The collective peak load determines the overall need for supply capacity. It is not the sum of everybody’s individual loads, so JQ’s case looks sound to me. Beyond that, I’m actually missing a lot of background information on the Australian system, so can only offer general remarks from my Spanish eyrie.
I pay a standing charge for my grid connection, and flat import and export tariffs per kwh. This is pretty standard IIRC. Since I have 5kw of solar panels, the standing charge is in effect a fee for an option contract to buy and sell electricity from and to the grid, up to a modest cap of 5.7 kw. The fee includes a payment towards grid capacity. Looks fair enough in principle. Working out a fair level is a pig, as it includes the right to buy, the right to sell, my contribution to the capital cost of the grid, and my small contribution to overall capacity. ToD pricing schemes are available, for larger-consumers than me. At all events it looks as this well-tried system can accommodate all the competing interests, with no need for an additional peak demand surcharge.
A lot of things are changing at the same time, starting with the shift in generation to WWS, implying more long-distance transmission and storage for firming. Storage can be centralised and run by utilities (generally cheaper) or decentralised and owned by consumers (more resilient): regulators should be pretty agnostic on the balance. The joker here is V2G, which will be very cheap as households will have already paid for the large car battery. However, the spare capacity is not fully despatchable – another option contract, this time with algorithmic complications that can’t be avoided.
Another change coming our way is home AI. An AI smart home controller will be capable of running transactions in the market of any degree of complexity, up to the theoretical economist’s wet dream of instantaneous arbitrage across multiple options markets in real time. I doubt if the ordinary citizen will be happy to happy to surrender control of their home to such incomprehensible algorithms, especially as the AI will probably be the slave of Jeff Bezos rather than you and me, and the monthly electricity bill is a very small part of disposable income. ToD management – with parameters set once or twice a year - is about our cognitive limit.
Regulators don’t have infinite bandwidth either. They have more important and more urgent problems to deal with over the next decade than a confused effort to complicate capacity charges. If it ain’t broke ...
DC has a strange system. Distribution and generation are separated, but distribution has all sorts of per KW charges that vary from month to month and not even just not linearly with use. And no time or day at all on either. :(
I see a lot of ads on Facebook from companies touting "wholesale electricity pricing", i.e. demand tariffs. The comments usually contain some horror stories.
I've recently installed solar panels on a new (to me) house. Amusingly, in NSW, you don't request a smart meter until after your install is complete, and from then until the meter is installed, your 'dumb' meter simply runs backwards while you're exporting power. My feed in tariff is effectively over 20c/kwhr right now.
When I requested a smart meter, my electricity retailer insisted that I go onto a time of use plan, even though they seem to advertise a single rate plan with a solar feed in tariff. I was okay with that, as I need to watch my consumption for a while to figure out what works best for me, and whether a battery has a positive ROI. (I will be using a diverter to heat my hot water instead of exporting, a poor man's battery)
I am surprised that there are any ‘dumb’ meters (induction disc) that run backwards. Most electricity suppliers way back (70s-80s) before solar or markets changed their meter specs to use indent meters I.e meters that were physically stopped from being able to turn backwards I.e that had a spinning disc. This was in response to a rising level of illegal devices that interfered with the meter, a bit like winding back the odometer on cars of the day.
Mine does. It's an Emmco M-1, which would (I think) date from the 70s. It has a spinning disc, which does spin backwards, and the least significant pointer definitely turns backwards -- I haven't watched long enough to be certain that the rest do.
I guess that the argument against "demand pricing" is that it creates more uncertainty about when and how much electricity to use than is gained. And the uncertainty means that consumers woud not even react enough to changes in marginal costs of generation. Conversely, producers would not take optimal account of consumers' cost of adjusting to rapidly changing prices it their choices of production decisions. Time of day gets to (or close enough) to these optima.
This mechanism (in the US we call them 'demand charges') was invented in 1897. We are literally screwing up our efforts to address climate change for a 19th century technology.
The California PUC (regulator) had some text about why they are so bad in a 2022 report.
In the last 128 years we have invented far better methods to address the issues that these are purported to do. They are pathological for good load optimization.
John, demand tariffs do serve a purpose. Ostensibly, they are there to ensure users pay for the peak network capacity needed to supply them. Generally, they apply to large users who need capacity available in the network to deliver enough power without impacting other users. If you expect the network to handle you coming home and turning everything on concurrently, then the network will need much larger cables, transformers and upstream generation to handle this peak, and consequently the network design must match this demand. If you spread your load over time so that the the peak is lower, the network does not need gold plating to meet a higher demand.
What is inequitable is the reset time when your peak/maximum demand drops back to a normal level. In Brisbane, I think the max demand is reset every month but other states the reset can extend for years, so one bad 30 minutes sets your demand charge for years.
I did cover this in the submission. "the aim of demand tariffs is to make pricing “cost reflective” with reference to the cost of network augmentation. The idea is that the required capacity of the network will depend on the peak demand it must serve. This seems broadly sensible in the case of a single large user with a dedicated network connection. In this case, the cost of the network will depend on the user’s own demand."
But this makes no sense for households, as I argue at length. Read the whole thing
I’m with JQ on the use of demand tariffs. Back in the day they were usually only applied to large commercial and industrial (mainly industrial) and they should never find their way to residential or small commercial. There was an alternative demand style tariff that sounds more like your description of the extended rest period, it used to be described as a demand ratchet tariff. Essentially, it was a limit and if you were under it then there was no demand component. If or when you exceeded it in a month then the demand charge triggered and the limit was reset to be that actual demand. Then each month if we’re over the original limit but below the last periods demand the limit was ratcheted down on a fixed or percentage basis. The idea was to encourage customers to return to the original limit and avoid paying demand charges. Where a lot of customers got caught was they would have an annual big month, slowly start ratcheting down by then that annual event blew them up again. In the day we used to talk to them about what the big annual event was and rest their baseline. My recent experience of the current crop of retailers is they are like Jon Snow- they know nothing.
The collective peak load determines the overall need for supply capacity. It is not the sum of everybody’s individual loads, so JQ’s case looks sound to me. Beyond that, I’m actually missing a lot of background information on the Australian system, so can only offer general remarks from my Spanish eyrie.
I pay a standing charge for my grid connection, and flat import and export tariffs per kwh. This is pretty standard IIRC. Since I have 5kw of solar panels, the standing charge is in effect a fee for an option contract to buy and sell electricity from and to the grid, up to a modest cap of 5.7 kw. The fee includes a payment towards grid capacity. Looks fair enough in principle. Working out a fair level is a pig, as it includes the right to buy, the right to sell, my contribution to the capital cost of the grid, and my small contribution to overall capacity. ToD pricing schemes are available, for larger-consumers than me. At all events it looks as this well-tried system can accommodate all the competing interests, with no need for an additional peak demand surcharge.
A lot of things are changing at the same time, starting with the shift in generation to WWS, implying more long-distance transmission and storage for firming. Storage can be centralised and run by utilities (generally cheaper) or decentralised and owned by consumers (more resilient): regulators should be pretty agnostic on the balance. The joker here is V2G, which will be very cheap as households will have already paid for the large car battery. However, the spare capacity is not fully despatchable – another option contract, this time with algorithmic complications that can’t be avoided.
Another change coming our way is home AI. An AI smart home controller will be capable of running transactions in the market of any degree of complexity, up to the theoretical economist’s wet dream of instantaneous arbitrage across multiple options markets in real time. I doubt if the ordinary citizen will be happy to happy to surrender control of their home to such incomprehensible algorithms, especially as the AI will probably be the slave of Jeff Bezos rather than you and me, and the monthly electricity bill is a very small part of disposable income. ToD management – with parameters set once or twice a year - is about our cognitive limit.
Regulators don’t have infinite bandwidth either. They have more important and more urgent problems to deal with over the next decade than a confused effort to complicate capacity charges. If it ain’t broke ...
DC has a strange system. Distribution and generation are separated, but distribution has all sorts of per KW charges that vary from month to month and not even just not linearly with use. And no time or day at all on either. :(
I see a lot of ads on Facebook from companies touting "wholesale electricity pricing", i.e. demand tariffs. The comments usually contain some horror stories.
I've recently installed solar panels on a new (to me) house. Amusingly, in NSW, you don't request a smart meter until after your install is complete, and from then until the meter is installed, your 'dumb' meter simply runs backwards while you're exporting power. My feed in tariff is effectively over 20c/kwhr right now.
When I requested a smart meter, my electricity retailer insisted that I go onto a time of use plan, even though they seem to advertise a single rate plan with a solar feed in tariff. I was okay with that, as I need to watch my consumption for a while to figure out what works best for me, and whether a battery has a positive ROI. (I will be using a diverter to heat my hot water instead of exporting, a poor man's battery)
I am surprised that there are any ‘dumb’ meters (induction disc) that run backwards. Most electricity suppliers way back (70s-80s) before solar or markets changed their meter specs to use indent meters I.e meters that were physically stopped from being able to turn backwards I.e that had a spinning disc. This was in response to a rising level of illegal devices that interfered with the meter, a bit like winding back the odometer on cars of the day.
Mine does. It's an Emmco M-1, which would (I think) date from the 70s. It has a spinning disc, which does spin backwards, and the least significant pointer definitely turns backwards -- I haven't watched long enough to be certain that the rest do.
Mine too. House was built in late 90s
That is old and if the disc and LSD are going backward then it’s not an indent meter (and I am surprised 😳).
I guess that the argument against "demand pricing" is that it creates more uncertainty about when and how much electricity to use than is gained. And the uncertainty means that consumers woud not even react enough to changes in marginal costs of generation. Conversely, producers would not take optimal account of consumers' cost of adjusting to rapidly changing prices it their choices of production decisions. Time of day gets to (or close enough) to these optima.
This mechanism (in the US we call them 'demand charges') was invented in 1897. We are literally screwing up our efforts to address climate change for a 19th century technology.
The California PUC (regulator) had some text about why they are so bad in a 2022 report.
In the last 128 years we have invented far better methods to address the issues that these are purported to do. They are pathological for good load optimization.
John, demand tariffs do serve a purpose. Ostensibly, they are there to ensure users pay for the peak network capacity needed to supply them. Generally, they apply to large users who need capacity available in the network to deliver enough power without impacting other users. If you expect the network to handle you coming home and turning everything on concurrently, then the network will need much larger cables, transformers and upstream generation to handle this peak, and consequently the network design must match this demand. If you spread your load over time so that the the peak is lower, the network does not need gold plating to meet a higher demand.
What is inequitable is the reset time when your peak/maximum demand drops back to a normal level. In Brisbane, I think the max demand is reset every month but other states the reset can extend for years, so one bad 30 minutes sets your demand charge for years.
I did cover this in the submission. "the aim of demand tariffs is to make pricing “cost reflective” with reference to the cost of network augmentation. The idea is that the required capacity of the network will depend on the peak demand it must serve. This seems broadly sensible in the case of a single large user with a dedicated network connection. In this case, the cost of the network will depend on the user’s own demand."
But this makes no sense for households, as I argue at length. Read the whole thing
I’m with JQ on the use of demand tariffs. Back in the day they were usually only applied to large commercial and industrial (mainly industrial) and they should never find their way to residential or small commercial. There was an alternative demand style tariff that sounds more like your description of the extended rest period, it used to be described as a demand ratchet tariff. Essentially, it was a limit and if you were under it then there was no demand component. If or when you exceeded it in a month then the demand charge triggered and the limit was reset to be that actual demand. Then each month if we’re over the original limit but below the last periods demand the limit was ratcheted down on a fixed or percentage basis. The idea was to encourage customers to return to the original limit and avoid paying demand charges. Where a lot of customers got caught was they would have an annual big month, slowly start ratcheting down by then that annual event blew them up again. In the day we used to talk to them about what the big annual event was and rest their baseline. My recent experience of the current crop of retailers is they are like Jon Snow- they know nothing.