DNA Sequencing the Electricity Industry Death Spiral

Anyone with the slightest interest in solar, electricity or electricity prices couldn’t help but watch in awe over Australia’s hot summer break.
The combination of changing demand, high solar radiation and extreme temperatures created a new set of scenario’s for our electricity industry. Things just aren’t the way they used to be in the National Electricity Market.
Solar PV’s insatiable contribution to changing these scenarios’ is only one part of the story but arguably, also one of the most interesting.
There has been lots of other analysis of recent NEM behavior, but if you really want to understand what’s driving the change, I highly recommend Hugh Sadler’s report Power Down, released in December.
Produced for the Australia Institute, this is one of the best analysis of what’s behind the recent changes in NEM behaviour I’ve seen and provides some incredible insights into what has happened and why; it’s almost like DNA sequencing the electricity industry death spiral we so often hear about.
The report is loaded with important and up to date statistics including a few key ones summarised here:

  • Overall, total NEM demand (of 171TWh) is 37TWh  down, far below where most people thought it would be a few years ago based on trends, and equivalent to 5000MW of annual coal fired capacity.
  • Almost 2.7TWh of electricity was provided by from rooftop PV in 2013. That’s 1.7% of total annual demand (avoided) and as we know from live maps, PV is contributing almost 10% of peak demand (reductions) in several states on a regular basis.
  • Although PV is down the list in terms of impact in the reduced demand, its growth has been predominantly in the last 24 months and is now a bigger impact (potentially) than all other embedded generation. Crucially,PV continues to grow at 70-80MW per month.
  • Residential electricity demand continued to fall by between 4% and 6% at a State level. This is a consistent trend and looks increasingly unlikely to reverse substantially now that behavioural changes are embedded.
  • The elasticity in demand (i.e. how fast and deeply consumers react to price movements) has also been analysed and suggests that it is responsible for the second largest impact in terms of reduced demand; shaving 14.1% or 5.2TWh off demand. Based on many conversations I had over the break about electricity costs and the lag in reaction time, I don’t expect that to change much in the short term either.
  • Energy efficiency is perhaps surprisingly, the largest contributor to reduced demand and is estimated to have avoided 13.5TWh of energy generation and dispatch in the same year. This is despite the fact that a huge number of schemes were axed and it is perceived as the least “exciting” of contributors.
  • Whilst a decline in large energy users and major industrial closures are the second largest (combined) contributor to demand reductions at a combined 8.6TWH or 24%, notably, there has been no observable reduction in activity by electricity-intensive manufacturing other than two high profile closures (aluminium and steel industry closures). The majority of manufacturing demand has been fairly constant, challenging the notion of a manufacturing collapse in Australia.
  • Of the 189TWH sent out in total in 2012 13.9TWh or 7.4% never reached a consumer but was simply wasted in transmission and distribution losses. Although not specifically analysed, every single distributed generator or demand side response has the potential to minimise this prodigious waste.

My favourite graph is this one, which shows the changing stack of generation and avoided demand. The expected 2013 peak of just on 209TWh was reduced by the top 8 wedges, leaving demand at around 171TWh, at the top of the two major generator wedges.

All up, I would argue what this paints is a picture of huge success, a story of energy evolution and of response to triggers.
What guile’s me most is that a few years ago politicians and Governments around the country were putting the fundamentals of these programs in place through a wide variety of mechanisms, yet today at the highest levels they increasingly (incorrectly) blame these same mechanisms for a blow out in electricity costs or worse, for “letting consumers down.”.
Nothing could be further from the truth.
Energy audits, insulation, lighting programs, electric hot water phase outs, price signals, energy standards and of course, PV and a price on carbon have all done more than was originally envisaged and reports like this one increasingly demonstrate the value of these investments for society in the context of the NEM.
What is abundantly and increasingly clear is that the only negative consequence of these changes is to those who were making money from the non-renewable electricity industry and simply expected perpetual growth. The rest of society are using energy more wisely, cleaning up their energy choices and demonstrating they are prepared to make changes with strong enough signals.
I eagerly await some form of honesty and awareness on this issue from our current Government who seem utterly ignorant of these facts, intent on un-ravelling the fruits of past efforts and lacking the guts to recognise a good thing when it’s sitting in its lap.  It’s no wonder Prime Minister Abbott got the Climate Grinch award of 2013.
It ain’t broken anymore you dimwits; the fix was working.
Graphs reprinted from the Australia Institute with permission.