November 6, 2015 7:00am by David Farrar

Do we need congestion charging for electricity?

The Electricity Authority wants lines companies to stop charging flat daily and consumption charges so they give the right economic signals to consumers about when the time is right to adopt emerging technologies.

Currently, lines company charges account for about 30% of the average household’s electricity bill with 22% of that being the daily charge and about 78% being determined by how much electricity they use, regardless of when they use it.

That’s even though it doesn’t actually matter to the lines companies how much electricity a consumer uses overall – they’re only affected if peak usage requires them to provide more capacity.

This is an important point. There is no marginal cost for supply in lines cost – unless peak usage requires greater capacity. So the sensible pricing signal should be around use at peak times. Fixed line charges are unfair on those who don’t use much electricity, especially at peak times.

The authority says if the pricing signals don’t change, that could mean between $2.7 billion and $5 billion dollars of wasted investment over the next 10 years.

That’s a lot.

That’s through the wrong pricing signals encouraging some consumers to install solar panels but that will mean those without panels will have higher bills.

The authority estimates those without solar panels could see their electricity bills in 10 years’ time being 10% higher than now as those with solar panels save money at their expense.

As well, lines companies would have to build more capacity to cope with peak demand if there’s no incentive to encourage consumers to use power at off-peak times when there’s minimal cost to the lines companies.

And solar power is good, but it has to compete fairly. And another story makes clear it is not solar vs renewables:

Mr Hansen said New Zealand’s experience with solar power generation was likely to be different from many other parts of the world, where solar rooftop panels displace high-cost electricity generated using either natural gas or coal. With 80% of New Zealand’s energy needs already met by renewable generation, all of which is less expensive than solar power to produce, there was no clear case in the short run to incentivise solar power installations.