Affordability Key to Successful Energy Transition: Report

Affordability is the key to ensuring public confidence and ongoing community support for the energy transition, which is now delicately balanced, according to the Chief Executive Officers of Australia’s major energy companies.

A survey of the CEOs - Delivering Australia’s energy transition affordably – released today highlights the challenges in meeting the country’s energy and emission ambitions. The CEOs, all members of peak industry body the Australian Energy Council, 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. The 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 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.

“Industry has an important role in supporting customers through the energy transition and we don’t shy away from the need to invest in and advocate for initiatives that help to improve energy affordability for all customers,” the Australian Energy Council’s Chief Executive Officer, Louisa Kinnear, said.

“We are keen to work collaboratively with Federal and State governments to ensure that the policy and market settings give us the best chance at ensuring affordable and reliable energy supply is accessible by all.”

The survey of the CEOs of the leading energy retailers, generators and investors was undertaken by SEC Newgate and commissioned by the AEC.

The importance of ensuring affordability of Australia’s power supply was one of the key issues flagged by the CEOs, along with the danger of price and supply shocks in the system, and concerns about the impacts these could have on vulnerable customers. CEOs noted that prices have never been under more pressure with the large-scale investment required to replace and decarbonise generation assets and delays in the rollout of some renewable projects.

 “I think it’s the calm before the storm, and… the storm is coming around cost and competitiveness,” according to one gentailer CEO

“Network cost is only going to go up, and go up by increasing levels. And the Australian consumer is not really wise to that yet because they haven’t seen the worst of it,” another gentailer CEO noted.

“… the cost of this transition is really going to affect the people who can afford it the least, so people that are already struggling to pay their power bills are going to get slammed with more cost from more of the transmission and distribution costs that are yet to come, and the higher cost of electricity with storage that’s got to be factored in,” according to a retail CEO.

Commenting on the transition, CEOs said:

“The transition right now is delicately poised and at quite an important point. There have been these bumps along the way. It is taking longer to deliver the new generation and transmission projects, transmission is obviously a critical path.”

“The energy transition now is as much about system security as it is about emissions reduction, and sometimes we emphasise one at the expense of the other and we need to actually hold them both together.”

The AEC’s Louisa Kinnear, said the report was the first of its kind for the AEC and was an important contribution to the public discussion on the energy transition and affordability.

“The overarching and central theme that emerges from this report is the importance of affordability. We need to ensure clean, affordable energy remains accessible to everyone during the transition.

“Yes, renewable energy once it is built and operational is one of the lowest-cost sources of energy, but we still need to account for the costs of constructing new supply and adapting our existing energy system to accommodate and firm up low-emissions intermittent sources. In the long run, this approach will still be cheaper than continuing to invest in existing or new coal-fired power generation.

“But we need to ensure the transition is managed carefully. Ultimately, it can only go as fast as the industry and consumers can bear.

“It simply will not succeed without public confidence that it will not just deliver a sustainable and reliable system but one that provides affordable energy for households and businesses,” she said.

Recommendations and guiding principles in the report include:

• Government and industry need to work together to develop and implement energy policies that ensure energy remains affordable for our most vulnerable customers.
• Government and industry need to collaborate to unlock the full value of consumer energy resources (CER) while policies and initiatives should assist those customers that can’t access CER to better manage energy consumption and energy bills.
• Boosting investor confidence through policy certainty and stability
• Approaching the energy transition through a stronger affordability lens, ensuring policies take account of business and household costs and other trade-offs
• Ensuring government assistance on household electricity bills is targeted on the vulnerable
• Ensuring network spending is timely and efficient
• Reducing the time it takes for environmental approvals for new projects.

About the Australian Energy Council

The Australian Energy Council is the peak industry body for electricity and downstream natural gas businesses operating in the competitive wholesale and retail energy markets. AEC members generate and sell energy to 10 million homes and businesses and are major investors in renewable energy generation. The AEC supports reaching net-zero by 2050 and is committed to delivering the energy transition for the benefit of consumers.