Is There a Magic Bullet for Energy Pricing?

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Is There a Magic Bullet for Energy Pricing?

Is There a Magic Bullet for Energy Pricing?

The following post was written by Bryan Leyland for KiwiBlog. Bryan is an engineer with over 60 years experience in the energy sector and regularly comments on various topics. He is a strong believer in a single payer market and Carl Hanson, former head of the Electricity Authority argues against this here. At Total Utilities, we track the competitiveness of contestable costs and been doing so for nearly 20 years. While this data is representative of our customer base (which is made up of small and large commercial and industrial customers and does not include residential customers) we have not seen large "energy" price rises over time. In fact, over-the-counter retail pricing has been relatively flat since the end of 2012 and akin to pricing in 2006. Much of this has been due to increased retail competition in the market providing customers with more alternatives than the traditional "big 4" generator/retailers. Non-contestable costs, primarily those that relate to the transmission and distribution of energy around the national grid and local grid infrastructure on the other hand, have continued to rise. These monopoly-based costs vary considerably around the country, for example, a typical split nationally between contestable energy and non-contestable pass-through charges is around 60/40. In Top Energy in the far north, it can be the reverse of this. Conversely, Auckland and Wellington the cost split can be 70/30 and in Christchurch 50/50. Regional networks, in the North Island particularly, due to its geographic shape and population imbalance suffer from covering large areas with lower customer density compared to main centers. As such maintaining the network over what can be very rugged and mountainous terrain is expensive. So where does this leave us, the fundamental issues of the system still remain. In a normal year, we have enough generation to meet current demand, however dry year future proofing remains an issue given current Government policy. Natural Gas which is seen overseas as an answer to coal-fired electricity generation will continue to increase in price in NZ as we exhaust current drilling permits and fields come offline. The Government is looking to try to accelerate the uptake of Electric Vehicles but not talking about the cost of the required upgrades to network infrastructure to support rapid charging. As most rapid charging will be done outside of main centers, this will put increased pressure on more remote areas of the Government-owned Transpower network and local network operators. The cost of building and consenting new large-scale generation infrastructure well exceeds current wholesale prices that generators can charge. Gas-fired thermal generation or Geothermal generation is far easier to build than a new hydro scheme or wind farm due to the size of its footprint and lower impact on the visual landscape. Distributed generation such as Solar remains unsuitable for many parts of the country due to a lack of sunshine hours. Businesses would only realise a payback on outlaid capital after 15-20 years in most areas. Batteries are still carbon intensive to manufacture and costly to buy. There is no magic bullet to ensure long-term security of supply at competitive pricing Why electricity prices have increased The Electricity Price Review has revealed that residential electricity prices have increased by about 80% above inflation since 1990. Why did this happen? We were promised that privatisation and the electricity market would reduce power prices. An objective examination of the whole electricity industry and the effect of the reforms leads to some interesting conclusions. Cross subsidies Before the reforms many power boards cross subsidised residential consumers by overcharging commercial and industrial consumers. The removal of these subsidies is a factor in the increased residential prices. The market The Wholesale Market Electricity Development Group made a mistake when they rejected the recommended market model and chose a market that pays all generators the price bid by the most expensive generator selected to run. This would have been a good choice if New Zealand relied entirely on fossil fuel generation. New fossil fuel power stations produce cheaper power than older ones so such a market encourages the construction of new and better stations. In New Zealand, the cheapest generation comes from old, low cost, depreciated hydro stations. The choice of a fossil fuel market structure pays these stations the much higher price needed by the most expensive fossil fuel station. Hydro stations then rack up their asset values to camouflage the fact that they are making windfall profits The recommended market model would have ensured that consumers would have continued to get low-cost electricity from the hydro stations that they had already paid for and built new stations that would give the lowest system costs in the long run. The chosen market structure has led to wholesale prices increasing when they should have decreased to reflect the major reductions in operation and maintenance cost that followed on from privatisation. Control of peak demand Before the electricity reforms all electric water heaters in New Zealand were remotely controlled by the lines companies to reduce system peak demand by more than 10%. The reforms destroyed this world leading system. Most lines companies abandoned water heater control because the reforms did not allow them to fully recover of the costs of operating, maintaining and expanding the hot water control system. As a result of abandoning hot water control, new power stations and a $960 million 400 kV line into Auckland were needed and millions more were spent on reinforcing transmission lines and distribution systems. All this to meet a peak demand that would not have existed with the recommended market. Assets revalued The reforms also allowed Transpower and lines companies to massively revalue their assets and use this increased value to justify charging consumers millions of dollars more for assets that consumers had largely paid for already. This is a major factor in the increased cost of electricity. Traders and retailers The electricity market also brought us traders and retailers who, it can be argued, serve no useful purpose whatsoever. The recommended market model did not need them. In our market, traders often compete to get selected to generate. But when generation is in short supply competition is virtually non-existent and the price that they bid is “a trade-off between greed and guilt”. (On several occasions in the last few weeks wholesale prices have spiked to more than 10 times the normal price for no apparent reason.) As two retiring CEOs pointed out, the way to make money in the New Zealand market is to keep the system on the edge of a shortage. With the recommended market the system operator would have ensured that sufficient generating capacity was available and selected the generators that would give a reliable supply at the lowest cost. Retailers increase consumer costs by spending millions of dollars trying to steal consumers from each other and pretending to compete in selling a commodity that is identical for everyone. Conclusion So what of the future? It does not look good. Transpower has warned that the risk of serious shortages and high prices in a dry year is rapidly increasing and no one has plans for new power stations that would mitigate this risk. The government ignores dry year risk because it is hellbent on shutting Huntly down and limiting gas supplies and believes that exploiting wind and solar power will solve all the problems. Never mind that they are much more expensive, require backup when the wind doesn’t blow or the sun doesn’t shine and don’t make any useful contribution to meeting peak demand. The best and cheapest way of mitigating the risk of blackouts in dry years is to ensure that Huntly continues to provide dry year reserve with two or three generating sets and 1 million tons of coal available. The government should be taking steps to make sure that we have an economical and reliable supply into the future. If it wants to reduce CO2 – a gas that promotes plant growth and benefits our agricultural industries – it should contemplate the construction of a major and very expensive hydro pumped storage power station in the hills above Roxburgh that would solve the dry year problem. Only then can it ditch Huntly. The New Zealand electricity market is a classic example of what happens when the politicians and the decision-makers do not understand power systems and how difficult it is to provide a reliable and economic supply. Choosing the wrong market model has cost the customer dearly.

Volkswagen e-Golf Review: This Hot Hatch Electric Vehicle Suits Me

Volkswagen e-Golf Review: This Hot Hatch Electric Vehicle Suits Me

In this exclusive series of articles by David Spratt, he explores the electric vehicle (EV) options for specific business uses. Part 3: Evaluating the Volkswagen e-Golf electric car. It may be that I have now test driven one too many electric vehicles (EVs), but I have become increasingly irritated by the clunky and, dare I say, ugly designs that have been rolled out by some manufacturers. Not the e-Golf, though. Volkswagen addresses this design challenge with a vehicle that feels familiar, comfortable and accessible from the moment you climb into it. Built from the ground up to look, feel and handle like a standard Golf Super Mini, this smart town car is a delight. I want a car that can take me safely along country roads while allowing me to travel to the city, park in tight parking spots and save money on fuel. The e-Golf ticks every one of these boxes. It accelerates smoothly and relatively quickly (from 0 to 100kph in 9.6 seconds). It also has, for a small car, decent boot space and plenty of leg room for front and back seat passengers. I am six feet tall (1.83 metres for those of you living in the 21st century) and found the front and rear seating gave me plenty of leg room and riding comfort. My wife, a not-so-tall person, had an issue with seeing over the steering wheel for a clear view of the road ahead. But a simple height adjustment for the seat would have addressed this issue. I live in the rural outskirts of Auckland and so want a car that can take me safely along country roads while allowing me to travel to the city, park in tight parking spots and save money on fuel. The Volkswagen e-Golf ticks every one of these boxes. If I was to be critical though, there were occasions when the car’s electronics got themselves into a bit of a twist and just stopped working. On at least two occasions, the parking brake and the auto hold feature for hill starts went to war, leaving me stuck in one place with a warning light and screeching sound, raising my anxiety levels. In the end, the only answer seemed to be to switch everything off and start again: fine if you are in a parking lot but not great if you are pulling out into traffic. This may be the result of an idiot behind the wheel rather than a fault, but it happened to both me and my wife on separate occasions. Are we there yet? Range anxiety was also an issue with the e-Golf’s distance calculator. One moment my predicted range was displayed as 157km, then a few minutes later was 140km, only to return to 150km a while after that. I put this down to the range calculator being very sensitive to driving style and conditions, but a bit less variability would have had me more focussed on the road and less on worry about getting home on the available charge. But charging was a breeze. At home, using a simple three-pin connector, a total recharge took around 11 hours. My favourite, free, fast charger at Counties Power HQ took 45 minutes to get me up to 80 percent, plenty of time for a coffee and a quick browse around the shops nearby. As is the case with all the electric vehicles I have tested, the e-Golf saw me spending less than $20 per week on charging with no concessions to convenience. Despite the car’s price of $65,990 the economics for the average business owner almost make sense. Give it a year or two and EVs like this will be a no-brainer for many business applications. My contacts tell me the Volkswagen e-Golf is rapidly becoming a European sensation, and the future of VW motoring. I can see why. This car is a little beauty.   I gave the Volkswagen e-Golf an admiring 7.5 out of 10. Thanks to VW New Zealand for supplying the e-Golf for testing.

The Tesla Model S makes a statement of success

In this exclusive series of articles by David Spratt, he explores the electric vehicle (EV) options for specific business uses. Part 2: Evaluating the Tesla Model S P100D electric car What do you get when you mix an eccentric, Los Angeles-based, internet billionaire with the desire to build an electric vehicle with speed and acceleration to challenge the world’s top performance cars? The answer is the Tesla 100S, complete with vegan leather seats and “bio-weapon defence mode” to keep the car’s air fresh in case of anthrax attack. I started test-driving the Tesla S (P100D model) with a mixture of excitement and trepidation. Excitement because I knew this vehicle could take me from zero to 100kph in less than three seconds; and trepidation because of the $250,000 price tag and more personally the $5,000 insurance excess I agreed to when I signed for the car test. After a week, the fear of crashing a car worth more than the deposit on a Ponsonby house had almost completely gone but the sheer thrill of an EV accelerating in Tesla’s infamous, “Ludicrous” mode remained days after I tearfully gave the car back. Long range So, what makes the P100D so special apart from its raw power? First is the range. This beast will travel from Auckland to Taupo and back on a single charge. That’s 600km. Despite reservations about charging and spare tyres, the Tesla 100S is, bar none, the most exciting and innovative car I have ever driven. There is a downside though. Recharging the 100kW battery from empty in your garage power point means a 36-hour wait. But for around $8,000 you can install a special Tesla charger at home that dramatically reduces this time. After failing the home charging test, I resorted to Tesla’s free charging stations (there are six across the country, with many more to come). This will recharge from empty in less than an hour. I also tried using the Counties Power free charger in Pukekohe, only to discover that the Tesla charging cable requires a special adapter to fit standard charging stations. As this adaptor was not provided, I skulked home and resorted to an overnight top-up before driving to town and the Tesla service centre, where the unfailingly helpful people charged my car and provided the adaptor. No dirty hands Speaking of not provided. The Tesla Model S has no spare tyre. Instead you push the help button, and someone turns up and changes it for you! This service comes free for the life of the car and includes towing you home if you run out of electric charge. Ah to be that rich! When driving I felt safe and in control throughout, even around the challenging corners of Auckland’s Waitakere Ranges. Traction control, adjustable suspension and the stabilising weight of the Mosel S’s powerful batteries made for responsive handling and comfortable road feel, this despite the Tesla’s extraordinary performance characteristics. The Tesla even comes with “Santa mode”: listen to Christmas carols and glimpse a sleigh pulled by reindeer on the screen while winding the car out to a top speed of over 250kph (in controlled conditions at Hampton Downs racetrack of course). The bottom line. Despite reservations about charging and spare tyres, the Tesla S is, bar none, the most exciting and innovative car I have ever driven. With companies like Tesla driving change, the future of the EV is in safe hands. I give the Tesla Model S an ecstatic 8.5/10. *Thanks to Tesla NZ for providing the Tesla S model for trial. For all the specifications visit www.tesla.com

IT Security for New Zealand Businesses – The threat within

Data protection is the process of safeguarding important information from corruption, compromise or loss. Many of us will have watched with some concern the ongoing reports of hacking, ransomware (where a hacker locks or encrypts your company data and demands a ransom before releasing it) and data theft by outside agencies. IT Security Threats Pose New Risks for Owners and Directors As owners and Directors of businesses in this country, we cannot ignore the real risks presented to our companies by theft or destruction of company data. Stricter laws governing Director’s responsibility make risk management and mitigation very personal. Henri Elliot, Founder and CEO of Board Dynamics commented to me recently, “It is essential Directors take a strong position on all forms of risk. Risk should be on the Board’s agenda each month and should be appropriately categorised. For example – is a staff member taking a list of clients a company policy issue? An HR issue? An IT security issue? In truth, it is all of the above and Directors need to take a holistic approach.” Security Risks Are Mainly Internal The scary thing when we consider the risks around IT is that it is not the sneaky Russians or the depraved teenage geeks who represent the real threat to most businesses. In fact, it’s often quiet Jane from Finance or good old reliable Mac from Sales who represent the real and present danger. If you think I am being a bit dramatic (and my wife would agree with you) think again. Here are a few things that should give you food for thought. Nearly two-thirds of employees surveyed, who leave an organisation voluntarily or involuntarily, say they take sensitive data with them. That is a real wake-up call when you consider that your staff will almost inevitably have access to sales and customer records, design secrets and new product plans. Nine out of ten Information Technology (IT) staff surveyed indicated that if they lost their jobs whether through redundancy or by firing would take sensitive company data with them. Techies are extra smart, often socially inept and prone to impulsive behaviour when stressed. Just because Jason the geek is a bit dishevelled in the morning doesn’t mean he is not capable of revenge served cold. So how does Jane, Mac or Jason walk out the door with your most valuable secrets? In truth, they probably don’t. Your worst enemy is email. Over a quarter of data, thefts have been as simple as attaching a file to an email and sending it home or to a friend. Next on the IT security threat list for most small to medium businesses is that convenient friend, the USB stick. In many cases, these data downloads start quite innocently with your trusted person downloading files, so they can work from home.  It’s only when they are preparing to leave that the true value of the customer list they downloaded becomes clear. I can dwell on ways you can lose your company data, but in truth, this only serves to make you overly fearful. Instead, let’s look at a couple of the signals that your data may be at risk. Signals Your Data Might Be at Risk  Negative Work Events Laying off or firing staff, whatever the reason should be a signal that your data is at risk. A huge proportion of internal IT security failures come from a desire for revenge. If you are planning to terminate a staff member it is important that you monitor that person’s behaviour. A surge in large data files being downloaded or emails to an unusual address should be a huge red flag. Complacency In many cases, data security failures are just a case of staff members, managers, or owners who just don’t get it. Data is valuable only if you see it that way. The signals of complacency are often clear. You should be troubled by people violating simple IT security policies like keeping passwords protected. It is the company who will pay and the staff who end up with their jobs at risk if you ignore the knowingly irresponsible behaviour. Next month I will run through the key things you can do to reduce the risk of insider security threats without treating your much-loved people as if they are criminals.  

New Branding and New Services

Intelligence without ambition is a bird without wings. Drawing is the honesty of the art. Salvador Dali Today Total Utilities announces its new branding. Over the last 18 years we have worked hard to assist companies in controlling consumption and cost. It's an exciting day for us and we are proud to share this with you. From today you'll see a change in the way we look, including our new ribbon logo. The spherical shape represents the whole as we take a 360 degree approach to understanding our clients and their utility requirements, whether it be Energy, Waste and ICT or Insights, Strategy and Solutions. What doesn't change is our desire to create a sustainable future for New Zealand businesses and how they manage their utilities by continuing to deliver ongoing value for our clients. We continue to work hard to provide new services to assist our clients such as Energy Monitoring and Targeting through wireless non-intrusive energy senors, Cloud Computing Analytics for consumption of computer services and qualitative and quantitative reporting aligned to overall financial strategy. Total Utiltities About Us Presentation We remain committed to delivering a personalised service and assisting our clients navigate a rapidly evolving commercial market place by underpinning strategic thinking. I would like to thank our existing clients for your continued loyalty and confidence in our company. To prospective clients, I hope that you will partner with us to discover real world solutions for sustainable utility consumption and cost optimisation.

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BMW i3 electric vehicle review: Making savings skating about town

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Caution urged on New Zealand's 'gung-ho' climate change approach

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