POLICY UPDATE: THE DEATH SPIRAL – IS IT INEVITABLE OR EVEN DESIRABLE? Clean Energy Week 2014 Tim Sonnreich Strategic Policy Manager Clean Energy Council

EVERYONE IS TALKING ABOUT THE DEATH SPIRAL

BUT IS IT ACTUALLY HAPPENING YET? Number of grid-connect battery storage systems sold to date (est): 2013 – – (to date) 2015 – 1000+? Number of households that have disconnected from the grid so far?

WHY IS IT SO SLOW? Factors delaying uptake of storage: Underlying cost of systems (although falling) Inability to benefit from the ‘stack’ of services Eg. Victorian Government’s Powerline Bushfire Safety Program (PBSP) PBSP is considering switching diesel gen sets for batteries in aged care facilities. BUT will only assess value of back-up power service.

IF COSTS COME DOWN WE’LL GO OFF GRID. Key assumptions about electricity consumers: (1) They are being crushed by power bills, (2) They are rational actors. Cost of electricity as a share of average household expenditure has remained steady over the last two decades at roughly 2.6% (ABS).

(1) CRUSHED BY POWER BILLS? Cost of electricity as share of average household expenditure has remained steady over the last two decades at roughly 2.6%. Some people are struggling with power bills (disconnections are up). But network costs are stabilising and so rising price alone won’t push most people off the grid if networks are even half-smart about reforming tariffs.

(2) RATIONAL ACTORS Even if the sums add up, consumers are very, very lazy. Uptake of energy efficiency technologies and behaviours is sub-optimal. Retailer-switching habits are sporadic at best.

THE ‘LAZY TAX’ Consumers are generally lazy. Companies exploit that to fund discounts for new customers (what Choice calls ‘the lazy tax’). But consumers know that, and are still lazy. 86% of Australians believed they could save up at least 15% on everyday expenses if they switched, but couldn’t be bothered (Longeran Research, Adelaide Advertiser, 18/6/14).

ELECTRICITY: LAZY OR CONFUSED. 44% say switching is too much effort (E&Y) 37% saying the information available was too complex (Ernst & Young, Customer Experience Series – Utilities, 20 August 2012) Will households take the time to understand costs of going off-grid? Will they want the responsibility for ensuring reliability and quality? Will they be prepared to risk getting it wrong?

BUT WHAT IF THEY DO? Maybe it will become so cheap and easy to go off grid (and outsource worries to others) that lots of people would be willing to do it. Should we welcome that? Some things to keep in mind. Grid connected batteries can do more than just provide power, and getting paid for those services improves the business case for storage. A grid is the best way to share risk and manage bulk (clean) electricity supply needed to power the economy.