2021 saw a raft of new appointments to senior leadership positions in the Australian energy sector. They face a challenging future. Whilst the transition to renewable energy presents lots of exciting opportunities, the current infrastructure and systems were built for a bygone era, writes Kirstin Crothers, Conference Director, Australian Energy Week.
Each year Australian Energy Week brings together the CEOs who are shaping the industry, for an overview of new directions in the energy sector.
Struggling under the pace of change
Anna Collyer became chair of the Australian Energy Market Commission (AEMC) in 2021 and inherited the chair of the Energy Security Board (ESB) shortly after. The post-2025 redesign of the National Electricity Market (NEM) has to take into account distributed, intermittent renewable energy; battery storage; electric vehicles and a possible resurgence in hydrogen. As she puts it, “We are working on ways of ensuring that power system requirements are still satisfied, now and into the future, as more weather-driven sources of power and batteries connect to the grid and thermal generators start to exit.”
The Australian Energy Market Operator, which runs the electricity system, is being forced to intervene at record rates, issuing directions to energy generators and users to ensure grid stability on a daily basis. AEMO CEO Daniel Westerman says modelling has outstripped previous expectations but he remains confident that the transition could run smoothly as long as there is a “substantial increase” of dispatchable power to prepare for when the grid is completely coal-free.
Governing bodies are not the only ones grappling with the rapid pace of transition. In mid-2021, Origin CEO Frank Calabria warned “the transition has the potential to get messy, as we are likely to see coal-fired generation leaving the market in a planned and potentially unplanned way, leading to shocks to either reliability or affordability. These are clearly outcomes we all want to avoid.”
The big three ‘gentailers’ in the Australian energy landscape have traditionally been AGL, Origin and Energy Australia. But things are changing both within them and as new challengers rise to take on their market dominance.
AGL Energy plans to split into a generation business, Accel Energy, (to be led by current CEO Graham Hunt) and a retail business, AGL Australia (to be led by Christine Corbett). It’s easy to interpret this as cynical attempt to greenwash and quarantine the more profitable side of the business from the uncertainties of fossil fuel generation, but the truth is more nuanced. For one thing, energy retailing is not as profitable as it once was.
And although Accel’s generation assets are mostly coal fired, Fortescue Future Industries (FFI) and AGL announced in December that they would be examining repurposing their power stations to generate green hydrogen. FFI has emerged as a new player in the energy space. Fuelled by Fortescue Metal Group’s deep pockets, they have embarked on some ambitious plans and raided key members of staff from across the energy sector.
Julie Shuttleworth is stewarding one of corporate Australia’s most fascinating experiments, converting the iron ore miner into a clean energy superpower. She has a keen eye on the returns expected from FFI’s current spending spree, saying, “We need to make sure the investments go into real solutions such as renewable electricity and green hydrogen.”
Updating EnergyAustralia’s climate change strategy was one of Mark Collette’s first major announcements as managing director (appointed in July 2021). The commitment is to slash its direct carbon dioxide emissions by 60 per cent from today’s levels by 2028-29.
“The clean energy transformation is accelerating, with more renewable, storage and flexible energy technology available at lower costs than ever before,” he says.
Ampol is another organisation heading the winds of change and re-inventing themselves as a player in the clean energy space, transforming forecourts into energy distribution stations, with refuelling stations for hydrogen cars and charging points for electric cars.
Ampol CEO Matthew Halliday asks, “Can a petrol company today transition for tomorrow? The way we think about ourselves is we are a distributor of energy.”
Decarbonisation of gas and oil
The pressure to reduce emissions is not new, but COP26 and the rise of ESG have made it more pointed. Shell have been investing in alternate energies in an effort to decarbonise themselves in Australia. Shell Energy has purchased ERM, ESCO Pacific and more recently Powershop. Tony Nunan, Australia country chair for Shell Australia, is keen to point out that business must remain viable in order to transition to low emissions. In June 2021, he told the APPEA conference that companies had to remain profitable in making the transition, estimating the costs at “anywhere from $US60 trillion ($78 trillion) to $US120 trillion”.
While bigger players can divest fossil fuel assets or buy renewable businesses to balance their overall emissions profile, how can niche players respond? Australian Gas Infrastructure Group (AGIG) has been aggressively pursuing alternative gases for some time and under the recently appointed CEO Craig de Laine, that push has become more overt. AGIG are actively exploring hydrogen and dabbling in biomethane, and see decarbonisation as a chance to work with renewably generated electricity. Craig says, “I love thinking about the way hydrogen brings the electricity and gas sectors together into a single renewable energy system.”
Infrastructure and technology as keys to a smooth transition
More widely distributed, intermittent energy generation will require more transmission and smarter tech to support it. Marinus Link CEO Bess Clark has been tirelessly promoting what some might describe was the last great interconnector of the NEM, and says “Australia’s transition to renewables is happening quickly. The NEM needs access to affordable, ‘on-demand’ energy and long duration deep storage to ensure the lights stay on and power bills stay low.”
Under the current Federal Government, technology plays a key role in lowering emissions, reflecting a commonly held faith in new tech as a key to decarbonisation. When Brett Redman was appointed CEO of Transgrid in late 2021, he specifically nominated technology as vital to decarbonisation and modernisation, saying it will be essential “to deliver the projects and the innovations that will accelerate Australia’s transition to a cleaner energy future.”
Ben Burge of Telstra Energy sees technology completely transforming the whole system, posing the question “How can a new energy system based on evolving technologies minimise costs and maximise benefits at every level of society and the economy?” He sees a future with profound transformative transitions in technology, including energy storage and conversion, artificial intelligence and connected devices.
2022 will be the start of a new era in energy for Australia. Who survives (and thrives) in the coming decade will depend on the decisions being made now.
All the industry leaders in this article will be speaking at the plenary day of Australian Energy Week on June 7, 2022. Hear from these thought leaders and be part of the conversation on the future of energy by attending. Click here for more information.