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Australian homes have historically been moderate users of air conditioning. However, the number of air conditioners installed in homes more than doubled between 1995 and 2005, and Australia is on the way to becoming a high air-conditioning country. Air conditioner peak demand is one of the main factors driving capital investment in the National Electricity Market, as well as a mechanism for cross-subsidies between air conditioner users and non-users. If no action is taken, both the energy and peak demand impact of air conditioning will increase rapidly in the coming years. The National Energy Market Management Company (NEMMCO) projects that summer maximum demand in the mainland states will increase at a rate of 0.8 % per annum more than the growth in energy consumption. This deterioration in load factor means that the benefits of market reform are being eroded, and the efficiency of capital utilisation in the electricity industry is declining, largely due to air conditioning. Typically about 30-40 % of commercial sector demand and 40%-50 % of residential sector demand on summer maximum demand days is now due to air conditioning. The two loads are currently of similar magnitude, but the household air conditioner load i