Want to slash energy bills? The solutions start at home

Australia’s policy debate on how to address rising energy costs has largely focused on the wrong solutions.

State and federal governments have provided one-off power bill subsidies, while some politicians have deliberated over whether to slow down the rollout of large-scale renewables in favour of alternatives (which more often than not would actually increase power prices).

These debates ignore the fact energy bills are a product of not only the price of energy, but the amount of energy we consume. And Australian homes consume a lot of energy.

Until the mid-2000s, most of the country had no form of minimum thermal efficiency standards for new homes. And while these have now been introduced and ratcheted up over time, we still live with the legacy of housing stock dominated by older, poor-performing homes.

It doesn’t help that we often use very inefficient machines to heat those homes and meet other energy demands – such as appliances powered by gas, or resistive heating elements.

One thing Australia has done very well is rooftop solar – in fact, we are a global leader. Very recent trends point to the start of a similar boom in battery installations.

But solar and batteries can only go so far when our homes are inefficient, or when we’re burning gas to meet household energy needs.

In a new report released this week, IEEFA modelling shows that by combining sensible upgrades such as efficient electric appliances, rooftop solar and batteries, we could cut a typical household’s energy bills by more than 90% in many parts of the country (see figure below).

Those savings sound extraordinary – but they are achievable when a household significantly reduces the amount of energy it needs to purchase from the grid (gas or electricity) and takes greater advantage of free energy from the sun.

And we mustn’t lose sight of the fact that homes that are thermally efficient – without air gaps or draughts and with adequate insulation – have the lowest running costs, and greatest health benefits of all.

Household energy upgrades can benefit other energy users. Switching away from household gas consumption can reduce gas supply gaps, supporting industrial users. And – with the right regulations in place – reducing the amount of electricity consumed during peak times can lower the amount of electricity generation and network infrastructure we need.

Efficient appliances and rooftop solar are already cost-effective in most regions, and household batteries are rapidly falling in cost. So why do many Australians still face high energy bills?

Many households – such as renters or those without the upfront capital to make upgrades – are locked out of the savings. And many other households simply don’t have the time, ability or motivation to ensure every decision they make about household energy use is the most economically rational.

In the long term, there’s a strong case to improve minimum standards for household appliances – ensuring Australians aren’t lured into buying appliances that appear cheap upfront, but lock them into high ongoing costs.

Specific standards for efficient appliances in rental properties – as has been announced in Victoria – is another part of this solution.

Complementary solutions exist to address the upfront cost barrier of upgrades. The Victorian Energy Upgrades incentive scheme often reduces the cost of efficient electric appliances to near parity with gas appliances, and uptake rates have soared since the introduction of electrification activities.

While federal rebates for rooftop solar, heat pump hot water systems and batteries are helpful for many consumers, it would make more sense if the program were broadened to cover the full spectrum of upgrades that lower energy costs and support the grid.

Finally, big shifts in the way households consume and produce energy also require some big shifts in the way we regulate the energy system.

Households that reduce their reliance on gas and electricity networks should rightfully be rewarded for the load they take off the system – but this shouldn’t mean other users have to pick up the bill. There is growing need for an independent review of the economic regulation of gas and electricity networks.

In the meantime, if governments are looking for a strategy to halve energy bills, they would be hard-pressed to find anything as effective as the solutions that start at home.

Jay Gordon is energy finance analyst, Australian electricity, at IEEFA