Choice was concerned that perhaps not enough was being done by energy retailers to help consumers become energy efficient. With funding from the Consumer Advocacy Panel, we commissioned NERA, an energy economics consultant, to examine what incentives and barriers exist for energy retailers to promote energy efficiency. The aim of the research was to also make recommendations about what can be done to transform the market, making sure energy efficiency becomes a fundamental part of an energy retailer's offering to consumers.
Improving energy efficiency can save costs and lower electricity supply costs in the future, as well as reduce our carbon emissions. NERA's report found that:
- Energy retailers have an important role to play in promoting energy efficiency.
- Retailer competition creates some incentive for retailers to differentiate products through the promotion of energy efficiency.
- Retailers currently provide information about government financial incentives, energy saving tips, and take part in mandatory government schemes.
- Australia's energy efficiency policies are in line with international practices - although approaches like California's deserve more attention.
The report's key conclusions are:
1. Benchmarking the performance of retailer energy efficiency programs will likely improve outcomes
There is a need to review the effectiveness of retailer energy efficiency programs and in doing so identify where opportunities exist to enhance existing programs. Part of this should involve providing incentives for retailers to continuously improve programs and adopt best practice approaches from within Australia and globally. Such incentives could be provided by (but not limited to):
- providing an annual award for the most innovative energy efficiency information program
- obliging retailers to publish the average energy efficiency of its customers and categories of customers (eg a family of four living in a house)
- obliging retailers to audit and publicly report on the effectiveness of current energy efficiency programs
Making information available on the performance of retailers in lowering customer energy use and the effectiveness of existing information programs, would create direct incentives for retailers to be innovative in energy efficiency program design. Over time this would enhance efficiency outcomes from retailer programes.
2. Government obligations will be needed to encourage more effort by retailers to promote energy efficiency.
While commercial pressures will likely lead to retailers becoming more engaged in the promotion of energy efficiency in future years, and particularly following the introduction of a carbon price (eg. via the CPRS), these efforts are most likely to be at the margin and aimed at attracting and retaining customers rather than the achievement of specific energy efficiency outcomes.
In these circumstances, energy efficiency promotion will be limited to those programs that are cost effective (ie are expected to deliver returns that exceed the cost) to the individual retailer.
Encouraging greater effort by retailers to achieve a socially desirable level of investment in energy efficient practices and products (reflecting associated market failures) will therefore require direct intervention by the government in the market.
Click here to read the full report.
This project was funded by the Consumer Advocacy Panel (
) as part of its grants process for consumer advocacy projects and research projects for the benefit of consumers of electricity and natural gas.
The views expressed in this document do no necessarily reflect the views of the Consumer Advocacy Panel or the Australian Energy Market Commission.