Demand Management Incentive Scheme

Traditionally consumer electricity demand has grown steadily. This has required expensive upgrades to the ‘poles and wires’ to deliver the extra electricity. The ACCC inquiry confirmed over the past decade these upgrades have dramatically increased electricity prices.

It is generally assumed Demand Management programs, which reduce electricity demand at peak times, provide a cheaper alternative to upgrading the poles and wires. Distributor owned and operated Demand Management schemes are not new, for 50 years consumers have been offered lower electricity prices in exchange for only running their hot water heater in off-peak periods.

More recently Australia has developed a range of Demand Management standards which includes air-conditioners and pool pumps. It is straight forward to estimate the potential savings.

DM Theoretical Saving

The problem is this simple analysis does not look at the lifetime of the two solutions or the certainty of delivered benefits. Factoring these differences into the cost of the Demand Management solution produces a very different outcome.

DM Practical Saving

Why is this significant for consumers?

Several Government regulators have decided to pay distributors who install the above Demand Management equipment. The analysis shows these incentive payments will result in higher, not lower, electricity prices.


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Copyright of this article remains with Dr Martin Gill. All references to this article should include the authorís name and website www.drmartingill.com.au.

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