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Foresighting Forum 2021 System Design Webinar: Your Questions Answered!

When we convened 200 leaders and thinkers from across the energy system for the final webinar in our Foresighting Forum series for 2021 we knew we were biting off a big idea. 

To effectively plan for a future energy system that will meet consumer values, needs and expectations we need a shared vision, across our diverse sector. But how can we arrive at a shared vision for the future energy system that is big enough, flexible enough and imaginative enough to encompass the potential ways in which the system and its users are morphing and new characteristics emerging? 

Think of Covid-19 – which along with Black Summer – was the original framing for our three-webinar series. Never before have we faced such a disruptive experience as the unpreceded bushfires followed by the surprise arrival of the pandemic in early 2020. Overnight, things changed radically; for all of us but also for the energy system and the assumptions that underpin it. (As covered in our first webinar HERE)  

These cataclysmic events have helped to show us the limitations of how we currently plan for the future system, basing assumptions around what will be needed on what we currently understand to be true. As I mentioned in the webinar, we might need to stop calling it forecasting, as that idea – using the past as an indicator for the future – has such clear limitations when it comes to the two energy transitions that are underway. We are in a world of uncertainty now. We must integrate that thinking into our planning for the grid. 

That’s not to say that uncertainty is bad. In fact, we see it as an incredible opportunity and the precise reason that we chose System Design as our webinar theme. Below you’ll find some reflections from me on this final session and the discussion it engendered, as well as the questions many of you posed in the Q&A thread, which have now been generously answered by our panellists. 

The extent of the engagement, discussion and debate throughout the Forum has blown me away.  

At Energy Consumers Australia, we know that the impact we set out to make cannot be delivered by our people and resources alone. We seek to act as a connector and a charger, bringing the right mix of people together to have the right kind of strategic conversations. With this year’s forum we were thrilled with the attendance from government, public sector decision makers, market bodies and regulators, as well as more than a dozen retailers and most of the nation’s largest network operators. We were also pleased to see representation from academics and researchers across many of Australia’s leading universities and the all-important community organisations and consumer advocates. 

The presence of so many of you for this kind of conversation shows us that there is an appetite for changing the status quo. That’s something we hope to explore further in our Foresighting Forum 2022 next February. But first, what did we learn from our System Design Webinar? And what did we glean from your questions and comments? 

Jump to Q&A

Foresighting Forum 2020 Resources and publications

Big thinking starts with the right question 

We are already at the stage where we are producing virtually free energy at certain times of the day at certain days of the year. However, due to the significant pace of change, we are also at the stage where security and stability (in a system that was only designed for a one-way flow of power) is being compromised. 

The industry is asking ‘how can the domestic energy grid and energy market design be adapted to cope with a higher percentage of variable renewable energy and the withdrawal of coal and gas generators?’ But as Brian Spak asked: Is this even the right question? Is this too narrow-minded? By asking how do we cope, are we missing the opportunity for big picture thinking and conceptualising an energy future where energy is clean, local and virtually free? Where the system is more flexible, with structures in place to allow adaptation in the face of change or emergency, efficient with greater utilisation of existing infrastructure and ripe with opportunities for everyone to participate. We have to be revolutionary in the way we decide to operate the grid. This energy transition will need to be bigger, faster, and more inclusive than anything we have ever seen before. 

Consumers in control 

Consumer behaviour and the adoption of technologies is moving faster than the mindset for change. Almost 3 million households across Australia have fitted their rooftops with solar panels. Together, they are the largest electricity generator in the country. This, combined with investment in other Distributed Energy Resources (DER) such as batteries, electric vehicles and smart appliances means that power has shifted to the side of consumers.  

As Brian Spak said: 

“Welcome to the future in Australia… at certain times in the day, in the year, we have energy so cheap that we are pretty much willing to throw it away.” 

Herein lies the opportunity to put consumers and their energy uses and habits first when dealing with various energy issues. We must remember that consumers value energy for the services it provides – hot water, cold fridges and entertainment – to name a few, and not as a tool to support the grid. Consumer participation and the decisions they make about when and how they support the grid should be recognised, planned for, rewarded and integrated. Imagine the possibilities of capturing and utilising excess energy by updating market design and regulation to support the system that consumers are already building. 

Moving from top-down to bottom-up thinking 

The future is local. The future is people and communities as participants. But what kind of political and regulatory changes do we need to make to ensure that communities, individuals and businesses can work together to provide local energy solutions? How do we ‘join the dots’ so that we have the optimal mix of local and large- scale generation and avoid overinvestment and overbuilding (spending) on both transmission and distribution? Small scale resources have intrinsic value relative to their larger counterparts in the energy system – mainly in their modularity and optionality. We need that flexibility to be able to integrate technologies into the grid in a lower-cost way. Fitting this into a transparent, national rulemaking process provides the best opportunity to achieve a good outcome for all. 

As Andrew Nance said: 

“Is the electrification of everything our chance to pivot to a different approach?” 

The need for energy awareness  

Consumers are craving autonomy and control, we can see that in their energy behaviours. But there needs to be clear and valuable information available about the decisions they are making. There are missing links between consumer-driven decisions, mass market uptake and the centralised, top-down energy system. While we are sceptical about the idea of ‘educating consumers’ or making them ‘energy literate’ there is definitely scope for helping more Australians to understand how they can navigate the changing energy landscape, with minimal effort or disruption, to benefit themselves and their communities. This is where the benefit of good engagement comes in; explaining what the system can do for consumers, how they plan to engage with it and using that feedback to create a continuous loop of improvements. A public-facing plan for the energy system and the transformation would help build confidence that the energy sector is acting in the interests of consumers and the future. 

As Mark Byrne said: 

“I ran a bunch of workshops in New South Wales… Most people came along wanting a battery, by the time we explained how batteries worked and integrated with solar and the whole system, almost nobody wanted a battery!” 

There is a line however, and we must be careful to bring consumers on the journey without overloading them with complexity.  

Conceptualisation is key 

There is a need for research to better understand a range of energy topics and a strategy to identify emerging issues and consumer concerns, as well as individual and community aspirations and expectations. Tracking key emerging issues nationally would improve the efficiency and impact of consumer research which would make it easier to have the necessary structures in place to account for the uncertain future we face. 

As Andrew Nance said: 

“Consumer interest is most likely to be met if (we) continuously improve the accuracy of the forecasts. We need to get better at predicting the future.”  

Building up a national body of research that is accessible to all energy system stakeholders could properly inform network, regulatory and policy approaches. The current gap in this space undermines the potential of demand management to cost efficiently support the operation of the grid, and makes it harder to accurately forecast future demand. LINK TO AET report. 

A systemic approach is needed in designing the best energy system for all, no one group has the answer. Our panellists asked if it is retailers and networks that should be working in this space – doing the work to understand how people use energy now and into the future and designing tariffs to fit? Does it start with the rules and the legislation? We believe consumers have the answer – and it links back to the discussion from our first webinar on Social Practice and Consumer Behaviour. Give people the right tools and they can be very useful to the planning of the system. However, progress to fully unlocking the potential of demand side technologies in 9 million homes and 1 million small businesses, must be integrated with a fit-for purpose consumer protection framework for new energy services. 

Your Questions Answered

Brian Spak (BS), Mark Byrne (MB), Andrew Nance (AN) 

Q: How important will a shared vision across jurisdictions and Australia be to the success of this system transition? How can this work with the similar importance for community engagement and local planning? 

BS: I think a shared vision is integral to a successful transition. If we don’t all share a common idea of where we’re going, it’s going to be more expensive and timelier to get there, if we arrive at all. With that said, I think a shared vision of the system transition doesn’t mean identifying precisely what has to be enabled or provided in each community. Community engagement and local planning are going to continue to grow in importance and hopefully compliment the broad system planning that AEMO and the networks do today. But I would consider a shared vision across Australia (or at least within states) of the energy transition as not competing with those local efforts, but more as identifying and embracing the common themes, values, and expectations found from community engagement.  

Q: Interested to hear the Panel’s views on how we can help consumers engage, but also help them understand how jurisdictional decisions affect the whole system?  

BS: I think building capacity for consumers who want to engage is a key part of the process. To this end, the AER has just published, The Better Resets Handbook – Towards consumer-centric network proposals which serves as a great guide for consumers about the key issues raised and questioned to ask during network regulatory resets. Perhaps a similar type of handbook focused on the impact of jurisdictional decisions and policies could likewise be useful?  

Q: Who is best placed to deliver complex information to and engage with consumers about DER?  should we start with installers or do regulators/operators and other market bodies have a part to play? 

BS: This is an important question, and I think the recent move to task the Clean Energy Regulator with installer certification provides a potential avenue for making a more concerted effort to provide installers with the information they need. In practice, to be successful, the market bodies and the network operators will have to work together – with consumer and communication experts – to determine the best approaches. And while I agree that we should start with installers, we will need to do broader consumer engagement on complex issues, because some issues are likely to hit existing rooftop solar consumers, who are not likely to speak with an installer soon.  

Q: How can we account in our forecasts for government policies that will impact DER and demand? 

BS: Scenario-based planning, like what AEMO uses for the Integrated System Plan, provides a way for incorporating various government policies that may emerge in the future. Individual scenarios attempt to tell a credible story of the future – including how potential policy measures might impact the industry and consumers.  

Q: How can our energy policy bodies put consumers’ perspectives front and centre if they don’t have sociology, anthropology and philosophical expertise? 

BS: One of the reasons I love the energy industry is that it’s endlessly fascinating and large. No one organisation or individual or team can have all the answers – we all need to collaborate. And so, I think policymakers can work with consumer advocates to help balance their perspectives. Some training probably wouldn’t hurt either – just as many of use with sociology, anthropology, philosophy and more checkered backgrounds have to be trained in the intricacies of good policymaking and regulatory frameworks.  

MB: They definitely need to either have a range of social science expertise on board, or mechanisms in place to provide advice on it. But the most important thing, of course, is to directly listen to the people. It would be great if we also had structures in place which mandated collaborative regulatory design. In my experience the market bodies and industry are gradually getting better at this, but in many cases it’s a steep learning curve. And let’s not forget that the national electricity and gas objectives are still framed in purely economic and technical terms, so this fish rots from the head.  

Q: How has the growing uptake of household batteries and customers looking to go off the grid been considered in our system planning? 

BS: Western Power has done an outstanding job in helping plan and transition for consumers to go off the grid. They have developed a new planning paradigm that develops native demand forecasts for individual consumers, so they can understand their total energy needs and how best to meet them. Into the future, while more remote consumers will go off the grid, it’s an open question as to what the vast majority of consumers do. If large numbers of consumers defect from the grid, then it creates an asset that has to be recovered by fewer consumers, many of whom likely are less well off than those that can afford to go off grid. So I think how well the system transitions to meet changing consumer needs is the pivotal issue for determining if and when consumers might go off grid.  

A more pedestrian answer to your question is that scenario-based planning, like that used by AEMO for the Integrated System Plan, is capable of developing scenarios in which large numbers of consumers decide to go off grid and then seeing the implications of that on the rest of the system. 

Q: How much could the industry’s collective lack of understanding about what happens and what could happen down at the low voltage level forming a barrier to any discussion about local energy markets? 

BS: The lack of knowledge about the state of the low-voltage network is a major barrier to local energy markets, but it’s not a black or white issue. You need some awareness of a need in a specific location to create a local energy market – and you need to know that the services procured to meet that need have done the job that you’ve asked of them. And so overseas you will see networks procure a group of DER from a given manufacturer or company to provide a specific grid service in a particular location without a ton of low-voltage information. A broad local energy market that involves regular trading of energy between households – or even one that simply allows consumers (or their agents) to provide different services at different times given different grid conditions – requires more visibility than we have today. But the distribution networks recognise this is an issue and are starting to make progress.  

MB: Users who are likely to benefit from local trading should also be prepared to pay for increased visibility of the LV network. That is happening already to some extent via regulator approval of network DER integration expenditure. One question is whether we need visibility over every LV connection, which can be expensive, or just a representative sample in any network. 

Q: where does energy efficiency fit here? An efficient hold uses a third as much as a typical one and MUCH less on an extreme cold or hot day. It seems to me we need ‘efficient, smart, equitable electrification? 

BS: I couldn’t agree more. Efficiency really should be the “first fuel” – and homes and buildings that are more efficient have greater ability to flex their energy use, because the building itself forms an efficient form of thermal storage.  

Q: What is being done to better understand consumer motivations around DER?  what are we basing current forecasts on when it comes to consumer behaviour and is it possible to predict their diverse needs and expectations? 

BS: There is a lot of research being conducted on consumer motivations and DER; most if not all of the ARENA DER trials involve some consumer research. The bigger challenge may be turning that research into useful action. Currently, forecasts of future consumer behaviour rely primarily on “expert opinion,” which in practice means that we assume that consumers will be mostly motivated by profit for how they use their DER. Such a stance is supported by the research – but only partially. Most research indicates that economic and financial issues are the primary – but not the only – motivation for a majority or a large plurality of consumers. We’re missing good models for how best to forecast how other consumers (and their devices) will behave.  

How do we account for the fact that not all consumers are profit maximising or motivated by economic efficiency when it comes to DER in future planning? 

MB: By not getting in the way of people making choices which may be considered uneconomic (eg home batteries, at present) while ensuring that those choices do not increase costs for others. Given that the main economic motivations are for greater autonomy/control and to help decarbonise the system, it would be extremely useful if these were part of the national electricity objective. Community energy is a reminder that altruism is another motivating factor in people’s behaviour around energy. 

Q: How can we protect the benefits and opportunities for consumers in this transition e.g., low cost of energy, sharing resources, when this might seem at odds with profitability for businesses? How can we incentivise innovative businesses, as opposed to largely an energy monopoly of traditional companies? 

BS: Your question may be more of a philosophical one than anything and your mileage may vary depending on the trust you put in the market. I think good companies that create better products for consumers that reduce energy costs and increase satisfaction will win. Plenty of people are making money off of rooftop solar, while also providing lower cost solutions for consumers. Same is becoming true with energy storage and electric vehicles. Networks themselves are “natural monopolies” – it is inherently more efficient to only have one set of poles and wires connected to our homes and businesses. And that monopoly status therefore requires direct government regulation of prices. Making sure there’s space for innovation in the sector likely comes from additional regulation on networks to ensure that they also provide a platform for new companies to innovate on – the networks seem keen on such an outcome themselves.  

Q. Under the Demographic Grid Model – if it is primarily backup — how do you share the cost equitably, fairly and easily over the whole community? Everybody (including DER) pays via capacity? 

MB: As users become more and more responsible for their own supply, they are also more responsible for directly meeting the costs thereof. I think the problem arises in regard to people who don’t have active DER, like renters and low-income households. Apart from being able to tap into shared resources like community scale batteries, fixed charges may need to increase as a proportion of retail bills in order to ensure that legacy or passive users do not bear more than their fair share of maintaining the grid, which even most active users will continue to require for backup supply. Capacity tariffs may also be a good idea. 

Q. If – and I agree – the new energy paradigm is truly bottom up – then customers are “participants” but that has a fundamental conflict with the role of retailers – esp. gentailers?  How do we address this? (The problem is that customers do not have usable data, are kept in the “dark” by retailers. The biggest issue is that the distribution network is now a platform that connects customers (directly) – they can provide “buffers” like Community Batteries to facilitate it – yet retailers frustrated that at every turn – and generators and retailers object to any “service” provision by DNSPs/DSO to customers.) 

MB: Maybe this is a problem this with the big retailers, but among the smaller boutique retailers I see a willingness to work with DER users — eg, around innovative and transparent tariffs. Network businesses are the main early movers on community scale batteries, but of course they can’t sell directly to users, so they will need to do deals with retailers to extract the maximum value. The democratic grid also implies the emergence of a plethora of distribution level trading platforms, which could also be provided by retailers. Data transparency is key, even where most transactions are automated. For instance, if a community scale battery is being recharged from the grid overnight, users are entitled to know whether that energy is green or black. 

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