By Damien Hudson, Partner, Digital and Emerging Technology and Emma Hawthorne, Associate Partner, EY Australia

Consumer confidence is the compass that can either propel the energy transition forward or risk stalling its momentum. As energy providers navigate the evolving landscape of rising prices, security concerns, and the decarbonisation agenda, it is taking its toll on consumer confidence.

Consumer confidence matters. It is a strong predictor of consumer behaviour and investment as confident consumers will be more certain about their future and more likely to spend money. The confidence of energy consumers underpins investment in new energy technologies and solutions and will either accelerate or hinder the breadth and momentum of the energy transition.

Consumer confidence is also a powerful force that aligns government policy, corporate sustainability, and personal responsibility. When consumers show a strong preference for sustainable products or services, they create a virtuous circle that influences government policies and which, in turn, encourages more corporations to prioritise sustainability.

Put simply, consumer confidence is a non-negotiable requirement if we are to align with our net-zero targets. According to EY Energy Consumer Confidence Index, only 38 per cent of consumers express confidence in the affordability of their energy, and a mere 36 per cent of Australians are confident in the stability of their energy providers.

It also shows that consumers’ expectations are not being met today across all aspects of the energy experience. Nearly half (47 per cent) of Australian consumers don’t understand the actions and investments they can make to be more sustainable. Energy consumers are moving beyond basic expectations and their purchasing decisions are increasingly influenced by their values, but those values – for clean, green, and socially responsible energy – must align with value for money.

As cost-of-living pressures continue to rise in Australia, with nearly one-third (30 per cent) of the population perceive themselves as being in “energy poverty”, a premium for green energy is a hard sell. Energy providers must work harder to understand the concerns of energy consumers, empower them to understand their important role in the energy transition, and ultimately rebuild confidence in the path to cleaner energy.

The Energy Consumer Confidence Index (ECCI)

The Energy Consumer Confidence Index (ECCI) looks at consumer energy confidence across the globe, highlighting the opportunities and challenges present in each country.

In this process, the Index draws on analysis to consider the stability of energy providers’ businesses; the value that providers create for consumers and their community; the ability of consumers to access clean energy options; their ability to access affordable energy; and regulator or government support for a fair and equitable energy transition.

Looking from end to end of the ECCI spectrum, confidence in Japan is very low, with consumers facing rising energy prices, market deregulation, and the lasting impact of the Fukushima nuclear disaster.

On the other end, consumers in mainland China are extremely confident in their energy future, perhaps driven by the significant focus on, and investments in, energy infrastructure and renewables. The Index shows Australia to be higher than the global average, but the global landscape itself indicates there is still cause for concern.

The trajectory of consumer confidence often follows a pattern of initial optimism, followed by a decline as the complexities and challenges become apparent to the population. The data highlights that Australia might be in this phase, facing a dip in confidence as the energy trilemma  affordability, reliability, and sustainability, come into play. Given the important role of consumer confidence in the energy transition, energy providers have a critical job ahead.

Opportunities for energy providers to build consumer confidence

Energy providers need to change the narrative on the energy transition, rebuild the confidence deficit in the integration of renewables into the grid, and engage in meaningful discussion with their consumers. This begins with simplifying the consumer journey, offering trustworthy advice, and showing the tangible benefits of the energy transition and how it will create value for the consumer personally.

Building a robust energy system that instills confidence requires a collaborative ecosystem. All stakeholders in the energy sector – energy companies, retailers, technology giants, and installers – must have the unified goal of simplifying the consumer experience.

Stakeholders need to work together to make it easier for consumers to adopt clean energy and foster a sense of shared purpose, reinforcing consumer confidence in the transition.

Energy providers need to start making the intangible benefits of cleaner energy solutions real for consumers, beyond reliability and safety. They can do this by illustrating how renewables and greener options can amplify community impact, convenience, pricing, and comfort.

Finally, by harnessing the power of behavioural science, energy providers can also build on learnings from successful campaigns during the COVID-19 pandemic to appeal to consumer emotions, foster personal accountability, and link behavioural change to the collective benefit of playing a role in Australia’s energy transition.

Making the energy transition real and appealing, and a concept that we can all contribute to, is critical to the success of Australia’s energy transition. We hope to see a more united effort from businesses, government bodies, and community organisations to reshape messaging and stimulate a new wave of consumer confidence that transcends tangible investments and resonates with societal values.