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If you want to know what I'm on about in the shortest time then please read the introductory first post and my current action plan. Comments are very welcome. And if you like this blog, please tell a friend. Thanks!

Friday, 21 September 2007

Money and power

This past week has had a fairly clear theme for me: the price of energy. There's the record-breaking crude oil prices, a discussion at our BNCWAG meeting about the confusing options for buying renewable electricity and then of course the replacement of our hot water system with a solar one.

Lets leave the oil issue alone for the moment (partly because the record prices are being kicked along by a weak US dollar which reduces the significance of the raw numbers). Just now I'm more interested in the electricity market.

Here in Queensland the energy market is regulated. There are fixed tariffs for the supply of electricity to various types of customers for various purposes. Most homes have two circuits: one which supplies electricity for general domestic purposes 24 hours a day for roughly 15c per kWh, and another which typically is connected to a water heater but only works during off-peak hours and is billed at a much lower rate (as low as about 6.5c per kWh).

These prices are the new ones, following an increase at the start of July which was largely attributed to the rising cost of producing electricity with cooling water being in short supply due to the drought. Ironically the drought conditions have led to a significant reduction in shower times and a corresponding reduction in the amount of water heating required. My most recent figures have us averaging 7.3kWh per day this winter at a cost of around 47c.

Now here's the bit which is bugging me. If my shiny new solar hot water system was so good that it never needed any electrical boosting (it's not), and assuming that we required that same amount of heating all year round (we don't), it would take just shy of 30 years for us to recoup the cost of the new unit from the savings on our electricity bills.

I can imagine my wife's raised eyebrow and my father's shaking head about now. But even having run these numbers I would still make the same decision again. It's only bugging me because it makes it harder to convince other people that it's a decision they'd want to make too. There are three reasons I want to point out here.

1. This is mostly about saving energy, not money

The pursuit of short-term economic advantage is what led to our current dirty coal infrastructure and is what maintains the hegemony of the coal industry in Australia's energy industry.

The reason that electricity is available at less than half price overnight is that the massive steam turbines in the coal-fired power plants cannot be switched on and off in a daily cycle. The operators of these plants need to smooth out the demand curve over the course of the day and these skewed pricing arrangements help them achieve that by encouraging additional energy consumption during the night.

It works too: this past quarter my water heater used more energy than everything else in the rest of the house combined! Though it will reduce our bill by less than 30% and at these prices will never pay for itself, installing a solar hot water system is going to approximately halve our total electricity consumption.

2. Electricity prices are likely to rise sharply - even for dirty coal.

There are a number of pressures on the electricity market which I suspect will cause prices to rise sharply over the next couple of decades. If you forgot about sustainability concerns completely you'd still have decreasing availability of cooling water, increasing global demand for coal, increasing local demand for electricity and the need for infrastructure work on generation and transmission.

Now I do hope that the sustainability and environmental agenda is going to have a powerful influence on future policy and development. This would lead to greater reliance on wind and other renewables which have a lower overall capacity, generally higher cost (than the present price of coal where many costs are subsidised or simply not accounted for) and a different delivery profile (solar, for example, is obviously linked to daily cycles).

All in all I expect the price of a unit of energy for the end user like you and me is going nowhere but up. Hopefully through a range of efficiency measures we can keep our overall costs from rising. My Solahart might turn out to be an economic winner in the future.

3. It's in keeping with the philosophy of sustainable design

I keep thinking back to McDonough's work on architecture and building design and his philosophy of making the best use of the available natural resources. Without the solar water heater up there the sunlight's energy would be wasted. My vision for the future is nowhere near as vivid as McDonough's but I'm quite certain that I'd expect to see solar heating in a place like Brisbane.

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