Everything you wanted to know about the electricity

Everything you
wanted to know
about the electricity
industry – but were
afraid to ask!
Mark Binns, Chief Executive, Meridian Energy
7 May 2015
FMANZ Summit
What we’ll talk about
1. A little bit on us - Meridian
2. How the industry works
3. The elephant in the room – price!
4. How you can take control of your
bill – pricing and energy efficiency
5. New technologies
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
7 May 2015
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Meridian − a little bit on us
Meridian – some facts
Renewable generator producing approximately one-third of NZ’s
electricity
NZ’s largest generator – 100% from renewable resources
Operating seven hydro stations and seven wind farms in NZ and
Australia
Retailing to over 300,000 customers in NZ and Australia
Through two retail brands: Meridian and Powershop
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
7 May 2015
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How does the industry
work?
New Zealand electricity industry
27
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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What’s in my bill? And why
does it keep going up?
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
7 May 2015
Breakdown of an average residential bill
Image here?
Source: Meridian
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Cost increasing at a higher rate than price
Source: Electricity Authority. Electricity
Market Performance: 2014 Year in Review.
Available: www.ea.govt.nz/monitoring/yearin-review/2014-review-of-electricity-marketperformance
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Transmission/distribution costs a major price driver in
recent years
Source: Electricity Authority. Electricity
Market Performance: 2014 Year in Review.
Available: www.ea.govt.nz/monitoring/yearin-review/2014-review-of-electricity-marketperformance
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
7 May 2015
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Are New Zealanders paying too much?
NZ residential electricity prices compare favourably with other OECD countries
Source: Ministry of Business Innovation (2013). Data available: www.med.govt.nz/sectorsindustries/energy/energy-modelling/data/international-comparisons
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Meridian’s return on investment
RETURN ON CAPITAL EMPLOYED
5%
4%
3%
2%
1%
0%
FY12
FY13
FY14
FY15
(half year)
Source: Meridian
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
7 May 2015
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So how do I reduce my bill?
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
7 May 2015
Get the best pricing to suit your business
• 14 retailers and 27 brands to choose from
• Innovative, time of use pricing available
with the roll-out of smart meters
• Consider the spot market – if you can
accept variability when the system
experiences adverse constraints or
shortages
• Should you fix? Read the fine print.
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Innovative time of use pricing
off-peak
off-peak
peak
Usage
6am
4pm
Time of day
midnight
Source: Meridian. Illustrative
purposes only.
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Spot market − if you can manage the risk
“Normal Day”
Normal retail price
Price
Average spot price
Midnight
Midnight
Time of day
Source: Meridian. Illustrative
purposes only.
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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What’s the demand outlook? Should I fix?
• NZ electricity demand has
been reasonably static
since 2007
• MBIE is forecasting growth
but at reasonably low
levels
• My guess – prices unlikely
to race ahead over the next
few years
… and, if the Tiwai Point Smelter exits NZ prices must go down, mustn’t they?
• Depends on how the supply side adjusts
• Some downwards pressure would be inevitable
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Reduce waste – be energy efficient
• Choose a retailer that will work with you to
identify cost saving opportunities
• Understand your usage and charges
• Undertake an audit
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Unashamed plug for Meridian
• 100% renewable generation
• Committed account managers
• Coverage throughout New Zealand
• Online energy monitoring tool
• Smart tailored solutions
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Creating a better energy future
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Can new technologies
save me money?
21
Solar PV − saviour or smoke?
•
Meridian has international solar
experience – in California and Tonga
•
Meridian’s domestic buy back rates
continue to be attractive − solar signups post-rate change not slowed
•
Surveys of our customers indicate
there are multiple reasons for
installations
•
Low capacity factors in NZ − about 14%
•
Need to maintain access to the grid
•
Need to size it right, and avoid selling
back to the grid
•
Meridian can provide technical
expertise, e.g Auckland Museum’s solar
installation
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Factory size installation − example scenario
For a three-phase 50 kWp solar PV
system
•
Capital cost = $100 − 150K +GST
approx.
•
Annual yield =60,000− 70,000kWh
•
Reduction in annual energy
purchase = $5,400− 6,300
(based on a day-time average
energy-only cost of 9 cents plus GST
per kWh)
•
Operation & maintenance = say
$1,000
•
Business case hard to get past the
accountants
•
Some businesses will choose solar
to be sustainable
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Batteries to the rescue?
Very early days
Interest due to:
Enabling consumers to go off-grid
entirely
Helping customers avoid peak
pricing
Reducing injection back into the
grid for solar PV
Increased facility resilience
Lines network management
Winter sunlight
Energy
generation
4pm
8am
Time of day
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
Source: Meridian.
Illustrative purposes only.
7 May 2015
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Battery storage − domestic and commercial use
Economics are mostly unattractive:
Going off-grid: PV + battery system
cost > $100K for an average home
Avoiding peak pricing: Peak to offpeak price differential needs to
regularly reach levels > $300$500/MWh
Reducing PV injection: helps avoid
$80/MWh injection prices to secure a
$280/MWh tariff but relies on a
temporary cross subsidy
Resilience: depends on personal
attitude to risk and frequency of
outages
As and when costs outweigh
alternatives
We assume US $3,000 7kWh battery plus installation costs
with daily cycling capability sufficient for a 10 year lifetime
(100kg & 1.3m x 0.86m x 0.18m)
Day-time-consumption >>
25%
No Seasonality
Solar PV
Battery
Total
Installation kW
6.9
5.2
cost $/kW $ 3,333 $
3,593
Installation $ $ 23,162 $ 18,726 $ 41,888
Efficiency
14%
92%
Annual kWh
8,000
6,522
Daily kWh
21.9
17.9
Load kW
0.91
0.74
Per unit $/MWh
$290
$430
$720
From the Grid
$ 2,200
$
275
$/MWh
Day-time-consumption >>
10%
Winter
Solar PV
Battery
Total
Installation kW
15.8
14.2
cost $/kW $ 3,333 $
3,593
Install $ $ 52,518 $ 50,953 $ 103,471
Efficiency
7.5%
92%
Annualised kWh
9,600
9,391
Daily kWh
26.3
25.7
Load kW
1.10
1.07
Per unit $/MWh
$560
$810
$1,370
From the Grid
$ 2,640
$
275
Per uni t $/MWh
Source: Meridian
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
7 May 2015
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Battery storage − low value in the NZ system?
New Zealand has a significant
amount of grid storage within the
existing power system:
System Value of Battery Storage
Battery System Value
vs Declining Unit Cost
$200
$180
Thermal 4.8 TWh – monthly
Headponds – daily
Domestic battery storage will do little
to add value to system flexibility any
time soon
$140
$120
Christchurch
$100
Wellington
Auckland
$80
Unit Cost
$60
$40
$20
$FY2015
FY2016
FY2017
FY2018
FY2019
FY2020
FY2021
FY2022
FY2023
FY2024
FY2025
FY2026
FY2027
FY2028
FY2029
FY2030
FY2031
FY2032
FY2033
FY2034
FY2035
FY2036
FY2037
FY2038
FY2039
FY2040
FY2041
FY2042
FY2043
FY2044
Smaller lakes – weekly
average rev/cost [$/MWh]
Reservoirs 4TWh – monthly
$160
Source: Meridian
The value of battery storage in the New Zealand power system is currently <$10/MWh
while costs are >$300/MWh
Costs will likely fall over time while the value will increase, however the transition point
is not for some time
We assume NZD $4,000/kW battery cost declining
at 5% pa and a 10 year lifetime increasing to 25 years
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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And finally, the hot topic “electric vehicles”
• Early days
• Anecdotally, 548 electric vehicles
(EVs) in New Zealand at end of March
2015
• More than 50 public charging stations
• EVs offer an opportunity to transition
towards a lower carbon future
• And make the most of our national
renewable energy advantage
• Timing is the issue
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Concluding remarks
• 80% of New Zealand’s electricity
comes from renewable resources –
world class
• A different market to overseas
economies trying to decarbonise
• Subsidies from new technologies are
unlikely
• Evolution NOT revolution
• Take control of your bill – choose the
best pricing for your business and
focus on reducing waste
• Get an electricity retailer that gives a
damn!
Happy 50th Benmore
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
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Any questions?
MERIDIAN ENERGY LIMITED Everything you wanted to know about the electricity industry - but were afraid to ask!
7 May 2015