With the arrival of energy optimisation technologies, governments and industry must find a way to deliver efficient energy to everyone
A Choice survey revealed last year that electricity bills have become the biggest worry for Australian households. According to the report, more than 80% of Australians are concerned with rising costs, with South Australians and West Australians most concerned about the price of their energy.
The report followed the March 2017 announcement of an ACCC inquiry into retail electricity pricing, as directed by treasurer Scott Morrison. The report is due out in June 2018.
Providing everyone in the community with electricity in a fair, affordable and efficient way seems to be problematic for governments, with increasing costs, the growing impact of greenhouse gas emissions, and the risk of unreliable supply all proving to be stumbling blocks.
Australia has significant inequities in its pricing structures that often see vulnerable customers, particularly those in Indigenous communities, endure a drastically different service quality. These customers often have higher barriers to accessing energy efficient appliances and renewable technologies.
Under current pricing structures, lower income households spend a higher proportion of their income on electricity. So the challenge for policy makers, regulators and utility companies is to figure out how to provide affordable, reliable and clean electricity to all consumers.
The good news is there are innovative technological solutions on the way that will optimise our use of energy. These technologies will generate clean and renewable energy, provide ways to store it and, perhaps most importantly for households struggling with bills, automate its use in the most efficient and affordable way.
Solar panels, for example, are becoming cheaper and as researchers refine the technology, may well soon be built into everything from roof tiles to windows to car hoods. Satisfying demand with sufficient generation will no longer be an issue, and as long as energy can be optimised, it needn’t be rationed.
These energy optimisation technologies will make the system more reliable and secure. They will improve power quality, lower costs and reduce emissions. Optimisation does this by balancing energy price, individual and collective demand requirements, weather forecasts and battery charging times.
And instead of expecting all consumers to have an intricate awareness and understanding of their electricity consumption and the most economical tariff rates (namely those that give a discount for off-peak electricity use), optimisation algorithms will simply churn away in the background, leveraging the rapid advances in data analytics to optimally respond to the ever changing variables – continuing to keep the beer cold at the lowest possible cost.
But technology will not solve the social equity issues. As seen with the uptake of solar and storage technologies, it is vulnerable customers who are left behind. They are likely to find it harder to finance energy saving services and smart appliances due to limited cash flow, a lack of credit history, negligible savings, or a rational aversion to risk-taking – even if the payback periods are attractive.
Energy efficiency policies must evolve and expand to facilitate energy optimisation. One idea from development economic circles, and strongly advocated by the World Bank, is the use of public-private-partnerships and bespoke markets for micro-financing.
Innovative market structures may also provide the right signals to encourage efficient and fair electricity provision. What if all parties could be encouraged to use energy infrastructure more productively?
Once energy efficiency measures capture savings, these savings could then be redistributed between customers, investors (both government and private) and electricity utilities. If this value could then be attributed to and appropriated by those that finance the investments, then there will be far greater incentive and capability to provide high-quality services to underprivileged populations.
Immediate benefits would go to participating customers via bill savings, and benefits would be realised by the wider community thanks to the avoided network expenditure – all the poles, wires and transformers that no longer need to be built and paid for. Private finance would be encouraged by an allocation of some of the financial value that is created from the investments, while customers and government would reap the rewards of the substantial social value generated in closing the gap on service inequalities. Taxpayers would also benefit from the hardship grants, discount schemes, subsidies and essential service payments minimised once traditionally vulnerable customers have access to greater household energy optimisation.
In a promising signal of future possibilities, innovative companies, such as Matter, have started exploring how to overcome some of the barriers in energy markets via incentive redistribution schemes – for example ensuring renters and landlords are not left out of the solar revolution.
But, as the late academic Gill Owen recognised: “Disadvantaged households are not a homogenous group and they do not have identical needs.” This is where market-driven responses could help as it avoids the need to design specific solutions. It also allows investors, utilities, governments and customers to share and trade incentives, and collaborate on products for individual households or communities.
Properly designed, a market platform by which customers could access alternative forms of financing and exchange services with others would also enhance the value of the network beyond the single dimension of transporting electricity, helping increase value for both utilities and customers.
Innovators are starting to explore this area: advanced meters, for example, unlock many of these opportunities. Horizon Power is one utility already reaping the rewards of its advanced infrastructure – intelligent meters that automatically collect readings and offer communications services – providing a wealth of customer data that can be used for behavioural incentives and new pricing and reward schemes.
Disruption of the energy sector is only set to accelerate, and the era of energy optimisation has arrived. The energy sector needs to ensure it works with new technologies in a way that does not leave the vulnerable more disadvantaged. New incentive frameworks and markets established to encourage long-term, efficient investments will require a little risk-taking from investors, a little cooperation from governments and policy-makers, and a whole lot of innovation. Let’s not waste the opportunity.
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