Forum on Sustainable Energy, Good Governance and Electricity Regulation <ul><li>Regulation’s role in demand management and...
Drivers for DM and RE <ul><li>Societal/externalities </li></ul><ul><ul><li>Environmental </li></ul></ul><ul><ul><li>Access...
Role for regulator <ul><li>Context/country specific </li></ul><ul><li>Depends on – for example </li></ul><ul><ul><li>Insti...
IPART’s role <ul><li>Established 1992 – multi-sector utility regulator </li></ul><ul><li>‘ Long’ involvement in DM issues ...
Network regulation <ul><li>Two key aspects </li></ul><ul><li>Form of regulation and the incentives created </li></ul><ul><...
Network regulation and DM and RE <ul><li>Many challenges to DM and RE – not least are cultural and planning biases </li></...
IPART’s experience with network regulation <ul><li>IPART started with hybrid revenue cap and full revenue cap </li></ul><u...
D factor <ul><li>In 2004 Tribunal adopted price cap with D-Factor. </li></ul><ul><li>D Factor is an add-on designed to cor...
Network DM projects under  D-factor
Impact on network investment <ul><li>Program is still small  </li></ul><ul><ul><li>But relative to the size the capex savi...
 
Emissions Trading
Outline of the scheme <ul><li>Obligation to reduce greenhouse gas emissions attributable to retailers </li></ul><ul><ul><l...
Role of the Regulator <ul><li>The regulator (IPART) </li></ul><ul><ul><li>Monitors compliance with the target reductions i...
Structure of the Scheme
Issues in Implementation <ul><li>Responsibility for making good ‘bad certificates’ is with creator </li></ul><ul><ul><li>C...
Assessment <ul><li>Targets achieved </li></ul><ul><ul><li>200 accredited providers – over 100 in DSA </li></ul></ul><ul><u...
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Regulation's role in demand management and renewables: reflections from the experience in Australia

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Presented by Eric Groom, Independent Pricing and Regulatory Tribunal of New South Wales

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Regulation's role in demand management and renewables: reflections from the experience in Australia

  1. 1. Forum on Sustainable Energy, Good Governance and Electricity Regulation <ul><li>Regulation’s role in demand management and renewables: reflections from the experience in Australia </li></ul><ul><li>Eric Groom </li></ul><ul><li>Principal Advisor, IPART </li></ul><ul><li>Singapore, 17 March 2008 </li></ul>
  2. 2. Drivers for DM and RE <ul><li>Societal/externalities </li></ul><ul><ul><li>Environmental </li></ul></ul><ul><ul><li>Access </li></ul></ul><ul><ul><li>Local development </li></ul></ul><ul><ul><li>Affordability </li></ul></ul><ul><li>Wholesale/retail </li></ul><ul><li>Network </li></ul>
  3. 3. Role for regulator <ul><li>Context/country specific </li></ul><ul><li>Depends on – for example </li></ul><ul><ul><li>Institutional/political framework </li></ul></ul><ul><ul><li>Market structure </li></ul></ul><ul><li>Varies over time </li></ul><ul><li>… and between different activities of regulator? </li></ul>
  4. 4. IPART’s role <ul><li>Established 1992 – multi-sector utility regulator </li></ul><ul><li>‘ Long’ involvement in DM issues </li></ul><ul><ul><li>1996 review </li></ul></ul><ul><ul><ul><li>Delineation of role of regulator </li></ul></ul></ul><ul><ul><ul><li>Hybrid revenue cap </li></ul></ul></ul><ul><ul><li>1999 review </li></ul></ul><ul><ul><ul><li>Full revenue cap </li></ul></ul></ul><ul><ul><ul><li>Pricing principles </li></ul></ul></ul><ul><ul><li>2002 DM and RE review for government </li></ul></ul><ul><ul><li>2004 review </li></ul></ul><ul><ul><ul><li>Price Cap + D factor </li></ul></ul></ul><ul><ul><ul><li>Emissions Trading Scheme </li></ul></ul></ul>
  5. 5. Network regulation <ul><li>Two key aspects </li></ul><ul><li>Form of regulation and the incentives created </li></ul><ul><li>Pricing </li></ul><ul><ul><li>‘ positive pricing’ i.e prices that reflect costs by locations </li></ul></ul><ul><ul><li>‘ negative’ pricing or payments to reduce load on networks to reduce congestion and avoid capex </li></ul></ul>
  6. 6. Network regulation and DM and RE <ul><li>Many challenges to DM and RE – not least are cultural and planning biases </li></ul><ul><li>But regulation can also create bias </li></ul><ul><ul><li>in short term </li></ul></ul><ul><ul><ul><li>Price cap is a strong disincentive due to the lost revenue </li></ul></ul></ul><ul><ul><li>In long term </li></ul></ul><ul><ul><ul><li>Uncertainty over treatment of capex and perceived bias towards traditional options </li></ul></ul></ul><ul><li>And regulators have a role in ensuring bets practice planning process and opportunities for participation of DM and RE projects </li></ul>
  7. 7. IPART’s experience with network regulation <ul><li>IPART started with hybrid revenue cap and full revenue cap </li></ul><ul><li>‘ Best solutions’ to short term bias but ineffective. Why? </li></ul><ul><ul><li>Long term uncertainties remained </li></ul></ul><ul><ul><li>Strong bias to selling more electricity in utilities </li></ul></ul><ul><ul><li>Difficult concept for advocates within utility to sell </li></ul></ul>
  8. 8. D factor <ul><li>In 2004 Tribunal adopted price cap with D-Factor. </li></ul><ul><li>D Factor is an add-on designed to correct for problems of price cap. </li></ul><ul><ul><li>Adjusts for impact of lost revenue from foregone sales </li></ul></ul><ul><ul><li>allows for recovery of direct expenditures on DM up to cost of network alternatives </li></ul></ul><ul><ul><li>allows for the retention of cost savings by the utility for the regulatory period </li></ul></ul>
  9. 9. Network DM projects under D-factor
  10. 10. Impact on network investment <ul><li>Program is still small </li></ul><ul><ul><li>But relative to the size the capex savings are significant </li></ul></ul><ul><li>Over 2 years EA avoided $11m and IE avoided $12m </li></ul><ul><li>Trend: small (eg sub $1m) deferred indefinitely, larger projects for 1-2 years </li></ul>
  11. 12. Emissions Trading
  12. 13. Outline of the scheme <ul><li>Obligation to reduce greenhouse gas emissions attributable to retailers </li></ul><ul><ul><li>Target: reduce from 8.65 to 7.27 tCO2e per capita by 2007 </li></ul></ul><ul><li>Emission reduction certificates can be created through </li></ul><ul><ul><li>low emission generation </li></ul></ul><ul><ul><li>energy efficiency </li></ul></ul><ul><ul><li>carbon sequestration </li></ul></ul><ul><ul><li>large user changes to production process </li></ul></ul><ul><li>Interstate activities included </li></ul><ul><li>Certificates are tradeable </li></ul><ul><li>Obligations met by acquitting certificates </li></ul><ul><li>Penalty: $10.50 per tCO2-e(not tax deductable) if target not met </li></ul>
  13. 14. Role of the Regulator <ul><li>The regulator (IPART) </li></ul><ul><ul><li>Monitors compliance with the target reductions in emissions and imposes penalties </li></ul></ul><ul><ul><li>Performs the scheme administration role </li></ul></ul><ul><li>Scheme administration is not a regulatory function and need not have been given to IPART </li></ul><ul><ul><li>IPART established it as a separate stand-alone activity to facilitate a future change in responsibilities </li></ul></ul>
  14. 15. Structure of the Scheme
  15. 16. Issues in Implementation <ul><li>Responsibility for making good ‘bad certificates’ is with creator </li></ul><ul><ul><li>Certificates, once registered, are ‘good currency’. </li></ul></ul><ul><li>Benchmarks for existing generators and concern at ‘windfall gains’ </li></ul><ul><li>Inclusion of inter-state activities </li></ul><ul><li>Measurement and verification of energy efficiency programs </li></ul>
  16. 17. Assessment <ul><li>Targets achieved </li></ul><ul><ul><li>200 accredited providers – over 100 in DSA </li></ul></ul><ul><ul><li>60 million certificates issued – 1/3 for DSA </li></ul></ul><ul><li>Implemented with few resources, relatively quickly </li></ul><ul><li>Reliance on third party auditors has developed capacity, aided learning </li></ul><ul><li>Main criticisms: generous rules on allowed generating activities – but policy issue; administrative ‘learnings’ stand </li></ul><ul><li>Facing critical transition – oversupply, declining price and uncertainty about future. Key </li></ul><ul><ul><li>Transition to national cap and trade scheme on emitters </li></ul></ul><ul><ul><li>Separate EE certificate scheme </li></ul></ul>

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