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From the CEO
We have seen, during the past week, multiple reminders that we are at something of a tipping point when it comes to managing a transition to a modern, flexible and resilient system that delivers affordable, clean and abundant energy to consumers.
The system we are working towards also needs to be consumer centred, taking as its starting point and central consideration the changing values, needs and expectations of Australian consumers. How do we build this system, you might ask? Join us at our third and final Foresighting Forum 2021 webinar this Tuesday September 7, where we will discuss whole-of-system change and how we can imagine, visualise and begin working towards a preferred future.
In this context we also weigh the Post 2025 Options Paper, recently submitted to energy ministers by the Energy Security Board (ESB). It’s also instructive to look at that document alongside another released this week – the Electricity Statement Of Opportunities (ESOO) released by the Australian Energy Market Operator (AEMO).
Unlocking Consumer Participation
We see much in the ESB’s final advice and recommendations to commend. Not least is an acknowledgement that there are technical and market issues that need to be resolved for households and small businesses to obtain the full value of the investments they make in generation, storage and smart appliances. It is clear that the roles of and responsibilities of the actors in the energy system need to evolve, to unlock the value of consumer participation in the energy system and to mitigate the risk of an energy divide, much of the work lies ahead of us.
But, as seemingly happens with any energy market reform in these times, there are contentious elements; in this case, a fierce public debate about whether the ESB is sensibly shoring up future resource adequacy or needlessly propping up ageing coal-fired generators.
Much of this debate necessarily involves filling in blanks. The ESB has not designed a capacity mechanism to ensure an adequate supply of dispatchable electricity as fossil-fuelled generators exit the system and are replaced by variable renewable energy. Instead, it has merely said we need one and that the design of it should be consultative.
That is a notion we find persuasive but it leaves a large amount of work still to be done. There is clearly a version of a capacity mechanism that could increase costs for consumers, unreasonably delay the exit of fossil fuel generators from the system and therefore slow the transition to cleaner alternatives. These are outcomes that we strongly oppose and that – on behalf of all consumers – will actively advocate to prevent.
Energy Market Reform is essential
But they are not baked into the ESB’s work on capacity mechanisms. The ESB has said that it does not expect coal-fired power stations to be competitive over time in providing capacity (they have become increasingly uneconomic in the energy-only market we currently have). Measures could be built into design of a mechanism to favour generators or storage that can provide capacity without emitting carbon. The design could be tweaked to enable demand side flexibility to play a more active role in delivering system security (something we strongly support). The story is yet to be written and will require strong advocacy on behalf of Australian consumers, who have repeatedly told us they expect future energy to be clean, affordable and reliable.
The ESOO released by AEMO this week provides evidence – if any more were needed – for why energy market reform is required. Pleasingly, it found that there is sufficient capacity in the market to provide reliable supply over the coming five years – a function of the renewable generation and battery storage that has so changed our system, and of planned investment in additional generation and transmission (more on that later).
Beyond that, though, the ESOO identifies a more uncertain future. By 2025, the statement finds, minimum demand levels will threaten power system security, requiring new operational tool. Clearly, measures are needed, as AEMO shifts towards its stated aim of a future grid that has the ability to operate for periods of 100% renewable energy by 2025. But to the extent those measures require consumers to shift their use into the middle of the day, go without the use of their own solar generation, or to have their solar exports curtailed, there is a need for the way they operate to have a strong social licence.
Interestingly, these findings align strongly with what consumers themselves are telling us. In our Energy Consumer Sentiment Survey earlier this year, we asked respondents to rate the importance of specific challenges the system is facing. Only 9 per cent rated preventing grid outages as the top current priority. Other challenges ranked much higher by consumers were affordability, managing the transition to renewables to combat climate change and investing in new technologies to replace coal and gas power plants.
Consumers were not overly concerned about grid outages in the short term but when we asked them to think long term, more than half were very or fairly concerned about future outages. We also saw household confidence in future reliability decrease for the first time since 2017, (from 58% to 53%). You can read more about this trend in our bECAuse blog here.
Consumers are the system
In my view, consumers may not always be experts in the energy market but they have an unerring ability to detect and reflect uncertainty and lack of clarity. They are right to feel this way. We are not just at a tipping point in the energy transition but a tipping point in our civic and industry-wide discussion. These debates are critical but still often lopsided. They begin from a starting point of what the system needs, not what consumers want to do.
We still find that the debate around future energy needs defaults to the operation of the centralised supply chain, and what we call the first transition to 100% renewable generation. The efficiencies and potential consumer benefits of demand side flexibility are too often relegated to the background. Energy Consumers Australia’s position is that investment in infrastructure is needed but must be clear-eyed. Not one cent more than is necessary should be spent because the cost of investment is always passed back to consumers. And when it comes to investing our time and energy, a lot more should be going to maximising the impact of best-practice demand flexibility – done in a way that responds to consumer needs, secures their understanding and permission and ultimately results in their benefit.
The ESOO makes another interesting observation, stressing the level of long-term uncertainty around the future market impact of electrification and the possible emergence of hydrogen as a significant player. Assessments of the amount of electricity the future market will need to provide vary wildly. Again, there is significant potential for over or under investment if this part of the transition is disorderly. The results, we know, would either be cost increases or reliability problems for consumers. This is why our ECSS shows consumers are nervously uncertain about the longer-
We need a shared vision
What is missing, and badly needed, is a shared vision. As a sector we need to coalesce around a strong and definable vision of the future we are racing towards. This need – and the need for consumers to be central to meeting it – form the backbone of our recently-released Strategic Plan. This document sets our organisation’s new vison, mission and purpose and commits us to a set of priorities and activities that will guide our work for the coming three years.
Implicit in our strategy and in the ESB Options Paper is the importance of a national approach, recognising that individual jurisdictions may need targeted action to address their own specific challenges. A jurisdiction by jurisdiction approach to shared problems can make it extremely difficult for those who wish to understand, influence and create energy policy to see the entire playing field. It can create duplication and it can mean we fail to move energy efficiently across the system, a key to delivering affordability for consumers.
For this reason, we have collaborated with KPMG to create the first Australia’s Energy Transition report. The report, released this week, collects dozens of energy policies across all eight jurisdictions and applies a sense-making framework that allows the reader to get a better sense of the entire policy landscape. It can help to show where we are concentrating our policy-making and where there are gaps. Where there is duplication that can lead to inefficiency and where there is possibility for knowledge-sharing and collaboration.
As all of this shows, we are at a critical juncture. The discussions and debates we are having right now will be instrumental in creating the system that consumers will interact with a decade into the future. Our continued priority, which we are working hard to advance, is that this future system is one that begins with responding to consumers’ changing values, needs and expectations and keeps them at the centre of system reform and system operation.
As you can see from the volume of news, publications and grants listed below, August has been an incredibly busy month for our team. I would invite you to take a look to see where our focus has been and will be going forward. We welcomed three new staff members to our team this month and now that we have our Strategic Plan finalised and are at full capacity (for now), we will continue drive forward with our ambitious plans to reach our vision.
I hope to see you online at our final Foresighting Forum webinar on Tuesday. Thank you for reading, we welcome your feedback as always here.
Chief Executive Officer
Register for our final Foresighting Forum 2021 webinar this Tuesday, September 7
This webinar will explore how we, as collaborative and future-focused system leaders, can position ourselves to envision and co-create the whole-of-system change consumers want and need. Creating change at a system level is hard and requires the ability to see the totality of the thing you are working towards – the desired future state – and agree on a shared vision for its transformation.
Australia’s Energy Transition: A snapshot of the changing policy landscape
This report, a collaboration between Energy Consumers Australia and KPMG, collects a large number of the policies announced or implemented across all Australian jurisdictions and applies a framework for understanding how and where they seek to make impact.
Energy Consumers Australia’s Strategic Plan 2021-2024
Our new strategy presents a glimpse of the large shifts we see in our future energy system and places people at the centre of everything we do..
The bECAuse Blog: How reliable is our narrative about reliability?
Reliability certainly matters but maybe not in the way many in the energy system once thought it did.
Introducing our new Director, Energy System Transition
We’re pleased to announce we’ve appointed experienced energy sector leader Brian Spak to this important role.
The bECAuse Blog: Do Australians really want more information about their energy use?
How much information do consumers really want access to when it comes to their energy use? Our Energy Consumer Sentiment Survey has some insights.
Foresighting Forum Webinar Two: System Resilience
More than 250 energy sector leaders and thinkers came together for our second Foresighting Forum webinar on System Resilience
New reforms will allow millions more to benefit from Australia’s rooftop solar revolution
We welcomed the announcement of new rules that will govern how Australians are rewarded for exporting solar.
Resilient system, Resilient communities: The Connections That Matter
A new report that examines the experiences of East Gippsland energy consumers before, during and after the 2019-20 bushfires to begin a conversation about resilience.
Submission to the UK House of Lords regarding Inquiry: OFGEM and Net Zero
We were invited to present our learnings to the Industry and Regulators Committee from an Australian perspective on the impact of the transition net-zero on affordability and consumers.
Submission to AEMO’s Market Ancillary Service Specification Second Stage Consultation
There is an opportunity for DER to play an important role in the FCAS market if the current specifications were to change.
Submission to Infrastructure Victoria’s Interim Report
We believe the reforms proposed by the Australian Energy Regulator may not do enough to enable emerging opportunities in a manner that works in the long-term interests of consumers.
Submission to the Victorian Government Gas Substitution Roadmap Consultation Paper
Our submission outlines some of the key challenges and questions the Victorian Government must consider in developing their Roadmap.
VIDEO: Supporting CALD Australians to be empowered energy consumers
This project aims to give policy makers the tools to ensure Culturally and Linguistically Diverse consumers can also participate fully in the energy market.
High-impact projects tackling important challenges: Our latest grants recipients
We were delighted to announce new grants funding for four high-impact projects from ANU, UQ, the Brotherhood of St Lawrence and ACOSS.