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Revamping the NEM’s Pricing Game for a Fair Energy Playfield


The countdown is to the Power + Utilities Australia 2024 Leadership Summit. In anticipation, we’re giving you exclusive insight into what you can expect our line-up of industry professionals and experts to be discussing.

This year, the summit includes a dedicated stream putting customers front and centre of the energy transition. Customers are driving change in the utilities sector as they demand cleaner, more sustainable energy solutions. This shift is prompting utilities to invest in renewable energy infrastructure and grid modernization. Customers’ active participation in energy generation and consumption is fostering collaboration and innovation, yet highlighting the need to rework our current pricing, regulation and grid frameworks.

We spoke to 2024 Leadership Summit speaker Laura Jones of the Australian National University, as she gives us her thoughts before the highly anticipated session in May.

Laura Jones

1. Can you share your perspective on how NEM’s current pricing mechanism impacts energy equity, particularly in terms of access and affordability for underserved communities?

There has been a lot of research to show that access to energy is not equitable now. The most disadvantaged struggle to access the energy they need, the wealthy can access a cornucopia of products and services to meet their every energy needs. Unfortunately, it seems we are pressing as hard as we can on the accelerator pedal on this inequity.

For me I see a lot of the problem around the fundamentally inequitable way we are trying to make consumption more “flexible”. Flexibility is the new capital of energy equity – those with it prosper, those without it suffer. If you have flexibility you can reduce your energy price by shifting consumption to when it is cheap. If you have flexibility devices like a battery it’s even better because you can hand the keys to a virtual power plant operator and they can navigate your batteries through the twists and turns of the energy market. Assuming you don’t get carsick from those twists and turns, you’ll see even more rewards for your flexibility.

It’s all well and good if you can be flexible. Sick people can’t stop heating their homes when electricity is expensive. Busy people can’t do the washing when electricity is cheap. We promise them that one day they will see a reduction in their energy bills when all that money we pay to those who are flexible works its way through network investment pipelines. Cold comfort when you are struggling today.

2. In your experience, what are the main challenges or shortcomings within NEM’s pricing structure that hinder its effectiveness in promoting energy equity?

The biggest issue to me is that we have left all this harnessing of flexibility to the private market. We buy flexibility from the lowest bidder. Of course that means flexibility providers will create products for people with money. They are so much easier to profit from, because they can afford to buy the hardware.

The free market is great at some things, but it’s always been pretty bad at equity.

3. From a utility standpoint, what specific changes or improvements do you believe are necessary within NEM’s pricing mechanism to better address the disparities in energy access and affordability across different socio-economic groups?

Sometimes questions like these feels like someone dragging a car that rolled 3 times down a cliff to the bodyworks and asking them to provide a list of things that need fixing.

Models like Oregon Energy Trust seem like a really promising start. Why don’t we turn equity into a core measure of success for our energy system rather than a side effect of a blinkered push for automation and technocentric versions of flexibility? Focusing on things like energy efficiency, and low tech pragmatic everyday solutions like timers is less exciting than things like batteries, Vehicle to Grid, and all that but it can be made accessible and materially improve the lives and comfort of those who are missing out today.

4. How do you envision a revised NEM pricing mechanism contributing to a more equitable energy landscape, and what steps do you think utilities should take to implement such changes effectively?

An immediate pragmatic solution is to address the complexity of the energy system today. Like we have spent so long creating a market so complex that most people can’t even engage with it. It’s a form of inequity itself. So lets focus on simplification. Just about every piece of consumer research I have done or read has said that the energy market is complex and inaccessible. Energy Consumers Australia’s proposed “one stop shop” is a good start at helping cut through complexity, but they’d have a much easier job if there was less complexity to cut through right?

There are simple pragmatic things we can do too. Like do we need all this complexity of aggregators for things like contingency frequency control? Maybe large devices like hot water cylinders, batteries, EV chargers should just do it by default? The impact is so small that people are unlikely to notice – or not any more than they might notice flexible exports on their PV export. Then the benefits can be shared amongst everyone rather than just some.

Don’t miss hearing from Laura and the panel live this 7 -8 May! Book your ticket here.

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