Why Demand Tariffs Like 3950 Can Be Far Worse
Demand tariffs, such as the Energex 3950, are designed to manage electricity usage during peak times by charging households based on their highest electricity demand during peak hours. While the intention behind these tariffs is to reduce strain on the electricity grid, they often result in significantly higher costs for households compared to traditional per kWh tariffs. Here's why:
Example Scenario: Battery Charging During Peak Period
Imagine you own a home battery system and you usually avoid using grid power during peak times (4 pm to 9 pm). One day, the electricity prices are forecast to surge to 70c/kWh. To avoid this high cost, you could charge your battery with 1.6 kWh at a full speed of 20 kW during the current period when the rate is 20c/kWh.
Cost Analysis Under Per kWh Tariff (6970):
| Current Rate: | 20c/kWh |
| Usage: | 1.6 kWh |
| Cost: | 1.6 kWh * 20c/kWh = 32c |
By doing this, you avoid paying:
| Future Rate: | 70c/kWh |
| Usage: | 1.6 kWh |
| Cost: | 1.6 kWh * 70c/kWh = $1.12 |
Savings: $1.12 - 32c = 80c
This makes economic sense under a per kWh tariff as you spend 32c to avoid paying $1.12, resulting in a net saving of 80c.
Cost Analysis Under Demand Tariff (3950):
| Demand Charge: | $5.127 per kW per month |
| Maximum Demand: | 20 kW (since you charged your battery at 20 kW during peak time) |
| Monthly Demand Cost: | 20 kW * $5.127/kW = $102.54 |
Even though the immediate cost of charging 1.6 kWh at 20c/kWh would cheaper 20.8c, although the savings would be the same, the demand charge adds a significant cost for the entire month.
Total Cost wi:th Demand Charge:
| Charging Cost (7c cheaper): | 1.6 kWh * 13c/kWh = 20.8c |
| Demand Charge: | $102.54 |
| Total Cost: | $102.86 |
...the attempt to save 80c by charging your battery would result in a monthly charge of over $102.
In this scenario, the attempt to save 80c by charging your battery would result in a monthly charge of over $102. This stark contrast highlights the potential pitfalls of demand tariffs for households with irregular but occasional high electricity usage during peak periods.
Conclusion
Demand tariffs like the Energex 3950 can impose disproportionately high costs for occasional high-demand periods, making them far worse than paying per kWh. Households with battery storage or electric vehicles, which may occasionally need to charge quickly, can find themselves facing significant monthly charges due to a single peak usage event.
In comparison, a per kWh tariff allows for predictable and manageable electricity costs based on actual usage, making it a more consumer-friendly option for many households.
References
1. Canstar Blue - Understanding Demand Tariffs
2. WATTever - Demand Tariffs
3. Energex - Residential Tariffs