The Power of One: Designing a better relationship between retailers and networks to rescue a declining industry

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Customers are turning away from the grid in favour of alternative energy supply options at comparable cost. These alternatives can even command a price premium over the grid; in part, due to new entrants successfully identifying and selling to customer needs, and also due to customers’ levels of frustration and mistrust toward the traditional electricity industry.

This trend is causing networks’ utilisation levels to fall unsustainably, and signals a decline in the long-term prospects of generation and retail.  Evidence of this includes the fact that significant generation capacity is now mothballed. Many experts are now proposing reformed industry models that would better serve customers and arrest the market share decline which the grid-delivered energy industry is seeing. This transition needs to happen in the next two to five years – the industry cannot afford to wait for the normal pace of reform to save it.

However, transitioning to any new model will require retailers and networks to act as allies rather than adversaries. Retailers will need to spruik the attributes of network-supplied electricity to customers by selling the value of safety, reliability, and scalability. Both parties will need to stop publically blaming each other for price rises and problems, present a united front to policymakers, and argue convincingly of the need for change. Both will need to:

  • Develop aligned cost-reflective pricing plans that recognise the needs of both the energy market and energy networks at particular times and locations
  • Develop an aligned approach for pricing and selling demand management products that recognise these same needs, and
  • Develop a joint plan for optimally managing Storage / EVs (for the benefit of customers).

But what possible event will spur networks and retailers to start co-operating in this way? Does the industry need a crisis to force its hand, or will a visionary retailer and network pairing lead the way before serious damage to the industry is done?