by DavidSpratt | Jul 31, 2019 | Energy
I lit my first fire at home for the year on the unusual date of May 31, just one day before the official beginning of winter.
I live in the sunny north side of Auckland, but I would have expected to see my dog sleeping in front of the fire by around late April.
There are some of us who believe that to the detriment of future generations the planet is suffering from global warming and others who feel that the scientific consensus is still a long way from being agreed. Either way, I do believe there is a general accord that we can’t keep consuming the planet’s resources at the rate we are, without very dire consequences.
Whether it is to save the planet or to drive efficiency, businesses are now using technology to reduce their carbon footprint. Some of these are unexciting and some are just plain cool. Either way, I describe below a few to pay attention to.
Tech to reduce the footprint
Methane co-generation
Very few people realize that Auckland’s largest landfill is also an energy park. The rubbish that goes into Waste Management’s Redvale Landfill captures more than 95 percent of the methane gas that is generated from the waste, which is then used to generate up to 14MW of electricity. Last year this meant it generated enough electricity to power 12,000 homes, making it the largest producer of renewable electricity in the Auckland region.
Heat recovery
Energy-intensive businesses, supported in some cases by subsidies from the Energy Efficiency and Conservation Authority (EECA), are now placing increased emphasis on the reuse and reinjection of heated water and steam in their industrial processes. We at Total Utilities have, as a result, seen excellent improvements in energy efficiency at factories and larger campuses.
Heat recovery is also used for go-generation where energy is converted to electricity and put back on the national grid.
Sensors, monitoring and the Internet of Things (IOT)
There is a difference between managing and monitoring business activities. A simple analogy is parents in the park: one couple hovers over their beloved children, constantly checking and rechecking their safety while exhausting everyone in the process; meanwhile, over at the park bench, another couple enjoys the sun, chats and drinks coffee while watching their young ones interact safely with the world and only interfering when they observe a real problem.
In the past, businesses used product-specific sensors to monitor equipment and processes. These sensors tended to be expensive, proprietary and clunky in their outputs (think: complex graphs on green screens).
Today an edgy new cousin has turned up, reducing the cost of monitoring, and providing rich insights via web-based applications that run on almost every device. This is called the Internet of Things (IOT). These simple, useful sensors provide streams of meaningful data about electricity consumption, temperature, process efficiency, humidity and more.
Artificial intelligence
While the Internet of Things sounds a bit like Nirvana, it does have one significant flaw: complexity. In theory, we could provide an IoT connector to every grain of sand on Earth without consuming all the available capacity.
Making sense of all the data it reports is the big problem. This is where Artificial Intelligence (AI) comes in. Capable of analyzing billions of bits of data from multiple data sources, AI is being used by many businesses to sift huge data pools and deliver the insights and activities that deliver competitive advantage and reduce wastage.
by chris | May 20, 2019 | Energy
The Government has set a target for New Zealand’s economy to be net-zero emissions by 2050. Does our current approach stack up?
Methanex – adding 15% to national electricity demand?
In a recent submission to the Ministry of Business, Innovation and Employment (MBIE), Methanex, New Zealand’s largest single gas user suggested that should the company transition from gas-based manufacturing of methanol to electricity, this would increase New Zealand’s national electricity demand by around 15% (5,800 gigawatt-hours). In other words, there would be a Rio Tinto Aluminum Smelter-sized electricity user in Taranaki.
Methanex currently consumes around 88 petajoules of gas and 84 gigawatt-hours of electricity and produces about 2.4 million tonnes of methanol per year.
Located away from New Zealand’s main generation sources, this would place increasing pressure on the North Island generation mix. With only limited new baseload generation planned for the North Island, electrification of methanol production would require more coal and or gas being used by thermal generators.
Methanex says that should conditions become nonviable to remain in New Zealand, they would relocate to China. Because of China’s current generation mix and energy sources, this could increase global emissions by four to six million tonnes of carbon dioxide a year.
The hydrogen solution
Last year the New Zealand Government signed a memorandum of understanding with Japan to develop hydrogen production in the Taranaki region with the view to pave the way for a transition away from Natural Gas and LPG.
However electronic hydrogen production will further strain the New Zealand energy system as 41.4 kWh of electricity is required to produce 1 kg of hydrogen from water.
In a recent article, Centrica (owner of British Gas) warned a move to make the gas grid run on hydrogen is “unlikely to be practical”.
Centrica chief executive Iain Conn said natural gas would be “crucial” in the transition to reducing carbon emissions, and that Britain and other countries would need to start using more of it before it could wean off the fossil fuel.
“It is quite clear that we cannot get from A to B without using more natural gas,” he said at a speech at the Aurora Spring Forum in Oxford.
“I don’t believe in the mass use of pure hydrogen, I think it highly unlikely to be practical,”
Iain Conn
Conn said, but said he was open to injecting around nine per cent hydrogen into the grid.
“We have done a lot of decarbonising power generation, but heating and cooling will be key,” he added.
Heating and Cooling in Britain
The remarks come just a week after chancellor Philip Hammond announced a plan to ban fossil fuel boilers from new homes built after 2025.
“We will introduce a future homes’ standard mandating the end of fossil fuel heating systems in all new houses from 2025, delivering lower carbon and lower fuel bills too,” Hammond told parliament during last week’s Spring Statement.
Conn said that heat pumps would eventually start taking British homes off the gas grid. He also said the world would be able to add around one gigawatt of renewable power capacity each day for the next 30 years.
Heating and cooling in New Zealand
Heat pumps in New Zealand have only added to electricity demand in recent years as more are installed and being used for cooling in Summer as well as heating in Winter. While more efficient than electric fan heaters, gas heaters and oil column heaters, the added cooling load has counteracted the savings in many cases as large numbers of New Zealand homes are moved away from wood burners.
These concerns were echoed in New Zealand by Paul Goodeve, First Gas Chief Executive, saying that, “A key element is affordability. We need to find affordable ways to meet winter electricity peak demand and maintain the competitiveness of large industries that use gas for production. Would New Zealanders find it palatable to pay substantially more for their electricity to upgrade infrastructure which will be underutilised to cover large energy use sectors and peak winter use? These are considerations we believe policymakers need to take carefully into account when making decisions.”
by DavidSpratt | May 9, 2019 | Energy
When we look at New Zealand electricity prices, it is important to consider lines companies in the equation.
The lines company or electricity distribution business (EDB) operates and maintains the transformers, power poles and copper wires that keep our local electricity networks running and delivering reliable electricity to the door. Examples in the EMA membership region are Northpower, Vector, Counties Power, WEL Networks and Powerco.
Lines companies in your power bill
Take my last home bill. The energy component, which is the part provided by my retailer, was $184.76. This part is subject to market competition and as a privileged, old white guy with a good credit history I can move freely between retailers chasing the best price. I can also take advantage of a prompt payment discount of $56.65 – nearly 30 per cent of the entire cost of the energy I purchased that month.
In the detail of my bill, however, is another bit called the “Daily Line Charge” of $52.85, being 33 days at $1.60 per day charged by my local lines company.
Electricity Monopolies and Regulations
Unlike retailers, lines companies are monopolies, not subject to competition and they supply an essential service. As a result, they are highly regulated by the Electricity Authority and the Commerce Commission.
This regulation occurs in three ways:
• Limits to the percentage return on the assets deployed,
• Legal requirements for the quality and price of service, and Company ownership structures.
There are 27 electricity distribution businesses in New Zealand. Some are privately owned such as the North Island giant, Powerco, which is owned by overseas investors and supplying electricity and gas to about 440,000 homes in the North Island.
There are public/private ownership companies such as Auckland’s Vector (supplying 331,000 households) which is 70 per cent owned by a consumer-owned trust and 30 per cent by shareholders on the stock exchange.
There are also 100 per cent consumer-owned trusts such as Counties Power and there are companies owned wholly or in part by local Councils, eg, Aurora, which is owned by Dunedin City Council.
Owners and investments
Ownership is critical when we look at pricing and quality of service and the impact of rules, regulations and the inconsistent behaviour of the regulators.
Privately-owned Powerco, for example, after years of underinvestment in lines infrastructure, last year went to the regulator asking for dispensation to increase its charges to consumers so it could remediate its increasingly dilapidated and unreliable infrastructure. Incredibly, the regulator agreed to this request without a whimper!
Meanwhile, further south, the Commerce Commission is indicating it will levy fines on council-owned Aurora for quality failures on its network. These failures have been attributed to Dunedin City Council’s active decision to use Aurora’s profits to help fund a new sports stadium and other civic works, while neglecting maintenance and renewal of its electricity infrastructure.
Back up north, after a one-in-100-year storm blew out the lights in Auckland last year, Vector was fined nearly $3.6 million by the Commerce Commission for failure to meet its reliability targets for the second year in a row. This, despite massive investment on Vector’s part in technology and improved services aimed specifically at improving quality.
Areas of economic growth such as Auckland, the Bay of Plenty and Franklin are faced with big increases in investment to meet demand, while many EDBs in the regions face regulatory demands for increased investment in infrastructure despite their consumer bases shrinking.
Ownership has a direct relationship to New Zealand’s electricity prices. Whether growing or shrinking, the reality is that EDBs are in a bind, because investment in maintaining and growing reliable infrastructure means price increases are a fact of life for the consumer.
In the meantime, the Electricity Authority’s price review seems to be wilfully ignoring the market-distorting behaviours being exhibited by the elephants in the room: the government-controlled generators/retailers (gentailers). We’ll take a look at them in an upcoming article…
by DavidSpratt | May 1, 2019 | Energy
In 2009 a visiting expert on commodity studies from Stanford University, Professor Frank A Wolak, opined that each year New Zealand’s electricity consumers were paying around $700 per household more than they should.
This figure also applied to the tens of thousands of small businesses using small amounts of electricity. What followed was a studied silence from the industry.
Government’s Energy Price Review
In April 2018 after years of consumer electricity prices continuing to rise at a rate far exceeding inflation, the Minister of Energy and Resources appointed Miriam R Dean QC to, among other things, conduct an energy price review. The aims included investigating whether the electricity market, as it exists at present, is delivering fair and equitable electricity pricing.
There has subsequently been a great deal of debate and finger-pointing as to just who is responsible for an electricity market that delivers average monthly bills of around $300 to Kiwi households, while our Melbourne, Australia, cousins are charged roughly the same price per quarter!
All this while Aussie generators are burning expensive and polluting coal, gas and oil to meet demand, and we mainly use sustainable hydro generation that has paid for itself many times over.
Business Impacts
As business people, we are not immune from this unresponsive market. Our staff are consumers too and their budget pressures impact wage demands. We are also just the last cab off the rank when it comes to increased electricity price charges.
If you signed a new, fixed price, 24-month electricity contract last September you will now be paying around 20 per cent less for electricity than if you signed a similar contract today. Everything indicates that this trend in the commercial market will continue as the industry continues to “adjust” prices skywards.
The Power Players
There are several players that influence our electricity market. Let’s start with the retailers. Most of us are aware of so-called “prompt payment discounts” that offer between 10 and 20 per cent lower pricing if we pay on time. For individuals or businesses under financial pressure these discounts can often be unattainable as the need to pay staff, taxes or put food on the table trumps their ability to pay by a given date.
What many of us don’t realise is that these discounts are often not discounts at all. The retailer has just loaded the “discount” onto their usual rate, leaving the late payer under even more cost pressure.
To their credit Meridian announced an end to this practice last September. The price review panel chimed in last month and called for an end to this practice altogether.
To Switch or Not to Switch?
There are also the much advertised switching campaigns that try to persuade consumers and small businesses to switch suppliers in the hope of getting a better deal. This is a complete fallacy for small businesses and households under financial pressure. While retailers are only too happy to accept businesses or individuals with good credit records, they simply decline switch applications from distressed payers.
It could be said that’s the outcome of paying bills late but in many cases credit checks will, at a time when they need to watch every dollar, exclude people or businesses from beneficial pricing.
Many retailers have also, until recently, offered significant incentives to stop customers from switching. Fair enough, you might think, except that businesses that pay their bills on time and loyally stick with their preferred supplier are not offered these incentives, and so end up paying more despite being great customers.
This, along with many other structural impediments, is exactly why Ms Dean QC and her team are finally taking a long, hard look at how our electricity market functions. This year’s energy price review should prove interesting!
by DavidSpratt | Mar 4, 2019 | Energy
[Electricity] Demand has, year on year, been steadily rising. This trend is likely to continue, so don’t look for much relief from higher electricity prices in the near term.
I recently talked to a businessperson who had signed up to an electricity contract that had his company effectively speculating on the spot market.
What the company didn’t realise (and wasn’t told) was that playing the electricity spot market was fraught with upside cost risk. In their case they are now paying more than three times the standard retail electricity rate for business, and facing significant fees if they attempt to get out of the contract.
What disappointed me in this case was that the consultant they paid for advice also took a trailing commission from the electricity service provider. In other words, no-one was representing the client’s best interests in a transaction that was fraught with risk.
Let’s talk about the situation our businessman faces and how it came about that the company is locked into a contract that will potentially cost it tens of thousands of dollars more than a simple retail contract offered.
It comes down to supply, demand and price uncertainty.
How the electricity spot market works
Most of our electricity is provided via South Island lakes. Lake water has remained at average levels for the time of year right through the summer period thus far. What has driven the price escalations is thermal outages. A large chunk of North Island thermal generation plant has been unavailable due to maintenance.
What was scheduled as a short-term outage has turned into longer ones as issues have been found that are taking time to remediate.
Even when it is running at full capacity, thermal generation is more expensive than hydro. The wholesale price of gas is escalating, and the price of coal has effectively doubled since 2016. The impact of this means that generators are less likely to offer thermal generation to the market if prices are low. Hydro has, therefore, been used through the year, reducing the ability for hydro generators to conserve water when the pressure went on summer lake levels.
National demand has also increased significantly. This summer so far, demand is the highest it has been in the past four years. Demand has, year on year, been steadily rising. This trend is likely to continue, so don’t look for much relief from higher electricity prices in the near term.
It’s not entirely bad news though. Even in a time of escalation, fixed prices have remained below where we were at this time in 2012. There was a significant market correction towards the end of that year and businesses have benefitted from attractive electricity pricing since.
Should we enter the spot market?
What does this mean for those businesses whose contracts have expired or will expire soon?
- Unless they have an energy expert on staff, they need to think very hard before entering contracts that lock them into variable pricing based on the electricity spot market.
- Negotiating an electricity contract can be complex. Good advice can save a business thousands, if not tens or even hundreds of thousands of dollars, depending on the size of the business and its energy use profile. Business should use a reputable advisor but be certain that he/she only represents the business’ interests.
- Right now, and for the rest of 2019 at least, I suggest a fixed term, fixed price contract wherever possible. Yes, business may pay a small premium in some cases but there are numerous, reputable electricity retail firms that offer good pricing and carry the upside risk for their clients.
by DavidSpratt | Feb 10, 2019 | Energy
Warning! Formidable Japanese electric vehicles (EVs) are coming to a dealer near you this year.
After reviewing European and American EVs last year, I was offered the Mitsubishi XLS SUV plug-in hybrid electric vehicle (PHEV) to test during my holiday break.
The XLS currently retails at $50,990 plus on-road costs (NZD). This puts it right in the sweet spot for businesses looking for a workhorse, four-wheel drive SUV.
Unlike two years ago when high prices and low residuals were a real turnoff for businesses, electric and hybrid SUVs are now in high demand on the second-hand market, and my industry contracts confirm premium trade in prices and strong lease residuals.
Lease companies’ reservations about financing EVs and PHEVs have largely evaporated.
The XLS combines a 2l petrol engine with twin electric motors, giving you a theoretical fuel efficiency of 1.7 litres of petrol per 100km travelled. In theory if you were running the electric motor only and never exceeded its specified range of 54km, then this incredible efficiency is quite possible.
However, in Auckland motorway traffic, I found a single tank of gas and a $1.50 overnight charge got me well over 700km or 6.43 litres of fuel for every 100km travelled: still an excellent range result by any measure.
Pragmatic manufacturing
When I drained the EV battery the XLS automatically switched to petrol power. It also offered the option of “charge” mode that used the petrol engine, engine braking and inertia, to recharge the electric motor. This proved more expensive in fuel usage but was convenient, simple and practical – Japanese manufacturing at its most pragmatic.
Charging has often been a bone of contention for users hooked on the convenience of petrol stations. This PHEV delivered a fast charge to 80 per cent in just 20 minutes. As fast chargers become more common the convenience gap should be a minor irritant for most users. We will have to alter our behaviours a little though.
Mitsubishi now offers a 160,000km, five-year warranty on the motor and an eight-year warranty on the battery. This largely matches the warranties offered for their petrol and diesel options.
So enough of the technicalities. What did I and the love of my life think of this Japanese invader? For me, words like practical, common sense, hardworking and efficient come to mind. My beloved liked the excellent visibility from both front and rear seats, the sensitive steering and braking and the fact that the vehicle looked stylish without losing its fundamental functionality.
We both loved the spacious leg room and fold-down seats for carrying luggage, samples and tools in the back.
We didn’t like the oddly small driver’s rear vision mirror. The acceleration and sustained performance that we have come to expect from electric vehicles wasn’t to the fore either. Not that the XLS was underpowered, it’s just that when you are used to the romance and zip of a pure electric motor the hybrid felt a bit like kissing your sibling: underwhelming.
Overall, I really liked this solid addition to the SUV fleet.
The years 2019 and 2020 will see big moves from Asian manufacturers into the EV market. Soon the combined price, residuals, fuel efficiency, reliability and convenient charging of hybrid and pure electric vehicle categories will make the business case very compelling for New Zealand enterprises looking to drive out costs, reduce capital deployed and contribute to a sustainable world for future generations.
Businesses will do well to keep a close eye on how they can reap the benefits.
I gave the Mitsubishi XLS PHEV a sturdy 7.5 out of 10.
See more electric car reviews, or New Zealand analysis of the electric car business case.
