The Australian Electricity Conundrum

Today we are transitioning to a renewable tomorrow. Renewables, largely being wind and solar, generate when nature provides the source of the power, not when people want it to be there. So unless we have storage (and lots of it) we will not have the power available when we need it to meet the demands of consumers.

Herein lies a big problem.

One discussed recommendation from the Finkel review is rewarding consumers for reducing their demand for energy when it’s most needed. Or during ‘Peak Power’ times. This occurs when the demand for electricity changes throughout the day depending on what we are doing (washing, cooking, working, sleeping) and of course the weather (hot and cold temperatures). So at a domestic level the type of action that is expected to occur within this recommendation is that an air conditioning unit will be turned off during a heat wave. Or the heater during a cold snap.

While understanding and agreeing with the rational, I do find it at odds with consumercentricity. Which is another way of saying ‘putting the customer first’.

And therein lies another big problem.

In every other area of our consumer society, a business or service provider caters to the needs of its customers. That’s how it survives. It will even modify the product or service to suit a customer’s ever changing demands and expectations. Just like our supermarkets – they increased operating hours until 10pm to cater for the mass majority of the population who have day jobs. So could you imagine turning up to the supermarket only to be told it’s far too busy and to come back later when there are less people around? Even if you are offered a price incentive, this would still likely be unacceptable and highly inconvenient.

That is kinda what Finkel is recommending we do with electricity prices.

And we all heard about the surgeon who was dragged off an American United Flight because there weren’t enough seats, even though he paid for his fair and square. He too was apparently offered a price incentive to get off (the usual $200 voucher which barely covers one night’s accommodation in a cheap airport hotel). But in reality, no price unless grossly significant could have compensated for the great inconvenience of not being able board his flight when he really needed to.

There was one other recommendation that makes a little more sense to me –and that is to make new and large renewables include elements which allow them to be dispatchable. Or to run when we want them to run. This may entail battery storage or it may be supplementing their output with some peaking capacity such as gas fired generators.

This idea seems fair and feasible. Like when we added dams to hydro generation to enable us to run them when we needed the power, not just when it rains. It will undoubtedly add significant costs if we want the solar and wind generation to be as reliable as traditional base load generation.

So the electricity conundrum continues – the wide gap between supply versus demand and the price we consumers will continue to pay.