Reliability, renewables and regaining trust: top trends for the Australian energy market in 2019

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by Simon Vardy, Managing Director, Accenture Australia’s Utilities Strategy Practice
2019 was another tumultuous year for the energy industry in Australia. Consumer focus on the cost of electricity, the state government focus on renewables, the pressure on existing fossil fuel generation, and a push on reliability and capacity by AEMO highlight just some of the key developments in the energy market.

Adding to this pressure was the collapse of the National Energy Guarantee (NEG), demonstrating the nation’s mixed views on carbon emission reduction.

With the pressure still high, we anticipate 2019 to be another eventful year, but we expect to see some positive developments driving the industry forward.

Accenture’s top seven industry predictions for 2019 are:

1) Prioritise trust for future success

Utilities need to execute a balanced strategy that places trust at the same priority level as growth and profitability. This will provide the ‘social licence’ and public confidence the industry requires.

Accenture predicts a big push in utilities working to regain trust with their customers. In an industry with high churn rates, the need is to be faster than competitors, whilst keeping a keen eye on the disruptors.

Utilities that prioritise trust will achieve greater resiliency, making them more competitive. Those who don’t are putting billions in future revenue at risk.

2) Speeding towards an electric future

Electric vehicles (EVs) will continue to gain popularity from this year, as Tesla has confirmed it will ship its Model 3 to Australia in 2019; and two of the other stalwarts of EVs in Australia, the Nissan Leaf and the BMW i3 are expected to launch upgraded models this year.

According to our research, the tipping point seems to be between 2025-2028, when having reached price parity, EVs will overtake sales of ICE (internal combustion vehicles). The question for 2019 is whether government support and other interventions will fast-track this uptake scenario.

3) A focus on DER integration

The actual integration of mostly ‘behind the meter’ DER (Distributed Energy Resources) assets, and their capacity into the Network Management Systems and retail systems of the industry, will be a key focus for the industry.

Accenture believes that we will see an increase in platforms that can coordinate and orchestrate thousands of DER that can then interact and exploit multiple value pools, including the Distribution Network, wholesale and ancillary services markets and peer-to-peer trading.

4) Cheaper and more reliable energy?

With registrations of interest closed in January 2019, the next phase of the Underwriting New Generation Investments (UNGI) program could expand the capacity of new renewable generation; or fund the addition of storage to a new development in advanced stages of planning.

The government will need to demonstrate that it is converting plans to action and allocate funding under the first phase of the program.

5) Green gas – commercial hydrogen application

Accenture believes the gas industry will continue its focus on building ‘renewable’ credentials for gas to remain competitive in the face of increasing renewables in electricity and consumer perceptions.
In Europe, countries such as France and Germany are experiencing an increased demand due to the availability of supply. This year could see the same trend in Australia.

6) The sleeping threats in energy infrastructure

Renewables assets are usually left unmanned in remote locations – and a relative lack of cyber security for sensors and wind turbines leaves renewables operators open to higher risks of cyber attacks.

Security threats evolve constantly. In 2019, it will be important for Australian utilities, especially those moving to distributed energy, to shift their thinking towards improving cyber resilience by knowing, being, detecting and eradicating cyber security threats.

7) Mixing up retail competition – the new disruptors

We anticipate that 2019 will see a range of new industry disruptors emerge, in the same way Aldi has taken on the supermarket giants in Australia.

Now Australia’s most trusted brand, according to the 2018 Roy Morgan Net Trust Score survey, Aldi has carved off a large niche of customers and accepted lower margins to become a major grocery player.

New energy operators will emerge in 2019, upsetting the current balance in the retail market, providing strong services in a narrow field. We anticipate this will be backed by significant funding and a long-term investment outlook in line with the changing energy mix.

The short-term focus for the Australian energy industry will shift to reliability, closely followed by affordability. For the year ahead, recent state elections and the upcoming federal election will set the scene for a robust debate of energy policy throughout Australia.

As the energy market works to innovate and build stronger consumer trust, Accenture believes that 2019 will be a promising year, particularly if organisations fully commit to transforming their internal operations, focus on targeted growth opportunities and place a higher value on building trust with their customers.

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