Press Release from Sustainable Energy Forum
18 December 2002
"The issue is not whether electricity costs CAN be reduced, but whether the generating-retailing companies will ALLOW
this to happen" said Mrs Molly Melhuish, energy analyst for the Sustainable Energy Forum. Mrs Melhuish was welcoming an
EECA report released this morning about the ability of demand management to reduce electricity costs for New Zealand
businesses.
"Active demand-side participation in electricity markets would reduce the growth in peak demand that drives the
'requirement' to build new power stations. But it also reduces the profits that generator companies need to fund the new
power stations.
"The power companies have little incentive to pay customers to use less energy (ie save kWh) or to reduce demand (ie
reduce peaks) - other than to keep the Minister of Energy happy."
"Peak load response is just one of four types of demand management; all four together are needed to effectively reduce
the cost of electricity to the New Zealand economy.
"Energy efficiency is the first and foremost of these four - and if targeted to locations where supply is constrained,
investments in energy efficiency could generate "negawatts" at typically less than half the cost of electricity from new
power stations."
"Peak load response is the second type of demand management that targets changes in the time of use. This is
particularly favoured by electricity retailers because it is most easily controlled by them.
"Fuel switching is a third response - using solar water heating, gas or firewood to replace electricity, especially in
dry years.
"The fourth is distributed generation - that is, installing small generators, such as wind turbines, and also using the
stand-by generators in commercial or industrial buildings.
"Together these demand-side technologies could easily reduce the growth of electricity demand by half - at the same time
significantly reducing the cost of electricity to all consumers.
"But there are other barriers that need to be addressed, and SEF has called on Government to take a stronger lead to
eliminate these. At present the electricity market rules, and the fact that electricity retailers are unregulated,
prevent demand management from competing effectively with conventional power supply. The present system of industry
self-regulation will perpetuate this costly bias towards supply-side investments.
"Demand-side investments are desirable for many reasons. Energy efficiency makes houses warmer and healthier. Modern
energy management techniques improve lighting and air conditioning in commercial buildings; improved electric motors
work better as well as using less energy. Peak load response drastically reduces the market power of generators, thus
reducing electricity prices for all consumers. All these techniques improve the reliability of electricity supply - and
also reduce the environmental impact of electricity generation.
"Profit-seeking generator-retailers will only support a token use of these technologies - only enough to keep the
Minister off their backs. Only a real overhaul of electricity market rules would allow these technologies to compete
effectively in the market place" concluded Molly Melhuish.
ENDS
For more information please contact:
Molly Melhuish, 42 Waitohu Rd, York Bay, Eastbourne, NZ, tel 04-568-4873, 025-230-5911, fax 04-576-0873
OR Sustainable Energy Forum, PO Box 11-152, Wellington Phone 04 586 2003, Fax 04 586 2004, Email info@sef.org.nz
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FOR YOUR INFORMATION THE EECA PRESS RELEASE IS BELOW.
Press Release by Energy Efficiency & Conservation Authority 18 December 2002 06:35
EECA encourages major users to turn torch on energy suppliers
A report released by the Energy Efficiency and Conservation Authority (EECA) today makes a very compelling case for
demand side participation in the New Zealand electricity market.
EECA Chief Executive Heather Staley says the report, Exploring Our Untapped Electricity Resource, identifies that up to
$100 million of electricity cost savings may be available to medium and large energy users through demand side
participation.
"The report highlights how the electricity market is immature and how medium and large users are often captured by
imperfect supply agreements.
"In a developed market, both buyer and seller are fully aware of the price. But New Zealand's medium and large users
exposed to the electricity spot market have their hands tied. They have no idea as to the price they will pay for the
electricity they are using until 24 hours after they have used it, at best. For the market to operate as it should, the
demand side must be given timely information and the ability to participate.
"If retailers allow it to work, the opportunity for New Zealand is huge. Demand response can deliver a reduction in use
of between 250 and 900MW of electricity (roughly equivalent to the generation from a new combined cycle gas turbine
plant), which will manage exposure to spot electricity prices at times of peak demand. The value of tapping into this
resource could be as high as $100 million and will also reduce the need for generation from inefficient plants which sit
idle for all but the peak demand times of the year," Ms Staley said.
EECA commissioned the report from Demand Response Ltd, which looks at aspects of electricity demand to find out what it
would take for customers to become involved in the market. The report incorporates experience from Meridian Energy's
Internet based electricity trading exchange, The Demand Exchange. Using the platform, and driven by wholesale prices,
Meridian's traders place offers to pay customers to reduce their electricity demand. The report also covers other
barriers to the creation of more active demand response.
"It is very clear that larger electricity consumers can, and want to be part of the solution to security of supply and
stability of prices in the electricity market. It was surprising how small price changes can trigger a response from
some customers.
"Medium and large electricity users must turn the heat on their suppliers to allow them to be an active demand-side
participant in the market. They should demand timely price signals from their retailer that can enable them to respond
by rescheduling their load, or to run standby generation as a back up.
"Many New Zealand businesses have switched on to the fact that energy efficiency saves them money, and now we hope to
show businesses how they can have more influence over the price they are charged for the energy they do use," Ms Staley
said.
Copies of a synopsis report and the full report are available on www.eeca.govt.nz
ENDS