Submission: Department of Climate Change, Energy, the Environment and Water – 2025 Reforms to the Default Market Offer – Institute for Energy Economics and Financial Analysis (IEEFA)

 

Advancing Sustainable Development Goals through Australian Electricity Market Reform

A submission by the Institute for Energy Economics and Financial Analysis (IEEFA) outlines necessary reforms to Australia’s Default Market Offer (DMO) for electricity. The proposed changes are framed to significantly advance Australia’s progress towards key United Nations Sustainable Development Goals (SDGs), particularly SDG 7 (Affordable and Clean Energy), SDG 11 (Sustainable Cities and Communities), SDG 12 (Responsible Consumption and Production), and SDG 13 (Climate Action).

Aligning the Default Market Offer with SDG 7: Affordable and Clean Energy

Ensuring Energy Affordability and Consumer Protection

• Reforming the DMO is a critical measure to ensure households and businesses receive fair electricity bills, directly supporting SDG 7’s target for universal access to affordable, reliable, and modern energy services.
• The primary objective is to protect consumers from inequitable pricing while creating opportunities for efficiency gains and bill reductions.

Fostering Innovation for a Clean Energy Future

• The rapid energy transition, marked by household adoption of rooftop solar, storage, and flexible energy technologies, necessitates a modernised regulatory approach.
• Current DMO processes rely on standardised load profiles, which represent averaged consumption and fail to reflect individual consumer behaviour or the impact of clean energy technologies.
• This reliance may disadvantage retailers offering innovative tariffs and slow progress towards cost-reflective pricing, thereby hindering the acceleration towards increasing the share of renewable energy in the global energy mix (SDG 7.2).

Empowering Consumers and Promoting Sustainable Consumption (SDG 11 & SDG 12)

The Role of Consumer Energy Resources (CER) in Sustainable Households

The most substantial energy bill savings for households, contributing to sustainable cities and communities (SDG 11) and responsible consumption patterns (SDG 12), can be achieved through the following measures:

1. Transitioning from inefficient appliances to high-efficiency models.
2. Electrifying homes by replacing gas appliances with modern electric alternatives.
3. Installing rooftop solar and battery storage systems (CER).

IEEFA analysis indicates that a combination of these actions can reduce household energy bills by approximately 90% in key regions, empowering consumers and reducing environmental impact.

Re-evaluating Network Infrastructure for High-CER Communities

• The growth of CER raises fundamental questions regarding the economic regulation and cost recovery of traditional distribution networks.
• A deeper review of network regulation is urgently required to ensure that infrastructure planning appropriately incentivises both network and non-network solutions, such as CER.
• This is essential for building resilient and sustainable infrastructure that supports the decentralised, clean energy systems of future communities (SDG 11).

Reforming Economic Regulation for Climate Action and Fair Pricing (SDG 13 & SDG 7)

Addressing Inefficient Network Costs and Supernormal Profits

• A significant impediment to achieving affordable energy (SDG 7) and effective climate action (SDG 13) is the inefficiency within network cost structures.
• IEEFA analysis found that electricity distribution and transmission networks generated approximately $15 billion in supernormal profits from 2014-2023, in addition to their allowed profits.
• These excessive profits signify a regulatory system that is not performing as intended, imposing an unreasonable cost on consumers and failing to drive the efficiencies needed for a low-carbon transition.

Recommendations for Regulatory Review

To ensure the regulatory framework supports national sustainability objectives, IEEFA recommends the following actions:

1. A comprehensive review of the economic regulation of electricity distribution networks should be conducted concurrently with the DMO reform process.
2. The DMO reform process must consider and integrate the findings of the AEMC Electricity Pricing Review to create a cohesive regulatory environment.
3. A subsequent review of the DMO and other price regulation mechanisms may be necessary following the implementation of changes from these concurrent reviews to ensure long-term alignment with Australia’s sustainable development commitments.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

SDG 7: Affordable and Clean Energy

• The article focuses on ensuring “fair electricity bill” and “bill reductions for consumers,” which directly relates to energy affordability. It also extensively discusses the transition to renewable energy sources like “rooftop solar” and the adoption of “efficient electric appliances,” aligning with the goal of clean energy.

SDG 9: Industry, Innovation, and Infrastructure

• The text calls for a “review of the economic regulation of distribution networks” and reforms to the Default Market Offer (DMO) to support a “high-CER future.” This involves upgrading and innovating energy infrastructure and its regulatory framework to make it more resilient and sustainable. The push for “innovative tariffs” is a key aspect of this goal.

SDG 13: Climate Action

• The submission is addressed to the “Australian Government Department of Climate Change, Energy, the Environment and Water.” The core theme is accelerating the “energy transition” to a “sustainable… energy economy” by integrating renewables and improving efficiency. This represents a direct effort to integrate climate change measures into national energy policy and planning.

2. What specific targets under those SDGs can be identified based on the article’s content?

SDG 7: Affordable and Clean Energy

1. Target 7.1: By 2030, ensure universal access to affordable, reliable and modern energy services.
   • The article’s emphasis on reforming the DMO to ensure households and businesses receive a “fair electricity bill” and achieve “bill reductions” directly supports the affordability aspect of this target.
2. Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix.
   • The article highlights the trend of households installing “rooftop solar” and “storage” and advocates for regulatory changes that support a “high-CER [Consumer Energy Resources] future,” which is centered on increasing the share of renewable energy.
3. Target 7.3: By 2030, double the global rate of improvement in energy efficiency.
   • The article explicitly states that the “largest energy bill savings for households could be found by moving away from inefficient appliances to more efficient ones” and notes that upgrading to “efficient electric appliances” can significantly reduce energy bills.

SDG 9: Industry, Innovation, and Infrastructure

1. Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure… with a focus on affordable and equitable access for all.
   • The call to review the “economic regulation of distribution networks” to ensure they can handle a future with high levels of Consumer Energy Resources (CER) is about developing resilient and sustainable energy infrastructure.
2. Target 9.4: By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies…
   • The discussion on reforming the DMO to open the door to “innovative tariffs” and accommodate technologies like “rooftop solar, storage and flexible energy technologies” is about upgrading the regulatory infrastructure to support clean technologies.

SDG 13: Climate Action

1. Target 13.2: Integrate climate change measures into national policies, strategies and planning.
   • The entire article is a submission to a government consultation on the “Default Market Offer” (DMO). This process of reforming a key national energy market mechanism to better facilitate the “energy transition” is a direct example of integrating climate change measures into national policy.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

SDG 7: Affordable and Clean Energy

• Household energy expenditure: The article’s focus on “electricity bills” and potential reductions of “about 90%” implies that the cost of electricity for consumers is a key metric.
• Level of network profits: The article quantifies “supernormal profits” of distribution networks (“$15 billion from 2014-2023”) as a sign of an inefficient system. Reducing these profits would be an indicator of progress towards fairer pricing.
• Share of renewable energy from consumer resources: The mention of a “high-CER future” and the uptake of “rooftop solar and batteries” implies that the installed capacity or percentage of energy generated by these resources is a key indicator.
• Adoption rate of energy-efficient appliances: The article points to switching to “efficient electric appliances” as a primary way to save on energy bills, making the rate of this switch an implied indicator of progress in energy efficiency.

SDG 9: Industry, Innovation, and Infrastructure

• Implementation of regulatory reforms: Progress can be measured by whether the recommended “review of the economic regulation of distribution networks” is undertaken and leads to new regulations.
• Availability of innovative tariffs: The article suggests that the current DMO process may “discourage tariff innovation.” An increase in the number and variety of “innovative tariffs” that support CER and cost-reflective pricing would be a direct indicator of progress.

SDG 13: Climate Action

• Policy and regulatory reform milestones: The progress of the “DMO reform process” and the “AEMC Electricity Pricing Review” serve as direct indicators of the government’s action to integrate climate-friendly measures into its national energy market policies.

4. Table of SDGs, Targets, and Indicators

SDGs	Targets	Indicators Identified in Article
SDG 7: Affordable and Clean Energy	7.1: Ensure access to affordable, reliable and modern energy. 7.2: Increase the share of renewable energy. 7.3: Double the rate of improvement in energy efficiency.	– Level of household “electricity bills” and potential for “bill reductions.” – Value of “supernormal profits” ($15 billion) earned by electricity networks. – Rate of uptake of “rooftop solar” and “batteries” (CER). – Rate of adoption of “efficient electric appliances.”
SDG 9: Industry, Innovation, and Infrastructure	9.1: Develop quality, reliable, sustainable and resilient infrastructure. 9.4: Upgrade infrastructure and retrofit industries for sustainability.	– Implementation of a “review of the economic regulation of distribution networks.” – Number and availability of “innovative tariffs” that support CER.
SDG 13: Climate Action	13.2: Integrate climate change measures into national policies, strategies and planning.	– Progress and outcomes of the “DMO reform process” and the “AEMC Electricity Pricing Review.”

Source: ieefa.org