Leaders in the Australian energy industry met in Sydney on June 13 as part of the Energy Network Association’s (ENA’s) Smart Reform: People, Power, Price summit. Energy Source and Distribution was at forum, where discussions surrounding the impact of network costs on energy prices took centre stage.
Confronting the reality Australian households and businesses have experienced significant price increases in recent years, energy industry leaders agreed now is the time to focus on reshaping electricity network services to meet the changing needs of customers.
Faced with doubling debt margins in the aftermath of the Global Financial Crisis, ageing assets and changes in energy demand, network charges have grown significantly. As such, panellists at the ENA event – which included leaders from Australia’s utility companies, regulatory bodies, consumer groups and government – honed in on the importance of real and meaningful consumer engagement, as well as technological advancement and pricing reform.
The forum was divided into four key discussion areas: the future of networks; engaging consumers on energy use; creating the new market; and making energy prices clearer and fairer for consumers.
Acknowledging networks are changing, discussions revolved around integrating resources with customer choices; generating and managing data; and flexible pricing structures. In particular, effective communication with consumers was identified as a key focus area, along with securing the attention and trust of customers who are more and more often placing themselves at the centre of the national energy landscape.
Needless to say, with the Australian Energy Market Operator predicting solar energy output to triple in the next decade, a focus on renewable energy was also a topic of interest, with ENA identifying network businesses have already connected more than 1200MW of embedded generation capacity to their systems.
As showcased in the ENA discussion paper, which was launched at the forum, network businesses in all jurisdictions are investing in innovation and contracting with customers for controlled load to reduce peak demand.
Acknowledging even small changes can “free up capacity and create lasting, positive outcomes for consumers, the electricity supply network and the broader economy”, case studies provided in the paper provide examples of the new directions that are being pursued in energy networks.
According to the ENA, in Queensland, 59 per cent of Energex’s customer base utilises a demand management service, while Ergon’s “Save a Bomb” program is saving pool owners around $2.8 million in electricity costs by taking advantage of demand management and pool pump efficiency – at the same time meeting network objectives at a cost 29 per cent lower than expanding network capacity.
The country’s demand-related capital expenditure is only 6-10 per cent of the distribution cost, according to recent estimates by the Australian Energy Market Commission. Nonetheless, it was clear at the forum network businesses are making real attempts to work with stakeholders to improve cost outcomes for customers, by embracing new technologies, reviewing the value customers place on reliability and by reforming price structures to support informed customer choice on energy use.
It is ENA’s view that network businesses have a vital stake in understanding how people, power and price can effectively work together and welcomes all stakeholders in discussions moving forward.
Smart reform: What is the future for networks?
Electricity network operations are facing rapidly evolving customer expectations, regulatory changes, technology developments, communications interfaces and market roles. How are ENA businesses responding?
“Networks are changing. The challenge now is how do we best utilise existing assets? How do we integrate the new resources with customer choices?”
Terry Effeney, Energex CEO
“Distributed energy will not be stopped. We need to be much more clear with customers and other businesses on what we can and will supply. Networks are experts on maintenance safety, but we must take the opportunity to communicate clearly.”
Tim Rourke, Citipower/Powercor Australia CEO
“Consumer behaviour changes. Industry faced changes in consumer behaviour several times throughout the last century and nothing is different today. The difference is, today technologies are giving consumers more alternative options. Consumers are substituting products and we need to establish the critical role of networks as facilitators.”
Paul Italiano, Western Power CEO
“The rapidly changing nature of the energy industry means distribution companies need to engage more actively with consumers to better understand their needs. For the first time we have a regulatory requirement to consult with stakeholders, which is something Jemena welcomes. it is important customer representative groups become an integral part of the price review process.”
Paul Adams, Jemena managing director
Smarter people: Experience, strategies and outcomes in engaging consumers.
Customers are taking their rightful place at the centre of the energy system. How does the energy industry engage effectively with customers to optimise benefits?
“Engagement comes from within, it cannot be enforced or imposed. PV customers are highly engaged, due to incentive. Engagement and awareness have increased, but more needs to be done by networks.”
Christopher Zinn, One Big Switch director of campaigns
“In the future, behavioural science will win over technical science, in terms of driving consumers. The emphasis should not be on load shifting or peak demand but on changes in consumer lifestyle.”
David Hamilton, Energy Australia general manager sales and marketing
“Retailers and distributors tend to engage with high-end users and vulnerable customers represented by consumer representative organisations, but it’s difficult engage with the silent majority. Customers need to make choices, not have information shoved down their throats.”
Darryn McDonald, United Energy and Multinet Gas general manager customer and market services
“Education is critical for transformation to work. Portals and new technologies are helping to get information to consumers. Note that utilities get huge influxes of data from smart meters, but do little or nothing with it. Industry needs to better utilise this information.”
Steven Windsor, Oracle Utilities Asia Pacific senior director consulting – Asia Pacific and Japan
Smarter power: Creating the new market
What does the future energy environment look like and how are we going to get there?
“Do you see innovation in the history? Networks are not known for being past moving.
Dr Paul Troughton, EnerNoc manager of regulatory affairs
“How robust is the new technology for customers?” This is one of the issues distributors struggle with due to the need to ensure reliability. Ergon is seeking to build a better database to ensure information covers the full range of options.”
Tony Pfeiffer, Ergon Energy A/EGM asset management
“The market rollout of meters will be challenging. I can use the New Zealand market as a model; distributors don’t get access to the data and can’t enable network service benefits. Retailers only invest in benefits they receive as the alternative was too expensive. So how do you roll out the technology so all benefits are realised?”
John Garner, Silver Spring Networks country manager Australia and New Zealand
Smarter price: Can energy prices be made clearer and fairer?
Should electricity costs reflect time of use? What are the benefits and challenges of flexible pricing?
“Customers know best what their interests are. Customer preferences should drive metering rollout, tariff structures and so on.
Distribution businesses and retail businesses must market their products.”
Simon Draper, IPART tribunal member
“We will see the introduction of flexible pricing in 2013 with the government website Switchon, which will have a safe try period for flexible pricing.
It is based on a common form of network tariff, agreed with network companies.”
Mark Feather, Victorian Department of Primary Industries executive director, energy sector development
“Regarding infrastructure, who pays, when and how is it reflected in pricing? Technology now has a much shorter timeframe.”
Steve Jeston, Landis+Gyr CEO Australasia
“The AEMC has just released a proposed rule for public comment, which is all about reducing the transaction and information costs faced by people who want to install distributed generation.
It would make it easier for people to invest in DG efficiently.
My immediate concern is that when people install DG they are facing the right price signals when they make use of the network.”
John Pierce, Australian Energy Market Commission chairman