloaded the consultation papers, but not yet read them, so cant comment fully on the debate, but there is one issue raised above about which Gareth couldn’t be more wrong.

    Looking at the pricing structure for lines networks in the way this report does, the solution implied is greater fixed costs – a per day, not per unit, electricity rate. This is not the right solution and it sends a terrible message.

    Although in a political sense it may not be “the right solution” and might “send a terrible message”, the god honest truth of the matter is that lines companies costs are almost entirely independent of the electrical consumption habits of their customers. Their costs levied on customers should be entirely fixed.

    The job of a lines company is to transport power from point A, almost always a Transpower GXP, and point B, which is almost always a consumer. Thus the investment of a lines company is mostly in infrastructure, stuff like poles, wires, transformers, switchgear, and holes in the ground. This is all capital investment, and once built, its there for at least fifty years. There are no running costs in terms of electricity moved, only in people keeping it all working, and that is a fixed cost too, it doesn’t vary by consumption.

    It doesn’t matter if, on the domestic scale, the end consumer is a low user pensioner, a solar powered house that uses almost zero power (and sometimes even contributes a few watts for their neighbours) , someone with no insulation who runs resistance heating, a hot tub and a heated pool. The cost of provision of service to these different types of customer does not depend in any way in how much or little electricity they actually use, or indeed contribute back.

    The lines company have to have built enough infrastructure so that on the worst day, they can carry the necessary power from point A to point B. And because it takes a long time to plan, procure, and install this kind of engineering, the timescales are long, the planning is for years in advance.

    So what we have now is a situation whereby low users get charged a small cost, whereas large users get charged more for exactly the same product, namely provision of lines services. How can that be fair or just? We say its fair because bigger users make more use of the service, but that is just a convenient lie.

  31. It is always refreshing to read a clear analysis explaining how the elites are trying to manipulate public opinion and why.

    With the utility companies likely to get ever more desperate I look forward to the Greens letting people know when we will need to disconnect from the grid to avoid the high daily lines charges which are all too likely to be imposed.

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