After the 2025 election …

Alan Pears gives us his round-up of energy and sustainability issues.

It must be a relief to many in the sustainable energy and climate management communities that many uncertainties have been calmed with the return of the Labor national government. It has a strong focus on reducing electricity emission intensity and it recognises its climate commitments under the Paris Agreement, but it is still weak on demand-side energy action. It refuses to confront management of emissions from our fossil fuel exports. Though it’s all relative.

State and territory governments play significant roles in energy and climate, and often control the legislation of energy markets, implementation and other important factors such as planning, social welfare and infrastructure investment.

How often did you hear energy efficiency mentioned in debate before our recent election? I heard it once, from an academic at the end of an ABC podcast, not a politician. The most cost-effective option that delivers multiple productivity benefits remains Australia’s ‘forgotten fuel’.

The government focus on short-term rebates on bills and discounting home batteries is flawed, though they were obviously attractive to voters. Instead of bill rebates, support to invest in ongoing energy savings and electrification are much more effective.

The focus on subsidising home batteries certainly will help many owners of rooftop solar to benefit from storing their PV output instead of exporting it at low prices—such as the 0.04 cent/kilowatt-hour draft feed-in price proposed by Victoria’s Essential Services Commission. This will take effect in July 2025 unless the Victorian government overrides it. Many households with PV will feel betrayed as export prices crash. Governments and the solar industry encouraged them to invest in bigger PV systems on the basis that they would cover the costs with electricity exports.

Home batteries are expensive relative to electric vehicle batteries and even e-bike batteries. There are also expensive installation issues such as fireproof materials, labour costs, ongoing maintenance and replacement costs. Only building owners with available capital will benefit, driving further inequity as others are left stuck on increasingly expensive gas and electricity tariffs that often increase prices at times of high demand—evenings and early mornings, when many can’t reduce demand without compromising their household’s service quality.

The government must find a way to transform energy market design and operation. Unfortunately, the review it established late in 2024 just focuses on the wholesale market. Many of the problems are in distribution networks (treated as regional monopolies) and retail markets, which distort consumer perceptions and drive inequity in their pricing designs. The spot market is broken—it feeds profits to incumbents and has failed to drive appropriate investment in appropriate locations, or to control gaming that drives very high spot prices, not just by gas generators but also by hydro and big batteries.

In my submission to the 2024 Australian Energy Market Commission’s consultation on electricity pricing for a consumer-driven future, I pointed out that the electricity and gas policy assumption of ‘consumer choice’ to respond to energy prices ignored high fixed charges and constraints faced by renters (over 30% of households and many small businesses), occupants of strata title premises and many other consumers. Control of buildings and fixed equipment are beyond their control. Not many building owner consumers have large amounts of time, are highly numerate, see energy as a major cost, and have sufficient capital or available cash flow to respond to energy price signals. We need a ‘beyond the power socket’ revolution to empower all electricity consumers, which I have outlined in several articles and my AEMC submission.

Energy market policy thinking still doesn’t link electricity and gas, as well as the demand side. As we electrify, electricity network operators and retailers will profit from higher demand while gas networks and retailers will struggle. Maybe we should integrate gas and electricity network and retailing policy and market rules. Then remaining gas consumers, who may have limited capacity to change, won’t suffer as fewer, smaller gas consumers cover increasing fixed gas charges as well as high fixed daily electricity charges.

AEMO’s steps to break down the brick wall between top-down energy policy and end-use delivery of essential services

We are starting to make progress on integrated thinking about energy.

AEMO (Australian Energy Market Operator) has released a ground-breaking report that explores electricity and gas use by households and small commercial consumers. It provides many significant insights into the nature of their energy use—and the significance of PV exports. The graphs below are examples of the content of the report and the insights they offer.

The study also raises many questions. But it is a very valuable start on the journey of our supply-side dominated energy policy and market culture’s transition to recognition that no-one actually wants energy for its own sake—they want useful or essential services, and they want to work with businesses they can trust. Although the report plays down the role of building and appliance performance in favour of energy storage and smart management, it does mention building performance a few times, though mention of appliance and equipment performance is lacking. It shows that weather conditions play a big role in residential and commercial energy use because the thermal performance of buildings really matters.

It also highlights the reality that we know much less about gas consumption than we do about electricity use. This is a problem for good policy and program design.

The report provides a useful example of how improved quality of ‘behind-meter’ data can assist in development of improved policies and programs and provide real-world insights into the effectiveness of policies. Now we need much higher quality gas data and, even more, we desperately need much more data on end use efficiency of energy for services!

The report’s broad discussion and exploration of possible drivers of change is a pleasing shift. But its tendency to focus on rebound effects to explain high energy demand doesn’t consider other factors and largely ignores the role of improved building thermal performance. Larger homes, those with higher bills being more likely to shift, mainstream building industry tendency to stick with gas in Victoria, etc, may be factors.

I wrote an article for Renew magazine years ago (in issue 134) smashing the rebound fantasy. I don’t deny the existence of rebound but I pointed out that there are many ‘efficiency amplification’ factors at work too. I suggested that we should use the term ‘flow-on effect’ not ‘rebound’. Could you imagine a world without extreme efficiency mobile phones, heat pumps and virtual service delivery via the internet?

The report’s analysis of renter transition from gas provides powerful support for stronger government intervention, as it shows low adoption of transition measures from gas and efficiency improvement due to split incentives and short-term financial thinking.