Saving energy to help those who can’t

The following article is one of seven finalists in the 2019 Gill Owen Essay Prize, which honours the memory of Dr Gill Owen, who was a tireless campaigner in the fields of energy efficiency and social equity. The competition is sponsored by AGL Energy, the Institute for Sustainable Futures at UTS, the Association for Environmental and Energy Equity, Uniting Communities and RenewEconomy. The finalists’ essays will be published in Renew Economy between Monday 17th February and Tuesday 25th February.

A passionate and pioneering campaigner for social justice, Gill Owen was one of the first women to bring the voices of the consumer and the disadvantaged to the boards of the UK’s and Australia’s competition and economic regulators. Gill advocated passionately for these causes until her untimely death from an aggressive brain tumour in August 2016.

To celebrate Gill’s contribution to empowering disadvantaged consumers, and improving energy efficiency, the Gill Owen Essay Prize invites emerging voices under the age of 35 to offer their own perspective on energy efficiency and social equity. The overall winner of the 2019 Gill Owen Essay Prize will be announced at the Dr Gill Owen Forum: Fairness for consumers in the energy transition, hosted by the Australian Energy Regulator in Melbourne on Tuesday 25th February 2020. The overall winner receives a prize of $3000 and the runners up receive a prize of $1000 each.

 

Leading the energy transition: saving energy to help those who can’t, by Louise Walsh

In the midst of Australia’s energy crisis, businesses, retailers, government and consumers are scrambling to find solutions to affordable, reliable and low emission energy.

With headlines such as “Australians choosing between vegetables and paying their power bills”, “High energy costs make vulnerable households reluctant to use air conditioning” and “Power bills put the vulnerable at greater risk” it is undeniable that low income households are most vulnerable to the changing energy landscape.

There are a variety of solutions that have the potential to reduce energy bills for those most at risk without the need for them to go without electricity or to choose between food and power.

However, with the amount of conflicting information, product offers and uncertainty in the energy market, it is difficult for household consumers to understand what the best option is for them to save on power.

It is therefore up to business and government to take the lead in navigating the solutions and implementing them optimally with the least impact on the vulnerable.

Reducing peak demand

Considering that network costs make up approximately 40-55% of energy bills, it is fitting to first review how these costs can be managed.

As much of Gill Owen’s research uncovered, peak demand is a clear driver in the increase of energy prices, and presents a number of challenges and opportunities.

There is a need for significant reduction in both overall energy demand and peak energy demands within the electricity network, to reduce the associated costs passed on to consumers, and to enable the ongoing delivery of clean, affordable, reliable energy.

Gill Owen’s work discussed solutions that engage consumers such as introducing financial incentives to reduce peak demand through time of use tariffs that would discourage energy use at these critical times and shifting consumption. However, as Owen herself pointed out, “any tariff design creates winners and losers”.

To avoid vulnerable households being left without air-conditioning on those hot summer days, we can instead take advantage of opportunities that reduce peak demand and the associated energy prices without the need to engage individual household consumers.

The link between peak demand and network charges was examined in 2017 through an inquiry into retail electricity pricing conducted by the Australian Consumer and Competition Commission (ACCC).

The findings indicated that the over-investment in ‘poles and wires’ was the primary driver of higher power costs, a decision approved by the Australia Energy Regulator (AER) amid warnings from energy companies that demand was about to spike, which had the potential to result in blackouts.

However demand ultimately decreased, resulting in an unnecessary locked-in network investment that consumers are now paying for. Reducing the need for these costs would therefore have a utilitarian impact on energy costs for all consumers, without relying on individual energy consumers to reduce their energy consumption.

Instead of investing in the ‘poles and wires’ to accommodate peak demand, a smarter, more cost-effective approach would have been to invest in reducing gross energy consumption to reduce the impact of peak demand.

Already there have been studies that encourage demand management instead of increasing network capacity to reduce consumer costs, and programs trialling this opportunity in demand response.

We now need to look beyond the trials at how peak demand reduction and demand response will be implemented on an ongoing basis, how the role of demand response will interplay with other energy solutions, and better understand which demand-side measures will provide the optimal, least-cost results.

Energy efficiency and renewable energy

Another key solution Owen explored was for consumers to save money through self-generation of electricity, in particular the installation of solar PV.

Despite the rapid decrease in solar PV costs, this approach may still be difficult for the most vulnerable consumers to adopt. Again, we see the need for business and government to take the lead.

We should learn from the examples set by Germany and California, that demonstrated targeting energy efficiency before focusing on the supply side reduces the impacts associated with variable renewable energy.

Coupled with implementing demand response measures, energy efficiency will therefore assist grow the ever-expanding renewable energy sector in Australia.

Building a renewable electricity market has consistently been proven to be the cheapest power option, which will benefit those who are unable to generate clean energy for themselves.

Building the energy efficiency sector Building energy efficiency and energy management capability in the business sector has positive flow on effects to the residential sector, as has been the case with developments in LED lights and solar PV.

Research and development in these technologies, and the uptake in the business sector, resulted in improved technologies and associated price reductions that the residential sector is now benefiting from. Much of the advancements in these technologies has been due to incentives from state-based energy efficiency schemes that have enabled the investment from business.

A recommendation from the joint report by the Australian Energy Market Commission (AEMC) and the Climate Change Authority echoes the sentiments from Owen, who suggested “it would be helpful to have a national framework that allows for some flexibility to meet different circumstances in different states.”

The report recommended implementation of a National Energy Efficiency Scheme, which would further enable the uptake of low emission incentives, and provide access to incentives for consumers in those states that don’t currently have an energy efficiency scheme.

The growth of energy efficiency policy at a national level would likely see further technological developments and cost reductions, in a wider variety of technologies, which would further benefit vulnerable consumers.

Implementing change

The opportunities to deliver clean, affordable, and reliable energy to all consumers are available. In a rapidly changing electricity industry, the need for clear, adaptable policy that considers all the available solutions is essential to developing a coordinated and harmonised transition.

The federal government is yet to demonstrate leadership in developing a policy that would enable this transition without leaving vulnerable households with no vegetables or neglected in the heat. Until such a federal policy is in place, consumers will need to rely on business and state government to identify and implement opportunities without leaving them behind.