The energy market is being turned upside down, as consumers become suppliers and renewable sources replace coal. Chief scientist Alan Finkel’s review has provided a road map for the transformation of the National Electricity Market, where the goals are security and reliability. All Australians are eager they be supplied power at all times, and that prices are affordable and track inflation. It’s up to incumbent providers of generation, transmission and distribution to heed Dr Finkel’s call, but the replacement of coal with intermittent renewables and the rise of distributed energy resources is making life increasingly difficult.

The big question now is: what will they do about it?

Simon Vardy, managing director of utilities strategy for Australia and New Zealand at global consultant Accenture, has the tough task of catching the swirling unknown of how the local energy market will evolve and pinning it into actionable strategies for the leading energy and utility companies, government departments and industry associations.

Simon Vardy, managing director of utilities strategy for Australia and New Zealand at global consultant Accenture, says our utilities need to swing into action to make the most of the transition to clean energy.

“I say I work in the utilities space, but that sounds so dull and boring. In reality I work in the energy transformation space,” Vardy says.

To survive, these monsters will have to adapt to what Finkel is recommending. Yes, a Clean Energy Target is still up in the air, but the industry has timeframes on 49 recommendations and it is time to act. These are big reforms. The question for the existing energy market participants is what do they do and how do they plan for this.

For the regulated utilities that are the natural monopolies of transmission and distribution, “there’s been a massive shift in attitude over the past couple of years about how their businesses need to reform,” Vardy tells EcoGeneration. “They all realise there is a major transformation going on in the energy sector.”

As they slowly are opened to competition many of these monopoly providers are establishing “contestable” new businesses that involve renewables, smart city concepts and electric vehicles, he says. If regulation provided protection, that floor is being removed. “It’s hard for a natural monopoly that’s used to meeting regulatory obligations transition over to understand the major shifts in consumer attitudes and uptake of new technologies.”

Pretty much all of Vardy’s clients, he says, have programs in place to transition to a world where consumers are more empowered. The Finkel Report provided an “end-to-end blueprint for change” which had been sorely needed after a run of reviews and case-by-case rule changes.

Vardy has been advising his clients there are six important components or themes of the 49 recommendations within the Finkel Review. Forewarned is forearmed. The six themes are:

1: The rise of distributed energy resources

It’s essential that distributed network service providers manage the shift to a distributed system operator model, Vardy says. Transmission and distribution companies will play a part in the distributed energy resources markets but will need to work out how to facilitate and manage the roles of integrator and orchestrator. It will require a large shift in the way these organisations operate, with a two-way flow of energy requiring real-time monitoring control at the edge of the grid to providing pricing signals. “The customers will have agents,” he says. “How will the grid operators interact with those agents?” The Finkel Review says demand response guidelines should be implemented by mid-2019, which is not very far away. “There is a clear milestone,” Vardy says.

2: Proof-of-concept testing and funding

To encourage market participants to experiment in preparation for change, specifically around integrating distributed generation, Vardy says the Australian Energy Market Commission needs to update its regulatory framework that facilitates proof-of-concept testing and innovative approaches and technologies. An update to regulatory framework would facilitate change and encourage new ways of doing things even if current regulations “in the black and white form” don’t currently allow it. “The question to my clients is: what are your plans around that? How are you going to access that funding and what would you request some leeway with the regulators for?” he says.

3: Cyber security

Vardy says Finkel was right to highlight a very much underestimated and underrated area of concern for the energy market – cyber security. “We’re at risk in this country because [the market is] very disaggregated,” he says. “There are lots of different parties and a lack of centralised control.” Cyber security will be a big topic in the future, he says, and Finkel rightly points out the risks are very real.

4: Distributed energy resources data collection

Distributed generation at the edge of the grid needs to be visible. Static and real-time data is valuable when it is aggregated and controlled and managed, he says. The Australian Energy Market Operator has been saying for a while it doesn’t have enough information to be able to manage the NEM with the proliferation and uptake of distributed generation. “This is a sorely needed area … so we can work for the betterment of control of the grid.” A market that is fully informed will see less chance of capital being diverted to unnecessary buildout of the grid, such as new feeder lines and substation upgrades.

5: Transparency on retail prices

The Finkel report pointed out the need for transparency and clarity in electricity retail prices and an ACCC review is underway. This is important, Vardy says, “so that consumers can more easily compare and get better deals.” The UK went through these reforms a few years ago and Vardy thinks we face a similar outcome here, where retailers offer tariffs that reflect market prices. “You can see where the breadcrumbs are going with this transparency of retail market offers.”

6: A skilled and flexible workforce

“You can’t go through an energy market transformation and revolution without requiring new skills and new ways of doing things,” Vardy says, and there’s no question the existing market participants will need to upgrade their workforces, with key areas being data analytics, new power system engineering, cyber security and IT/OT systems integration. Australia may be regarded as being at the vanguard in some parts of the industry, he says, but we haven’t yet attained scale in many areas. “It’s only when [a new technology] gets true scale and is on a path to providing an essential service rather than a pilot or a trial that you’re really tested in terms of the big incumbents having the right skilled workforces to deliver essential services.”

Get a move on

Australia has immense consumer appetite for distributed generation and is looking a bit like the canary in the coal mine as the world turns towards renewable sources, Vardy says. We have a retail sector which is generally competitive by global standards, a disaggregated energy chain and a national electricity market – a combination of factors which require innovation in designing new ways to operate.

“Yes, we can learn from around the world but we need something specifically tailored for the Australian market, and we can’t wait too much longer,” he says. “We have some unique characteristics here that are pushing us to change quicker than what we are.”