Supporting consumers’ journey to net zero: no hero walks alone

By Anna Collyer, AEMC Chair

The is the text of a presentation given by Anna Collyer at the Australian Energy Week 2024.

The story:

On a recent sunny Sunday afternoon in Melbourne, I was standing with some other mums on the sidelines of our daughters’ Aussie Rules game. 

In between enthusiastic barracking, we were chatting – as you do – and, without them knowing anything about my job, the mum on my left, Clara, was talking about some house renovations they’re doing. They wanted to include solar panels in the deal, but the decisions were, frankly, doing her head in.

The mum on my right, Jane, chimed in: ‘Don’t talk to me about solar! We got panels last year and Brett - (her husband) - is still completely obsessed with the app’.

And so, I ‘fessed up and said to them: ‘This is actually what I do for a living – it’s so interesting to hear about your experiences!’

Clara, the one with the reno, immediately asked me to recommend the best brand of panels because it was all so baffling but, alas, I definitely wasn’t the right person to ask about that! 

And then Jane, the one with the energy app husband, kind of rained on my parade even more by saying: ‘Honestly, I couldn’t care less about the solar. I just want to run the dishwasher without a drama.’

It turns out, in Jane’s house, Brett carefully programs the dishwasher to run in the middle of the day so it’s free from the sun. 

Then, two things happen:

1. The kids put their breakfast things in the dishwasher – good teenagers, very good parenting: right? But then,
2. If they don’t click the dishwasher door shut, it fails to run at lunchtime –bad teenagers! Major parenting drama!

Thinking about it after the game, I pictured Jane’s and Clara’s households as running the full gamut of our highly valuable, but highly diverse, population of CER tech owners and would-be owners: 

• In Jane’s home, we have the opposite ends of this continuum – from the new energy fanatic of flexible load on one side, all the way over to those who really have other things on their mind.
• And in Clara’s home, we have the confused middle ground between those two extremes. People who want to make the right choices, but are lost in the confusion of so many competing yet similar options.

In other words we have those who are obsessed, those in a mess, and those who – completely understandably – just couldn’t care less.

As a postscript…

At the girls’ match the following week I caught up with Brett, who immediately pulled out his phone and showed me exactly how many kilowatts every one of his panels were punching out right that moment.

Jane rolled her eyes, and said, ‘Look, I’m happy to save money, I’m happy to save the planet, I just don’t want to talk about it anymore… Have you got any gossip instead?’

CER context

Now, CER’s definition certainly covers Australia’s 3.5 million rooftops with solar, but it’s so much more. CER is also domestic batteries, electric vehicles, pool pumps, hot water heaters and, yes, it’s even Brett’s programmable dishwasher. 

CER can be anything that you own in your home or small business that produces or stores energy. 

But more run-of-the-mill or ‘dumb’ appliances can also be a consumer energy resource: because we are interested in anything where you have a choice about when and how you use energy.

Rooftop solar is a powerful element in that CER list, but it’s a mistake to think it’s the only tool we have. 

While we expect around one in two Australian homes will have solar panels by 2040, that still means about half of Australian homes won’t. 

The half that do have panels will be tremendously helpful in getting us to net zero by 2050, if we get the set-up right now.

But the real challenge is to build a reduced-carbon power system that integrates those millions of tiny rooftop generators, and also captures the rest of the list. That means EVs, pool pumps, hot water systems, clothes dryers, washing machines, dishwashers and more. 

It also means, importantly, how and when customers choose to use energy. Because that is the way we will be able to ensure that people living in homes without a lot of fancy CER kit can benefit, too. 

Regulating for innovation and disruption

And, like so often in this extraordinary period we find ourselves working through, the answer to our problem must be innovation. To paraphrase Albert Einstein: we won’t solve new challenges with old ideas. 

It might sound strange coming from a statutory authority, but innovation, and even disruption, are very much what we have in mind when we put our thinking to new frameworks for the energy transition. 

This is especially true for CER. 

Australia is leading the world in growth and adaptation of CER technology. 

The amazing thing is this means we have an immense resource to help us get to net zero if we integrate it well. The hard thing is that almost every choice we make as a sector is being made here, by us, for the first time, before anywhere else. 

This is the new reality. This is just business-as-usual now.

And if your thinking, or your company’s strategy, is still about modifying what you’ve always done rather than creating a better way: you need to catch up. 

You need to be the Uber, not the taxi; Apple, not Kodak. 

And I’ll return to this point at the end.

We are all working at the intersection of two enormous revolutions: environmental, and technological.

In times like these, agility and courage count for a lot, and that is hard. But one of my personal mottos comes from the old movie, Ben Hur: to rise, you must do difficult things.

The blue sky piece of the puzzle

I spoke to this conference last year about putting the energy transition puzzle together. 

I talked about ways of thinking and working that can bring together many different and unknown pieces on the table, and how we need to keep a wide view and check in with other players if we’re going to finish this work with net zero emissions from energy by 2050.

I’m returning to our jigsaw puzzle this year.

However, instead of the whole picture – which others today will cover admirably – I am going to zoom-in to this one, tricky, section of how we can make CER work for everyone. 

You might want to think about it as the ‘blue sky’ of the energy transition puzzle.

The AEMC is working on four very specific and interconnected puzzle pieces that all have critical milestones in the next few months, and, together, set up a framework of opportunity. Opportunity to innovate, opportunity to disrupt, and opportunity to be the business that is smart enough to give customers what they need, before they’ve even realised they wanted it.

These four pieces of work include rule changes and a review, and they include some typical AEMC titles so let me get that out of the way right now. 

The rule changes are:

1. Accelerating Smart Meter Deployment. 
2. Unlocking CER Benefits Through Flexible Trading 
3. Integrating Price-Responsive Resources into the NEM. 

And then the fourth is the new review, with a working title of Electricity pricing for a consumer-driven future.

I’ve tied these four pieces together because they will work so closely to create that opportunity framework and be a platform for innovation – by you. 

This is, if you like, our chance to support you, on your own hero’s journey.

Consumers who invest in CER kit like solar panels and home batteries want at least two things: lower bills and lower greenhouse emissions. Their degree of passion for each of those things may vary, but paying less and doing something good for the planet and their grandkids are consistent themes. 

And the consumers who can’t invest in this kind of CER tech? Unsurprisingly, they also want lower bills, and to help the planet.  

You only have to think about how we have embraced recycling our garbage to see how willing people are to do their bit when we make it easier for them. 

With the right support and rewards, appliances in our homes that can be used flexibly will become a resource that’s equally valuable for consumers and the grid. 

These four puzzle pieces are designed to help you to help them. 

I have previously put forward consumers as the hero on the road to net zero, but no hero makes the journey alone. 

What we recognise with this regulatory work is that energy service providers can and should be the Buzz Lightyear helper to Toy Story’s Woody, as the Australian consumer: Woody may have the special cowboy boots with Andy’s name on them, but you’ve got the wings, and it’s up to you to help him fly. 

Let me show you how we see this coming together for consumers, for you, and for the grid.  

Smart meters

Firstly, accelerating the smart meter rollout is a crucial enabler of the transition in Australia.  

Smart meters are the digital foundation for a modern, connected, and efficient energy system. 

We need many more of them than we have now, and we need them soon, and we need them to work as we hope they will: turning power into knowledge for the benefit of everyone from AEMO and distributors, through to tenants in homes without solar. 

And we’re not starting from scratch. Australia’s millions of rooftop PV systems already use smart meters and inverters that talk to the grid. 

The meters are a physical point of connection and information about how to save money, and they offer access to new kinds of retail products that can create further savings. 

New retail offers, like time-of-use tariffs, might interest anyone with a smart meter. 

Once you can see how your home actually uses electricity, it’s easier to choose energy-saving moves like programming different run times for your pool pump or getting a plug-in timer for your old washing machine.

Both our smart meter review – and this related rule change to implement the rollout – considered additional customer protections including:

• providing notice of changes in tariffs, 
• information on the impact of changes, 
• preventing upfront installation costs, 
• and privacy.

However, in this round of consultation, we have heard ongoing concerns for customers seeing unexpected changes to their tariffs when smart meters are installed. 

Now, it is critical to the success of the rollout, that we work through concerns raised about how retailers may be applying demand and time-of-use tariffs in unexpected ways. 

And we expect we will need to push back the final determination to give us time to do this well.

This does not mean we are stepping away from smart meters, or away from the importance of accelerating the rollout. 

It does mean that we are aware of the fears arising from some customers’ early experiences and that we do not want to blindly push ahead without considering what more we can do to address concerns and avoid a multiplier effect.

Pricing review

I mentioned a pricing review, and while this will be broader than the smart meter concerns, it will commence in parallel with our work on tariffs linked to the accelerated smart meter roll out. 

We will be extremely mindful of how any changes we make in the context of the smart meter rule change will need to transition to a future world we are still considering. 

That rule change needs to ensure we maintain the social licence to undertake the accelerated smart meter rollout, because any future tariff design will depend on customers having the data that smart meters provide.

The traditional thinking around tariff reform is sound: we want to reduce the peak demand because we have to build our infrastructure to the peak. So, if we can reduce the peak, we can have less infrastructure and lower costs for all. 

One way to do that is that is if people can change how much energy they use during the peak, and the traditional way to prompt customers to do that is to make their energy more expensive then, and less expensive at other times. 

But, is that traditional thinking working now?

Are the signals actually getting through that tariff maze, and all the way to customers? 

What's the role of retailers in all of this? 

Will it work at all once we have half the customers with solar panels and batteries, and half without? 

And – importantly – what is it that the customer really wants? 

Well, there is no one customer, we all know that. We have Janes and Bretts and Claras and many others besides.  Different categories of customers who want different things. So, what’s the best way to achieve those things for all of them?

The pricing review will step back to examine some of these structures, and whether they work now and into the future. 

This piece of work is one where the journey is as important as the destination and there will be many opportunities for engagement, so I’d encourage you to get involved.

Unlocking CER benefits through flexible trading 

The next piece in this bit of the puzzle, meanwhile, is our Unlocking CER benefits through flexible trading rule change, which is heading towards its final determination. 

This is the one that is designed to allow for ‘flexible’ CER loads, like EVs, and potentially expanding to other things if we want to get more sophisticated. 

It means your flexible load can be separately metered away from your ‘passive’ loads such as lights and fridges.

This is a first step in creating more options for consumers in households and businesses to be able to use and manage flexible loads, as they choose. 

It opens up a new way to develop and access innovative retail offers, for everyone.

In fact, for commercial and industrial customers, we’re looking at how they can also choose a different service provider for those different loads.

They’re already doing it now, using a workaround, so we’re considering formalising those rules to make sure they work for everyone.

It means you, as the retailers of today or the household energy management companies of the future, can develop ways to give consumers the option to use their CER in the grid, and be rewarded for it without having to think about it too often or too hard. 

Integrating price-responsive resources into the NEM

And this rule will work alongside the next related rule change, Integrating price-responsive resources into the NEM, which is up to the draft determination stage.

This reform provides greater integration to the wholesale market of price-responsive resources like community batteries and virtual power plants, as well as the ways customers may want to use energy but where they don’t want to formally sign up to something like a VPP.

Now, this is an area where many retailers are already doing innovative work (as we have already heard this morning). 

Virtual power plants are growing alongside domestic battery take-up, and there are many retail opt-ins rewarding customers for responding to peak demand. 

Like, maybe your retailer sends you a text, offering enticing credits for reducing usage in a specific hour or day. 

But this is currently invisible to AEMO, who asked us for this rule change. The market operator is currently doing its planning on both a five-minute-by-five-minute basis, and on a long-term basis, without the benefit of all of this additional information. 

If we have more integration of those activities back into the wholesale market, then the operator can take them into account more seamlessly, be able to plan more effectively, and that will save both money and emissions for everyone. 

Zooming out on the puzzle

Let me zoom out again. 

We expect the combined strength of Australia’s CER will deliver at least 20 per cent of our energy transition solution by 2050 – and that’s just based on the technologies and behaviour choices we know about today.

And if we can get this right, there are big, big savings to be made that deserve to be shared more widely. A range of highly credible studies now estimate that the net benefit of effective integration is at least $1 billion and as much as $6.3 billion by 2040. 

I admit that, towards the end of last year, I was concerned that CER was a long way from getting the percentage of our collective attention it deserves.

Happily, I believe that has turned a corner. 

In March this year, after considering the final work of the Energy Security Board on CER, all energy ministers committed to reforms under a National CER Roadmap that will deliver:

• new consumer protections, 
• greater integration into the grid, and
• nationally consistent technical standards, including enabling vehicle-to-grid technologies. 

This is new and noteworthy for the sector, in that there is agreement, direction, and high motivation to complete this highly complex and interdependent mosaic of work. 

The taskforce charged with the roadmap will build on a large body of existing and ongoing work by the AEMC and other market bodies. And we will all continue to drive interrelated reforms that aim to integrate CER into the grid and realise its full potential. 

And of course, it’s not only government bodies working on CER integration and capability. 

A quick glance at ARENA’s website, for example, or almost any university, displays the many innovations being developed and tested by commercial and academic bodies. 

Conclusion

So now I look ahead, to another Sunday afternoon sideline watching some future Aussie Rules game with Jane and Clara – maybe one of our daughters has made it all the way to the AFLW!

In this future Sunday picture, the AEMC has clicked the four immediately essential CER jigsaw pieces into place in the larger energy puzzle, and we have opened the way to that framework of opportunity for you energy service providers to take up.

What I want to know, is who will be the space-savvy Buzz Lightyear, powerful and technically astute, ready to make things easier and more successful for our consumer hero, Woody?  

Which of you will disrupt the sector, innovate the sox off the platforms we build for you, and give customers a reason to choose to share their CER kit or the way they use their flexible load for their own benefit, and the lasting benefit of the NEM?

I’m just imagining things here, but: which of you takes up our CER flexible benefits rule change and makes it incredibly simple for our footy mum, Jane, to change her power use without once having to look at Brett’s app?

Who finds a way to get timers out to people with old appliances, so they can share in the benefits of time-of-use tariffs, in contrast to the stories we are hearing lately? 

Who develops a system that offers versatile tariffs to nurses, and fire-fighters, and FIFO workers that match their shifting hours at home? 

Who, among you, are the disruptors who take the chance to break the old ways of thinking and leap ahead in this sector as a result?

Will you be the Apple… or will you be the Kodak?

Thank you.