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Creating clarity during the energy transition

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      Policy & Regulation, Retail — 5 mins read

      What the transition to Net Zero means for consumers

      With the rise of the prosumer and the multi-directional flow of energy that goes with it, consumers are gaining more skin in the game.

      As prosumers participate in distributed energy resources (DER) such as solar rooftop panels, domestic and community batteries and electric vehicles, they will be looking for value for money and return on their investment.

      Another big change in energy is the transition away from natural gas. This is likely to lead to greater electrification and the possibility of gas being replaced with hydrogen or biogas.

      These shifts and changes in the energy system are bringing their own set of challenges to the industry - and consumers.

      So what are the challenges?

      • Current regulatory frameworks
      • Growing inequities for consumers
      • Phase-out of gas
      • Tariff reform
      • System resilience
      • Dispute resolution
      • Maintaining social licence

      What are some of the considerations for developing solutions?

      Addressing the challenges will require a rethink of how energy services are delivered and managed. In the process, industry will need to consider the role of consumers in future.

      Here are some of the factors at play.

      • A fit-for-purpose regulatory framework
        Currently, consumer protections are provided through Australian Consumer Law, and the National Energy Customer Framework (NECF) which regulates the sale and supply of electricity and gas to consumers.

        St Vincent De Paul’s Policy and Research Manager, Gavin Dufty, says the current regulatory systems and structures will need to be updated, as more consumers become prosumers and the market moves from one of consumption to one of service.

        ‘We need to look at how we can redesign the surrounding social and consumer architecture to reflect and complement the changes,’ he says.
      • Targeted complementary measures
        A range of measures are required to provide critical support to consumers in transition. This will help ensure households without the means to invest in DER do not end up subsidising the system through higher costs.

        These measures may include targeted energy concessions, as well as appliance subsidies for dual fuel households.

        ‘This will be particularly pertinent for consumers transitioning their electricity and gas use,’ Dufty says.
      • Tariff reform
        The Australian Energy Regulator (AER) believes that tariff reform is necessary to integrate DER into the grid with maximum efficiency, and to lower network costs for customers.

        In addition, it’s important to consider tariff reform in relation to the divide between customers with access to DER and those without.
      • Reformed dispute resolution mechanism
        In the current system, consumers generally engage with energy retailers for services. When disputes arise, consumers have recourse through the Energy Ombudsman in their state or territory.

        However, as customers become prosumers, they may end up dealing with companies other than energy retailers – such as when entering into power purchasing agreements. In these cases, they are not afforded the same level of energy consumer protection.

        So, as the energy system changes and becomes more complex, it’s important people will have a place to go to get their disputes investigated.

        To address this, Gavin Dufty suggests a one-stop-shop or ‘single front door’ approach, to provide a seamless service. This also means that call centres will need to know how to respond to a wide range of complaints and issues in the new energy environment.
      • An orderly transition for dual fuel households
        With greater electrification, there will be unique challenges for the industry.

        Whether this involves accelerated depreciation and the shutdown of the gas industry, or a shift to hydrogen or biogas, there will be impacts on consumers. For example, the implications of appliance refit in the event of a gas phase-out. As more appliances become electrified, companies also need to consider the impact of planned and unplanned outages and how they respond.

        Whatever direction this takes, consumers will want an orderly transition that does not end up costing them more.
      • Increased cyber protections
        Where distributed resources have communication and data flow capabilities, the risk of cyber-attacks is higher. In essence – more interconnectivity means more points of potential failure.

        Strengthened cyber security measures will no doubt be needed for the protection of people’s personal and sensitive data and information.
      • Building consumer trust
        Building and maintaining consumer confidence and trust is crucial according to Ayesha Razzaq, Executive General Manager of Ergon Energy.

        ‘A strong social licence, through 'doing the right thing', will be critical as the industry transforms’ says Razzaq.

        Simply Energy’s CEO Shannon Hyde concurs, saying that products and services that work seamlessly for consumers will ‘build trust and provide the licence to broaden the retailer relationship.’
      • Empowering the people
        Matthew van der Linden, Managing Director at Flow Power, says it’s crucial to provide customers with the knowledge and tools they need to make the right choices for their needs.

        ‘If we can empower the demand side of the equation, I believe this will help us accelerate the development of a reliable, robust and renewable energy system.'

        General Manager of Product and Portfolio at AGL Energy, Jo Egan, emphasises the importance of providing expert advice and innovative products.

        ‘Customer preferences are continually changing’ she says, ‘and we need to make this transition both affordable and sustainable.’

      Putting people at the centre

      In meeting all these challenges, Gavin Dufty points out that the most essential thing is to focus first and foremost on people rather than on technology. In taking this approach, industry can bring everyone into the conversation, make sure no one is disadvantaged, and allow everyone a role in the transitioned energy system.

      Tess Oliver, Article Writers Australia

      Energy Monthly

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      March 25, 2024 | Sheraton Grand Sydney Hyde Park

      Australian Domestic Gas Outlook 2024

      June 11, 2024 | Melbourne Convention and Exhibition Centre

      Australian Energy Week 2024

      New call-to-action