Promoting good public policy for the energy industry is newly appointed Energy Networks Association CEO Malcolm Roberts. Energy Source & Distribution talked to the policy specialist about the need to ensure investment certainty while balancing political and business needs.
Public scrutiny in energy has reached fever pitch. The contentious Victorian smart meter rollout, recent carbon pricing legislation, a draft energy white paper, a host of factors driving power increases as well as rising electricity prices have contributed to a whirlpool of discussion, interest and debate in the sector. As this watershed moment continues to unfold, a person familiar to many within Canberra’s power circles has quietly assumed a peak leadership role within the energy industry.
Stepping into the role of Energy Networks Association CEO is former National Generators Forum head Malcolm Roberts. Making the move from generation to distribution in late 2011, Mr Roberts has a genuine interest in public policy as well as the energy industry, having worked for several national associations and served under former energy minister Ian Macfarlane. With a testing time ahead for the industry as considerable reinvestment is poured into an ageing infrastructure that is, on average, three decades old, the policy specialist hopes to bring some much-needed balance to the debate.
“It’s exciting to be involved making good public policy. It’s a balancing act between the politics and the policy. The only reason you come to Canberra is because you’re interested in that and the only reason you stay is that you find it rewarding to do it,” Mr Roberts explained to Energy Source & Distribution.
Much needed technology investment will bring long-term benefits for Australia, but a short-term community backlash to the costs involved will first need to be addressed. As the network transitions from a passive, one-way channel to a platform for a host of new products and services, the 47-year-old wants the ENA to be a source of credible information and direction for government, business and community stakeholders.
“I want to make government and communities aware of the trade-offs we face. People do tend to have conflicting aims for the energy sector. Very broadly, the community would like to have the lowest possible price, but the highest possible reliability, and we would like to have, over time, lower emissions energy. And those three objectives are the general publics expectations of the sector. But you can’t deliver all of those equally well, they are at times conflicting,” Mr Roberts said.
“There’s an assumption in many circles that you can have a sea-change in your technology mix, you can bring in embedded generation, you can do a host of things and somehow or other you can simply assume the network will always be able to deliver what’s needed at the right time,” he said.
“So it’s going to be fascinating to see how all this plays out and if it leads to a situation where your average consumer is really able to have a better understanding of what their costs are and have some real power to control that cost. So that’s going to be a real positive development.”
Mr Robert’s priorities are to ensure good public policy and investment certainty. The contributing costs that decentralised and intermittent renewable power as well as improved reliability standards will have on rising energy prices will need to be well communicated. With revolutionary technology changes taking place, the industry CEO believes maintaining public confidence in network regulation is a necessity during this transition.
“We’ve obviously seen commentary from IPART, Professor Garnaut, the AER (Australian Energy Regulator) and I think a lot of that commentary is seeping into urban myth, if you like, about the industry. So I think it’s interesting for us to bring a little bit more rigour to the debate, a little bit more evidence,” he said.
Extensive experience in government and industry has taught Mr Roberts that investors need to be confident that they can make infrastructure investments without being exposed to regulatory change. Sharing information and open communication will help to ensure this confidence.
“I really do think that if you have just a fuzzy notion placed in the media and policy circles that there’s something’s wrong, it needs to be addressed before it begins to eat away with the confidence of the system. The last thing you want to see is turbulence in regulation because we’ve got a huge takes to deliver the investment and the technology change to fulfill the potential and demand based on networks,” he said.
The federal draft energy white paper released in December 2011 highlights the issue of continuing growth of peak demand and recognises the inefficiencies in continuing to build a network under-utilised for much of the year. Concerned about the increasing amounts of capital businesses are spending to maintain and expand their networks, the AER informed the industry in 2011 that the Ministerial Council for Energy would review its assessment process.
Mr Roberts believes the rule change discussion is warranted and timely, but is a complicated process that needs to consider the different conditions between the current and previous regulatory regimes. While these have been ongoing for several years, Mr Roberts argues that any comparison between past and present periods is like comparing apples and oranges.
“There’s at least $3 billion worth of additional network investment needed in Queensland and New South Wales to meet those reliability standards. We’ve had the GFC and that’s significantly added to the cost of debt to the industry. That affect will hopefully diminish over time. But it’s been a very significant impact on the cost of capital in the business and the AER had to, in its decisions, recognise that with some slight increase in the debt risk premium,” he said.
A commodity boom has made the input costs of steel, aluminum and copper rise sharply, along with higher cost debt and higher cost standards for building. Peak energy demand is another major factor contributing to costs, requiring the building and augmentation of the network as peak demand grows faster then demand.
“I suppose the question there that industry will put back to government is, essentially, ‘Be clear about the choices you have.’ You can’t have your cake and eat it,” Mr Roberts said.
Embedded generation and networks shifting from historical patterns of one direction to flows going back and forth will pose further issues for the sector. The New South Wales solar bonus scheme met its residential PV panel target in six months, creating a boom-bust cycle. The cost of heavily over-subscribed schemes has forced governments to wake up to the affect poor program design at Commonwealth and state levels can have.
“It’s been a bit of shame that all that pain had to be experienced and not just in one state before policy was reviewed again,” Mr Roberts said.
“From the networks’ point of view, managing the increasing use of embedded generation is going to be a very interesting technical challenge over the next few years and obviously there’s an expectation in the community that networks are going to become more capable, that’s it’s going to become a two-way street.”
A third of the way through its smart meter roll-out, Victorian distributors were recently given the go-ahead for smart meter implementation to continue after health and safety concerns were alleviated. Trying to communicate the benefits of a mostly intangible service will be a major challenge. Vital to the public acceptance of smart meters as a platform will be when consumers start to see successful, useful tools to help them control their demand. Many ENA members are working on in-home displays, web portals and mobile apps to display energy information, with many prototypes being tested and trialled.
“The issue I suppose is that there are benefits, but to a great extent they are invisible to the average customer, because they are about improved service delivery and efficiency of the network,” Mr Roberts said.
“That’s got a very clear benefit to the customer, but they can’t touch or feel it. In some ways, it’s the things that don’t happen, or the things that happen more quickly, which they might not notice, then what they have in the past.”
The many issues affecting the industry will be discussed at Energy Networks 2012, to be held April 30 to May 2 at the Brisbane Convention and Exhibition Centre. With a range of views showcasing the future of the grid, Mr Roberts expects the event to be “bigger and better” than previous versions.
“We will have the most broad ranging and engaging program that we’ve had. We’re looking to create greater opportunities for people to participate. We’re looking for people to have a little more controversy, a little more debate and discussion on the broader issues,” Mr Roberts said.
“We will have, I’m quite confident, more exhibitors than we have ever had at these events. So, it should be a broader, more engaging program than we’ve had. There should be more businesses represented and exhibitions and it’s a very exciting time for us all to come together and talk about what’s happening.”
The ENA is likely release more long-term strategic papers in 2012. Mr Roberts hopes the consolidation of smart meters in Victoria will reveal the potential of that technology, with the results of the Smart Grid, Smart City trials also feeding into the overall improvement of Australia’s energy networks.
“I think its just going to be an interesting time. The focus of the community on energy is more than it’s ever been, unfortunately that can make it more interesting to ensure policy stays on reasonable lines,” Mr Roberts said.
“But there’s so much that’s going to happen this year and when the carbon price is introduced, I think that’s going to bring another round of intense scrutiny of power costs. There will be plenty of political and other debates about what the community is getting for its money.”