by Suzanne Falvi
Executive General Manager, Strategy and Economic Analysis

The COVID-19 crisis has magnified concerns about energy affordability.

Energy consumer groups have warned that job losses and the shuttering of small businesses, coupled with increased weekday residential energy demand, could see some consumers struggling to pay their utility bills.

Australian governments have boosted their assistance schemes with measures ranging from expanded energy vouchers to utility payments to assist with electricity bills and concessions to households receiving the JobSeeker payment. The energy sector has introduced complementary measures to support customers suffering financial hardship.

The Australian Energy Market Commission’s last report on electricity price trends showed that energy supply chain cost components that drive residential electricity prices and bills for each Australian state and territory are falling. This analysis suggests, in contrast to the upward prices trend of much of the past decade, residential bills are set to fall over the next few years nationwide, delivering hip-pocket relief to consumers. Primarily this is driven by falling wholesale electricity purchase costs as new solar, wind and gas generation is injected into the system.

Network costs are also trending down, led by south-east Queensland.

The report was produced before the COVID-19 crisis and we have started to analyse the impacts.

But the extraordinary pandemic-related challenges make it all the more important to cement these trends and to manage the system to ensure that the cheapest power can get to consumers.

It is crucial that we don’t take our eye off the ball.

Consumers are at the core of all of the Australian Energy Market Commission’s work program on security rules, reliability standards and the electricity and gas networks of the future.

We are very mindful of the need to protect the stability of the national electricity market in order to avoid disruptions to consumers.

Our work around improving access to the grid is aimed at giving generators a way to manage congestion so that households and businesses can access the cheapest power possible. This means consumers get can get wind and solar power at the lowest cost as the power system shifts.

At the same time, we are doing work on a two-sided market that enables  technology so consumers can participate more actively as buyers and sellers of energy – giving consumers more choice and control over how much and when they use energy and, through access reform making the best use of existing and future  investments in network and generation infrastructure. 

Transmission access reform, reforms related to the two-sided market, and ahead markets are all important parts of the Energy Security Board’s post-2025 market design work.

These are fundamental to to supporting the shift in the power system as the generation mix moves to one where there is a larger number of geographically dispersed smaller resources.

Encouraging consumer participation in a two-sided market will require issues around accessing the grid, such as congestion and access issues, to be tackled.

Over the past few years, there has been a huge growth in renewables. However, this has resulted in increasing congestion and access issues. This is partly due to a lack of transmission. It is also partly because newer generators, particularly weather-dependent renewables, are being connected in sunny and windy areas, where there are not the strong transmission links. Our blueprint on transmission access reform aims to address these issues being caused by increased congestion and reduced access to the grid as they are a roadblock to the lowest cost energy reaching consumers.

The work is part of a two-pronged approach.

AEMO’s integrated system plan, which outlines the projects needed for Australia’s future energy system, is one important lever that needs to be pulled. 

The second lever is transmission access reform program, which focusses on efficient network investment. Given that high- voltage transmission projects cost billions of dollars to build, and that is recouped from consumers, we are wanting to make the best, most efficient use of that investment and avoid repeating the gold-plating mistakes of the past.

Under the changes we’ve proposed, a system of locational marginal pricing would give generators an incentive to locate more efficiently. Financial transmission rights would give them a way to protect themselves against congestion that may arise.

In other words, we are aiming to change the way generation and transmission interact so that cheaper renewable energy can be dispatched to consumers.

We are also looking forward to releasing our seventh retail energy competition review shortly.

Like previous reports, it will look at consumer empowerment.  The report will include insights into how we best ensure consumers can continue to benefit from innovation, while having appropriate protections in place.