Changes in electricity and gas pricing

Electricity and gas pricing is important to the selection of the optimal heating system and this varies by State, not only in relation to the end-price for electricity and gas but also, the structure of electricity pricing.

There has been extensive media coverage in the last few years about rising electricity pricing.  This is certainly a consideration in the choice of heating system for your pool but this is not a black and white issue.  For example, although electricity price rises have been dramatic in New South Wales, it is now possible to heat a swimming pool electricity at an average price equivalent to the general domestic rate in 2004. The critical aspect is learning and working with electricity tariff options, particularly as relate to smart or digital metering.

The electricity industry’s focus is on lowering peak time demand.  By containing growth in demand for electricity at peak times, the requirement for new power generation capacity and new distribution assets can be delayed or avoided.  Electricty pricing provides increasing incentives to business and residential customers to push demand to non-peak times.  This actually creates an opportunity to lower costs rather than grudgingly accept that costs are rising.

Basic electricity pricing has typically been a flat rate, so most householders and small business owners have always paid the same cost regardless of when plant has run.

The option is now likely to exist to move to an electricity price which gives off peak, shoulder and peak usage times.  The importance of understanding the new digitally metered options can be seen from the stark difference in costs that occurs depending on when electricity is used.  For example, a two horse power pool pump will demand 2.0KW.  If run for one hour, this is billed as 2 KWhs of use.  For a business in NSW, the actual cost of running this pump can vary from 20.68 cents /hour to 88.22 cents/hour depending on the time of day or day of the week that the pump runs.  A home pool owner would pay slightly more.

Electricity pricing now has many possible structures and across the spectrum of business and residential, this includes not only time-of-use pricing but also may include demand and network related charges.  The control of costs where demand charges apply not only looks at what plant is running and when but how much plant should run at the same time.  We look at the changing options by State and strategies to lower costs below.

In NSW, there are clear options for lowering power costs by smart control of pool plant.  Despite the substantial general price rise for electricity, there is potential for commercial pool operators to achieve a heating cost today close to that which would have applied in 2004, when the General Supply price was 12.34c/KWh.  The achievement of an average electricity input price around this level (or even lower) is possible with time-of-use tariffs.  For example, Energy Australia now offers Business PowerSmart pricing. This is a three tier tariff, comprising off peak, shoulder and peak price periods.  Provided that consumption is minimized in the peak period of 2pm to 8pm Monday to Friday, then all other usage would be a combination of the discounted off peak (8.8c/KWh) and shoulder (14.96c/KWh) pricing (prices as per price release of 1 July 2010).  With these periods being billed at 8.8c/KWh and 14.96c/KWh (as per prices released on 1 July 2010), the potential to achieve a low average price is clearly evident particularly when it understood that the discounted hours represent some 82% of the available hours in working week.  For residential pool owners, the PowerSmart Home Tariff provides a virtually identical scenario.  Home owners may also find that they have the option of an extended off peak rate known as Off Peak 2.

In Victoria, time of use electricity pricing is also well established but lower gas costs certainly make gas heating a viable option.  The electricity tariff options cover peak and off peak, so a higher level of peak usage can be anticipated.  Extended Trader Tariff D provides 11pm – 7am as off peak and all day Saturday and Sunday at 10.274c/KWh, while Business Tariff E applies the peak/off peak split to a seven-day week, ignoring any concession for weekends.  For home owners, AGL offers a Home Weekend Saver (GH/GL) option, which provides a strongly discounted off peak price of 11.121c/KWh for consumption between 11pm and 7am Mon-Fri and all weekend. The ability to run the heat pump overnight and achieve a lower averaged electricity price (without creating a noise nuisance) is essential under Melbourne tariffs.  At the standard AGL Home rate (24 hour), the heat pump and gas heater would run at much the same cost if used constantly, as the residential gas rate is very low compared with other States (averaging around 1.2c/MJ).

Tasmania lacks time-of-use metering for either business or domestic users but discussion on tariff options would be worthwhile.  Off Peak Tariff 61 could be an option but in particular, some flexibility is possible in the application of Business Hot Water Tariff 43.  This discounted rate of 15.558c/KWh provides a good reduction on the standard General Tariff 22 of 20.849c/KWh, which would otherwise apply to the pool heater and pump.

In South Australia, the energy pricing landscape broadly favours the use of natural gas where this is available.  For business users, the General Supply Time of Use Tariff 128 provides a blend of peak times (26.1c/KWh) and off peak (12.88c/KWh).  With control to optimise off peak run-hours, an average price of 16-17c/KWh would seem feasible and would be attractive relative to the standard Business rate of 23.6c/KWh and in relation to commerical gas costs. Electricity pricing options are limited for residential customers, with the only discounted option being Controlled Load Tariff 116.

Western Australian business customers can target maximum savings by connection to Time-of-Use Tariff R1, with a blend of peak (26.11c/KWh) and off peak (8.05c/KWh) offering potentially strong savings when compared with the standard small business rate of 21.5c/KWh.  Interestingly, WA has introduced smart (digital) metering for residential users and the SmartPower Tariff provides a unique blend of off peak, shoulder and peak pricing which is sensitive not only to weekday/weekend but also to season, with a changing price mix between summer and winter.  The potential saving in pool heating costs by the heat pump compared with gas pricing in WA are significant, making the heat pump option very attractive.

Heat pumps are also the preferred method of powered heating in QLD due to favourable energy pricing. Hotel and resort operators in Queensland can look to Time-of-Use Tariff 22.  Some 58% of the hours of the week are off peak with the discounted 9.31c/KWh price offering good potential for time clocking and shifting of load to maximize reduction in plant operating costs.  This rate is less than half the cost of the standard tariff. Residential pool owners should look at the Economy Plan Tariff 33, which is an extended discount rate of 12.826c/KWh and one of the lowest rates in Australia.

At Rheem, we pride ourselves on a detailed understanding of energy pricing and being suppliers of both the Accent heat pump and the Raypak gas heater, we intend to provide professional but unbiased advice when it comes to making a choice between heat pump and gas for each project.  As we have seen from the above, the level of saving achieved by a heat pump compared with gas will vary by State and by application.  The level of saving is not necessarily compelling in every case.

We would also highlight that while more attractive energy prices may be available, the energy retailers do not take responsibility to fit customers to tariffs.  It is the user’s responsibility to find what is best for them and we will be happy to work with you in this.





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