Vic smart grid success hinges on incentives

The Victorian Government has urged electricity retailers to pass savings generated by smart meters on to consumers to give the state's beleaguered metering scheme the best chance of success.

A discussion paper [pdf] released by the state Department of Finance and Treasury said that the savings could help counteract higher bill prices paid by some consumers during peak usage periods.

Savings for energy distributors and retailers came from cost avoidance in meter replacement, manual disconnections, meter readings and complaint investigations.

The department warned that if such savings were kept by electricity distributors and retailers, the benefits of the Government's smart meter scheme "may not accrue to consumers who are ultimately funding the implementation costs of the program".

But it noted that "achieving full identification and pass through of benefits directly related to the program will likely require significant effort from... regulators".

The state government had originally planned to install a smart meter in all 2.5 million Victorian homes and small businesses.

Treasury's paper was issued in response to a call 18 months ago from the Victorian Auditor-General for greater government oversight of the smart meter program from the department.

Public submissions on the Treasury paper, to be accepted until 21 June, would inform a continued review of the smart meter scheme by the department, which was considering regulatory and industry modifications.

The review was also slated to include a third cost-benefit analysis for the scheme, following on from reviews in 2008 and 2010.

The most recent, undertaken by utility industry consulting firm Oakley‐Greenwood, indicated total benefits from the smart meter scheme could total $2.55 billion.

Meter troubles

Dubbed by the incoming state Coalition Government as the "myki of smart metering" [a reference to the state's transit smartcard project], the Auditor-General found in November 2009 that the smart meter scheme costs had blown out from an initial $800 million to at least $1.56 billion and as high as $2.25 billion.

Rollout delays had also pushed back the initial completion date to the end of 2013.

The report recommended the state government re-examine the project's governance structure, reassess its cost-benefit and adopt the government's standard risk management guidelines.

It warned that the regulatory regime decreased industry incentives to participate in the program, and that the technology risks had so far been underestimated by government.

State Minister for Resources and Energy Michael O'Brien claimed the Liberal government was first to implement recommendations from the auditor-general's report more than 18 months after it was published, in order to attack "public concern" around the project.

NSW incentives

Ausgrid, the former NSW distribution arm of EnergyAustralia, has explored network and retail-based incentives as part of its smart meter rollout to 50,000 homes in the Newcastle, Hunter and inner west Sydney regions.

The incentives covered dynamic and seasonal time-of-use, interruptible load and air conditioner cycling.

Ausgrid managing director George Maltabarow told a recent forum of utility industry personnel that utilities would have to rethink their business models to meet the pressures of increased smart meter use.

"If we can't tell customers what the benefits are going to be, then I suspect that we won't be able to succeed in deploying that sort of innovation," he said.

"Are the customers going to believe that we're building something to save money or are they going to be believe that we're building something to save ourselves costs and pocket all the profits?"