Unlocking the power puzzle

CEO Jon Stretch hopes the controversy over how to achieve reliable, affordable and sustainable energy will prove to be a catalyst for change in the way people use energy.

POSTED 31/03/2017

The heated debate over electricity shortages, soaring prices and greenhouse gases has focused on the knotty problem of supply, but largely neglected the other side of the equation – demand.

This is a missed opportunity, because every megawatt of power not consumed represents a saving in carbon emissions, lower energy costs, a lighter burden on the existing grid, and reduced requirement for new, costly infrastructure.

Jon Stretch, managing director and chief executive officer of electricity retailer ERM Power, hopes the controversy over how to achieve reliable, affordable and sustainable energy will prove to be a catalyst for change in the way people use energy.

“What we need is an enduring energy policy – long-term, stable, nationally consistent and ideally bi-partisan – which will provide direction for industry and greater investment certainty,” he says. “The policy needs to include not only generation and distribution, but also better consumption management.

“The wholesale price in the national energy market is adjusted every five minutes. The best way to get wholesale prices down is to cut demand through smart, integrated energy solutions involving sensing and controlling, demand alerts, strategically timed energy procurement and efficient lighting.”

All cards are on the table in the current review of the national energy market, chaired by Australia’s Chief Scientist, Alan Finkel.

Stretch says the policies expected to emerge from the Finkel Review should ensure a level playing field for all technologies, plus competitive neutrality between new market entrants and incumbents.

While the energy industry makes the transition to renewables, gas offers the ideal low-carbon alternative, but its availability is constrained by market and policy-driven challenges.

Moreover, a lack of co-ordination between the states has complicated planning. Victoria and Queensland, for instance, have set their own Renewable Energy Targets.

“In this climate of uncertainty it’s a very risky proposition for anyone to put their hand in their pocket and invest,” Stretch says.

The Finkel report is expected later this year, but energy consumers are not waiting to see how they can save.

ERM Power is seeing “a groundswell of interest from business wanting to know how to take control of energy, which is a significant input cost for many commercials and industrials”, he says.

Stretch believes ERM is uniquely positioned to advise on cutting consumption, because it has no conflict of interest in advocating for demand management.

“We are the number two retailer to the commercial and industrial segment, but we’re the only one of the top four that doesn’t have a vested interest in coal-powered power stations”

Roughly one in five government, business and industrial customers source their energy through ERM. And it’s these customers who, in the past 12-18 months, “have been hit with these increases of up to 170 per cent due to network, generation and wholesale costs”.

This, says Stretch, is an issue for Australia’s place in the international economy.

“Let’s say your business is running data centres, something fundamental to the economy but quite power-intensive, and you’ve suddenly seen a massive increase in your bills.

“It’s not about competition between companies in Australia, but between rivals in New Zealand or Hong Kong.”

When looking for savings, people tend to think first of solar photovoltaic panels, but many simpler solutions are less expensive and have shorter payback periods.

Lighting systems often yield a quick win. ERM’s LumaLED division recommends modern LED bulbs, which can be 60 per cent cheaper than conventional lamps and last up to 10 years, generating savings on maintenance costs.

ERM Power provides analytic systems that measure energy consumption by business process over time and post alerts when an out-of-range event occurs.

It also offers a “demand response” program that rewards customers who use their onsite standby generation when energy peak events push wholesale prices up.

Several years of turmoil and high prices can be expected until the new energy landscape emerges. Until then, and even afterwards, Stretch says, “a megawatt less demand must be viewed as equivalent to a megawatt of renewables”.

*Article as published in the Australian Financial Review on 29 March 2017.

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