No two Australian households are the same - and neither is what people want and expect from the energy system. Until now consumer choices have been limited by technology, but digitalisation has advanced to the point where it is time to consider a completely new approach. The post 2025 project is working to capture and extend the benefits of digitisation for everyone into the future.

Consumers are already investing in their own rooftop energy generation – the system needs to be able to unlock the full value of that for everyone. And we need to be able to do it on fair terms. The industry is now focused on turning networks into trading platforms where consumers can be the drivers of change and regulatory reform will support market development along those lines.

We are already seeing more take-up of distributed energy resources like batteries, electric vehicles and smart appliances. They can enable higher levels of domestic demand response, smooth peak demand on the grid and help stabilise the power system – making the most of all the energy in the system, where ever it is produced or stored and opening a whole new world of opportunities for households and businesses.

Updated regulatory reform will support this kind of market development where consumers can enable higher levels of domestic demand response, smooth peak demand on the grid and help create a more stabilised power system, opening a whole new world of opportunities for households and businesses.

We need to act now to maximise the consumer investment made to date and avoid more investment in networks that may not be needed. Failure to do so would mean that either fewer people are able to export solar to the grid or everyone will have to pay more to build new substations and poles and wires will rarely be needed in the future.

How digitalisation is changing the national electricity market

Appliances in our homes and businesses are increasingly automated. They are becoming smarter and playing an increasingly important part in managing demand to reduce system costs and save people money.

Consumers - or someone acting on their behalf - can set and forget devices such as batteries, pool pumps, air conditioners and electric vehicles to consume electricity at the cheapest times and export it back to the grid at times when it has the most value. More sophisticated consumer participation such as this takes the pressure off the grid and reduces the overall costs of the system. It also generates returns for families and businesses who are investing in smart appliances and distributed energy resources of all kinds.

What are two-sided markets?

Two-sided markets will be the next big thing in energy market development. Two-way electricity trading happens in where consumers are rewarded when buying and selling energy in real time.

Everywhere we look we see technology driving extensive decentralisation. More people are interested in do-it-yourself-generation and motivated to explore how they use energy. Looking to the future - both the demand and supply sides of the energy market would be actively engaged in electricity scheduling and dispatch processes while delivering all the services people expect.

In this future system, decisions to consume or not to consume would be valued digitally through any device that is connected to the internet and remotely controlled. Price signals would automatically switch household or business power from grid import to export and back again, delivering services people want at least cost. It would also be cheaper for neighbours across streets and suburbs to share local generation resources and storage devices.

Less generation and network capacity would be needed in a market with higher levels of consumer participation and responsiveness – lowering system costs for everyone and putting demand response in a stronger position to compete with more expensive generation.

Consumer differences and implications for market design

The market needs to recognise consumers will seek different services and products, have different needs, values, expectations, risk tolerances as well as competing demands outside the electricity market. Their responses to any market signals will be weighed against these demands, or they may not have the ability or motivation to respond at all. The complexity of the market, in terms of the consumer’s experience with engaging with it, also needs to recognised by market design.

Complexity can be a significant barrier to consumers being able to take up the benefits of new service offerings and can lead to poorer outcomes, particularly for vulnerable consumers.

Using the Energy Consumers Australia consumer behaviour framework

As a result of these consumer differences, in redesigning Australia’s energy system to be fit-for-purpose for the future, the Energy Security Board has drawn on Energy Consumers Australia (ECA)’s work to understand how diverse types of households might use energy services in different ways.

Through its Power Shift project, ECA commissioned ACIL Allen to develop the Supporting Households Framework. In developing the framework, ECA was embedding behavioural approaches to support policymakers to target energy services and programs that recognise the diversity of households. This diversity includes differences in income, socio-economic disadvantage, health, and their environment. ECA considered the range of choices a household could make to manage their energy usage and bills, looking at their motivation to make that decision, their ability (literacy, numeracy, etc) and whether they had the opportunity to engage (eg renters can switch to a better deal, but they can’t install solar panels).

ECA then asked ACIL Allen whether the framework could be used to consider the impacts of market design and other systemic decisions on consumers, including small business, to help understand where people might be constrained, face barriers to engagement or risk.

The ESB will also continue to work with customer advocates regarding how the needs of larger commercial and industrial customers can be better met as part of the broader package of reforms.