This is the second in a series of posts (Part 1, Part 3) exploring how automated devices that produce energy conservation outcomes can integrate with local energy trading, reducing network costs and driving financial value for energy users.
At the end of my previous post I mentioned:
“The key thing, though, is that a kilowatt saved through energy efficiency is more valuable than an increase in generation.”
But how does this work? And why is it important?
To understand this, it’s worthwhile exploring the benefits of a “negawatt” over a megawatt.
“A what-a-watt??” I hear you ask?
Imagine for a moment there’s a certain amount of electricity required on a grid to support all the usage at that particular moment in time. It’s mid-afternoon on a hot summer’s day and demand is about to increase as everyone gets home and starts to turn on their airconditioners and the like. Network managers can pretty accurately predict such events, and they manage their operations to accommodate.
At a high level, we can respond in one of two ways:
- Generate more electricity to meet this demand; or
- Find ways to keep demand at a lower level, so we don’t need additional generation.
In this way, energy not used is as useful as energy generated. This principle is sometimes referred to as a “negawatt.” Rather than “megawatts” being generated, we create “negawatts” by avoiding or reducing consumption.
While a megawatt and a negawatt can both be used to respond to the challenges of increased demand, on the whole a negawatt is more valuable than a megawatt. Why?
The cost of reducing electricity use is typically much lower than generation. The Green Alliance has put together a terrific infographic explaining the concept of a negawatt and its benefits in terms of savings. They report that energy saving can cost as little as one third of meeting demand through generation.
Why is this so? Here are a few reasons:
A megawatt is produced through more generation, which has associated fuel costs and suffers from losses in the transmission network, as the electricity is transported from the point of generation to the point of use. A negawatt is cheaper as it doesn’t suffer from these losses and doesn’t have these associated fuel costs — in fact it immediately saves the energy consumer money (as they don’t pay for electricity not used).
A megawatt requires an upgrades in network infrastructure to support greater peak demand. This is a global phenomenon but has been particularly prevalent here in Australia, sometimes referred to as “gold plating” of the grid. This has increased the cost of electricity for everyone (much more than the so-called “carbon tax” ever did) with network charges now accounting for 40–60% of our electricity bills. A negawatt reduces these peaks, therefore requiring less infrastructure to accommodate the additional megawatts to achieve the same outcome.
Peaks on the electricity network often occur for just minutes in an entire year, yet the infrastructure needed to support critical peaks needs to be in place all year round, essentially lying idle most of the time. This means that we’re all paying more for our electricity to accommodate these (infrequent) peaks.
In some cases, the benefits of peak reduction can be achieved simply by changing the time when electricity is used, rather than reducing consumption overall. This is called “load shifting.” If we can predict a critical peak is likely to occur this afternoon, what if we could ramp up some air conditioners a little earlier or later than the anticipated peak? That way we could turn them down or off during the peak period. The energy consumption at the peak is reduced (flattening the load profile on the network by knocking the top off the peak), but for the most part people haven’t noticed any difference in their degree of comfort.
Lastly, energy saving devices typically cost much less than technologies like solar or home-scale storage (batteries) and could achieve similar benefits, in aggregate. And they can, theoretically, be easier and cost effective to retrofit. The Sinsibo is a great example: it uses infrared control, commonly supported by air conditioners, to make existing devices “smart” by connecting them to the internet. Therefore, you don’t need to replace the entire air conditioner to take advantage of these opportunities.
That said, the cost savings of controlled appliances don’t always stack up to offset the up-front cost of the controlling device(s). This is in part because savings on energy costs don’t properly reflect the overall benefit at the aggregate (community or network) level. Local energy trading is one way that this broader benefit can be valued and provided back to those who invest in such devices (but more on that in a future post).
In the next instalment I’ll take a look at one of the challenges with current approaches to leveraging this aggregate value…
Posted by Grant Young, Chief Experience Officer (CXO) of Nexergy.
Want to get a better return for the energy generated by your solar and/or batteries? Or just want to pay less to get your energy from clean local sources? Sign up for the preview release of the Nexergy local energy trading platform.
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