Tuesday, November 04, 2014

Power down: What the Melbourne Cup tells us about electricity

Something remarkable happens as the horses leave the barrier at 3pm each Melbourne Cup day. Our use of electricity drops.

Last year NSW usage slid from 7.831 gigawatts just before 3pm to 7.791 gigawatts at 3.15pm. By 3.30pm it had climbed back up to 7.865 gigawatts.

In Victoria the dip is less severe. Tuesday is a public holiday and so electricity use is down all day. But in the rest of the nation factories slow or stop work at 3pm as workers gather around TV sets to watch the race. By 3.30pm they've finished and are back to work.

Electricity suppliers have to react in real time. If electricity supply doesn't almost exactly match demand awful things happen to the equipment.

A YouTube video titled Tea-time Britain illustrates the balancing act wonderfully.

On the wall of Britain's national grid control centre in London is what looks like a large digital clock. Its readout usually varies from 49.9 to 50.1. More power than is needed pushes the frequency of alternating currents to more than 50.1 times a second - a danger zone. Less power than is needed drops it below 49.9 - another danger zone.

To cope with the surge in demand as more than a million kettles are turned on at the end of EastEnders the controller fires up hydroelectric power stations as far away as Scotland and pulls in power from France. He has one eye on the TV schedule and another on a TV screen so he is able to time the surge in supply to meet the surge in demand as the credits roll.

Some of the adjustment is automatic. In both Australia and Britain certain power stations are designated "Frequency Control Ancillary Services" generators. Their output adjusts instantaneously in response to demand in an attempt to get things back in sync within six seconds. They achieve this by either opening or closing turbine steam valves or (in the case of hydro) quickly unleashing or stopping a torrent of water.

But big events overwhelm automatic adjustments and demand on-the-spot decisions.

During the first 2013 Queensland-NSW State of Origin match the controllers watch the action on TV screens and attempt to time a surge in supply to match the surge in demand when viewers turn on kettles and open fridge doors during the halftime break. They even pay attention when the match gets boring. The energy analyst Global Roam has published a fascinating blow-by-blow graph of a 2013 State of Origin match linking surges and troughs in demand to "First try to Hayne for the Blues - a 30 megawatt rise in 1 minute", "Second try to Blues, more tea anyone", and "Maroons try denied, kettles are boiling".

The process by which we - through our individual decisions - control what's happening in power stations from Townsville to Hobart can best be thought of as an industrial form of democracy. Although no single Australian decides whether more or less power will be produced across the eastern Australian grid, combined we make the entire decision.

It's analogous to what economics pioneer Adam Smith called "the invisible hand".  And it's true that we rarely think about it.

Remember the oil crisis of the mid 1970s? It ended largely because Americans switched from six-cylinder to four-cylinder cars and insulated their homes. For the most part no one told them to switch, but millions did and slashed an entire nation's demand for oil.

They were responding to price.

Australians did the same thing in just as spectacular a fashion from 2010 as climbing energy prices and talk about a carbon tax started to bite.

For Australia's entire history right up until 2010, every year through two world wars and the Great Depression, Australians used more electricity each year than the year before. Each year from 2010 on Australian households have been using less.

It's probably not because anyone told them to - there have been exhortations about saving electricity for decades. It's because big price rises and the talk about the looming carbon tax persuaded enough individual Australians to insulate their houses and to install solar generators and hot water systems.

For the most part it was painless. Most households were compensated for the carbon tax with tax cuts. But the price signal worked as expected. When something is more expensive we buy less of it - not all of us, and not because we are forced to, but because enough of us decide to.

It's a different approach to the one the Coalition is adopting with Direct Action grants to polluters. Although clunky (think of the administrative expenses) the Coalition's idea is fair enough as far as it goes. Any business that has a good idea about how to cut its pollution can bid for a grant to reward it for implementing it. The lowest-priced bids win.

What's missing is the price signal encouraging individuals to change their behaviour. We know that it works. And we know that individual decisions add up, just as they do each Melbourne Cup day and each State of Origin night.

This week's Intergovernmental Panel on Climate Change report warns of "severe, widespread and irreversible impacts" unless carbon emissions are cut sharply and rapidly. "Substantial" cuts are needed in coming decades and "near zero" emissions by the end of the century.

If we accept the findings, we need to accept that it's silly to argue about whether we need Direct Action or a renewable energy target or an emissions trading scheme. We need all of them, and more, at once. Both Labor and the Coalition are guilty of acting as if their preferred solution works to the exclusion of all others.

Whether it is cost-effective or not, Direct Action will be with us for a long time. Its contracts will lock in the government for years to come. A carbon price, likely to be recommended by the inquiry set up by the Coalition as part of its deal with the Palmer United Party, could work alongside Direct Action, even helping fund it.

The invisible hand is too valuable a tool to throw away.

In The Age and Sydney Morning Herald