Solar mean and means

It is not ‘means’ tested. But it can mean a nightmare. The phone call: My business is wanting to purchase a small scale solar PV array, and I noticed the contract will not guarantee my price, and the price potentially will increase indirectly because the import of electricity will not remain a constant and directly because it is likely the Small Scale Technology Certificate (STC) will not be fixed for the duration.

Why is import of electricity important? The price of electricity is generally either regulated or contestable. Regulated prices are reset according to an application for price changes – you are a price taker. In short, the price changes each reset period and usually set by state government bodies. In a contestable market set by rules of the national body, to reduce your energy consumption you can carry penalties and price risk. Hence, you might find you have to pay a higher price because you have reduced your import of energy needs. Therefore there is no incentive to reduce your energy use.

Next matter is the popular selling point of Solar, and it is the opportunity to benefit from the export of energy. It follows that just as import prices changing is a risk, so is export energy a price risk. Especially when feed in tariffs (FITs) are being phased out, and in Australia – a review of the Renewable Energy Targets (RET), and the promised repeal of the carbon pricing mechanism could see a collapse of the renewable certificate price. The new’ish’ government is hopeful ‘affordable’ energy will follow the review.

So, if you want to protect your purchase by way of a price guarantee from third parties. You most likely cannot if you are larger than 7.5kWp (residential) but under 300kWp. Why? The energy retailers have no interest because of uncertainty exposing them to the price shocks, and commercial buyers of power have a line drawn in the sand of an economic value of no less than 300kWp export capability.

So, if paying a fixed price is important to you – then you should choose an installer who guarantees the price quoted – clearly and irrevocably. Is it possible? Yes, but the vendor needs to be courageous and needs to laterally rethink how they operate. But, we will save that thought for another post.

Still interested in Solar. Onward then we go: What can still be done in Australia to reduce the upfront cost of solar power systems even after hearing “the solar rebate ending”. There is still a financial incentive from the Australian federal government for installing solar. But you need to be quick if you consider the report on the RET review will reach government by July and ‘put to death by the Reich’.

What is tipped to go is the solar subsidy for anyone buying a solar system of up to 100kW. It is called the STC program. Which stands for Small-scale Technology Certificate. Whilst CO2Land org has previously been concerned that the STC is a distortion of the market, it believes any change should be phased out and not shut off suddenly. Another thing to consider is the STC scheme is not described as a rebate (even though it is = it is politically difficult to call it that). If you check what The Clean Energy Regulator says on their website, it says:

“Under the Small-scale Renewable Energy Scheme the reduction in the cost of your solar panel is not a rebate. You will not qualify for any Government-based financial recompense at the completion of any process relating to STCs.”

The meaning of this is that the cash you get off your solar system price does not actually come from the government. It is a government scheme that compels other people to buy your certificates.

So it is a government run scheme, using other people’s money, and it becomes confusing when you consider the question what must change when all government schemes use other people’s money – is it not?  So, if you are confused over why does a scheme that will save you money and tick the box as a financial incentive be considered to have to walk the plank.

The solar Financial Incentive is a subsidy to assist with the upfront cost of installing a Solar Power System. Currently, it is not ‘means’ tested in any way. However, the criteria for claiming it are:

1) Your system is less than 100kWp in size.

2) You get it installed and designed by an accredited professional.

3) You use panels and inverters that are approved for use in Australia.

We said FITs are being phased out, but each state may differ in what is offered. So check out the following, as an example: The Feed In Tariff (FiT). “The FiT is a State Government subsidy in which some states pay you for the electricity that your solar system will export to the grid”.

How to get involved in the Solar Financial Incentive Scheme involves:

1) The regulator creates Renewable Energy Certificates (RECS).

2) The government mandates that fossil fuelled generators have to either build a certain amount of renewable generation (wind/solar) or buy the right to other people’s renewable energy systems in the form of RECs.

3) When you purchase a solar power system for your roof, the government gives you a number of RECS depending on the size of your system is and the region of Australia it is installed.

4) The special type of RECs that you get for under 100kWp solar system are called “Small Scale Technology Certificates” (STCs).

5) You (or more likely your installer) sell the STCs to the fossil fuel generators and use the cash to offset the upfront cost of the solar system purchase.

6) The STC price is a bit like a share price – it fluctuates on the open market depending on supply and demand. E.g. when the solar industry is booming (usually just before the rebate is cut!) then the STC price drops and vice versa.

7) “You can see the current market price of a STC here. Look for the number in the box in the bottom RH corner labeled: STC”.

8) Almost all solar system prices you see advertised will already have the solar Financial Incentive included in the pricing. So watch out for that too.

Earlier we said the amount of solar rebate that you can claim depends on where you live: It is broken down into zones that roughly mean live in the lower southern parts (zone 4) and get less incentive than other parts with central west parts (zone 1) getting the most.

But, beware of a small number of unscrupulous companies that use the “Inflated STC Price Scam” appear to be deceiving the customer into thinking they are getting a great deal and then hitting them with a bill for thousands more than the quoted price when the system is installed.

——

Be clear on what you want:

CO2Land org is aware that many installer/vendor quotes are virtually silent on saying they guarantee what is said in the quote as the STC price.

Co2Land org believes the truly good guys will be totally upfront and transparent that the final amount payable may go up (or down) based on the STC price on the day of the install.

It is up to you to make the decision to buy based on the facts. When ready to sign – why not say ‘This contract is signed for this fixed price only’ and make it a written condition, and have all parties endorse each copy!

 

Advertisements

Transistions – SME or Contestable Energy Strategies

Energy procurement is significantly different in 2014 than previously. The models for success require a multifaceted theme for the energy procurement process this time around.  What is different is you must manage and arranged the information for what you see as the product, and have them – the energy retailer/supplier, evaluate whether they want to participate.  The critical success factor is no longer ‘did you get the best price’, it is ‘did you get enough participants to respond with a good price and adequately market test your result’. It was so much easier when performance was as simple as input becomes output = price paid, and outcome was the accountant is happy.

Some of you reading this may not understand that the original idea of being contestable was to adequately market test and as the market matured the real cost of generation and supply would settle at the economic point of being sustainable. This point may disappoint those that are building reputations on driving prices down, and that the market is doing as it is expected to do – show maturity of the design.

So, it is time to move on and change the model of the market? Wintelboff and CO2Land org are seeing the Australian Electricity Market and the rules are in itself bringing about change, and there is further evidence most participants in the market are not prepared for the changes. Most of the difficulties are not the will to change by the participants, but more likely to be the extent of the systems required and needed to bring about the change.

Consider that it is now clearly the market is in two different tranches, and when you last went to market the electricity market described itself as contestable down to 160MWh pa consumption, and then below that effectively you were termed domestic and regulated at a set price or reset by regulatory pricing structures and determinations. It was also much easier when you could use the meter type as the rule for whether you contested on price or sought a discount on your tariff with the incumbent retailers. The incumbent was usually your network company and default retailer.

This time around you are either on an agreed price to pay for energy as a contract rate above the threshold of 160MWh pa or seek a discount on tariff set by regulation under the rules of as a small business enterprise (called SME) from 100MWh pa. In the latter a retailer licenced to sell energy might offer aggregation of sites to a contestable size or elect to do nothing other than offer tariff rates.

Another assumption that can be dangerous is to assume as a contestable site the retailer/supplier has an association with the network service provider/utility that will work to your benefit. Changes from within the system in all likelihood  means we can no longer ring our loyal and trusted friend and say can we fix this on one side of the ring-fenced entity or the other and have the problem resolved to mutual satisfaction.  It is now a detailed process. To get a result usually you need to address what they call the asset on a project basis, and computer says yes for you to proceed. If you have previously watched the TV series ‘Little Britain’ you will understand that statement rings very true.

Pursuing sustainable outcomes too brings new awareness, and innovation and the introduction of technology would be assessed according to the business case. Where you are showing success at getting a good price for your energy it can undermine the business case for the sustainable outcome. Especially where carbon pricing is needed to level the playing field. If you have been following that approach you will be seeing with the Feed In Tariffs (FIT) and other incentives being distorted as a political whim that only brings uncertainty to the project, and uncertainty has a cost.

On the point of whims, carbon continues to be a problematic area and the federal Energy Reduction Fund (ERF) is still very much without detail other than a benchmark carbon price will be set by government as government dictates and that price can change when the government decides to do so at its whim. The assumption to be made is that either you or those that you invite onto your agreement might be liable entities under that rules and impact your outcomes.

If we are attempting to bridge the needs of Energy as strategic, tactical and operational, and we describe this as Energy Management, Transition Strategies, and Savings – the need for individual assessment is more important than ever before. Yet, most competitive services are tending to be web based and call centres. This is hardly adequate when you desire to be an energy efficiency centre.  That sort of work requires a fuller understanding of the needs, other than a checklist and dubious interpretation of guidelines according to the level of training or programing of the robot. As a sustainable approach it is likely changes to the energy needs over the life of the agreement is being sought, and that is more than price.  Another way of looking at that point is in medical practice the prognosis will be accessed as preventative (price gained now) or diagnostic (what is the best course of action). A good example can be taken as: You want to introduce solar technology, and you need to know what penalties are written in the contract and will a standard form contract be sufficient to cover this off sufficiently well. LED is another very interesting technology as it can negate the need for conventional building management systems entirely, and that could have long-term upstream effects on current contracts and relationships for tenants and landlords and building managers.

We must take into consideration the balance in terms of energy supply and demand, and the responses must relate to multiples of price, network and security, and even emergency responses. The later because increasing in frequency is disaster.

 

 

 

Solar black spots and Specs

What’s the story about solar – simple answer: It’s complicated. Why, it delivers less than you are led to believe; yet it is very sensible, and misinformation prevents you seeing the ‘real’ picture? Should you buy: Probably yes, but are you fully aware of what you buying? Two different buyers have asked very similar questions. For instance, my friend said they would be free of energy bills after fitting solar – $25,000 later they still get bills! A commercial entity is getting nervous about a $70,000 outlay after having heard that you can expect on hot days up to less than 20% less energy output from solar – the return on investment (ROI) would not stand up on those numbers. The obvious in all this: They did not ask the right questions about performance and reliability, they believed the mantra of free energy without considering what was the quantity of free and the quality of claims. Greenwashing and false claims become the issue.

On 17 January 2014, the Australian Competition and Consumer Commission (ACCC) successfully prosecuted and had imposed fines of  $145,000 penalty for fake testimonials and false solar energy country of origin representations. You can find the ACCC media release 003/14 on http://www.accc.gov.au .

In direct quote from the media release is “Businesses making misleading representations can harm consumers by influencing them to purchase products, sometimes at a premium price, they otherwise wouldn’t choose to. They can also harm competitors who accurately represent their products by creating an unfair playing field.”

So CO2Land org with the help of WINTELBOFF went looking for a fair playing field specific to Australia. We found something and while it might mention Australia, we think it is applicable for all to take note of:

http://www.solarquotes.com.au/blog/the-top-10-things-to-check-on-every-solar-panel-specification/

The Top 10 Things To Check On Every Solar Panel Specification

The message from the author is look carefully at the specifications sheet, “If the spec sheet combined with the quote doesn’t have the answers, call up the solar supplier and ask. If they don’t know the answers, that’s a bad sign”.

The Top 10 Criteria

1. Warranty.

It seems that all panels claim to have a minimum 25 year Power Output Warranty. I’ve covered how to go thru the solar panel warranty with a fine tooth comb here. But the main criteria is to check that the Warranty is backed by an Australian Entity that has to comply with Australian Consumer Protection Laws, and that it is an “on site replacement” warranty. You really don’t want to be removing the panel from your roof and going down the post office to send it back to China! Plus the last time I checked, Chinese consumer protection laws weren’t that hot. (Note: There are some excellent solar panels, made in China, these days and also some shocking ones – the best way to know if the supplier believes in their quality is to see what responsibility they take for the warranty they offer on them)

2. Cost

Typical prices for solar power systems of different kW sizes are shown here. If the cost of your quotes solar system is substantially less, then make sure you are getting a bargain, not a liability by reading this post.

If the price is much more expensive than those show, then either you have a particularly difficult install, or you are paying too much. Get multiple quotes to check which is the case.

3. Manufacturer

Do a quick Google of the manufacturer – What’s their website like? Is there a “warranty” section? Is there an Australian office? How long have they been around? Has anyone had any bad experiences with them on the forums?

4. Panel Type

Is it a mono crystalline, multi crystalline or thin film solar panel, or some wacky new technology? The types of solar panels and their pros and cons are discussed here. Make sure you are happy with the technology that you choose.

5. Solar Panel Efficiency

Unless you have a huge roof, you probably want an efficiency of at least 12%. Otherwise if you ever want to upgrade in the future, you’ll probably struggle to find any roof space left over. However don’t fall into the trap of believing that efficiency is the be all and end all of solar panel quality. You can get great quality panels at the lower end of the efficiency scale. There’s an in depth discussion on solar panel efficiency, when it matters and when it doesn’t here.

6. Power Tolerance

This is the amount that the actual power output of your solar panel can vary from the output specified by the supplier. For example a 165W module with a tolerance of +/- 5% could actually produce from 156.75W up to 173.25W.

So be aware of this number, as it will directly affect the amount of power you can get.

Some manufacturers have a “positive only” power tolerance, which means you are guaranteed to get at least the specified output from the panel and usually more. For example: a 200W solar panel with a tolerance of +5%/-0% will produce a minimum of 200W and a maximum of 210W.

7. Framing Quality

The aluminum frame which goes around the solar panel is a good indicator of the overall quality of the solar panel’s manufacture.

Look at the corners. Are they tidy joins? Are they anodized after the cut, or before. Anodizing after the cut is more time consuming, but means that the 45 degree edge is anodized too, helping protect from corrosion. Are the panels glued (bad), screwed or welded at the corners.

If looks are important to you – then you may want to look for a black anodized frame – they look damn sexy when mounted in a solar array on a roof.

8. The Backsheet.

All solar panels have a plastic backsheet glued on the the back of the panel to protect the solar cells. A flimsy backsheet with any air bubbles or signs of coming unstuck is a sign of a crappy panel.

9. Bypass Diodes

If your panel is mono or multi crystalline then these are a must. They are diodes that cost a few cents each and are put across neighboring of cells inside the solar panel. If you don’t have bypass diodes then a small shadow on a tiny part of your solar panel can stop the entire panel from making electricity.

10. Temperature coefficient.

This is especially important in sunny Australia!

The temperature coefficient is a number that describes how well the panel handles hot temperatures – where hot is defined as greater that 25 degrees Celsius.

The units of this number are “% per degC”

The lower this number, the better.

The higher this number, the more your power will degrade on hot days, when the sun is at full force! And you though that the more sun you had on your roof the more power you would get. Not if this number is too high…

A high temperature coefficient is a sign of a crappy panel. A reasonable number is about 0.5%. If you can get this down to 0.3% that is the sign of an excellent panel. Over 0.7% is a warning sign.

I’m a Chartered Electrical Engineer, Solar and Energy Efficiency nut, dad, and founder of SolarQuotes.com.au. My last “real job” was working for the CSIRO in their renewable energy division. End quote.

 

CO2Land org ponders the Castrol advertisements of some standing: Oils aint Oils. You can speculate Solar aint Solar = get the facts first.

Then there is the elephant in the room – if you brought junk panels where do you dump them? Are they not still classed as dangerous and capable of shock! We better check that out ASAP too!

 

Danger in oversimplifying energy savings – built environment

When organizing energy procurement opportunities you can experience frustration with the need to use simplified language in order to tell your client how they will make the cost savings. The danger in presenting over simplified information is the data might be clearly shown the distortion of savings that may occur. However, the simplified information package cannot illustrate the effects when small but significant changes to operations, occupancy rates of building, seasonal variations, how government policy changes will impact on the cost equation.  What comes to mind immediately is the Carbon Price in government policy, and the opposition in Australia stating they will retrench that price – it then becomes important to consider how different energy retailers might treat it in the energy agreement – something very few thought about until recent times.

And, it appears universal that the common mistake in the information delivery is the over simplified explanations that can be interpreted as all actions the client takes is a linear function in terms of costs. When in reality the issue is the bigger the contract in terms of dollars the greater the impacts of what you do to affect energy used will affect your price paid for the total energy consumed.

Then we find we are not alone: It is common to make mistakes, and it all comes down to oversimplifying the estimates when presenting the cost savings.

When researching the phenomena it was found Lindsay Audin wrote  “Common Mistakes Made By Energy Managers” recently and we share much of his thoughts. So similar in fact, it is also what Co2Land org has been discussing with Ecoprofit Management (www.ecoprofitmanagement.com.au ). What we need to exercise care in is the data has a message, and to paraphrase into simplified information may miss very important part of that message:

1.    Beware of using averaged electricity rates. Customers in a tranche other than domestic tariffs will be rated for electricity charges for both how much electricity is used in terms of kilowatt-hours (kWh) and for how fast electricity is used in terms of kilowatts (kW) – The  “peak demand charge” and the variance of how fast you use electricity can be as much as 50% of a total bill change.

Note a) The danger in using averaged electricity rates as a simplify in estimating dollar savings from energy upgrades, is it is likely you might calculate an average electricity rate by dividing the total cost of electricity in a month by the kWh used in the same time period – therefore the rate includes the cost of peak demand in it.

Note b) Some upgrades to equipment may fail to reduce peak kW demand – examples are using motion sensors to control lighting needs and such measures will save kWh, but may fail to reduce peak kW demand because of changes to occupancy rates and timing of production loads changing to operational needs to be met. It also follows that controlled lighting might also only happen when the peak of energy use has already passed. In the case of motion sensors for lighting if they don’t cut peak demand, they won’t reduce the kW charge of the bill.

Note c) “This same problem arises with photovoltaic (PV) panels that generate power. A system rated (for example) at 100 kW will, at some point, provide that level of capacity – but not necessarily at a building’s peak time. Full PV output occurs when the sun is highest (between noon and 1 PM), unless the panels are mounted on a motorized platform that follows the sun. Commercial buildings usually peak between 3 and 5 PM, at which point PV output may have dropped considerably.” – Audin.

Note d) “Under a power purchasing agreement (PPA), a PV vendor owns the system and sells the output to the host customer at a small discount off the average utility price, typically for 15-20 years. Once again, that averaged price assumes all the PV power is being provided during the building’s peak. Studies have found that is often not the case. Depending on how much of one’s bill is for peak kW, the true value of the kWh from PV may be significantly lower than the vendor’s price.” – Audin.

Note e) It is then obvious that an averaged electric price overestimates dollar savings, and in all likelihood and unless there is data to prove otherwise, only savings based on the kWh can be assumed as a simple measure.

2.    Beware HVAC savings might not result from a lighting upgrade. Do not assume a watt for watt drop in cooling or assume a heating constant to replace the lamping output. It will not be a proportional saving of kWh in a linear fashion.

Note f) “Reducing lighting kWh cuts fixture heat output, but – for several reasons – that may not always translate into a proportional air conditioning (A/C) savings. For example, chillers run for only a portion of the year, while lighting is on most of the year. When lighting wattage is reduced in a room served by a constant volume air system containing electric reheat coils, a drop in cooling load may be made up – watt for watt – by an increase in reheat output. Not only will there be no cooling savings but even the kWh savings from the lighting upgrade may be negated.” – Audin.

Note g) “A 100% outside air system (e.g., serving a lab) may remove a significant portion of fixture ballast heat in its exhaust air instead of returning it to the cooling coil, thus mitigating some of the assumed A/C savings. If any of the upgraded light fixtures are outdoors or in uncooled spaces (e.g., stairwells, bathrooms, basements, mechanical rooms), their reduced heat output will never be seen by the A/C system. If, on the other hand, that reduced heat output necessitates an increase in winter heating through electric resistance baseboards, the net winter electric savings from the lighting upgrade may also be minimal.” – Audin.

3.    In Co2Land org’s mind the greater mistake is assuming maintenance savings will occur.  Repeated again and again are claims that new equipment will need less maintenance. It may be true, but in all likelihood it will have a cause and effect that might not be adequately assessed.  Consider this scenario: A new boiler is fitted with inverter technology and will require less maintenance. Staff will be cut because of this, or retrained, or reassigned elsewhere. But when maintenance is required of a harmonic distortion occurred the building’s maintenance budget will blow out and little or no actual measurable savings from new equipment will be reported. Admittedly it will most likely be in the preceding budget periods that this affect will show itself.

Note h) Research you case studies thoroughly, and do not assume marketing is telling the truth, the whole truth.

Our underlying message is to exercise caution when you try to explain with too little detail, and do not assume the other party is wanting you to explain all as a simplified explanation.  It might even pay to ask – can you make the time to understand all the implications?

patterns of behavior – natural gas prices up

Researching Gas Cogeneration for the built environment you will be told many different stories about feed stock prices. The more common story is we are over the costs blow-outs because of world shortage around 2006, so expect prices will go down. However, the opposite is likely to happen, the costs are going up. Why? The answer is complex. It depends on how you participate and where you participate.

CO2Land org takes note of ValueInvestorcanada.blogspot.com that has a very good article going through this argument from the perspective of an equity analyst. The premise of this article is rising gas prices would be good for people holding stock in gas suppy companies. The argument is based on American activites, being:

1 – Any energy company that can move capital spending away from natural gas drilling and into oil is doing so (Ed. a major driller doing just that).

2 – U.S. LNG import facilities are being converted to LNG export facilities. That will allow producers to get world prices, which are 4-6 times higher than North American prices.

3 – A continued shift from coal to natural gas as a source of power, for economics and the environment.

4 – At some point won’t the government get behind a plan to move to natural gas as a transportation fuel? Instead of having to rely on the Middle East, Venezuela and Nigeria to provide oil to the U.S. wouldn’t it make more sense to use natural gas which the U.S. has in abundance?

5 – Producers have hedges in place at the high rates they could get a few years ago. When those hedges expire they will only get a price for gas which might be below their break even level.

Then www.energyshop.com posts:

Dec 2012 – Driven by Oil Shale Economics, Natural Gas Prices Primed for Slow and Steady Rise – Forbes

“As long as oil stays close to $90 per barrel, it appears likely that the gas supply will continue to throttle back, and the supply overhang will continue to dwindle. In the meantime, demand is likely to grow in a variety of sectors, prices will rise, and a longer-term price equilibrium will eventually kick into place. Gas at $5 to $6 per mmBtu may well be in our foreseeable future. So, for now, drillers are generally going to prove up reserves and sit on them until the price of gas relative to oil makes it profitable to produce. ”

The last paragraph above clear shows a strategy is most likely to be based on profit. For those interested mmBtu as shown above can be interpreted as between 1.054GJ to 1.060GJ and 1GJ at 3.9 degrees C is 26.8cubic metres of natural gas. Source – Society of Petroleum Engineers (www.spe.org)

The Australian Experiences

In Australia we are seeing very similar patterns of behavior and we believe LNG exports to ASIA will be the price setter for energy prices in the foreseeable future.

We also note that cash strapped State Governments will seek to maximize the royalties from natural reserves including Natural Gas, Shale Oil, Petroleum and Coal Seam Methane extraction.

All of this will not be a surprise to most people, however the elephant in the room lies in how it is regulated and ‘allowed’ to get to your need. In Australia and in particular the Eastern Seaboard the federally based Australian Energy Market Operator (AEMO) has oversight, yet State based jurisdictions allow different treatments of price setting.

In more detail:

Victorian Wholesale Gas Market Data

A range of real time data sets from the Declared Wholesale Gas Market in Victoria uploaded from the Market Information Bulletin Board (MIBB) including price and withdrawals, ancillary payments, bid stacks, consumption, demand forecast, effective degree day, registered participants, heating values, gas quality data and more. Source – AEMO.

Short Term Trading Market

A range of data sets offering real time data from the Short Term Trading Market (STTM) system including ex ante market price, provisional market price, mos stack data, allocation quantity, schedule log, hub and facility definitions, total contingency bid & offer, default allocation notice, contingency gas price and more. Source – AEMO.

Viva la difference between the two market information sets as the STTM price represents a delivered price of gas to the Hub. That is, it includes both the commodity and the cost of transportation to the hub, unlike the Victorian Declared Wholesale Gas Market price which is a commodity price only.

Then come the area distribution effects on facility charges, the fees to distribute and that can include the trucking or reticulation. Other government changes and fees also.

The price you WILL pay, may change at any time.

Because of the range of commodity, transport, reticulation and delivery charges and government charges numerous bodies have argued it in itself brings about investment uncertainty. All well and good to talk about, however, one constant remains regardless to what is intended it is the opportunity to game that will not set but influence the price you will pay.

The Energy Users Association of Australia (EUAA), www.euaa.com.au , has presented several stories in January alone on the gas crisis that looms in Australia and now have a dedicated company page that features what is sees as the issues. The Australian Financial Review on 21, 22 and 23 January 2013 ran stories of a similar view from a number of sources. One story by Peter Roberts commented Western Australia’s reserving of 15% of gas supply for domestic use is under threat and it is further reported large Australian Companies cannot get supply contracts further out than 2 years, and those proposing new facilities are not able to secure any gas supply contract, or are finding it very difficult. In terms of what has happened around the country in gas prices since 2009 the following average gas price increases have been, despite adequate supply capability, Queensland 98%, NSW 79%, Victoria 80%, South Australia 78%, Western Australia 170%.

In term of what this means, the CEO Brickworks is quoted as saying his group now pays $8 GJ in Sydney (up from $4 GJ), Brisbane and Perth $12 GJ.

All writers expect the prices to rise more, and the reasons are given that transitions in the market are bringing conditions of uncertainty, and the export markets are getting policy priority. In another example it is quoted Japan is paying $15 GJ for Natural Liquid Gas (the form gas is transported).  The conclusion is therefore you will need to be very careful in how you evaluate your future gas price in your projects. In particular when considering fuel substitution focused projects such as cogeneration.

Co2Land org intends to look deeper into the price effects and predictions of the energy market and will post these accordingly.

 

Balancing energy in your business

In previous arguments the Zero Waste community has been either instructed or advised that revenues from electricity generation using waste materials have no economic benefit, or are too little in the amount of return to be feasible. Other reported arguments are that the material products from the waste stream process have a significantly higher value than generation revenue. Those assumptions can be assumed to be no longer relevant if we approach the problems in a different light. Nor should we discount that technology will advance many techniques and the risk of each decision should be taken on a case by case and/or site by site basis.

If you consider the traditional energy procurement approach: You enter into a standard contract agreement, you concede the terms of your connection conditions and may actually be penalized if you fail to take the load assignment. The problem from this perspective is the supply side is assumed the only legitimate interest in providing energy security. The concept of energy is more legitimate if you refer to the supply and demand balance.

All community is affected by the rising cost of energy, and a number of specialist companies are offering products that approach the three essential considerations in the cost of energy: The energy price, the delivery cost and the carbon price. Something is being done and the “Power of Choice” is doing what it can to address the issues.

The reasons to accept that change is possible is the AEMC and the Senate are the essential bodies that will influence and inform how the implementation of an effective balancing of the National Electricity Market (NEM) and that Demand Participation is the result that is saving $billions for the community, and continuous saving thereafter. If you think this is a relatively new idea, the reality is under the term Demand Response (DR): Alan Fels, Chair of ACCC, on 19 November 2001 made a considerable issue the balancing equation; The Parer Review 2002 presented “Towards A Truly National And Efficient Energy Market”; The EUAA April 2004 presented “Trial of a Demand Side Response Facility for the National Electricity Market”; The ERIG Review November 2006 advocated “Review of Energy Related Financial Markets”; AEMC (formerly by NEMCO) carried Stages 1 & 2 of the Demand Side Participation Review and Stage 3 is in progress.

What does this means if you want to design or reengineer your process products under carbon constraints? On the 1st July 2012 some 250 Australian businesses became lawfully liable to pay $23 for every tonne of CO2e emitted from ‘operational controlled’ facilities emitting 25,000 tonnes or more of scope 1 Greenhouse Gas emissions. A recent survey by the Australian Institute of Management (AIM) revealed that only one third of the organisations surveyed agreed or strongly agreed with the question “My organisation is prepared for the implications of the carbon tax”. It follows that an organisations’ total carbon capabilities are critical to creating the transformational business response necessary to not only remain competitive in the short term, but to prosper in the long term. The process for creating this outcome is heavily dependent on having essential carbon management knowledge and skills in place, and an awareness of the commercial & competitive impacts under the carbon pricing mechanism. Small to medium enterprise (SME) are not a liable entity, at the time of writing and where you may not have as yet assessed the impact of the carbon price, you should be aware the large liable businesses pass the cost down through the supply chain.
The supply chain and operating costs will be having an impact on all consumers and suppliers. We know government assistance programs are available to help mitigate the cost pressures & fund critical investment in areas such as energy efficiency. What we do additionally can be our benefit in reducing all manner of waste including energy and energy products.

On 17 October 2012 the Clean Energy Regulator issued a report, and as a selective reference, said that the year ahead is focused on amongst other things ecological sustainable development and that will favour the innovators prepared to rethink business as usual. The Australian Tax Office (ATO) also provides R&D incentives offsets for those groups, and the Productivity Commission encourages rethinking.

It might be time, if you have not already, consider curtailment opportunities, renewable generation, cogeneration or trigeneration (albeit some high profile projects may well prove to be an embarrassment for overblown claims), or combinations of technologies with emphasis on energy savings.

CO2Land org is aware of licensed energy retailers that are operating where you will be rewarded for sharing risk in the energy price, similar companies also can offer demand incentives that you might also have though less than likely. In this scenario at least one retailer will individually profile the site and make an offer for the output or develop a hybrid contract to suit.

Some of the products developed or can be adaptive to your needs to be developed is:

  1. For generators:

Short term grid balancing, renewable and base load, hedging strategies, Greenpower.

  1. Auto load management with shed load or transfer to generator capability
  2. Price substitution, Load shed offers.
  3. Structured options according to risk tolerance and managed adjustments.

The message is you are no longer obliged with the status quo as a price taker, and you can start the discussion and work for what works for you.

If you are confused with the terminology, hopefully the following will help you better understand: The energy market has three components that affect the price we pay: Price response (PR), Demand Response (DR) and the Emergency response (ER).  Electricity price is proven to be largely inelastic, and as we are more reliant on alternative energy sources we notice the costs tend to be absorbed. Therefore our only real option to mitigate the price is a Demand Response (DR). DR is proving its ability to offset the most volatile price driver in the market. For the supply side the capex and opex growth on the distributed network is a large cost driver, generation is the marginal cost of capital to develop the projects. Demand Participation (DP) can help slow down the cost drivers and the supply side will welcome the cost reductions or the ability to reduce accelerated infrastructure build times. In this instance think build and increase capital required for infrastructure projects (pole and wires builds and maintenance needs to cater for the demand growth). Emergency Response (ER) is an energy security problem and is reactionary to large events with little warning.

CO2Land org also notes success with DP and that DR has been implemented in a number of electricity markets. This includes DR for Reserve Capacity in Western Australia’s Wholesale Electricity Market (WEM) which works very well.  In New Zealand, with a focus on frequency control being particularly important.

In hindsight, the lack of an effective DR mechanism in the NEM has cost electricity users an estimated Present Value (PV) of $15.8 Billion[1] (this is in the order of a 9% impost on their annual electricity bills).  The power to change is with you.

Previously CO2Land org posted, 7 Sept 2012, The Power of Choice – review by AEMC of DR and to recap the “Power of Choice” Review is an unfinished work, and CO2Land org has experience in the material of Demand Response (DR). DR is most effective as a formal aggregation of small amounts of demand reduction from a larger electricity users who are contracted to reduce this pre-agreed amount of their demand at times when their are extreme wholesale prices, extreme peaks in demand or in emergencies.  It is much cheaper way to address these short term events than our current outdated approach of spending billions of dollars on more generators and networks which are only needed for a total of about 40 hours per year.

References to support this view are:

[1]

  • Alan Fels, Chair of ACCC, speaking at the Inaugural EUAA Conference on 19 November 2001
  • The Parer Review 2002 “Towards A Truly National And Efficient Energy Market”
  • The EUAA April 2004 “Trial of a Demand Side Response Facility for the National Electricity Market”
  • The ERIG Review November 2006 “Review of Energy Related Financial Markets”
  • Stages 1 & 2 of the Demand Side Participation Review (Stage 3 still in progress)