Delivering Australia’s Energy Transition Affordably

This week the Australian Energy Council (AEC) launched its first ever CEO Survey - Delivering Australia’s Energy Transition Affordably - which has provided insights and perspectives from those involved in delivering the transition in Australia. 

The survey was formerly launched at the first of the AEC’s Connects networking events, which was held in Melbourne this week. Below are the remarks from the AEC’s Chief Executive Officer, Louisa Kinnear, about the survey, the task ahead and key areas of focus for the Council. 

Valuable 

The survey has been a valuable piece of work providing insights and perspectives from those tasked with delivering the transition in Australia. What became very clear to us in undertaking this important contribution to the energy debate was the level of concern regarding the affordability of the energy system as it continues to decarbonise and helps Australia move towards its goal of net zero by 2050.  

The AEC and its members are at the forefront of what is a once-in-a-lifetime-change to our energy system. As operators of generation assets, retailers helping customers navigate the changes and as investors in the new infrastructure that is resulting in a new grid, our members have visibility of the shifts underway. 

The CEOs of our member companies in particular are intimately involved with the day-to-day management of the transition on the ground. For those reasons we wanted to sound them out on where they see the transition – the issues, the opportunities – and to understand what is keeping them up at night. The intent behind the survey was not to point the finger or direct blame, but rather to get a clear-eyed assessment of where we are and what we might need to consider to continue moving this transition forward. 

The AEC and its members remain committed to supporting net zero on the premise that the least cost, lowest impact pathway is an energy system dominated by renewables and firmed by battery storage, gas and pumped hydro.  

Replacing ageing, emissions-intensive generation is not costless. Renewable energy, once it is built and operational is one of the lowest cost sources of electricity, but we still need to account for the costs of constructing new supply, the supporting infrastructure and adapting our energy system. 

And one thing that comes through loud and clear for me is that our CEOs want a more open and honest dialogue about the challenges and costs of the energy transition. The survey also reinforces the critical importance of policy certainty and stability as Australia enters the “difficult delivery phase” of the energy transition and the need to support customers.  

The need to consider and address the affordability question is a recurring and overarching theme. We need to ensure that clean, affordable energy remains accessible to everyone during the transition. 

The survey report includes recommendations to address affordability and includes some guiding principles on how governments and industry can work together to successfully deliver a reliable, low emissions and affordable energy system.  

Recommendations 

Tonight is the first of many contributions that the AEC intends to make over the coming months on affordability. The report’s primary recommendation that we need a more open and honest dialogue about the challenges of the energy transition to ensure that we take the community with us is a critical enabler for a successful transition. Data from SEC Newgate in its mood of the nation survey has shown support for the transition has remained fairly stable since the election at around 56% of the population, well above the 47% recorded only 12 months ago. This is a positive footing for the industry and Government to continue to press ahead.  

While the transition is a highly challenging, technical, and engineering task, its success will be delivered by people and the decisions that we ultimately make.  

I have always been a big advocate of the power of collective wisdom and have spent the past couple of weeks loudly encouraging more collaboration between industry and Governments to ensure that policy decisions are enduring, well informed and made in the best interests of consumers.  

In particular we need to be working alongside governments to maximise the advantages of Australia’s remarkable take-up of rooftop solar and, more recently, home batteries, by building trust with consumers and delivering the value needed to encourage and incentivise them to share resources behind and in front of the meter.  

There needs to be better support for consumers in understanding the complexities of the changing energy system, moving away from technical jargon towards a language of opportunity and action.  

Industry must continue to provide effective and targeted support to those doing it tough. We must ensure that hardship programs can be better tailored to support the changing needs of energy consumers as the system evolves. For some consumers, the solution to energy affordability will be investments in the home – be it through electrification combined with rooftop solar and battery storage, or energy efficiency upgrades – but that won’t be possible for many, and the industry needs to play its part in ensuring a decarbonised energy system is also an equitable one.  

From Governments, industry needs more transparency and upfront engagement in policy decision-making and ultimately policy certainty to boost investor confidence and allow the transition to be considered through a stronger affordability lens, ensuring no one is left behind. An energy system powered by renewables, backed up by batteries, pumped hydro and gas will be the least cost system of the future, but how we get there will be critical. We welcome the consultative process undertaken by the NEM Review Expert Panel and we encourage the Federal Government to continue this proactive approach during the implementation phase.  

For energy consumers, any future bill relief initiatives should be targeted to those who need it the most and centralising and automating concession information so that retailers can automatically apply concession payments will be a game changer.  

Network spend needs to be efficient, and utilisation needs to improve to ensure that the cost of moving energy around the grid is as low as possible, maximising the benefits delivered by lower cost renewable energy. Ensuring that the signals networks provide to retailers can improve network efficiency and utilisation will be critical to realise these outcomes.  

In summary, we all have a role to play in delivering the transition affordably. Before I ask our excellent panel to join the discussion, I wanted to highlight two pieces of work we are undertaking to support the delivery of the transition.  

In December, we will release the first iteration of our Affordability Action Agenda, setting out tangible steps that industry and governments can take to not only support our most vulnerable customers but also give customers more choice and control in how they can reduce their energy bills.  

Short term policy interventions like additional retail price regulation are not going to shift the dial on energy affordability, but we recognise that we need to lean in and identify more enduring, sustainable initiatives that will help customers better manage their electricity bills.  

These initiatives include the development of a retail industry code to build industry capability and improve consistency in the support provided by retailers to vulnerable customers. Alongside this, we see an opportunity to improve the regulatory frameworks for energy retail and are keen to explore how a consumer duty can support a better customer experience and reduce retail transaction costs.  

In addition, our affordability agenda will highlight the need to continue to work with governments to evolve market and policy settings that will help to optimise retailer-led CER orchestration.  

Our second piece of work is our Energy2050 vision, which will be released early in the new year and will set out how net zero can be achieved through the lens of the trilemma pillars of reliability, affordability and sustainability. 

 Across the industry, there is broad agreement that a least cost transition will see an energy mix of solar, and ideally, lots of wind, firmed up by batteries, gas, and pumped hydro. The challenge now is how do we get there. Energy2050 will set out this vision for the AEC and its members, and I’m really excited to share this work with you all at a future event. We hope our CEO survey will contribute to a meaningful public conversation because the transition cannot succeed without public understanding and confidence. An effective transition will not just deliver a sustainable and reliable system but one that provides affordable energy for households and businesses. 

As noted by one CEO “the transition is right now delicately poised”. It can only go as fast as the industry and consumers can bear. 

You can find the AEC’s CEO Survey here.