Australia’s energy future depends on empowered consumers – from rooftop solar to smart homes – driving a cheaper, cleaner, resilient grid.
Australian consumers are some of the most active participants in the global energy system. Rooftop solar uptake in Australia has been rapid, supported by government subsidies, falling unit prices and a mature solar industry.
Three times as many Australian homes now have solar panels on their roofs as a pool in their backyard.
Energy Consumers Australia’s (ECA) most recent Consumer Energy Report Card – a survey of 4000 Australian households’ views on various energy-related issues – also shows that almost half of respondents who own a fully electric vehicle purchased it in the last 12 months.
Participation is growing and that’s great news. We will need consumers to play a bigger role in helping meet Australia’s energy needs.
The Integrated System Plan (ISP), AEMO’s primary tool for system planning, shows that rooftop solar capacity is modelled to increase fourfold between now and 2050. In that same period, coordinated consumer battery storage capacity is forecast to increase 168 times.
Luckily for Australians, the evidence shows that consumer resources are often the least-cost and most efficient way to meet our energy needs. Consumer resources are proximate to energy use, and thus more efficient. They can be less costly to build than utility-scale infrastructure, which faces barriers in planning and social licence.
Owning these resources can deliver large savings for consumers. ECA’s research with CSIRO found that, by the end of this decade, the average efficient, electric household saves more than $2000 annually compared to their neighbour relying on fossil fuels to keep their house and car running.
Research from Rewiring Australia, ClimateWorks, IEEFA, ACOSS and the Grattan Institute demonstrate similar savings.
Importantly, consumer resources deliver savings for both those consumers who own them and their neighbours who do not or cannot. For example, increasing the use of electric vehicles creates surprising benefits for all energy consumers. ECA’s research shows that because EVs help us use the existing grid more efficiently, they save all other electricity consumers money — more than $100 per year today and $500 per year by 2050. This is also being observed overseas, such as in California.
Overcoming system bias
Despite the clear benefits – and importance – of encouraging consumer uptake of CER, though, Australia’s energy system continues to favour large-scale generation. Historically, large-scale generation through coal and gas has dominated an energy system that delivered energy to passive consumers.
This bias permeates today in the way we plan for and invest in the energy transition. For example, the ISP includes an annual study on the cost and scale of supply-side resources (GenCost) but does not have a demand-side equivalent.
This isn’t just inefficient – it threatens the pace and affordability of the energy transition. Consumer resources are inherently modular and can be built and scaled in alignment with market needs. By contrast, large-scale capacity’s “all-or-nothing” approach requires perfect foresight to right-size investment.
Ongoing reforms to the National Electricity Market (NEM) are moving the system in the right direction. The NEM Review recognises the role of CER and the importance of aggregation and visibility of resources to the market operator. Reforms to the Capacity Investment Scheme are exploring a role for aggregated CER. The ISP is broadening its assumptions and modelling to include demand-side factors.
But much more is needed. Consumer resources can improve the efficiency of our energy system to provide the same – or better – energy service using less energy and less costly infrastructure. Instead of perceiving CER as a problem to be solved, it’s time to view it as a solution for reliability, supply and security. We must resolve the fundamental question of how we can improve our energy productivity to do more with less.
Targets, incentives and smarter homes
We can boldly identify targets for investment in consumer energy and then set out the policy framework to ensure we achieve them. Let us start with a target of rooftop solar on 80 per cent of detached Australian dwellings – as aligned to the assumption in the 2024 ISP’s Step Change scenario.
The Federal Government has set targets for emissions reductions and to deliver more electricity from renewable sources. We should do the same for the consumer resources that help achieve those goals most cost-effectively. Targets provide policy certainty and work best when they make an organisation or sector responsible for achieving them.
We can make the most of technologies including household solar and batteries resources if we consider how they intersect with other upgrades. ECA’s research found significant savings for households from electrifying gas appliances and energy efficiency upgrades such as insulation.
Thermally efficient homes allow us to safely ‘pre-heat’ or ‘pre-cool’ in the middle of the day while solar is abundant. Batteries also go further in thermally efficient homes because those homes have lower heating loads, allowing stored energy to be used for longer in the evening.
Energy efficiency and smart energy use (e.g. demand response) should be front and centre when we are calculating costs for providing energy. We should allow and encourage those resources to compete against traditional resources (e.g. large-scale supply side) to ensure we end up at a least-cost system. We do not yet have the evidence to know the unit costs of demand-side resources in Australia.
Every household with a smart thermostat, pool pump, or EV charger should have simple ways to participate more actively in the energy system if they want to and be rewarded for shifting their energy use when it benefits the system. Not everyone wants to actively trade energy, but everyone should have the option to say, “use my flexible devices when it helps the grid and pay me fairly for it”.
We can also look internationally for inspiration. California pays households for battery services during extreme events. Germany allows peer-to-peer energy trading. The UK has sophisticated local flexibility markets where households compete with traditional generators.
We’re just at the start of the journey in Australia – and the solutions. For now, governments should set targets and continue making technologies like solar, batteries and other smart technologies accessible to all households. Consumers must have easy access to the right information, be given the chance to opt-out if necessary and be fairly rewarded for participating in any services that benefit the grid and other consumers.
Getting this right will keep the costs down for everyone, ensure Australia can meet its net-zero targets and keeps the lights on to 2050.
For now, that increased role for consumers we mentioned from the ISP is just an assumption. To get there, we need the right incentives to empower consumers to make energy decisions that support their own savings and the system overall.
Words by Lotte Wolff and Michael Dello-Iacovo, Energy Consumers Australia Executive Managers – Advocacy and Policy
This feature appeared in the November edition of Energy.
