By Tess Oliver, Article Writers Australia
AEMC Chair Anna Collyer called the consumer “the hero on the road to net zero” at Australian Energy Week last year. But in 2024, it seems that not too many consumers are feeling particularly ‘heroic’ – especially when they have to keep on paying rising energy bills.
Data from global energy transition surveys by EY shows Australia’s Energy Consumer Confidence Index is at 54.3, below the global average of 58.7. According to EY, this indicates that customer apprehension is setting in.
Retailers are feeling the impact of the transition; they will need to become very nimble to adapt to the fast-changing energy environment.
This may involve developing new business models and approaches to keep customers engaged and assist those suffering financial duress.
We asked three of speakers at the upcoming Australian Energy Week 2024 for their take on the issue.
How can retailers keep customers engaged and satisfied?
Emma Hawthorne, Oceania Energy Leader at EY, says their surveys indicate consumers are not keeping pace with the transition.
“76% of consumers feel they are doing everything they can to be sustainable,” she says.
“But they also tend to believe it’s not all up to them and look to retailers to lead the way through education and new energy products and services.”
Hawthorne says there are three ‘pillars’ for addressing this:
- Access – providing consumers with access to clean energy products that give them insights into and greater control over their energy use
- Affordability – ensuring products are affordable and providing cost relief where required
- Appeal – this refers to presenting new products and services in a way that appeals to the different generations, and meets the drivers of cost, comfort, convenience and control
Michael Dart, Chief Customer Officer at Energy Queensland, believes building trust is the most important component in customer engagement, along with a good strategy that “sets the tone” for the business.
“I always say trust comes into town on a tricycle and leaves in a Formula One Ferrari,” he says. “It’s hard won and easily lost!”
Dart says gaining trust starts with knowing your customers, delivering value and making their lives easier. And of course doing what you say you are going to do.
According to Jacob Mahoney, Chief Revenue Officer at Flow Power, evolving customer expectations are forcing retailers to revisit their offerings. He says the historic way of doing electricity retailing – minimum customer engagement, simple products, large volumes and low margins – is now changing.
Mahoney says the residential landscape will need to adapt further to accommodate electrification.
“Retailers will have to consider how increasing demand from items such as EVs and heat pumps should be integrated into their market offering,” he says.
“This might mean offering flexible electricity tariffs that incentivise customers to use electricity when renewable energy is plentiful, and avoiding consumption when the grid is constrained.”
How can retailers respond to customers in financial stress?
Hawthorne refers to the way governments have already stepped in with bill relief programs, and how vital this is for reducing financial stress.
Retailers are focused on affordability and are putting in place the program structures to address it, she says.
“But the main driver of this will be the regulatory structures – such as tariffs – rather than the retailers, who I believe are doing everything they can to-date.”
Hawthorne says bill relief and hardship programs are showing signs of working – with customers under “energy poverty” having gone from 30% to 21% over the past year.
For Dart, responding to hardship goes back to having a great customer strategy in place to start with. “And obviously providing all the tools available for cost-savings, such as payment plans,” he says.
Retailers can also be advocates says Dart. He points out how his company has been acting as an advocate with the Queensland Government to deliver cost of living rebates – which are now some of the biggest in the country.
“Financial counselling is also important, not only for energy but for other cost-of-living pressures,” Dart says.
Mahoney says there are significant opportunities for retailers to offer innovative plans that enable customers to save or earn money through load shifting.
“Overall consumption can remain constant,” he says.
“But shifting demand from a period when the grid is constrained to intervals when lower-cost renewable energy is abundant, also ticks a lot of boxes in supporting the energy transition.”
Will retail business models need to reinvent themselves?
Hawthorne says retailers will need to look at it from several points of view – the products and services that they offer, the channels they go through and their internal operating structures.
She points out how energy consumers are more sophisticated and educated today.
“They are wanting a curated set of products and services, and they want them at low cost. They want access to information about pricing, such as wholesale prices and tariffs.”
Hawthorne believes millennials and Gen X in particular are looking for digital solutions and to be able to access subscription-based EAAS (Energy-as-a- Service) platforms.
Dart thinks EAAS models will become more common, especially as we are now seeing more customers taking control of their own energy through solar, batteries, EVs and home management systems.
There is more pressure on providing a positive customer experience too and expectations are high, Dart points out. He sees AI as being at the forefront to deliver this.
“We can use generative AI to provide low-value work, while using skilled staff to handle the high-value and more challenging work,” he says.
Dart expresses concern about vulnerable customers – such as renters and those who lack the capital to invest in solar. He says retailers can help by providing access to renewables and batteries as a service, such as through virtual power plants.
Mahoney also strongly believes retail business models will need to evolve.
“It’s becoming increasingly important to businesses and households that their energy is genuinely ‘green’ but also at a competitive price.”
He says retailers will need to design and deliver more innovative models that respond to market needs, and this includes models that help stabilise the grid.
“This involves connecting customers to cleaner, renewable energy, and technology that provides insights and helps shape energy consumption,” Mahoney says.
“Looking ahead, while the future of retail business models may still be a work in progress, one thing is for sure: the traditional hands-off approach won't cut it anymore.”
How can the regulatory landscape be streamlined?
Hawthorne says with Australia’s complex system, there has to be a simplification that happens in order to enhance customer appeal.
“Regulatory change will have to happen, and the energy retailers have a big role to play to support this, such as educating customers about how their energy bills work,” she says.
Dart says it is always a challenge to get new regulations in place that are fit for purpose for customers, and it takes time.
But whatever the case, constant customer engagement is crucial to ensure that in the end they get the best benefits, he says.
“It always goes back to having trust and a great customer strategy in place.”
Mahoney’s point of view is that with our emissions reduction targets on the horizon, the regulatory and policy landscape needs to evolve to allow the integration of renewables into grid more quickly.
But he also says we need to preserve some degree of regulatory certainty.
“Too much upheaval creates challenging market conditions for smaller players, who are critical sources of innovation.”
Mahoney’s belief is that if we can strike a balance between change and certainty, we can pave the way for an energy future that benefits both retailers and consumers.
All of the leaders quoted in this article (plus many more!) will be speaking in the Future Retail Stream of Australian Energy Week 2024.
To access the detailed conference program, download the brochure here.
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