By Ty Christopher, University of Wollongong, and Dr Vikki McLeod, Rewiring Australia

We all expect the lights to come on when we flick the switch. Have you ever stopped to think about the many rules, regulations, and organisations that keep the lights on? What does it take to change these rules? Where do vested interests lie? How does this impact your electricity bill?

Multiple regulatory bureaucracies govern and oversee the delivery of a reliable supply of electricity and how we pay for that supply here in Australia. The delivery of electricity to your home is defined by complex rules and regulations that take years to change. The rules define what is valued and what is not. These rules were optimised for the old fossil-fuelled economy, and they are not keeping pace with the clean energy transition.

To explain how this works, let's think of the electricity market as a team sport. You have a team of players, each with unique strengths and weaknesses. A coach is responsible for rotating players so the best players are always on the field. There is a referee. There is a governing body setting out the rules. There are the fans.

In Australia's electricity market, the players are the electricity generators, and traditionally, they have been a handful of large coal and gas-fired power generators. The Australian Energy Market Operator (AEMO) acts as the on-field referee, dealing with issues as they happen and generally trying to keep the game moving along. The Australian Energy Market Commission (AEMC) acts as the "coach", ensuring everyone plays by the rules, advises on the team development, and suggests changes as needed. The Australian Energy Regulator (AER) is the rule keeper and rule enforcer handling any rule violations, just like the governing body of any sports code.

Then there are the energy consumers – such as households – who we can think of as the fans. They pay to be there but historically have had no real influence on the rules or how the game is played. Having a rule maker, a referee, and a judiciary for a game is fine. But the rules for the old game are dated, the old players are sluggish, the game is not as competitive anymore, and the fans are not paying to attend. We know we could be international champions if we get the rules right and put the new competitive players up front.

But the question is, are we moving fast enough to put our best team on the field and keep the fans onside? Every day Australia plays by the old rules, we lose competitiveness, and the cost of electricity bills increases. The fans aren’t happy, and they want something done to make the game cheaper, cleaner and fairer. The new players want a fair deal.

With the cost of household technologies such as solar panels, heat pumps and batteries falling, energy consumers are no longer spectators but also players in the game. The fans want to feel welcomed in their support for the new game.

There is a slow realisation that the club’s business model has to change. The exclusive members will grumble and try to slow things down. But without the fans, there won't be a club. The game has already moved on.

Australia’s energy market needs reform

Australia has an entire system of rules and regulations and a supporting bureaucracy for those rules and regulations, which are all perfectly designed for an energy system that no longer exists.

More homes and businesses are adopting clean energy technology, such as solar, batteries and electric vehicles. Large-scale renewables, such as wind farms, solar farms and big batteries, are connecting to the grid at an accelerating rate. This is transforming where and how our energy is generated. It has disrupted the economics of the electricity market and highlighted the need to transform the grid into a smart grid.

Other countries have been successful in reforming their electricity markets, and Australia has now met the same preconditions for reforming our electricity market.

The Australian energy landscape is changing rapidly. To keep pace, we need to allow for greater regulatory agility and innovation. We need the coach, the referee, and governing body to work alongside the new players and the fans to co-design a new rule book rather than changing one rule at a time.

We need to create opportunities for the market to realign. So, we need places and spaces like ‘Local Renewable Energy Zones’ to test and sandbox the new rules. Rewiring Australia is creating this opportunity via community-level electrification pilots, such as Electrify 2515.

We need to value the end consumers' role in the future electricity system. We need to create local energy markets where consumers can trade the essential energy services that they can provide to the electricity grid. We need to design the rules for a cleaner and cheaper energy future that puts energy consumers at the centre of effective reform.

If we do this, we will all enjoy the benefits of a cheaper, cleaner and fairer energy system.

About the writers

Dr Vikki McLeod leads the energy market reform work at Rewiring Australia. Vikki has professional expertise in energy policy, energy and environmental markets, economic regulation, infrastructure economics, and energy technologies. She has higher degrees in electrical engineering, business, energy policy and design. She is an experienced Executive Director, Board member and Project Manager with achievements in delivering social and public policy outcomes in complex political environments. Vikki has experience in business development and is active in the community energy sector.

Ty Christopher, Endeavour Energy’s former ‘chief engineer’, is an electrical engineer who brings 37 years of hands-on experience in the electricity supply industry to his current role as Director of the Energy Futures Network at the University of Wollongong. Read more in this article.