In the ever-evolving landscape of energy consumption, Australian households have been introduced to dynamic pricing structures, such as time of use and demand tariffs, with the promise of cost savings and more efficient energy use.
However, a new report by Energy Consumers Australia suggests that many consumers have yet to fully realise the anticipated benefits of these pricing models.
The report, titled Consumer Energy Report Card: Consumer knowledge of electricity pricing and responsiveness to price signals, aims to shed light on the actual impact of dynamic pricing on household energy habits.
Time-of-use tariffs, introduced as part of Australia’s energy market modernisation, charge different rates for electricity depending on the time of day.
Typically, electricity costs more during ‘peak’ periods (usually 3 pm-9 pm) and less during ‘off-peak’ times (usually overnight). The idea is to encourage households to shift their energy usage to times when the power grid is under less strain.
However, according to the report, while some consumers have adjusted their usage patterns, the majority are not making the changes necessary to capitalise on the potential savings.
According to the report, heating, cooling, and water heating are the primary energy consumers in a household, accounting for approximately 35% to 75% of total energy use. Adjusting usage times in these areas could lead to the most significant cost savings.
However, the report also found that many households on time of use tariffs were instead altering the use of less energy-intensive appliances, such as dishwashers and washing machines. This suggests that the financial benefits of dynamic pricing may be modest for many.
Energy Consumers Australia CEO Brendan French expressed concern over the findings, stating, ‘This report shows dynamic pricing structures are yet to incentivise the kinds of consumer behaviour that the market hopes to see.’
The report, which analysed data from over 4,000 Australian households, also identified a large group of more engaged consumers, making up 46% of the survey participants. These consumers, typically higher-income homeowners with solar power systems in place, expressed interest in having greater choice and control over their energy consumption.
‘We need to encourage these people by providing more innovative products and services so that consumers with the means to shift large energy loads can provide benefits to the system and help everyone,’ Dr French said.
The report also highlighted a worrying trend among low-income households: these consumers, often living in energy-inefficient housing, may be cutting back on essential heating and cooling to save money under time of use and demand tariffs.
‘These consumers should be provided with basic electricity plans with simple pricing,’ said Dr Brendan French.
‘We need minimum energy efficiency standards for rental properties and help for low-income homeowners to improve the energy efficiency of their homes so they don’t face high energy bills.
‘Victoria and the ACT already have minimum standards and this should be taken up by the rest of the country.’
So, YourLifeChoicers: How do you think innovative solutions like time of use tariffs and dynamic pricing could strike the right balance between affordability and efficiency for all consumers?
