Opportunity Assessment – Rewarding energy flexible demand: Customer-friendly cost reflective tariffs and incentives

This research theme aims to develop and demonstrate innovative, flexible and dynamic pricing and incentives for customers to encourage load management and to reduce costs to energy customers.

This theme acknowledges that the largely untapped potential of flexible pricing to cut average electricity prices and bills has long been recognised. The residential sector has great capability for demand flexibility. Meanwhile, generation output is increasingly variable due to the rise of solar and wind power. Nevertheless, flat tariffs are still the most common pricing approach for Australian households. This project will identify how consumers can be empowered to make decisions about new pricing structures, incentives and reforms and what customer support tools and services would offer them the most out of these new pricing structures. This project is an opportunity assessment for the RACE for 2030 CRC led by University of NSW and supported by Queensland University of Technology

Why is this important?

Overseas practice and studies for Australia (e.g. Presutti et al, 1), have suggested that customers can have lower bills on flexible tariffs assuming increasing capacity and willingness to respond. Other reports have found that, at least in some cases, introduction of dynamic prices has been unpopular with customers. Furthermore, such experience appears to have led some energy retailers to lack confidence in recommending new pricing structures to customers. These ideas need to be tested and quantified in an Australian context to help us understand the limits of cost reflective pricing, whether there is an innate customer resistance to price reform and flexible incentives, and to identify the elements of successful reform. Further, it is important to examine the role of customer-supplier trust and the role of awareness, education, and social norming measures.

What are we doing?

A technology and market status review of the existing academic and grey literature surrounding electricity pricing, relevant barriers and motivators, and technology will be conducted. In addition, a review of the state of research and industry activities will be conducted, with the aim of this review being to examine tariff design, consumer support tools, and potential behavioural and social reactions to different pricing structures. Engagement and reporting activities will also occur.

For more information about this project, please email: best@qut.edu.au