The Australian Energy Market Commission’s Competition Review has found that 61% of consumers say they are getting value for money from energy retailers despite the fact that bills are increasing and that solar installations are set to double in two years.
In its Retail Energy Competition Review, the AEMC also found that 74% of customers were satisfied with their energy providers. The report contrasts wildly with another released on the same day by the Australian Consumer Watchdog. The AEMC also found that people did not have enough information available about energy offers to be able to effectively reduce their bills. It also found that the majority of consumers had not changed their power provider for five years.
Increasing energy prices
The AEMC said the findings come at a time where consumers are undisputedly experiencing increases in retail energy prices driven by increases in wholesale market costs. This, it said, is resulting in increased costs and pressure on businesses.
The AMC report was based on data provided by the Big Three: Origin Energy, Energy Australia and AGL. In June 2017, large retail standing offer price increases were announced for residential and small business customers from 1 July 2017 across a number of states. Victoria was spared because price increases were announced earlier in the year.
The AEMC’s price trends reports show that nationally for electricity, the wholesale component’s share of residential prices increased from an estimated 19.6 per cent in 2014-15 to an estimated 28.6 per cent in 2016-17.
- New South Wales – between 15 to 21 per cent
- South Australia – between 16 to 21 per cent
- Queensland – between 4 to 9 per cent
Uncertainty, gas exports and mothballed power stations
The AEMC said that lack of investment due to the uncertainty created by a lack of integration between current energy and emissions reduction policy mechanisms was one of the key factors that was driving prices upwards.
The removal of 20% of Victoria’s energy generation capacity due to the mothballing of the 1,600 MW Hazelwood 546 MW Northern Power Station and increases in gas prices,due to exports and the moratoria on gas exploration were also cited as major reasons for cost increases.
Small scale renewables and changing consumer trends
The AEMC report found that the level of solar panel ownership looks set to double in the next two years, going from 20% to 38%. It also found that 21 per cent of those who have invested in solar, or intend to, will also invest in battery storage.
The report also stated that consumer there is a growing diversity of products and services available and that there have been big shifts in consumer preferences and attitudes about how energy is consumed.
- Home energy management services such as Telstra’s smart home product, which allows consumers to manage energy use remotely through a secure mobile phone application.
- Reposit and Evergen services, which optimise consumers’ investment in solar and batteries by monitoring solar generation, battery use and energy costs in real time.
- Greensync and Power Ledger services, which focus on optimising and aggregating distributed energy resources back to the market. This allows retailers and other service providers to manage wholesale market risk and use demand response when needed. Traditional retailers are also reconsidering their value proposition to consumers, and making some changes, including:
- Investment in information technology platforms, such as AGL’s digital transformation project
- Ergon‘s partnership with new energy service provider Habidapt to offer home energy management and energy efficiency products and services
- EnergyAustralia’s partnership with Redback Technologies to integrate and optimise solar and battery use for consumers. iv Embedded networks represent a new way of providing retail energy products and services to consumers. They are increasingly being provided by non-traditional energy suppliers, such as property developers or intermediaries that are associated with property developers. Rather than promoting the sale of energy services, these providers often market the lifestyle benefits associated with environmentally sustainable infrastructure.
The AEMC said that that publically available discounts range from 12 per cent or $170 to 38 per cent or $507 for electricity and 5 per cent or $44 to 30 per cent or $285 for gas.
These discounts are based on moving from an average standing offer to the best market offer available in each relevant jurisdictional distribution area as at January/February 2017. Retailers have noted that there may even be higher discounts available than those that are publicly listed on comparator websites.
About Leading Edge
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