Decades before I first started to think about energy in any sort of serious way, I was dimly aware of how households’ decisions could affect the vast power grids delivering electricity to our homes.
My grandmother, who had grown up with a habit of thrift amid the depression, war and rationing of mid-20th century Britain, would routinely stay up until late at night to run the washing machine on cheaper off-peak electricity. My brother once went on a school trip to Dinorwig, a hydroelectric station in northern Wales that could pump water uphill with cheap off-peak electricity. When demand topped out — which, in Britain, often coincided with people switching on electric kettles to make a half-time cup of tea during televised soccer matches — the water would rush back down through turbines to generate an extra burst of energy.
I was thinking about that history around noon Saturday in my current home in Sydney, as I tried to decide what to do with a load of washing coming out of the machine. One rule most climate-conscious people follow is not to use electrical appliances if it’s unnecessary. With a blazing blue sky and spring temperatures topping 30 degrees Celsius (86 degrees Fahrenheit), it was a perfect day to hang my clothes on the line.
graph 1
It was also, however, a perfect day for Australia’s roughly 30 gigawatts of solar panels to be pumping out electricity into the grid. I checked the website of the local grid operator: With offices closed and air cool enough that few were using air conditioning, an excess of generation had driven the wholesale cost of power deep into negative territory, to minus A$80 per megawatt-hour.
That wouldn’t make any difference to my bill: I pay a uniform A$322.60 ($208.17)/MWh regardless of the time of day, with wholesale costs making up about a third of my monthly spend. Still, generators (including the renewable ones, which were then providing about 68% of electricity in the network) would enjoy better margins without negative pricing. The grid didn’t need me to frugally line-dry my clothes at that moment — it needed me to consume those surplus electrons with abandon. I stuck the clothes in the dryer.
That’s the sort of counter-intuitive decision that households in more and more markets will have to make over the coming years, as galloping uptake of solar moves the daily glut of electricity from the middle of the night to the middle of the day. Utilities and individuals are going to have to adjust their behavior accordingly.
There is no market on earth where balancing supply and demand is more challenging than in the power infrastructure that sits behind our plug sockets. If there’s too little generation, blackouts will result — but the same can happen if there’s too much, as Texas discovered earlier this month when the network had to deploy emergency measures after wind turbines were told to shut down to prevent overload of a transmission line. In grids that allow it, such as the National Electricity Market in southeastern Australia, negative prices like those I saw on Saturday are a potent signal encouraging power plants to shut down and consumers to plug in.
graph 2
This volatility is only going to increase as renewables take up greater and greater shares in our grids. Australia has the highest population-adjusted penetration of rooftop solar in the world, with an average of 1.2 kilowatts per person — but countries from Chile to Spain and Germany to India are rapidly catching up. Across the planet, sunny days in springtime and fall (especially if there’s a wind up) are already notable for the way fossil-fired turbines disconnect en masse, as falling wholesale prices push revenues below the cost of the coal and gas they burn.
These negative pricing signals should encourage more batteries to take advantage of the volatility, both in homes and in utility-scale storage farms. That might help fix the problem, but even then it’s likely that the low cost of solar relative to lithium-ion will mean we’re installing panels faster than rechargeable cells can suck up the resultant daytime glut of electrons.
Making this situation worse is the fact that in most countries time-of-use pricing — where households pay least late at night, most in the evening, and an average tariff throughout the day — still reflects the grid my grandmother grew up with. As a result, few people are seeing the pricing signals in their bills that would make them operate appliances in the middle of a sunny day in the same way she did in the middle of the night.
That has to change. Households should be encouraged to play their part in balancing networks by running appliances (and, where they have them, charging electric vehicles and home batteries) whenever prices dip into negative territory. When net demand surges above typical levels, they should also receive warnings to disconnect non-essential devices and machines, or have them switch off automatically. That shouldn’t be an emergency measure, but a quotidian aspect of grid management.
This ought to be relatively straightforward in a world of smart meters and phone apps. In most markets, however, regulation and retail pricing lag far behind what is possible. Consumers are building a new energy world so fast that lumbering governments and utilities are struggling to keep pace. If the structure of our power markets doesn’t catch up with changing times, we’ll all suffer.
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. Views are personal, and do not represent the stand of this publication.
Credit: Bloomberg
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