11 December 2017

Energy debate: Put customers at the centre, and set price targets

In my eight years as CEO of one of Australia’s largest manufacturing companies, and the country’s largest industrial gas user, I spent about 20 per cent of my time visiting customers. Most of my peers do the same.

As manufacturers, when we think about building new plants or refurbishing existing ones, one of the first things we do is talk to our customers. To be successful, we need to make products our customers want, at prices they can afford. If we can’t do that, everybody loses. That’s why manufacturers have been confused and fed up with Australia’s energy debate for most of the past decade.

In that same eight years, no major energy company CEO ever visited me at my office or at one of our plants. It was only smaller, emerging energy producers that showed that customer focus, which led to several successful partnerships.

Customers have had to fight their way into Australia’s energy debate, when they should always have been at the centre of it. Our needs haven’t changed much: industrial customers need reliable, 24/7 energy at internationally competitive prices in order to keep plants operating and continue creating manufacturing jobs.

Instead we are increasingly offered a grab bag of other products that don’t quite meet our needs. Some of these are exciting and promising but aren’t ready yet, like renewables generation and storage that can’t yet reliably and cost- effectively power a blast furnace, aluminium smelter or chemical plant. Others are well intended but misguided. Demand management solutions, for example, have their place, but paying businesses to do less business in order to reduce load on the electricity system isn’t a long-term solution.

After a decade of failed energy policy and energy markets, we are seeing the debate shift towards what customers need, instead of what energy companies, governments or bureaucrats want.

Manufacturing Australia supports the National Energy Guarantee. There are lots of detail to work through, but if done right it can provide a framework that allows customers as well as suppliers to invest. But we have a very long way to go to restore internationally competitive prices in Australia, and limiting price increases won’t be good enough.

My challenge to energy policymakers and regulators is this: if you are serious about affordability, set a target for energy prices, just like we do for security and emissions. There’s no point having a perfectly designed energy grid if customers can’t afford to use it.

My challenge to the energy sector is this: take a leaf out of your emerging competitors’ books and talk to your customers. If you are selling products that truly benefit your customers, then you shouldn’t need governments to underpin or subsidise investments.

Governments don’t provide investor certainty: customers do.

Read the full story at The Australian