Energy - the Best Deal

For consumers, the most important thing in the transition from coal-fired power to renewables is access to cheap, clean energy when and wherever they need it. And that goes for every consumer. Whether a commercial business, an industry, an individual rooftop solar owner, with or without batteries or EVs, or a renter. 

In the 2.0 world of ‘democratising service’, affordability, availability and portability are key factors for consumers. 

In Australia a really interesting situation has arisen between Ausgrid, the largest distributor of electricity on the East Coast and the Australian Energy Regulator (AER) (with a mandate to ensure that consumers are better off now and into the future, by monitoring the network, the wholesale and retail markets, and setting and ensuring the revenue limits on monopoly electricity providers are adhered to). The other protagonists in this current debate are energy consumers, including industry. 

Background

In the past the Distributed Network Service Providers (DNSPs) were satisfied with their monopoly, generating high reliable regulated margins from managing passive distribution networks, including poles and wires and transformers.

As electrification and consumer energy resources expanded and the transformation of our grid progressed, some business senior leaders and Boards quite rightly looked at the possibilities to expand their regulated monopolies. Maybe they could add new classes of active assets such as EV chargers, community batteries, and community solar initiatives to their portfolios? Or even fund or own commercial solar?

This is where the AER comes in, with its mandate to ensure that ‘consumers are better off now and into the future’, i.e. to get the best deal.

The best deal, as has been seen in other industries and sectors (Telco, Finance and Banking, retail), has been achieved by crafting a careful balance between regulation, monopoly status, competition and innovation. See our blog on Urban Renewable Energy Zones (UREZ).

So why should the energy sector be any different? 

Innovation - sandbox - but…

The AER, in seeking to understand what that balance could look like, enabled a single-use regulative sand box. This is where only one DNSP can be awarded exemptions to experiment for a defined set of tests. 

Ausgrid’s recent submission, which carries a number of requests for regulatory exemption, is turning out to be a test of both the AER’s sandbox mechanisms, as well as the design and architecture of what Ausgrid has submitted. 

The discussion has also gone public, see ‘Retailers and consumer advocates gang up on Ausgrid's push into rooftop solar and batteries’. It seems to be turning the sandbox innovation into a contested debate between four major players, the AER, Ausgrid, the Tech Council of Australia (TCA) and Consumer groups. And potentially the fair trading regulator, the ACCC and the Australian Energy Market Commission, the AEMC. 

Our purpose at SwitchDin is to tease out how best to meet our key ambition - ‘to provide the best deal for energy consumers’. Through significant legal and regulatory complexity, and the proviso there are still many rules to be tested, we think the core questions of the debate are essentially:

1. If a sandbox is a place to test new ideas, it must be able to stand up to independent critique, and so be methodologically robust and scientifically rigorous. 

2. If economic conclusions are proposed, then agreed fiscal baselines and direct comparisons and alternatives must also be provided and explored.

3. And given we know that ‘affordability, accessibility and portability’ are key planks of ‘the best deal’, if continuous downward pressure on energy prices for consumers isn’t the purpose of the sandbox, then why bother?

An exploration of Ausgrid's proposal doesn’t seem to highlight these three tenants. There are of course many parts of Ausgrid's proposal with agency and great merit. This is where a balance needs to be struck.

We think a good question to ask is whether it is possible to achieve the aspirations tabled by Ausgrid around the urban renewable energy zone (UREZ). In essence Ausgrid says that cities like Sydney can, if correctly enabled, motivated and managed, generate, store and deliver clean energy to consumers at a lower cost than long hauling energy from renewable sources of wind, solar and batteries on the distant western slopes of NSW. 

We totally agree with this statement, see our blog on Open vs Closed UREZ. So the other questions to ask include:

• What are the appropriate systems and architecture to make that happen? 

• And would that be a major or minor change to what Ausgrid is proposing?

As a company, Ausgrid is responsible to ensure shareholder value. But the Government, having granted Ausgrid a monopoly, is also responsible to ensure the terms of that grant are maintained. And of course, consumers, who ultimately foot the bill for DNSPs, must be able to get ‘the best deal’. Not just electricity consumer owners, but all electricity consumers.

Open Network Interfaces

In our view - the only way to achieve the ‘best deal’ is by opening up the energy sector to healthy competition through open network interfaces (ONI). Our experience, and that of the digitisation democratisation or consumer first movements, is that open systems promote interoperability (so portability) and innovation (creating something new and better). 

An Open Network Interface readily integrates diverse technologies and platforms. It encourages standardised protocols and enables the different components of consumer energy resources (e.g., solar panels, inverters, batteries) to work together. In the energy sector, today’s lack of interoperability is a significant cost factor.

SwitchDin’s analysis shows that even households without rooftop solar panels or batteries like renters, or social housing tenants, will still be able to benefit from an open UREZ. And achieve power bill savings of at least $300 a year. And the benefits for Commercial and Industrial clients will be manifold. Some of the most significant being predictability, stability and cost effectiveness.

The result

By providing benefits to the entire power system, an Open Network Interface with open source implementation, quality and potentially ‘real-time’ shareable data, and stakeholder collaboration, will transform the operation of both Distributed Energy Resources (DERs) and Consumer Energy Resources (CERs) on the distribution network. Sharing real-time data is key here.

Together the purpose is to improve the use of network capacity and renewable energy. Open Network Interfaces will likely also defer network upgrades, and help avoid curtailment events. In turn these impacts will create sustained downward pressure on costs, enabling consumer bills (whether for Commercial & Industrial users or individuals) to be reduced. And to meet the aspiration of the ‘best deal for all’, even for those who do not own renewable energy resources themselves.