Smart Grid, Smart City National Cost Benefit Assessment 27 November, 2014 Smart Energy Forum Newcastle Institute for Energy and Resources Bob Bosler, Senior Consultant, Energeia Ranelle Cliff, Senior Project Manager, Arup Page 1
Overview Approach to Smart Grid, Smart City National Cost Benefit Assessment Outlook and technology optimisation results Strategic Context SGSC Report Conclusions and Recommendations Transitioning to a Smart Grid Future Developments since SGSC and implications Page 2
Energeia Founded in 2009 in Sydney, now largest specialist consultancy in Australia 15 full-time experts based in Sydney, with network of distinguished experts We seek out transformative projects which, by their nature: Are technically high risk Have high strategic value Confidential Page 3
Smart Grid, Smart City Page 4
National Cost Benefit Assessment What is our independent, informed assessment of the Business Case for the deployment of an integrated Smart Grid in a national context? Page 5
Integrated Benefits Model Electricity Price & Tariff Structure Tech Costs Year n (PV, CHP Storage) Storage Algorithms AEMO Forecasts (Peak, Off Peak growth) Tech Costs Year n (SFM, FDIR, AVVC) Age, Utilisation, Replacement Period Sample NMI 1 Sample NMI 2 Sample NMI 3 Customer Behaviour Model Δ Load profile 1 Δ Load profile 2 Δ Load profile 3.. Diversity Model Network Model DC Feeder Zone Sub Avoided Network Costs Forgone Network Revenue Network Price Impact Retail Price Impact Sample NMI 19 Sample NMI 20 Δ Load profile 19 Δ Load profile 20 Wholesale Market Model Wholesale Price Impact Page 6
Model Scope Six states Three scenarios (H,M,L economic growth) 5 time intervals (2014 to 2034) 1.5 weeks per model run 18 virtual machines (courtesy of Ausgrid) Page 7
Smart Grid Technologies Assessed Retailer Pre-Payment Plan Critical Peak Pricing Seasonal Time of Use Capacity Tariff Direct Load Control Smart Meter Infrastructure Consumer Solar PV Fuel Cells (CHP) Battery Storage EV Smart Charging Network Active Volt VAr Control (AVVC) Fault Detection, Isolation and Restoration (FDIR) Substation and Feeder Monitoring (SFM) Page 8
Business as Usual Retailer Inclining Block Tariffs Accumulation Meters* Consumer Solar PV Fuel Cells (CHP) Battery Storage EVs Unconstrained Network No change * Victoria assumed SMI Page 9
Medium Scenario Outlook Page 10
SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS Present Value ($M 2014 Real) National Cost Benefit Assessment 30,000 15,235 27,183 25,000 20,000 3,635 796 354 (4,981) 15,000 15,745 855 (164) (1,334) (99) (2,514) (333) (265) 10,000 5,000 0 252 SMI Enabled SMI Enabled Benefits Costs Total 11 Page 11
Present Value ($M 2014 Real) Substation and Feeder Monitoring 350 300 250 230 21 0 24 139 200 150 100 88 50 0 1 Seach Costs VCR Load Surveys PQ Surveys SFM Opex SFM Capex Benefits Costs SFM Net Benefit 12 Page 12
Present Value ($M 2014 Real) Fault Detection, Isolation and Restoration 20,000 18,000 16,000 14,000 15,741 24 1,310 14,411 12,000 10,000 8,000 6,000 4,000 2,000 0 4 Seach Costs VCR FDIR Opex FDIR Capex Benefits Costs FDIR Net Benefit 13 Page 13
Present Value ($M 2014 Real) Active Volt VAr Control 1,000 900 846 98 800 1 756 700 600 500 400 300 200 100 0 9 Avoided Line Losses Peak Benefits Capex Opex Benefits Costs AVVC Net Benefits 14 Page 14
SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS Present Value ($M 2014 Real) Contribution to National Net Benefit 30,000 27,183 25,000 20,000 (164) 15,000 10,000 5,000 0 252 SMI Enabled SMI Enabled Benefits Costs Total 15 Page 15
SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS Present Value ($M 2014 Real) Contribution to National Net Benefit 30,000 27,183 25,000 20,000 15,000 15,745 (164) (1,334) 10,000 5,000 0 252 SMI Enabled SMI Enabled Benefits Costs Total 16 Page 16
SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS Present Value ($M 2014 Real) Contribution to National Net Benefit 30,000 27,183 25,000 20,000 15,000 15,745 855 (164) (1,334) (99) 10,000 5,000 0 252 SMI Enabled SMI Enabled Benefits Costs Total 17 Page 17
SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS Present Value ($M 2014 Real) Contribution to National Net Benefit 30,000 27,183 25,000 20,000 3,635 15,000 15,745 855 (164) (1,334) (99) (2,514) 10,000 5,000 0 252 SMI Enabled SMI Enabled Benefits Costs Total 18 Page 18
SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS Present Value ($M 2014 Real) Contribution to National Net Benefit 30,000 27,183 25,000 20,000 3,635 796 15,000 15,745 855 (164) (1,334) (99) (2,514) (333) 10,000 5,000 0 252 SMI Enabled SMI Enabled Benefits Costs Total 19 Page 19
SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS Present Value ($M 2014 Real) Contribution to National Net Benefit 30,000 27,183 25,000 20,000 3,635 796 354 15,000 15,745 855 (164) (1,334) (99) (2,514) (333) (265) 10,000 5,000 0 252 SMI Enabled SMI Enabled Benefits Costs Total 20 Page 20
SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS SFM FDIR AVVC Dynamic Tariffs SMI EV Charging DG & DS Present Value ($M 2014 Real) Contribution to National Net Benefit 30,000 15,235 27,183 25,000 20,000 3,635 796 354 (4,981) 15,000 15,745 855 (164) (1,334) (99) (2,514) (333) (265) 10,000 5,000 0 252 SMI Enabled SMI Enabled Benefits Costs Total 21 Page 21
SG Capacity (GW) BAU Capacity (GW) Total DGDS Capacity (NEM exc large ind) 30 25 20 15 10 5 0 30 2014 2019 2024 2029 2034 Cumulative Solar (GW) Cumulative Battery (GW) Cumulative CHP (GW) 25 20 15 10 5 0 2014 2019 2024 2029 2034 22 Cumulative Solar (GW) Cumulative Battery (GW) Cumulative CHP (GW) Page 22
Peak Demand (GW) Change in Peak Demand 45 40 35 30 25 20 15 10 5 0 2014 2019 2024 2029 2034 Peak demand - BaU (GW) Peak demand - SG (GW) 23 Page 23
Consumption (TWh) Change in Consumption 120 100 80 60 40 20 0 2010 2015 2020 2025 2030 2035 Consumption BAU Consumption SG 24 Page 24
12:00:00 AM 1:30:00 AM 3:00:00 AM 4:30:00 AM 6:00:00 AM 7:30:00 AM 9:00:00 AM 10:30:00 AM 12:00:00 PM 1:30:00 PM 3:00:00 PM 4:30:00 PM 6:00:00 PM 7:30:00 PM 9:00:00 PM 10:30:00 PM 12:00:00 AM Demand (GW) NEM Peak Day 35 30 25 20 15 10 5 0 2014 BaU 2034 SG 2034 25 Page 25
Strategic context Page 26
Strategic context Australian Government & COAG Energy Council Review of RET Development of new Energy White Paper Aust Govt and jurisdictional policies COAG Energy Council priorities & work streams AEMC Power of choice program DNSP pricing arrangements Expanding competition in metering & services Retail competition review and LOTS more AER Better regulation reform program Cost allocation guidelines Service target performance incentive scheme (STPIS) review AEMO Value of customer reliability Distribution network annual planning reports Page 27
COAG Energy Council Strengthening Network Regulation Fairer network rules A stronger AER Improvements to the appeals mechanism Empowering Customers Strengthening opportunities for consumer engagement Enhanced access to better consumer data Opt-in TOU pricing Greater demand side participation opportunities Enhanced consumer protection Enhancing Competition and Innovation Greater retail competition and innovation Fair and reasonable return for all microgeneration Ensuring Balanced Network Investment A national framework for reliability standards Investigating demand responsiveness of the regulatory framework Ensuring efficient transmission investment Page 28
Stakeholder priorities Price impacts Consumer impacts Greenhouse gas impacts Network impacts Market impacts Page 29
Conclusions and recommendations Page 30
High level strategic themes Cost reflective pricing for consumers Need for interoperability standards Existing COAG Energy Council market reform program Jurisdictional government and industry leadership Innovation in technology and product deployment Consumer education and industry training Page 31
Fault Detection, Isolation & Restoration FDIR has the potential to deliver significant economic benefits heavily dependent on the value of customer reliability (currently being reviewed by AEMO) Page 32
Smart Meter Infrastructure (SMI) Two value propositions modeled: Full deployment, termed stand-alone Customer-led, with the smart grid case assuming uptake with installation of DG or DS Enabling infrastructure Page 33
SMI (stand-alone or full deployment) Not yet economic (with the exception of some long-rural network topologies in some states) Avoided billing, metering and customer service costs for urban and short rural network not sufficient to offset capital costs for SMI Page 34
SMI + Dynamic Tariffs + Cust Feedback Clear positive economic case for immediate deployment of dynamic tariffs in Australia (requiring SMI) If dynamic tariffs are voluntary, not all customers will adopt the offer Page 35
Meters (Millions) SMI Deployment Predictions 18 16 14 12 10 8 6 4 2-2014 2019 2024 2029 2034 Spinning Disc Full Deployment VIC Rollout Customer Led Page 36
SMI + Dynamic Tariffs + Cust Feedback (2) Without dynamic tariffs customers will be presented with a strong financial incentive to install larger distributed generation systems If inclining block (or flat) tariffs are maintained in Australia it is unlikely that distributed storage will be deployed due to a lack of financial incentives Page 37
Overall savings Customer Research Survey Results Key findings relating to dynamic pricing 0.6 0.4 0.2 0.54 0.3 High satisfaction with SGSC Customer Applications network & retail products Most popular trial products involved discrete peak events BudgetSmart also popular Financially vulnerable customers derived more benefit and satisfaction from products than other households 0 Daily or 2-3 times per week Weekly or less often Engagement with feedback technology vs. overall savings Page 38
DG + DS + SMI + Dynamic Tariffs Dynamic pricing drives the deployment of smaller solar PV systems and CHP compared to BAU Balanced by the deployment of around 3.5 GW of storage capacity Under BAU, negligible storage is likely to be deployed Page 39
Annual Bill Impact ($) Electricity bill impacts (residential) 3,000 2,500 $156 $2,159 $420 2,000 $244 $47 $2,003 $1,712 $332 1,500 $1,407 1,000 500 0 SG Bill Customer with DG/DS Cost of DG/DS Cross Subsidy SG SG Passive SG Benefits BAU Passive Customer Cross Subsidy BAU Cost of DG/DS BAU with DG/DS Average Bill - SG Average Bill - BaU Page 40
Annual Bill Impact ($) Electricity bill impacts (business) 18,000 16,000 $2,108 $15,292 $9,251 14,000 $3,083 $13,184 12,000 10,000 8,000 $8,390 $1,711 6,000 $2,620 4,000 $3,421 2,000 0 SG Bill Cost of DG/DS Cross Subsidy Customer with SG DG/DS SG Passive SG Benefits BAU Passive Customer Cross Subsidy BAU Cost of DG/DS BAU with DG/DS Average Bill - SG Average Bill - BaU Page 41
Transitioning to a smart grid future Page 42
Transitioning industry and consumers Balancing: Risks and opportunities from new smart grid investment Financial, reliability and environmental benefits and issues People Industry and electricity consumers - understanding, education and change Page 43
Maximising the benefits and opportunities Need for interoperability standards Managing greater volumes of distributed generation and introducing distributed storage Examining the business case for: Cost reflective consumer prices In-grid smart grid technologies Consumer feedback technologies Key costs and risks of inaction Page 44
Post SGSC Developments Page 45
Post SGSC Developments (1/2) AEMC Metering Contestability Rule Change (Ongoing, Draft Determination due March 2015) o o o o Likely to be retailer lead Minimum functional spec likely to require smart metering New and replacements likely to include smart meter functionality Where there is a business case, retailers can roll out smart meters AEMC Distribution Network Pricing Draft Rule Determination (Aug 2014) o Requires tariffs to be based on LRMC o Networks already moving to capacity based tariffs (SA Power Networks, Energex) Page 46
Post SGSC Developments (2/2) AEMC Distribution Reliability Measures (September 2014) o AER to develop reliability guidelines o MAIFI increasing from 1 minute to 3 minutes AEMO Value Customer Reliability (October 2014) o Residential values have not changed substantially since 2007/08 o Commercial values notably higher Page 47
Thank You Arup Level 10 201 Kent Street Sydney NSW 2000 P +612 9320 9647 E ranelle.cliff@arup.com W www.arup.com Energeia Level 23 Gold Fields House 1 Alfred Street Sydney NSW 2000 P +612 8097 0070 E bbosler@energeia.com.au W www.energeia.com.au Page 48