ARENA study finds smarter grid regulations are needed

A smarter electricity network regulation would improve reliability, reduce emissions and cut power bills for energy users, according to a new study commissioned by the Australian Renewable Energy Agency.

The Demand Management Incentives Review found that the current regulatory framework favours investing in network infrastructure – such as new poles and wires – over demand management involving energy providers helping consumers to reduce their power demand and bills.

Undertaken by the Institute for Sustainable Futures at the University of Technology Sydney, the study found that building new grid infrastructure was more profitable for network businesses than demand management solutions.

Demand management includes offering incentives to help customers save energy through smarter, more efficient appliances and voluntarily shifting energy use from peak periods.

ISF project director Chris Dunstan said removing the regulatory bias against demand management could deliver more power capacity than a Hazelwood power station.

“Our study has found a clear and quantifiable bias in the regulatory incentives in favour of building network infrastructure over energy saving, local generation and storage solutions, which would offer a better deal for customers,” he said.

“Intelligently reducing electricity demand can be just as useful as increasing supply, and is often cheaper and quicker to achieve.”

The study was in part intended to assist the Australian Energy Regulator (AER), which is currently developing a Demand Management Incentive Scheme.

The new scheme is intended to create a level playing field for network demand management.

ARENA chief executive officer Ivor Frischknecht said the study was an important contribution to understanding how to support the reliable and affordable integration of variable renewable energy into the electricity grid.

“Having more variable renewable energy in our electricity system means we will also need more flexible resources to balance the system,” Mr Frischknecht said.

“Batteries can help provide this flexibility but in many cases it may be simpler, cleaner and cheaper for electricity networks to work with customers to reduce or shift power demand.

“Demand management also allows more efficient use of our existing network assets and reduces the need for network investment.”