Surely it is time for “the dog ate my homework” to pass into history.
It may have a long and cherished tradition as the excuse to end all excuses. And yes, “the dog ate my homework” is the grand symbol for any excuse which, although scientifically possible, is so unfeasible as to bring a wry smile of incredulity and an arched eyebrow.
In keeping with the times however, excusers around the world should now be regaling their excuses with “the dog chewed my modem”, or the more plausible, “I spilled the latte on my laptop”.
In the world of energy market PR and public policy, the great excuse for spiralling electricity prices is “peak summer demand”, or simply “peak demand” whether winter or summer. This is the new “dog ate my homework”.
Peak demand is driving the excessive spending on network upgrades, they say, which in turn translates into higher bills for customers.
In the hallowed tradition of canines devouring homework however, this peak demand excuse deserves little more than a roll of the eyeballs.
Peak demand no longer outstrips general electricity demand – although you would be hard-pressed to find inconvenient detail in the reams of industry analysis. It just doesn't suit the narrative.
Let's take the Australian Energy Market Operator for instance. It is AEMO's job as energy market operator and planner to do the forecasts. And it is these forecasts which are used to justify spending. Incidentally, the 2020-21 forecast for peak summer demand in NSW alone has been pulled back by 18 per cent in just 12 months.
A cursory perusal of the latest 10-year growth estimates from AEMO show that peak summer demand has been downgraded in every state (see table).
In NSW, peak growth now matches general growth at 1.2 per cent and in Queensland the rate of peak growth has actually fallen below general growth by 0.4 per cent. Meanwhile, in South Australia and Victoria it is now just 0.1 and 0.2 points higher respectively.
For all intents and purposes peak summer demand is no longer an issue. It can hardly be blamed for rising electricity prices. It is that old dog munching away on that old homework.
The most noticeable thing about the AEMO forecasts though is the fact that there is no national forecast, only a state by state breakdown. Why is this so?
Surely the operator of the National Electricity Market (NEM), the body entrusted with planning and forecasting, could tally up a national forecast?
Is this a case of, “Sir, I lost the plus button on my calculator”?
For students of the language of high-gibberish we attach the official explanation from AEMO at the bottom of this story. It is so obtuse that any normal reader would not venture any further past this point, had we included it here.
It is the apotheosis of the “dog chewed my modem” excuse, perfectly suited for pointy-headed people but eye-glazing for anybody else.
For the commoner like ourselves who fails to grasp the subtleties of hyper-gobbledegook, we have secured an explanation from AEMO itself. Why doesn't AEMO provide a national forecast?
“The maximum demand is broken down by state because there is a lot of variation between when each state reaches its peak. For example Tasmania has a peak demand in winter and everywhere else in summer. NSW is changing and may soon become a winter peaking state rather than reaching its maximum demand in summer. AEMO believes further work is needed to produce a robust aggregated maximum demand forecast for the NEM.”
This is the deluxe DAMH (dog ate my homework) model, the Yorkshire terrier gulping down the doctoral thesis on Tolstoy.
Could not AEMO drum up a dark-and-dirty national forecast for the sake of a journalist and a few readers with a penchant for sadistic energy market acronyms and uber-jargon?
“In previous years we did produce an indicative number but with the changes that we are seeing in electricity use, it is timely to look at changing the way forecast annual energy and maximum demand – thus the new independent robust electricity forecasts released for the first time this year,” said AEMO.
“It is also timely to look at how we would produce a national maximum demand forecast rather than aggregating the regional forecasts. An indicative value is limited in its use by energy analysts and that's why this forecast has to be reviewed in more detail before we issue any national electricity market maximum demand statistics.”
There you have it … no.
We can only surmise that, like the rest of the industry it just doesn't suit AEMO to concede that the gold-plating party is over. Last drinks have been called for peak demand.
A cynic may venture that, as AEMO is 40 per cent owned by industry and the balance by the states – who collect higher dividends the higher the returns from their network providers – they may be disinclined to switch off the lights and tell the revellers to leave the soiree.
It simply doesn't suit the cause. High spending is good for the network providers because they get paid a regulated return on the size of their assets; the more they spend, the more they make.
They may still be propagating the peak-demand myth because they are loath to admit they overcooked the demand forecasts in the first place and rattled this entire big desert island with bill shock.
In reality, the rate of demand for electricity has been falling, across the country, and forecasts have been way out of whack.
Yet AEMO is by no means alone. It has only just taken over the central forecasting job. All the players push the same line. Energy giant AGL for instance has been touting a report ascribing the phenomenon of rising energy prices to the metaphorical canine and its unquenchable appetite for homework too.
The report recognises the human impact of rising prices. One in four households stands at risk of not being able to pay their power bills, households in “the family-formation bracket” that is, where the main income earner is 30 to 50 and has offspring.
“If you want to find the root cause of all of this, you are talking about rising peak demand and the subsequent investment in new infrastructure to sustain it,” say the authors.
Not any more you're not. Though AGL told Business Day last week the company still stood by its report and its findings on peak demand – despite the latest AEMO forecasts which apparently put paid to the idea that peak demand outstrips general demand.
We should bear in mind that peak demand had been a plausible excuse in recent years – like “the car broke down” – but, in these same recent years, industry forecasts were clearly outstripping the actual rate of consumption.
The AGL report hones in on this, suggesting the energy market “death cycle" is threatened by the first fall in overall demand for power in Australia for 50 years, in part due to soaring prices, along with sharper peaks in demand on very hot or cold days as more buildings use airconditioners and heaters. This peak demand is driving an “investment megacycle”, they say.
So rising prices have hit demand. And now, nevertheless, the serious social implications of this "investment megacycle" are upon us.
Finally, without further ado and rambling about mega-cycles we can now present the quintessence of the DAMH: AEMO's official reason for not doing a national forecast for peak demand, its evil culprit of electricity extortion:
“In the 2011 ESOO (Electricity Statement of Opportunities), summer and winter maximum demand forecasts were calculated by scaling down the sum of all the regional forecasts by an assumed diversity factor. The diversity factors used in the 2011 ESOO were calculated as the average diversity between the regions over the past five summers and winters, and were used to indicate the coincidence of the maximum demand between each region. For summer the diversity factor was 0.92, and for winter the diversity factor was 0.98.
Using a single percentage-based diversity factor to approximate the NEM maximum demand does not reflect the true diversity that may result from actual conditions and producing probability of exceedence (POE) forecasts using this approach is inconsistent with how the regional maximum demand forecasts are developed. AEMO does not consider this estimation method to be robust, and as a consequence has not continued to use this approach to calculate maximum demand for the 2012 NEFR. This is an area of future work that will be developed for the 2013 NEFR, using time-sequential modelling to understand the coincidence between each region's maximum demand."
Source: AEMO National Electricity Forecasting Report page 3-8
The dog didn't just eat the homework, it swallowed the school bus. True story! Saw it with my own eyes!