One year on from widespread power cuts, we must not let a good energy crisis go to waste

Source: Stuff.co.nz, August 10th 2022

OPINION: A year ago, more than 34,000 New Zealand households went without power on one of the coldest nights of the year. There was speculation about who was to blame, various investigations, and more recently, renewed threats of electricity outages with inevitable references to August 9, 2021.

The Electricity Authority (EA) ruled Transpower’s coordination and communication failures meant consumers were disconnected unnecessarily that night. For its part, the national grid operator has stressed the unusual circumstances that led to the miscalculation that caused thousands of Kiwis to shiver in the dark.

Unusual or not, it’s crucial we don’t allow lessons from that crisis to go to waste. While the EA and Transpower have reassured us they have been learnt, our electricity industry cannot afford to be complacent. The investigation into the incident found that there’s a massive opportunity to utilise untapped demand side participation to achieve our goal of 100% renewables. It’s time to get on with it.

Consumers big and small have a part to play in stabilising the grid. This is not only critical for energy security, it’s critical for energy affordability. Some retailers are already supporting this shift with “time-of-use” tariffs that financially incentivise customers to use power-hungry appliances at times of day when electricity costs less. But expecting consumers to change their behaviour is a big ask. Most of us don’t have time, or incentive, to keep an eye on market signals and switch the dryer on or off as power prices fluctuate.

The answer, then, lies in automated demand response, facilitated and rewarded by electricity retailers. The investigation report points to New Zealand’s ripple control, which has been turning off our electric hot water systems in times of peak demand since the 1950s, as an example of what such a response could involve.

However, demand management technology has become significantly smarter in the past 70 years. Software like Intelligent Octopus lets consumers tell an app what time they need their EV charged by, and ensures the battery is juiced when wholesale prices are lower. Consumers save money, and the grid stays stable. It’s a win-win.

The same tech can be applied to heat pumps and hot water cylinders, injecting much-needed flexibility into the electricity system. With added breathing room, retailers would be able to pass on cost savings to their customers. Hot water currently comprises about a third of the average power bill; switching it off for 30 minutes during the highest-priced periods would provide a meaningful boost to Kiwi bank balances.

Automation is the only way we’ll ever see widespread uptake of demand-side solutions. And, widespread uptake is becoming a matter of urgency. In the last month, we’ve seen governments across the Northern Hemisphere scramble to stabilise their grids amidst intense heat waves that show us what we’re in for if the planet keeps warming. Responses have ranged from subsidies for cooperating with government-issued notices to conserve electricity, to compensating bitcoin miners for powering down their rigs. These moves highlight the crucial role demand side response plays in keeping electricity flowing, but they’re a patch for countries caught on the hoof. They’re not a long-term fix.

The UK is slightly more future-thinking, putting £65 million (NZ$126.8m) behind trials that support consumer flexibility in the market. Facing a winter with tenuous energy security due to the war in Ukraine, the national grid operator is considering subsidising households to swap gas boilers with smart heat pumps. Meanwhile, the energy regulator has put forward a plan that would allow EV owners to turn their cars into “mobile power plants”, able to sell power back to the grid in peak times.

New Zealand has the opportunity to be even smarter, not to mention proactive, in its demand-side innovation. We should not wait for a crisis – of communication, conflict or climate – to start implementing solutions already under our noses.