{"id":7120,"date":"2016-08-19T08:05:03","date_gmt":"2016-08-18T22:35:03","guid":{"rendered":"http:\/\/www.solarquotes.com.au\/blog\/?p=7120"},"modified":"2016-08-19T09:02:48","modified_gmt":"2016-08-18T23:32:48","slug":"victorian-residential-demand-tariffs","status":"publish","type":"post","link":"https:\/\/www.solarquotes.com.au\/blog\/victorian-residential-demand-tariffs\/","title":{"rendered":"Victoria’s Residential Demand Tariffs: Designed To Cripple Rooftop Solar?"},"content":{"rendered":"
\"an

The Victorian demand tariff appears to be a cunning plan to slow\u00a0the spread of solar.<\/p><\/div>\n

Residential demand tariffs are now available in Australia, and I recommend you watch out for them. If you are a modest user of grid electricity, as many solar owners are, they have the ability to blow your electricity bill through the ceiling.<\/p>\n

The South Australian demand tariff in particular can give such extreme charges it appears designed for comedic relief.\u00a0 With some electric instant hot water heaters, just one 30-minute, hot shower could result in demand charges of over $1,000 being added to a quarterly bill.<\/p>\n

I’ve written an introduction to demand tariffs here<\/a>, but in this post\u00a0I am going to concentrate on Victoria’s demand tariffs because Victoria is where the smart meters are.\u00a0 It is the only state where\u00a0most\u00a0homes can get\u00a0a demand tariff without changing their meter.<\/p>\n

I will describe a residential demand tariff now available in south-east Melbourne. I’ll show how it can can save some households money while potentially costing others a fortune. Finally, I’ll describe\u00a0how demand tariffs appear to be\u00a0designed to reduce the uptake of rooftop solar and slow the rate at which Australia transitions to clean renewable energy.<\/p>\n

The Details Of Victoria’s Residential Demand Tariff<\/h2>\n

Here is a summary\u00a0of a Victorian residential demand tariff. It is currently available from Momentum Energy in the United Energy network area in south-east Melbourne:<\/p>\n

[wpdtable id=”7192″]<\/p>\n

And you can download the full tariff details here<\/a>.<\/p>\n

As you can see, a household that uses the Melbourne average of 7,000 kilowatt-hours<\/a> a year1<\/a><\/sup> will pay considerably less per kilowatt-hour than if they were on a comparable standard tariff.<\/p>\n

If costs per kilowatt-hour were the only consideration then the demand tariff would save money, reducing average electricity bills by $364 a year.\u00a0 However, the household will have to pay an additional demand charge each day which can be large enough to eliminate any savings.<\/p>\n

How Retailers Calculate Demand Charges<\/h2>\n

To determine how much your additional monthly demand charge will be, your retailer will first look at\u00a0how you used electricity from 3pm to 9pm every day that month. That time period is divided into 30 minute chunks. The retailer then looks for the 30 minute period\u00a0with the highest average power draw2<\/a><\/sup>. \u00a0From April through November that number of\u00a0kilowatts will be\u00a0multiplied by 14.171 cents. From December through March by 31.665 cents. \u00a0That amount is then applied to every day of that month regardless your grid usage\u00a0on those days.<\/p>\n

So if your household’s peak demand over a half hour interval from 3pm to 9pm was 5 kilowatts, then in July your monthly demand charge would be $21.97. In December it would be $47.50.<\/p>\n

If a household’s demand charge was based on 5 kilowatts each month the total demand charges paid over a year would come to $364.64.<\/p>\n

There is a minimum demand tariff of 1.5 kilowatts that will be charged even if a household used no grid electricity from 3pm to 9pm for the whole month.<\/p>\n

South-East Melbourne Household Peak Demand<\/h2>\n

Household peak demand varies.\u00a0 The graph below is for households in the United Energy network area in south-east Melbourne. \u00a0Each blue dot represents a household’s peak demand. The numbers on the left side of the graph show the number of kilowatts a demand tariff would have been based upon each month, averaged over a year.<\/p>\n

\"graph

A graph of south-east Melbourne’s household peak demand in kilowatts on the left vertical axis. (Image credit: Rob Passey, Australian PV Institute)<\/p><\/div>\n

The dots below the yellow line are households with a 30-minute peak demand less than 5 kilowatts. Looking at the graph, it is clear the majority of households would have their monthly demand charge based on an average of less than 5 kilowatts.<\/p>\n

Demand Tariffs May Save Many Inefficient, Non-Solar Homes Money<\/h2>\n

A Melbourne household using 7,000 kilowatt-hours a year with monthly household peak demand from 3pm to 9pm averaging under 5 kilowatts would have lower electricity bills on a demand tariff than if they were on a comparable standard tariff.<\/p>\n

Whether or not they would be better off compared to a time-of-use tariff without demand charges would depend on just when they use their electricity, but it is likely many households currently on time-of-use tariffs would be better off.<\/p>\n

The more electricity a household uses, the lower the average cost they pay per kilowatt-hour for electricity, and so the more likely they are to benefit from being on a demand tariff.<\/p>\n

Demand Tariffs Reduce The Incentive To Install Rooftop Solar<\/h2>\n

Anything that reduces the cost of grid electricity reduces the incentive to install rooftop solar by lowering the potential savings. \u00a0Demand tariffs go one step further though. They reduce the cost of electricity per kilowatt-hour significantly while clawing back most of that reduction with demand charges. \u00a0Solar saves money by\u00a0reducing the amount of kilowatt-hours taken from the grid. It cannot reduce evening peaks3<\/a><\/sup>.\u00a0\u00a0So households on a demand tariff will save less with solar compared to a standard tariff.<\/p>\n

In fact, because Victoria’s demand tariff charges more for the first 6.58 kilowatt-hours used in a day, installing rooftop solar will increase the average cost per kilowatt-hour paid.\u00a0 Reducing the amount of grid electricity used bumps up its average price on a demand tariff and provides a further disincentive to installing solar.<\/p>\n

Demand Tariffs Are Not Rooftop Solar Kryptonite<\/h2>\n

While demand tariffs can and will reduce the incentive to install rooftop solar, their effect will be limited and won’t be nearly as great as some suggest or hope<\/a>. Of course, if they were made compulsory, this would all change.<\/p>\n

While those on a demand tariff will have a reduced incentive to install solar, savvy homeowners\u00a0will realise that if they install a rooftop solar system, they can switch to a non-demand\u00a0tariff.\u00a0 Because people are not stuck with a demand tariff this removes a considerable amount of the disincentive.<\/p>\n

Demand tariffs also improve the economics of adding battery storage. Widespread demand tariffs\u00a0will give\u00a0an advantage to batteries with high power outputs and smart software that can guarantee that there will be enough charge to lop every peak. This is important because if the software misses just one peak, then the whole month gets slugged with the daily demand charge.<\/p>\n

One final effect may be minor, but could still be important.\u00a0 Electricity tariffs are already confusing. At SolarQuotes we hear every day from homeowners\u00a0on simple, standard tariffs who are bewildered and angry at the size of their bills.<\/p>\n

The introduction of demand tariffs will make things worse.\u00a0 Many people will try them in the mistaken belief they will save money due to a lower per-kWh charge. But they’ll up paying more. \u00a0Imagine their anger if they get a high bill with no corresponding increase in their usage. They will be\u00a0motivated to reduce their reliance on the grid\u00a0 by installing rooftop solar and will become more likely to take political action that supports solar.<\/p>\n

Other Tariff Options Can Provide More Benefit To The Grid<\/h2>\n

The claimed\u00a0purpose of demand tariffs is to reduce the cost of operating the grid by reducing peak grid demand. But as they are not well designed to do this. It seems to me that their true\u00a0purpose is to retard the spread of rooftop solar.<\/p>\n

It is not clear that they are any more effective at reducing peak demand than time-of-use tariffs without demand charges.\u00a0 Other tariff structures such as dynamic tariffs<\/a> can be much more effective, but they provide less of a disincentive to install rooftop solar and I presume that is the reason why they are not available.<\/p>\n

Demand Tariffs Result In The Poor Subsidizing The Rich<\/h2>\n

Demand tariffs also have a distributional issue.\u00a0 They allow larger users of electricity to pay less.\u00a0 Some of these large users are merely big families that are not particularly rich. But on average it means the wealthy will pay proportionately less for electricity than the poor, the environmentally conscious, the efficient or the thrifty.\u00a0 This is not fair from a distributional point of view and very stupid from an environmental one.<\/p>\n

Demand Tariffs Are Bad For The Environment<\/h2>\n

If Victoria’s electricity was mostly\u00a0from clean energy sources I would not be too\u00a0worried about the introduction of demand tariffs. But this is not the case, Victoria’s electricity sector is the most carbon intensive in the developed world.\u00a0 Grid generation in the state is contributing to increasing world temperatures, the bleaching of coral, increasing bush fire risk, extreme weather events, droughts, crop failures, and directly contributing to deaths from heatstroke.<\/p>\n

Any change in electricity tariffs that slows the uptake of clean energy is a step in the wrong direction. I implore Victorians to carefully consider their options before before signing up to a residential demand tariff and to fiercely resist any push to make them compulsory.<\/p>\n","protected":false},"excerpt":{"rendered":"

Residential demand tariffs are now available in Australia, and I recommend you watch out for them. If you are a modest user of grid electricity, as many solar owners are, they have the ability to blow your electricity bill through the ceiling.<\/p>\n","protected":false},"author":10,"featured_media":7330,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[636],"tags":[655,32],"class_list":["post-7120","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-electricity-prices","tag-demand-tariffs","tag-victoria","entry"],"acf":[],"yoast_head":"\nVictorian Demand Tariffs: Designed To Cripple Solar?<\/title>\n<meta name=\"description\" content=\"The Victorian demand tariff seems designed to retard the spread of solar. 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Most Australian households are on a flat-rate or, increasingly, a time-of-use tariff for mains electricity consumption. 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