Getting Serious: The Peak Demand Reduction Scheme

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The New South Wales Energy Savings Scheme (ESS) was established in 2009 under the Electricity Supply Act 1995. One of the primary purposes of the ESS is to provide incentives to install, improve or replace energy savings equipment and appliances in NSW households and businesses.

The financial incentives under the scheme have been in the form of Energy Saving Certificates (ESCs), which are tradeable. When households and businesses fund energy-saving activities, they create ESCs which can be transferred to Accredited Certificate Providers (ACPs) in return for a discount on the costs of the energy saving activity. The ESCs are calculated on the basis of the megawatt hours saved by the activity.

Many of us know some of the programs that have been rolled out such as light bulb replacement and solar panel subsidies. The next wave of schemes is now upon us.

Who Governs the Scheme and Who has a Role to Play?

The (NSW) Department of Planning, Industry and Environment (DPIE) is responsible for the policy framework of the scheme. The DPIE is also responsible for the legal framework to implement the policies of the scheme.

The Independent Pricing and Regulatory Tribunal (IPART) administer and regulate the scheme. They are responsible for providing reports on the scheme to the responsible Minister.

As the administrator of the scheme, IPART assess applications under the scheme and issue the ESCs. They also monitor the compliance of the ACPs. They manage an ESS registry and online portal.

The Energy Savings Scheme Audit Services Panel perform some of the Scheme Administrator’s functions in regards to compliance of the schemes participants and ACP’s. Their statutory functions are contained in s 55 and s 56 of The Electricity Supply General Regulation 2014.

The Safeguard:

In 2021, as part of the NSW Electricity Strategy, the NSW Government handed down the Energy Security Safeguard Position Paper. The document was created in response to stakeholder submissions to the Energy Security Target and Safeguard Consultation Paper.

In the Position Paper, it was announced that the Government would establish a new scheme in addition to the ESS.  By way of media release, the NSW Government announced the Peak Demand Reduction Scheme (PDR Scheme) on 28 September 2021.

The PDR Scheme:

On 24 September the Electricity Supply Amendment (Peak Demand Reduction Scheme) Regulation 2021 commenced. The aim of the scheme is contained in reg. 83:

83 Establishment of peak demand reduction scheme

  • The principal object of this Part is to create a financial incentive to reduce peak demand for electricity by encouraging activities that create peak demand reduction capacity.

(2) The other objects of this Part are as follows— (a) to improve the reliability of electricity supply, (b) to reduce the cost of electricity for customers, (c) to improve the sustainability of electricity generation.

(3) The following persons are required to participate in the peak demand reduction scheme—

(a) a retailer,

(b) a direct supplier of electricity,

(c) a market customer within the meaning of the National Electricity Rules.

(4) A scheme participant is required to surrender certificates in relation to each compliance period in accordance with this Part.

The First PDR Initiatives:

  • There will be incentives (rebates) for households to purchase and install energy efficient air conditioners (rebates for businesses AC’s have been available for some time via other schemes);
  • Businesses with EV fleets will be able to export power from their parked vehicles back in to the grid at peak times.

The two initiatives above were cited as examples in the press release on 28 September 2021. There is very little information available as to what other initiatives will be forthcoming.

The largest peak times for electricity usage have been identified as daytime in the summer months when air conditioners are being used widely. To consider the efficiency of the AC unit itself, and then identify ‘idle’ electricity sources (such as EV fleets when parked) makes sense. The holistic approach is commendable.

The Future:

We will be closely monitoring any new developments in this space. This is an exciting time for innovative business plans, and it appears that any new and creative innovations that provide efficiency (power reduction) will be well received. As such businesses would know, this has not always been the case. Authorities are now getting serious.

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An Alternative to Compliance by Coercion

Alternatives to penalties are provided by the behavioural sciences, including command and control and economic instruments such as ‘nudging.’ The underlying concept is to create an environment in which individuals make choices based on nudges towards the desired state. This area is well-developed thanks to the advertising industry and, in the context of compliance, is considered to be ‘at the forefront of regulatory policy and governance.’

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