Australian system value, for a new citizen-energy industry compact

If you haven’t seen it already, delve into the Australian cut of the World Economic Forum’s System Value analysis and my first reflections on what it all means.

At the heart of the work is the notion that for a successful energy transition, value must be defined holistically, to drive broad and interrelated outcomes: for society, health, economy and planet. All the while, striving for future-proof and resilient energy system.

The work, supported by Accenture, looks in detail at four demand-side interventions at the core of Australia’s energy transition:

1.     Encourage residential and commercial self-consumption

2.     Accelerate electric vehicle (EV) adoption

3.     Electrify and transform residential and commercial energy demand

4.     Electrify industries and establish industrial clusters

And while the benefits at stake vary across the four, there is one consistent thread running through them all.

The consumer.

Or make that the consumer-prosumer-self-generator-grid stabiliser-decarboniser-innovator-partner in resilience. Because that’s what we’re talking about!

And while it’s a well-worn trope – discussed at every conference and on every energy provider webpage!! - that energy providers’ offerings are consumer-centric, consumer-serving, developed with the consumer top-of-mind … that’s perhaps not always the case historically.

As we look ahead, I’m counselling my clients to flip the script on the consumer in the energy transition. Rather than thinking about how consumers can be ‘managed’, or how they can be 'educated’ on the energy system and the costs to transition – invert the narrative and share the benefits of the energy transition to consumers. Be driven by what the consumer wants and treat the consumer as what they are – a critical player in enabling a safe, reliable and least-cost energy system.

Because if, collectively, we accept that the consumer can deliver a big slice of the decarbonisation plan, then collectively, we must elevate the need to serve them with simplicity, transparency, and true choice.

So how do you flip the script in a practical way? Here are three things I’m counselling my clients to consider.

#1: Commit to real choice, not presentational choice

 As the energy transition takes shape, players in the ecosystem are asking consumers to step up: to pay more in the short term to build out this new world, with the understanding that in the future, their bills will be lower and the world in better shape too.

This trust is fragile—but essential. It’s at the heart of this compact between the players and the consumers they serve. It’s about being clear and reliable on the benefits, be they short-, medium- or long-term in nature. And understanding what consumers really want in this scenario.

That means deciphering where consumers want and need choice, and where that choice generates simplicity, not additional complication for no benefit. As an example, take market reforms around smart metering, which offered more granular metering data and the ability to choose a metering provider – the notion that consumers would be gratified by having more data and more providers to choose from . But complexity and supposed availability of data are not a proxy for genuine choice. Instead, they serve to obscure the options, more often than not, and at great cost to the consumer.

At the crux of the new compact must be a consumer-driven view of what matters; where real choice occurs, rather than presentational or complexity-inducing choice.

What does that real choice look like? Well, we have to commit to finding out from consumers what they actually want! And then acting on it - broadly, consistently and committedly.

#2: Embrace the consumer leading the way

Real choice is when the consumer sets the agenda, and the energy provider facilitates what the consumer wants, and makes it seamless, cost-effective and maximised as a contributor to the energy transition.

Australian consumers are already setting the tone and paving the way.

Australia-wide, over 3 million households have solar panels and are exporting to the grid. Meanwhile, solar energy is now the fastest growing generation type in both commercial and residential settings.

 We know this isn’t a passing fad, but a movement that accelerated during COVID-19, with ‘Do it yourself innovation’ one of our top trends for utilities in 2021. Consumers are making over their energy lifestyle; installing their own solar; working towards self-sufficiency; and selling back to the grid.

 Getting the consumer compact right matters even more when you consider the emerging, and next phases of this transition: think vehicle to grid (V2G), vehicle to home…vehicle to everything (V2X).  

And those consumers are ready for real partnership from their energy providers. Our research shows energy providers know it: 78% believe that those that do not help their customers source energy more responsibly and efficiently with greener products and services will get left behind. Meanwhile, 56% expect residential customers to drive high demand for incentives to switch to more energy-efficient appliances and/or from gas to electricity.

 To date, however, too few energy providers are rising to the challenge: fewer than half, for example, say they are effectively meeting demand for green products and services.

But a genuine two-way relationship is essential for the next phase of two-way energy flow, with solar and EVs charging from the grid; discharging energy to the grid, and acceptance of a deal on both sides (you allow your car to be charged any time overnight for a cheaper tariff, in support of grid stabilisation).

#3: For everyone’s sake, articulate the benefits clearly and consistently

We know system value delivers holistic benefits—that’s the point. But articulating those benefits clearly requires a few principles.

Firstly: Let’s illuminate for consumers the built-on costs in the existing energy system. Hidden costs, if you like, to health, reliability and resilience. It’s easy to forget that in Australia we are spending more than $4bn a year in health costs associated with burning gas in the home, for example. But those costs matter, because they are baked into our existing business case, and must be revealed for sensible conversations about the road ahead.

Secondly: Let’s be clear that demand-side interventions set out in the Australian system value report are direct benefits to consumers, not the electricity industry. They deliver benefits now, but they’re also the gift that keeps on giving! They accrue year after year and delivery societal-wide benefits even to those who haven’t electrified.

As an example, let’s consider the resilience benefits of deploying distributed storage and electrifying transport. As more and more solar PV and batteries are installed, and more combustion engines transition to electric vehicles, consumers are individually and collectively more insulated from a more unstable climate and a more unstable geopolitical world.   

Thirdly: Each of the four interventions set out in the report can make a significant impact, but here’s the thing: when they are implemented simultaneously, they unlock amplified value, with one intervention generating growth in a related area. For instance, if electrification of industries decarbonises EV battery manufacturing, then EVs become less carbon-intensive, and so on.

And this interconnectedness, this story, is the foundation of this new relationship, this new consumer compact.

In short, applying system value to how we live, move and work in Australia has the potential to change the conversation; to elevate the consumer; to squash complexity and amplify benefits. And to deliver the renewable, resilient, future-proof energy system we all need.

Contact me to talk more about the road ahead.