Additional functionalities requiring further consideration and analysis

There were a number of functions in Phase 1 where it was decided that there was sufficient uncertainty surrounding the costs and benefits to justify further analysis prior to finalising a recommendation as to its inclusion in the national minimum functionality. The results of this additional analysis are discussed below.

16.2.1. Functionality Enabling Direct Load Control via the Smart Meter

Infrastructure and Facilitation of a Connection with an IHD

Two of the functionalities that we concluded in Phase 1 which required further analysis due to the uncertainty as to their costs and benefits were functionalities 15 and 16. These functionalities have been considered in more detail in Phase 2 of this study.

Functionalities 15 and 16 have the potential to provide direct load control benefits similar to the infrastructure associated with scenario 3, but within a smart metering infrastructure. In relation to functionality 16, this capability is provided via an interconnection with a HAN and three alternative cases were identified in Phase 1: 16A, 16B and 16C. These cases relate to alternative performance measures associated with the DLC functionality and also alternative means of achieving a DLC capability via a HAN.

Functionality 16 also has the added feature of allowing for the connection of an IHD, which has the potential to enhance a customer’s demand response through the real time provision of information on a household’s electricity consumption or extent of greenhouse gas emissions. This potential is available in all three cases (16A, 16B and 16C).

Given that functionalities 15 and 16 both provide DLC capability via a smart metering infrastructure they can be considered as alternatives to each other and we would expect to recommend only one for inclusion in the minimum national functionality. As a result we consider both of these functionalities together in this section before presenting our recommendation.

In relation to functionality 16, we have considered the costs and benefits of this functionality both assuming that it is used to provide DLC capability only, and also assuming that

customers are provided with an IHD, which has the potential to lead to a further demand response. As the discussion later in this section clarifies, there is considerable uncertainty surrounding the impact on demand that may result from the provision of IHDs to consumers and the results from trials both in Australia and internationally are mixed. In the lower bound there may be no impact on demand, meaning that the provision of IHDs would result in additional costs but no additional demand benefits. As a result, we consider that it is worth assessing the net benefit associated with functionality 16 both without IHDs and with IHDs. It should be noted that the analysis of the incremental net benefits presented in this section relate to the additional benefits compared with a distributor-led smart meter rollout (i.e. Scenario 1).

Functionality 15: Interface to other load control devices

Functionality 15 relates to the provision of an interface with other load control devices. To distinguish it from functionality 16, this functionality has been further defined such that the interface would be directly with the SMI communications network, not via the meter.

The results of our incremental analysis of the additional net benefit that may be realised from adding functionality 15 to the minimum national functionality is set out in the following tables.

Table 16.2

NPV of Costs and Benefits ($m) - Functionality 15, National

Functionality Costs Demand

Response Net Position

Functionality 15

Minimum Net Benefit (84) 169 85 Maximum Net Benefit (29) 169 140

Table 16.3

NPV of Costs and Benefits ($m) - Functionality 15, Jurisdictional Breakdown

Functionality NSW (winter

peak)

NSW (summer

peak) VIC QLD SA WA NT TAS

Nationwide (winter peark NSW)

Nationwide (summer peark NSW)

Functionality 15

Minimum Net Benefit 17 71 13 34 11 11 (1) n/a 85 138 Maximum Net Benefit 34 87 24 49 17 17 (0) n/a 140 194

Note: Given that the Australian Capital Territory does not have a separate NEM region we have been unable to separately estimate the demand impact for the Australian Capital Territory of a DLC capability

Figure 16.1

NPV of Benefits and Costs ($m) - Functionality 15, National

0 20 40 60 80 100 120 140 160 180

DLC Costs Demand response

Note: there is no upper bound shown in the figure in relation to demand response as we do not consider a higher take-up rate to be achievable for functionality 15.

The key features in relation to functionality 15 are:

ƒ costs required at the meter in order to facilitate this functionality;

ƒ the interface does require a device to be installed on air-conditioners and pool pumps, in order to allow them to be remotely cycled by the smart metering system. This device needs to be able to operate on the basis of whatever SMI communications technology and protocols are in place for a particular premises, and these may be largely proprietary systems;

ƒ we have assumed that this device is installed only in new and replacement air- conditioners and pool pumps for those household that choose to take-up a DLC tariff from 2009 and that there is no retrofitting of this capability in existing air-conditioners and pool pumps;227

ƒ EMCa has estimated the costs of the device for air-conditioners at between $40 and $80 per device, plus a further $40 to $80 per device for installation. EMCa has assumed that devices that reflect the state (or area) specific standards would be installed in new air- conditioners at the customer’s site (rather than in the factory before sale), and that this installation could be undertaken by the same person who installs the air-conditioner rather than requiring a separate home visit. As a result total installed costs per device are estimated at between $80 and $160;

ƒ As discussed in section 5.2, we have adopted the same device and installation costs for pool pumps as for airconditioners, in the absence of better information; and228

ƒ we have assumed a 7.5 per cent uptake rate for DLC under this functionality. A key distinction between this approach to providing DLC capabilities compared to the alternatives under functionality 16 or scenario 3, is the problem arising from different

proprietary communications systems in each distributor region. The air conditioning devices will need to be capable of communicating with the SMI communications network in the customers’ area. Communications networks will inevitably differ in different parts of the country and may involve different and proprietary communications protocols, which would therefore need to be inherent in the devices. This represents a significant issue that would need to be addressed. It also represents a potential barrier to customer take-up of DLC products, given that a customer would need to ensure that the appliance they purchased was suitable for the DLC system operated in their distribution region. As a consequence, we have not estimated a ‘high take-up rate’ for functionality 15 but have assumed that the 7.5 per cent take-up rate assumption is itself aggressive. We note that current work by Standards

Australia on DRED standards would address this technical hurdle by allowing different DLC communications modules to be inserted into an air-conditioner after manufacture (eg, at the point of installation).

The benefits arising from this functionality depend upon the impact the associated DLC program would have on electricity demand and the resulting:

227 _{Scenarios 1, 2 and 4 have been defined by the SMWG as excluding any DLC retrofitting, in order to distinguish them}

from Scenario 3 which does include retrofitting.

228 _{We note that the overall results of the cost benefit analysis are not affected to a significant extent by the adoption of this}