❓ A WA parliamentarian questions the Energy Minister about the future of capacity payments for demand side management (DSM) participants, given the Minister's concerns about the program's cost-effectiveness. The Minister acknowledges the program's value but signals potential changes based on an upcoming energy market review.
AnsweredQoN 989Legislative Assembly
QuestionView source ↗
ENERGY — DEMAND SIDE MANAGEMENT — MINISTER
FOR ENERGY'S COMMENTS
989. Mr W.J. JOHNSTON to the
Minister for Energy:
I refer to the
minister's comments in the media of 14 November about demand side
management, which I quote: ''My view is that it (DSM) is too big
here because it's not being called on'', and the minister's reported comments on 18 November that any
changes to capacity payments would be ''technology neutral''.
After seven years of the Liberal government, can the minister tell industry
participants in Western Australia whether or not he will continue to pay
capacity payments to demand side management participants?
FOR ENERGY'S COMMENTS
989. Mr W.J. JOHNSTON to the
Minister for Energy:
I refer to the
minister's comments in the media of 14 November about demand side
management, which I quote: ''My view is that it (DSM) is too big
here because it's not being called on'', and the minister's reported comments on 18 November that any
changes to capacity payments would be ''technology neutral''.
After seven years of the Liberal government, can the minister tell industry
participants in Western Australia whether or not he will continue to pay
capacity payments to demand side management participants?
AnswerView source ↗
I thank the member for the question. For those members who do
not know, demand side management is a very interesting program in which the
market agrees to pay people to shut off or shut down energy at peak times. We
can pay someone to install a peaking plant to come on at peak times; the
alternative is to pay someone to reduce the load. It is a very good program
worldwide. Western Australia does it a bit differently; we pay people to put in
installed capacity. Capacity is priced at an open-cycle gas-fired power plant
and people are paid to install capacity whether they build something or promise
to turn something off with demand side management. We have extensive, over 500 megawatts,
installed or agreed capacity in demand side management. I was told that last
year we paid $65 million to purchase the right to promise to turn off
electricity. We have done that for seven or so years in the system and it has
been called on very infrequently. We are paying about $65 million for a service
that we really do not call on and do not need. Therefore, the questions I put
forward to the energy market review is: Do we need this? How do we price it?
How does it fit in the market? A report will be coming out in the next few
weeks that will deal with this matter extensively. I know that some very large
organisations have put in a lot of effort into organising demand side
management around the south west interconnected system. They are doing a good
job and making a lot of money out of this program because they have not been
called on, and they are lobbying very hard to maintain the status quo. However,
the government is committed to reducing the cost of generating and producing
energy in this state and eliminating unnecessary costs. If the report comes out
and deals with demand side management, I will support it. The report will be
about whether we treat it the way we do it now or can we do it cheaper. If we
can do it cheaper, I will support that.
not know, demand side management is a very interesting program in which the
market agrees to pay people to shut off or shut down energy at peak times. We
can pay someone to install a peaking plant to come on at peak times; the
alternative is to pay someone to reduce the load. It is a very good program
worldwide. Western Australia does it a bit differently; we pay people to put in
installed capacity. Capacity is priced at an open-cycle gas-fired power plant
and people are paid to install capacity whether they build something or promise
to turn something off with demand side management. We have extensive, over 500 megawatts,
installed or agreed capacity in demand side management. I was told that last
year we paid $65 million to purchase the right to promise to turn off
electricity. We have done that for seven or so years in the system and it has
been called on very infrequently. We are paying about $65 million for a service
that we really do not call on and do not need. Therefore, the questions I put
forward to the energy market review is: Do we need this? How do we price it?
How does it fit in the market? A report will be coming out in the next few
weeks that will deal with this matter extensively. I know that some very large
organisations have put in a lot of effort into organising demand side
management around the south west interconnected system. They are doing a good
job and making a lot of money out of this program because they have not been
called on, and they are lobbying very hard to maintain the status quo. However,
the government is committed to reducing the cost of generating and producing
energy in this state and eliminating unnecessary costs. If the report comes out
and deals with demand side management, I will support it. The report will be
about whether we treat it the way we do it now or can we do it cheaper. If we
can do it cheaper, I will support that.
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