The Queensland Government should implement an ongoing review program, in conjunction with the network businesses, to monitor the impacts of emerging technology, and to identify the potential need for an early response to be made, based on an assessment of the costs and benefits.
2.1 A sector in transformation
Electricity markets around the world are in a period of rapid change that is transforming the way in which electricity is generated, delivered and used. A decade ago, when the centralised generator/grid structure was the predominant model of electricity supply, this capability was merely an aspiration.
While Queensland's electricity supply sector has changed in the two decades since the establishment of the NEM, it remains largely dominated by electricity generators, transmission and distribution network service providers and retailers. For the most part, electricity in Queensland is produced at large generation facilities, shipped through the transmission and distribution networks to the end consumers.
Emerging technologies are now eroding the dominance of the centralised generator/grid structure, and affecting values of existing business models as well as offering consumers new choices. They also have the potential to increase the productivity of the electricity supply sector by making better use of the existing infrastructure.
This transformation is being driven by disruptive technological innovations and the convergence of a number of associated factors, including:
rising electricity prices and declining trends in demand growth;
environmental concerns, particularly associated with climate change and aspirations to reduce carbon emissions;
falling costs of renewable energy and storage technologies; and
government policies that incentivise the adoption of new technologies.
As the availability of new technologies becomes increasingly widespread, consumer behaviour is expected to change. New choices will drive the entrance of new electricity products and services, forcing existing electricity utilities to change their business models in order to remain profitable.
2.1.1 New technologies Smart technology
Smart technology is a general term that encompasses the application of information technology, including internet connectivity, to an electronic device or system in order to improve the productivity or efficiency of that system. A related concept is the so-called ‘internet of things’, where appliances are embedded with electronics, software, sensors and network connectivity to enable them to collect and exchange data.
In the electricity context, smart technology involves the integration of sophisticated digital sensing, metering and communication technology into digital devices and appliances located:
within a network, creating a so-called smart grid; and
behind the meter at the consumer level, enabling the monitoring and management of energy flows in real time.
This technology provides networks and electricity users with information and an ability to optimise their investment and usage based on that information. It transforms the traditional grid from a
physical system to a transaction enabler,29 and provides the potential for the realisation of significant economic and productivity benefits across the supply chain.
A cost-benefit analysis based on the results of the Smart Grid, Smart City trial, found that there was a potential for a net economic benefit for Australia of up to $28 billion (in 2014 dollars), over a 20-year time horizon from 2014.30
Network
A smart grid requires a transformation of the existing electricity network through the addition of a range of devices, including smart sensors, new back-end IT systems, smart meters and a communications network. These enhancements promote opportunities for demand management to improve the efficiency and productivity of the existing infrastructure, enabling NSPs to manage their network in a manner that
… achieves outcomes remotely, automatically, more rapidly and more precisely.31 In particular, a smart grid allows NSPs to:
manage peaks in electricity demand through improved load control, and therefore defer network investment;
improve forecasts of electricity demand and supply at particular locations in the grid;
integrate renewable technologies, such as solar, into the system and adjust electricity supply over time in accordance with the availability of renewable power;
manage customer connections and meter readings on a remote basis;
identify and more quickly resolve faults on the grid; and
reduce operating expenditure through the wider adoption of performance-based maintenance practices.
Consumer
When smart technology is incorporated into household, commercial and industrial appliances, the consumer has the ability to better manage their electricity usage, take advantage of cheaper off-peak or time-of-use tariffs where available, and lower their energy costs.
As part of the Smart Grid, Smart City trial, a range of products and services were available to eligible participating households, including:32
a home monitor system — displaying detailed information about energy and water use in real time, and enabling the tracking of greenhouse gas (GHG) emissions and estimation of energy costs;
a home control system — tracking energy usage of connected appliances, and a allowing them to be turned off remotely;
demand response control — allowing networks to place high energy appliances such as air conditioners and pool pumps in low power mode at times of peak demand; and
29 AEFI Consortium 2014b, p. 25.
30 AEFI Consortium 2014a, p. 5.
31 AEFI Consortium 2014a, p. 9.
32 AEFI Consortium 2014b, pp. 114-18.
hot water load control — use of wireless technology to control off-peak hot water through the smart meter.
The adoption of smart technology and the rollout of a smart electricity grid will be key drivers in the broader take-up of other emerging technologies such as integrated battery storage systems and electric vehicles.