The suspension of the National Electricity Market (NEM) has sent shockwaves through the energy industry and energy consumers.
While everyone is digging deep and asking how we got to this point, we also need to look forward and acknowledge that automation and technology will reduce risks and provide rewards to benefit everyone that is connected to the NEM.
Energy consumers, whether they are businesses or households, have historically had a vexed relationship with their energy retailers.
This is one of the reasons for the popularity of rooftop solar in Australia, where over three million homes and businesses have invested billions in an effort to take control of their energy bills, gain energy independence and save money.
Now, with upwardly volatile prices and a suspended NEM, energy consumers have to shoulder the responsibility for their choice of retailer – either because their retailer has gone under or because they want a better deal.
What many energy consumers have failed to recognise is that their retailer has been the one who has shielded them from the wholesale market volatility we’re now seeing.
Over the past week, retailers across the NEM have been taking the upfront hits and absorbing the blows of an unprecedented spot market price increase.
Sadly, community-owned Enova Energy – a shining example of how clean energy focused retailers can inspire customer trust and enthusiasm by building effective customer partnerships – has been one of the first to collapse under the pressure. There are predictions of more to come.
The NEM shutdown is a once-in-a-24-year occurrence, and it’s not clear yet what things will look like on the other side of this crisis. With any crisis, however, comes the opportunity to rebuild something new.
Beyond what policy or NEM rule changes come out of this debacle, it is clear that distributed energy resources (DER) like solar, batteries and EVs will play an increasingly important role in the relationship between retailers and their customers.
New types of relationships and agreements with DER-owning customers, enabled by new technologies and automation, will be key in helping retailers differentiate themselves while also reducing the risk they face.
Investing in everything from automation, technology, rooftop solar, energy storage to electric vehicles is more crucial than ever for energy retailers who wish to avoid having to manage these risks alone on behalf of their customers.
Asset owners with the right equipment are already able to enter into new types of arrangements with their retailers – like virtual power plants – where they essentially give their retailer the capacity and tools to better manage their wholesale market risks. The grid is no longer a one way street, and consumers and retailers alike are coming to recognise this.
Retailers have the financial responsibility to manage risks, and just before the NEM was suspended, some smaller energy retailers had alerted their customers to find alternative retailers, as they would not be able to uphold their contracts at the agreed upon rates. If those customers stayed with their energy retailer, their retailer would have to absorb the risk of rising wholesale prices.
The prolonged uncertainty over when order will be restored to the NEM will plunge niche energy retailers into a deeper crisis. Enova Energy’s voluntary administration under these conditions is a sign that other retailers who are exposed to these market risks could be next in line.
While the state governments and energy regulators work to redefine what a potential new capacity mechanism would entail and how much renewables and energy storage will play a role in the NEM, we need to acknowledge that many of the tools needed to manage these risks are already deployed and functioning.
Automation and technology can balance the demand and supply of renewable energy in the wholesale market, or can be used to reduce the need for centralised electricity generation by optimising DER use on the local level.
Power purchase agreements are one of the tried and true ways that energy consumers and generators have endeavoured to ensure certainty in the face of volatility, but the number of tools for this is growing.
For example, there is the use of technology in the SA Power Networks and AusNet Services’ ARENA-backed Flexible Exports project, which is forging a path towards higher penetrations of rooftop solar on the networks through smarter management and dynamic operating envelopes.
Similarly, Simply Energy’s ability to orchestrate home batteries through its national Virtual Power Plant (VPP) is another example of how retailers can engage with their customers to manage risks.
WA’s Project Symphony and the Northern Territory’s Solar Connect VPP are two additional projects that are taking DER integration and consumer engagement to the next level and provide a glimpse of what’s next for retailers, networks, DER owners and the grid in general. SwitchDin is proud to be providing the technology to make these landmark projects possible.
The post-energy crisis retailer will be one that is able to adopt a partnership approach with its DER-owning customers where there is transparent sharing of value enabled through the coordination of assets like solar, batteries and EVs.
This is a mutually beneficial response that benefits everyone – instead of encouraging a loyal customer to exit what could be a profitable and long-term relationship.
Dr Andrew Mears is the Founder and CEO of Australian energy technology company SwitchDin.
