From Solar Sharer and virtual power plants to dynamic tariffs and other supposedly innovative new energy products, we’re witnessing electricity retailers “gaming” the system, and consumers are getting “screwed”, according to energy market specialist Tim Ryan.
Australia’s rooftop solar boom has cut wholesale power prices to virtually zero in the middle of the day, and millions of households now have solar, batteries, EVs or smart appliances capable of responding to those cheap prices.
But Tim Ryan told the SwitchedOn podcast the benefits are being intercepted before they reach consumers: “there’s an encouragement to the retailers to play a shell game to basically steal our money.”
And he says regulators have allowed retailers to remain firmly wedged between households and the cheaper, more flexible electricity system that new technology now makes possible.
The result, Ryan argues, is that some of the innovations supposedly designed to help consumers are instead being structured to preserve retailer profits.
His underlying argument is that Australia has built an electricity system capable of delivering much cheaper energy, but is still operating a retail model whose commercial incentives work against consumers capturing those savings.
“Retailers don’t want us to have dynamic prices because they make money by all of the derivatives and the prices and the margins.”
“The retailer has a problem – they don’t want us to be efficient.”
Free electricity, but at what price?
Ryan is a consumer energy advocate and the consumer representative on the Federal government’s Data Standards Advisory Committee, and he sees the recently released Solar Sharer offer as a case study in what has gone wrong.
“I don’t even know where to start with the Solar Sharer Offer, other than it’s a bloody disaster.”
Whilst the underlying principle makes sense – three hours of free daytime electricity to soak up excess solar – Ryan is opposed to consumers having to face higher prices and charges outside those hours.
He also points to controlled-load electric hot water being excluded from the free period. For many households with resistance electric hot-water systems, heating water is one of their biggest electricity loads, and one that could easily be shifted into the solar-rich middle of the day.
”There’s no justification there other than raping and pillaging the customer.” The result, he argues, is “a half-baked idea with some solid principles” and consumers have “gotta game” the offer to make it work.
A spokesperson for the Australian Energy Council, which represents major electricity retailers, has previously told Renew Economy that “the SSO is a regulated offer, and the prices outside the free three hours are not able to be independently increased by retailers to profit from customers.”
Who should benefit from your battery?
Ryan makes a similar argument about virtual power plants.
Under many VPP models, a household buys a battery and allows a retailer or aggregator to control it, trade its electricity or provide grid services, with the household receiving some of the proceeds.
“What a daft idea that ever was. Why is anyone going to be inconvenienced to let someone reach in and control their stuff to make them money and say, ‘I’m only gonna give you part of what I made, and I used your stuff to do it’?”
Households are already using batteries to store rooftop solar during the day and avoid buying expensive electricity at night. Collectively, since the Cheaper Home Batteries program, that is reducing evening demand and pressure on the grid.
“They’re doing that for free. They’re not asking to get paid to do it. They’re doing it for free, and it’s lowering the cost for everybody.”
”The retailers are furious because they actually want to make money out of that, control it, keep the services that go with it, and say to someone, ‘You take some money back.’”
Yet Ryan says the industry remains fixated on finding ways to monetise household assets.
His criticism extends to vehicle-to-grid (V2G), where EV batteries can export electricity into the grid. He thinks vehicle-to-home-to-grid (V2H2G) should be the aim.
“It has to be vehicle to home first, because you have to service your own load before you can export anything.”
Otherwise, he says, “the focus is trying to make money off our asset to deliver profits for third parties.”
Let the house talk to the grid
Ryan has an alternative vision for our energy system, what he calls the Consumers’ Grid. It would cut out the retailer as gatekeeper, let households respond directly to energy prices and network conditions to save themselves money, and by doing so, make the whole system cheaper for everyone.
One of its most important changes would be remarkably simple, but contentious: allow home energy management systems to communicate directly with electricity networks, the poles, wires, substations and other infrastructure that carry electricity.
Digitalisation already makes that technically possible.
”If the networks were a digital platform, like the internet, and all the other services that go with it, they could service us better directly than us being serviced through a retailer.”
However, a spokesperson for the Australian Energy Council told Renew Economy that direct customer relationships with networks are not “practical.”
“Retailers remain best placed to act as agents, helping their customers navigate an increasingly complex energy market and connect them with the products, services and support that improve affordability over time.”
But Ryan points to Project Edith as an example of what’s possible. Run by the network Ausgrid, it showed how households and their smart energy systems could respond to real-time signals about electricity prices and available network capacity, enabling them to use more power when it’s cheap and plentiful and less when the grid is constrained.
Ryan argues those real-time price signals should reach consumers and their smart devices as directly as possible. If a neighbourhood is awash with rooftop solar at midday, a home energy management system could see both cheap electricity and spare network capacity and automatically charge the household battery, EV or hot-water system.
The consumer saves money, and solar that might otherwise be curtailed gets used. And because local generation and consumption offset each other, pressure on the wider network can fall.
Ryan calls it the “magic pudding effect”: in a two-way grid, consuming more at the right place and time would create room for more generation and more productive use of the network.
But Ryan says the promise demonstrated by Project Edith was compromised as it evolved into Ausgrid’s new Residential Dynamic Network Tariff which was released on July 1. A proposed capacity subscription was dropped, consumers were left with fixed and potentially high congestion charges, and the real-time network signals continued to be mediated through retailers rather than communicated directly to households and their energy management systems.
“In a digital system, that is fundamentally wrong. It’s not just inadequate, it’s wrong.”
“The meal on the table”
Ryan reserves some of his strongest criticism for the institutions charged with writing and enforcing the rules. He argues the Australian Energy Market Commission and Australian Energy Regulator have continued to treat energy businesses as the principal participants in the market, with consumers “the meal on the table.”
Ryan says that during the final Project Edith reference group he pushed for a subscription-style network tariff that would give consumers a guaranteed minimum level of network capacity while allowing them to use much more when capacity was plentiful.
He asked Ausgrid to approach the AER about sandboxing such a tariff but was told they were busy with the retailers and “no one wants a subscription, and we don’t want the distraction.”
For Ryan this reflects his broader contention that consumer interests are repeatedly subordinated to preserving the existing retail model.
But if consumers could see real-time electricity prices, and the networks were able to directly communicate available capacity, households would really benefit from the energy transition, and the electricity system would benefit from millions of consumers independently responding to the same signals.
Ryan says networks, unlike retailers, do not profit from buying and selling electricity.
“They’re just obligated to be as efficient as possible so if we actually said to them, ‘You be as efficient as possible to make sure consumers can get access to the lowest prices,’ we’d actually see savings fall through to everybody, but loss of profits to retailers.”
“There’s one thing that consumers are guaranteed to do homogeneously the same as everybody else, and that’s their propensity to save.”
Ryan’s message to federal energy minister Chris Bowen is blunter still.
“Retailers are taking the piss with you. They’re pocketing the difference.”
“There’s lower wholesale prices – that’s a lower cost for them. That’s not transforming into lower cost for consumers. And the only way to transform that lower cost for consumers is for consumers to see the profit, see the price themselves.”
You can hear the full interview with Tim Ryan on the SwitchedOn Australia podcast.
