11.2.1 Developing more efficient market structures, including better price signals
11.2.2 Better coordinating regulation and planning
11.2.3 Fostering better technology and services options to manage energy use
11.2.4 Providing information to support efficient decision-making and enable behavioural change
The Australian Government’s energy productivity policy framework addresses a range of barriers and enabling factors affecting decisions about the supply, demand and use of energy. The objectives, guiding principles and key elements of the framework are shown below.
Improving energy productivity requires effective cooperation among jurisdictions. The Australian Government does not have sole responsibility for the energy market, demand-side policy or other factors affecting energy use, such as building regulation, transport policies and urban and other land planning strategies. Crucially, retail electricity price regulation remains a state and territory responsibility.
The Australian Government works cooperatively with the states and territories through the Council of Australian Governments (COAG) Standing Council on Energy and Resources and the Select Council on Climate Change. Under COAG arrangements, the National Partnership Agreement on Energy Efficiency was agreed in 2009. The related National Strategy on Energy Efficiency has provided a nationally consistent and coordinated approach to energy efficiency and sets out a range of measures designed to help households and businesses prepare for carbon pricing.
While those processes have improved cooperation among jurisdictions, implementation challenges in delivering nationally consistent and complementary energy productivity measures remain. There is also a need to reduce unnecessary compliance burdens on industry resulting from the duplication of programs across jurisdictions.
Policy objective
To improve the productivity of Australia’s energy production and use, including by:
- developing regulatory and market frameworks that provide for an efficient balance of demand-side and supply-side responses in our energy system
- empowering energy consumers directly, or through the market, to manage their energy use and costs efficiently and effectively.
Principles
- Cost-reflective energy and carbon prices supported by sound market and regulatory frameworks are critical incentives for consumers to use energy efficiently.
- Complementary action to overcome identified market failures or other non-price barriers can help consumers make informed choices about energy use.
- Market failures and other non-price barriers should be addressed directly, cost-effectively and in ways that do not distort the efficient operation of markets or the carbon price.
- Governance arrangements should support a consistent national approach to energy productivity policies to minimise consumer costs and overall regulatory burden.
Framework elements
The Australian Government’s energy productivity policy framework has four central elements:
- developing more efficient market structures, including better price signals
- better coordinating regulation and planning
- fostering better technology and services options to manage energy use
- providing information to support efficient decision-making and enable behavioural change.
11.2.1 Developing more efficient market structures, including better price signals
Pricing structures that reflect the costs of supply, including time-of-use costs, will provide more efficient signals for demand response and encourage improvements in energy efficiency. There is also a need to ensure that market structures allow for balanced choices between demand and supply, including an ability to trade in demand reduction.
Markets are generally the most effective means of providing efficient energy price signals. However, in the case of monopoly energy networks, regulation takes the place of the market in setting prices. Importantly, while price signals are a fundamental underpinning of more efficient choices, there are natural limitations that mean such signals may not always be effective on their own.
11.2.2 Better coordinating regulation and planning
Energy market regulation needs to provide balanced incentives for supply-side and demand-side options and to ensure that alternatives such as distributed generation, demand response and energy storage do not face barriers to their efficient adoption.
Planning approaches should consider the potential of supply-side and demand-side options, and provide information about future conditions to help consumers assess the value of those options.
In some cases, direct regulatory measures may be necessary where there are market or information failures or where individual benefits are highly diffuse and difficult to capture. Those measures must be integrated to maximise policy results and minimise compliance costs.
11.2.3 Fostering better technology and services options to manage energy use
New technologies will enable a greater range of demand-side and energy-efficiency options, including in energy services. This will open up opportunities for consumers to better understand and manage their energy use.
Technology improvements are already underway in areas such as distributed generation; energy efficient products and processes; energy storage; metering and control systems; and electric vehicles.
Governments have a role in ensuring that institutional structures can support the commercial adoption of such technologies and their integration into the energy system. Energy research, development and demonstration frameworks should support innovation and technology deployment in this area.
11.2.4 Providing information to support efficient decision-making and enable behavioural change
Improving energy literacy through consumer information is fundamental to the effective management of energy use and costs. The enabling aspect of technology also means there are strong links between technological innovation and the quality of energy information available for decision-makers (whether they are consumers, their agents or energy providers).
To bring about behavioural change, information should be designed for different audiences and provide meaningful context on the impact of different actions, including likely benefits and costs.
Government, industry and consumer groups have an important role to play as trusted information sources to support consumer decision-making and build capability.