Consumer power could fix Australia’s energy debacle

As politicians and power companies fail to act on rising energy bills, a new PwC report suggests consumer-centrism and new market players could soon run the incumbents ragged.

It’s hardly news that we are all at sea in a leaky boat when it comes to sorting out a secure, affordable energy plan which includes sustained carbon emission reductions.

Throw everybody else overboard and what you have left are perplexed politicians and their policy advisors on one end and a veritable mob of corporate types -- including wannabe investors with a one-eyed focus on their particular path to riches -- at the other.

The situation is not improved by the fact that the political side is pre-occupied with its own self-interests and often with trying to row away from messes made in government.

The corporate side may appear to have its oars better under control, but does it?

A new report suggests that the tide is turning for companies as much as for legislators.

Produced by consultants PricewaterhouseCoopers and written by Mark Coughlin, head of their Australian utilities team, the paper was presented on the sidelines of the Energy Networks Association biennial conference in Melbourne at the end of April to a gathering of senior industry figures.

They probably didn’t walk away feeling comforted by the discussion.

The PwC line is that the traditional utility role -- as controller of the flow of electrons to consumers for almost a century -- is on its last legs and incumbents need to be ready for their turf to be invaded by myriad of new players, including telcos and insurance companies, offering services.

This, of course, is a view not a million kilometres away from that held by the Greens and the green commentariat, who see a tide of change spearheaded by solar PVs sweeping all before it on the way to a clean, green future where householders (also wanting to be clean and green) are king and queen.

Saying ‘but’ to this crew, who are intent on monstering mainstream legislators to provide policies to support their dreams and intent on badmouthing the Abbott government to the earliest possible grave, is not a popular pastime.

And yet the real world of electricity supply throws up a large bouquet of ‘buts’ and, whether here or overseas, has a way of rudely intruding on the Dr Pangloss types’ world view.

Which is not to say that a perspective from a different corner of the boat, especially when it comes from commentators who are paid to give companies good advice and get short shrift when the recipients don’t enjoy the proposed ride, should be shrugged off.

The new PwC paper -- available on the firm’s Australian website -- floats a raft of thoughts about the electricity supply chain’s environment and future that, I am told, has already got more than a few senior industry types thinking hard.

Mark Coughlin says that the commentary is a preliminary foray in to the field. PwC plans to publish more over the course of the year.

At the core of the initial perspective is the view that “something has to give” as energy bills are still not coming down in a national environment where (to quote Essential Research polling) 56 per cent of us are unamused about the cost of living, compared with just 10 per cent fretting about climate change policies.

Coughlin and PwC contend that ‘customer centricity’ is going to be a big driver of change -- an evolution where consumers, cheesed off by electricity utility service levels and costs, are going to increasingly take up options, including new technologies, that disrupt the suppliers’ electron control mode while new players run the incumbents ragged.

Coughlin argues that this has major implications for existing industry heavyweights, as well as governments and regulators.

He sees the current crop of suppliers forming joint ventures and alliances to fight their ground against service invaders, with customers as big winners in a fiercely competitive marketplace – and he adds that continuing government ownership of electricity businesses will be “increasing unviable”.

A critical question -- part of the bouquet of ‘buts’ -- is the time this will take to reach fruition, the willingness of the mass market to shrug off the safety net of the power grid, changes in technology (or lack of them) that may not always work to the benefit of, say, solar salesmen, and the political and regulatory knee-jerks brought about when there are losers in this new free-for-all.

I occasionally point out to green boosters that old axiom of being careful what you wish for -- you might get it.

The big ‘buts’ in the power bouquet are always around security and reliability of supply, plus costs. This is what is really important to the majority of customers.

Power is called an essential service because unlike, say, mobile phones, the community can get really hurt when supply fails or service becomes seriously unreliable and this can include impacts on jobs.

Zealot commentators who have never been closer to power supply than their ever-ready PCs and Twitter tend not to appreciate this.

All this said, the new PwC paper provides a lot of food for thought and I am not surprised that some of the supply heavyweights are chewing over it thoughtfully.

They will be only too aware when that shift happens -- and PwC have provided a slew of thoughts about change in the power sector that can’t be shrugged away.