BENN BARR AEMC Chief Executive
When I was learning to drive, Australian-manufactured Ford Falcons and Holden Commodores were top-selling cars and a litre of petrol could be found for less than 60c a litre at the bowser. We used cassettes to listen to music on the road. My biggest concern at 18 was if my tape jammed while I was driving. Innovation throughout the streaming era has improved my experience in many ways, including when I drive.
Decades later, electric vehicles are on the rise here and worldwide. Innovation is changing the way we drive and bringing multiple benefits with it. Motorists purchased 6,718 electric vehicles here last year, a more than 200 per cent increase on the year prior – bucking the nationwide trend for new vehicle sales to fall over the same period. Electric cars are getting cheaper and government policies are targeting emissions cuts in the transport sector. The federal government’s technology investment roadmap discussion paper identified the vehicles as a priority low-emissions technology and the government is preparing a National Electric Vehicles Strategy.
Since I first got behind the wheel, I’ve had 27 years in public policy, with 15 of those directly in energy and climate policy. So, my interest in this is not as a rev-head. Rather, it’s on starting to plan so that electric vehicles have a positive impact on the energy market and benefit consumers. It’s on harnessing the innovation of where two technologies intersect -- so the changes in how we drive also drive benefits to electricity users.
The Australian Energy Market Commission’s latest research reveals that energy retailers are starting to seize the opportunity in this fledging market.
Our 2020 retail energy competition review released today shows that even in this uptake phase of electric vehicles, some energy retailers are sending price signals to encourage motorists to charge their vehicles off-peak when electricity is cheap. Other innovation includes bonuses such as discounts off solar or battery systems.
If the cars are charged during periods of peak demand, this could saddle households and businesses with the cost of extra investment in the grid.
But if we get the right systems in place, there is more potential for households to charge the vehicles from excess rooftop solar generation and discharge this to their homes or the grid.
For example, a new retailer to Australia, OVO Energy, is trialling vehicle-to-grid technology in the UK with households with the Nissan Leaf or Nissan e-NV200 vehicles.
The Commission, like our market body colleagues, is working on regulatory reforms to ensure the efficient integration of electric vehicles.
In this year’s review we’ve identified what needs to be done to ensure that consumers benefit from the rise of non-traditional energy products -- like electric car charging -- and technologies that allow them to more actively participate in the energy market.
Non-traditional energy products like electric vehicles, rooftop solar systems, batteries and virtual power plants are testing the boundaries of the consumer protection framework for energy customers.
The national energy customer framework, which complements the Australian Competition Law, was developed when energy was only flowing to consumers. Now technologies like solar panels allow households to generate and export energy to the grid. But some innovative new energy products could fall outside of the traditional definition of energy used in the framework.
We want to make sure that consumer protections keep up with the rapid changes we are seeing – it’s time to future-proof consumer protection.
This would mean for instance a greater role for energy ombudsman in the New Energy Tech Consumer Code, an industry code designed to protect consumers buying new products in a fast-paced sector.
The Commission thinks the rules in this area need to ensure retailers deliver outcomes for consumers in a rapidly changing market, while at the same time making sure that crucial consumer protections stay in place.
For example, the current rules require every retailer to list 24 different items on a small customer’s energy bill, without regard to what the customer actually wants to know or how they can access that information. At the request of Federal Energy Minister Angus Taylor, we are looking at how to make sure that bills can be made easier for customers to understand. And while many notifications from retailers are sent over mail or email, consumers should be able to decide if they want these sent via SMS or other channels.
As well as providing recommendations for reforms to respond to the technology revolution, the AEMC today sets up benchmarks to trace the effects of the COVID-19 pandemic and points the way forward for action to better equip the market to meet consumers’ needs in future crises.
The full extent to which households and small businesses will struggle to pay their energy bills amid the economic downturn is only just becoming apparent in this quarter as most small customers pay their bills three months in arrears.
This can put stress on the energy retailers who keep power flowing to families and businesses. Retailers on average make a $4 margin on every $100 of revenue by the time they pay $43 in network charges, $33 for wholesale power from generators, $8 for environmental obligations and $11 in their own retailing costs.
To minimise the risk of financial contagion -- a cascading hit from a possible failure of a large retailer or multiple small ones – we are calling for future measures to protect the resilience of the national electricity market. The recommendations would complement important measures such as federal JobSeeker and JobKeeper payments and state energy concessions. In particular they include important changes to the retailer of last resort scheme.
The proposals are about avoiding severe consequences for households and businesses, especially as we all focus on the post-pandemic economic recovery.
Competitive retail electricity and gas markets are vital to hauling the economy back out of the pandemic-related doldrums.
On that front, it is welcome that there are more competitors in the market, with new entrants including solar power specialist Hanwha Energy-backed Nectr and OVO Energy. Market concentration too has decreased. However, the rate of customer churn has slowed compared to 2018 – a situation the Commission will watch closely.
Consumers who have battery storage technologies and electric vehicles are able to tap some of the most innovative energy products from this growing array of retailers. The AEMC is driving reforms to remove any potential regulatory jams to make sure consumers get the most out of this now and in the future.