Major users to turn torch on energy suppliers

EECA encourages major users to turn torch on energy suppliers

A report released by the Energy Efficiency and Conservation Authority (EECA) today makes a very compelling case for demand side participation in the New Zealand electricity market.

EECA Chief Executive Heather Staley says the report, Exploring Our Untapped Electricity Resource, identifies that up to $100 million of electricity cost savings may be available to medium and large energy users through demand side participation.

"The report highlights how the electricity market is immature and how medium and large users are often captured by imperfect supply agreements.

"In a developed market, both buyer and seller are fully aware of the price. But New Zealand's medium and large users exposed to the electricity spot market have their hands tied. They have no idea as to the price they will pay for the electricity they are using until 24 hours after they have used it, at best. For the market to operate as it should, the demand side must be given timely information and the ability to participate.

"If retailers allow it to work, the opportunity for New Zealand is huge. Demand response can deliver a reduction in use of between 250 and 900MW of electricity (roughly equivalent to the generation from a new combined cycle gas turbine plant), which will manage exposure to spot electricity prices at times of peak demand. The value of tapping into this resource could be as high as $100 million and will also reduce the need for generation from inefficient plants which sit idle for all but the peak demand times of the year," Ms Staley said.

EECA commissioned the report from Demand Response Ltd, which looks at aspects of electricity demand to find out what it would take for customers to become involved in the market. The report incorporates experience from Meridian Energy's Internet based electricity trading exchange, The Demand Exchange. Using the platform, and driven by wholesale prices, Meridian's traders place offers to pay customers to reduce their electricity demand. The report also covers other barriers to the creation of more active demand response.

"It is very clear that larger electricity consumers can, and want to be part of the solution to security of supply and stability of prices in the electricity market. It was surprising how small price changes can trigger a response from some customers.

"Medium and large electricity users must turn the heat on their suppliers to allow them to be an active demand-side participant in the market. They should demand timely price signals from their retailer that can enable them to respond by rescheduling their load, or to run standby generation as a back up.

"Many New Zealand businesses have switched on to the fact that energy efficiency saves them money, and now we hope to show businesses how they can have more influence over the price they are charged for the energy they do use," Ms Staley said.

Copies of a synopsis report and the full report are available on http://www.eeca.govt.nz

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