The claim that the electrity reforms would reduce power prices was pure political spin. There is nothing in the free market theory to support that claim. What the theory does say is that energy costs will be reduced, and that is what has actually happened. Once people realised that power prices were not going to be reduced they started investing in energy efficiency like never before. That increase in demand has produced economies of scale so the price of energy saving lights has dropped by more than half. Prices for solar water and double glazing haven’t really fallen for but they haven’t increased by more than inflation either so they are relatively cheaper compared with the price of electricity. Most free market advocates don’t really seem to know their subject very well since they constantly confuse the free market’s effect on costs to the economy with price to the customer. And the free market’s effects mainly occur in the medium or long term not in the short term. For instance, the price of electricity goes up, you invest in a slolar water heater, ten years later you have saved back the original cost and now the money you are not spending on energy can be spent in some other economic activity.

I’d rather see the geothermal generating plant expanded and run more in a load following mode and use the existing gas-fired generation to handle the peaks.

Trevor.

What we need is a system which encourages demand-side management, by lowering the price of electricity when it is cheap to produce and raising it when it is expensive to produce (e.g. high demand and/or no wind). The key to DSM is to pass those signals to the electricity consumer in close to real time so they can choose when to use electricity and when to defer that use or choose to use other energy sources (such as gas, coal, or biomass). Ideally this would be automated. By giving the consumer (house-hold or commercial/inductrial) a financial incentive to use electricity when it is available and to install the necessary equipment, the peaks in demand are flattened and there is less wasted energy. This may be as simple as having a second thermostat on a hot water cylinder to boost the temperature higher than normal when the power is cheap plus an extra ripple-control channel on the power metering.

In general DSM leads to slight decreases in the efficiency of usage of electricity, but overall it leads to efficiency gains as more energy is used when available so it doesn’t have to be stored in some other system or generated using less efficient plant.

It also reduces the dips in the spot price of electricity, thus allowing the electricity generators to receive payment for generation that may otherwise go to waste.

Unfortunately the electricity retailers are not encouraging / permitting this as they would probably lose some revenue as consumers use cheaper power.

Trevor.

Trevor.

Pertinent to the discussion : this piece from the Financial Times, on the effect of privatization of gas and electricity in Europe on consumer prices.
http://www.ft.com/cms/s/0/29869d28-7fe1-11dc-b075-0000779fd2ac.html

Since there is already excess generation capacity in the South and excess consumption in the North, for obvious and structural reasons, and assuming that at least half the prime wind sites are in the SI, it’s logical that new wind developments will exacerbate the imbalance, i.e. increase the transport requirement. On a national scale, it’s clear that there is enough hydro to balance a greatly expanded wind sector. What’s more, a reinforced Cook Strait link will enable wind to take up an increasing baseload role (if the wind don’t blow in Taranaki, it’s quite likely it’s still blowin’ in Otago).

I can’t remember blackouts being any more common in the 1970s or 1980s. I’m not saying there were less blackouts, I am just very skeptical of your claim of regular cycles of blackouts. Maybe you were living in a rural area, not a city? I also dispute your claim of savage price increases … if the electricity market is such a success, why haven’t we seen big price cuts associated with the so called “market efficiency”?

Free market proponents always make claims like yours. They would have us believe that pre-1984 was the dark ages, and that everything was so much worse than it is today. Of course lots of things have improved in the last 25 years, but to make the claim that this is solely because of free market “reforms” (and to neglect the influence of many other factors, such as improving technology) is very biased.

On page 29, Contact Energy is quoted as warning that it would have to spill water from its Clyde and Roxburgh stations if additional wind generation [in the South Island] was put in place without increased transmission line capacity.

Trevor.

as requested by Alistair

Trevor.