Hot Water Company Warns Electricity Grid Unprepared for Net Zero, Poses ‘Extreme Risk’
Dux Hot Water, one of Australia’s oldest manufacturers of hot water system suppliers, has issued a warning to a Senate inquiry about the unpreparedness of the electricity grid for the country’s net-zero emissions target. The company believes that the demand for electricity will surpass the estimates provided by the Australian Energy Market Operator (AEMO), making the closure of coal-fired power stations a risky move for grid stability.
Dux Hot Water, which was acquired by Noritz in 2015, is renowned for its full range of electric water heaters, including electric storage, gas storage, gas continuous flow, solar, heat pump, and commercial water heaters. With an annual turnover of around $70 million, the company has established itself as a key player in the industry.
In its submission to the Senate Economics References Committee Inquiry into Residential Electrification, Dux Hot Water expresses its support for the government’s net-zero emissions target by 2050. However, it criticizes the conservative estimate provided by AEMO regarding electricity usage in the country. The company emphasizes that supply chains are shifting towards electrical appliances faster than expected, with a clear signal of electrification in the market.
The company highlights the ban on gas connections in new homes and apartments imposed by the Victorian government. As Victoria is Australia’s largest gas-connected market, this move will drive up the demand for electricity. Dux Hot Water urges caution in closing coal-fired electricity generation stations too soon, as Australia still heavily relies on electricity from this source. In 2023, over 50 percent of the National Energy Market was powered by coal.
According to Dux Hot Water, the closure of coal power stations has led to a significant increase in wholesale electricity pricing. The company cites the example of the closure of Hazelwood power station in Victoria in 2017, which resulted in a huge spike in prices. Further closures of coal-fired power plants will only exacerbate this issue.
The company also identifies shortfalls in storage capacity for renewables and the transmission network. Dux Hot Water states that Australia requires significant firming capacity for renewable energy sources like solar and wind, as they are weather-dependent. However, sufficient firming capacity from batteries, gas-fired power stations, and pumped hydro is currently lacking. Additionally, the transmission network in NSW and Victoria is not aligned with the locations of renewable energy farms, causing delays in progress.
Dux Hot Water criticizes the conflicting signals from the government, making it challenging for manufacturers to plan effectively. For instance, electric storage water heaters are banned in new homes under the National Construction Code 2022 (NCC), despite no restrictions on their installation in Queensland, the Northern Territory, and Tasmania. The company questions why the installation of electric storage water heaters is still restricted in some states if the government aims to achieve 82 percent of power from renewable sources by 2030.
The submission by Dux Hot Water raises important concerns about the unpreparedness of the electricity grid for Australia’s net-zero emissions target. The company emphasizes the need for caution in closing coal-fired power stations too soon, as well as addressing shortfalls in storage capacity and transmission infrastructure. With the demand for electricity expected to increase faster than projections, it is crucial for the government and industry stakeholders to collaborate and ensure a smooth transition towards a renewable energy future.
