Energy industry needs to focus on consumers, it may need them

You hear it quite regularly now from energy utilities: ‘This is all about the consumer, we are focused on what our consumer wants, our products are geared towards changing consumer needs.’

Except that – but for a few tentative steps towards new technologies by some leading players – it’s not, and for the past 100 years it hasn’t been. It’s been all about centralised power and centralised control.

Even in the new paradigm, where the incumbent utilities – networks, generators or retailers, or a combination of both – recognise that consumers now have the technology to make their own choices, and new competitors that will make sure they get them, the shift to a new business or consumer model is begrudging at best.

Nowhere is this highlighted more than in the critical area of the energy industry where the utilities still exercise almost absolute control and influence – with the policy and pricing regulators.

Alan Pears, senior industry fellow at RMIT and one of the leading experts in the field, says policy makers and regulators in the energy sector are failing consumers because they have a history of being ‘gatekeepers’ to the industry and defining their role as protecting the incumbent industry from risks associated with change.

This “sense of entitlement” has effectively led to discrimination against emerging energy solutions, such as rooftop solar PV and now battery storage.

In the past few weeks there have been several clear examples where the regulator – under the weight of hefty submissions from the incumbent utilities – continues to fail the consumer.

In Queensland, the newly formed state Productivity Commission advised the Labor government to back off from its pledge to deliver 50 per cent renewable energy and its commitment to 3,000MW of rooftop solar by 2020, because of its supposed costs. This is despite its own numbers which show the benefits clearly outweigh those costs.

In Victoria, the Energy Services Commission has been asked to investigate its own assessment of a “fair solar tariff” and in its discussion paper declared that it had yet to identify any benefits of distributed generation. The Tasmania Economic Regulator made a similar declaration in its own assessment of that state’s solar feed-in tariffs.

It could be that the people running these regulators fancy themselves as some sort of Horatio Nelson – turning the telescope to their blind eye in the hope of being able to ignore undesirable information (such as the benefits of solar and battery storage) on the presumption of winning some heroic battles (defending the incumbents). If that’s the case, they are deluding themselves and doing consumers, and the economy, a massive disservice.

Not for the first time, these regulators are putting assessments of solar PV and battery storage in the “too hard” basket. Tasmania’s regulator doesn’t even want to consider battery storage for another three years. Victoria’s ESC only wants to make “easily quantifiable” assessments.

Pears is aghast, and suggests that the ESC is being lazy, and has no intention of carrying out the sort of  “comprehensive analysis” that the state government expects.

In his submission to the ESC, Pears points out that guidelines for development of public policy clearly require policy makers to address issues that are difficult or even impossible to quantify. That’s what they are supposed to do with their reports, which often run to hundreds of pages.

The issue is important. Solar tariffs have been cut to the bare bones in most states, roughly equal to the wholesale rate. In no state are any of the benefits credited.

Now, customers in many states are being hit with major rises in fixed and unavoidable tariffs, special taxes that affect solar households are being imposed, and all the while new battery technology and business models such as micro-grids are being rolled out, giving the consumer even more choice.

The response of the industry lobby? Fine the consumer or penalise them in other ways if they dare leave the network. And when the issue is being discussed, the regulators are being accused of excluding the interests of consumers.

“Network operators have been given a false sense of entitlement to a ‘right to make a profit’, regardless of their past poor judgement regarding investment in infrastructure,” Pears writes in his submission to ESC. “There is a risk that the ESC’s approach to this inquiry will reinforce that misguided sense of entitlement.”

Pears asks why consumers installing solar and battery storage should be treated any differently to those choosing to switch from gas cooking or hot water, or installing a big air conditioner without paying the electricity retailer or network operator anything.

Indeed, Pears points out that the gas industry has had a major impact on the profile of demand for electricity through its replacement of electric off-peak hot water services by gas HWS units across most of Victoria.

The gas industry was never expected to compensate the electricity industry for its impact on their costs, nor was the ‘true value’ of gas based on what it saved the electricity industry.

And, as Pears also notes, solar households in Victoria are required to operate under a time-of-use tariff. Yet this rule does not apply to homes with air conditioners, which are responsible for the huge surge in network costs now saddling consumers.