Smart Meters and Energy Conservation

The Victorian state in Australia wants to introduce smart metering to all households and businessess. The idea is that continous feedback combined with “peak pricing” or “time of use pricing” will decrease consumption.

As we suggested a while ago, price feedbacks have worked in other parts of the world.

There is no reason a Woodstock-type metering system should not be combined with TOU (Time-of-Use) pricing. If the original scheme resulted in savings of 15%, combining that with TOU pricing as well an extensive education campaign should be able to achieve both additional conservation and load-shifting. If also combined with incentive programs to encourage the replacement of incandescent lighting and aging appliances, consumption could potentially be reduced by far more, and in a relatively short space of time.

The Ministerial Council on Energy (MCE) ordered some economic modelling to be conducted before the meters are rolled out across the state of Victoria. The NERA Economic Consulting cost-benefit analysis is out and it suggests that smart metering may increase consumption.

 But a snapshot of energy consumption shows that while overall Victorian energy consumption would fall 0.54 per cent because of energy savings by the commercial and industry sectors, households would use more.

While household energy use would be reduced by almost 30 per cent on 12 critical peak days over summer, NERA modelling shows it would increase 1.5 per cent every other day over summer and by 2.1 per cent every day in winter.

A similar situation would occur in households across other states except NSW/ACT, where use would fall.

Since the meters will cost $585 million to install, can this money be used better somewhere else?.

Two things stand out. One, that energy consumption at peak times will come down. In the state of South Australia 20% of the state’s electricity capacity is used on 4-6 hottest days of the year. This reduction in peak consumption will decrease energy infrastructure costs. Two, a market solution may be a better solution. The above example of Woodstock was a market solution. If companies thing it will help their bottomline then they will be prepared to shell out the dough to install the meters.

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