Takeaways from Australian Energy Week 2024

Speakers on stage at 2021's Australian Energy Week event
Speakers on stage at Australian Energy Week

By Phil Kreveld

Australian Energy Week congress featured an important plenary session, with some significant takeouts. In general, climate activism notwithstanding, there was clear message: commercial realism has to temper the community’s desire for progress in cheaper energy and the Government’s desire to stick to its COP commitments.

AEMO‘s Daniel Westerman announced a significant and welcome change to the integrated systems plan for 2026. The new ISP will introduce locations where generation sources can be developed, and will indicate expected energy losses on transmission lines. The ISP will also specify the use of gas-fired generation and the increasing importance of customer based energy resources (CER). The current energy statement of opportunities (ESOO) indicates a strong need for storage in addition to 6GW of new capacity added in the past 12 months. Westerman stressed the necessity of gas fired generation in the south eastern winter energy mix. When questioned by the ABC’s Dan Ziffer, Westerman was very clear that Australia’s green energy transition required certainty; “investors will not just hang around”. Serious challenges impeding a businesslike and therefore effective transition to renewable energy sources to meet the 2030 82% target, set much of the tone of the plenary sessions.

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Questions rather than solutions raised by a variety of presenters ranging from regulatory to network operating and construction, and legal and information technology, presented a faltering transition. Carbon emission reduction as a single issue is blinding us to the cost effectiveness of removing the “last 10% of emissions” from otherwise economical renewable energy source solutions according to Matthew Warren, Principal at Boardroom Energy. The panel discussion which was moderated by Mark Patterson of Energy Catalyst raised issues including renewable policies being subjected to public opinion, a lack of discipline in planning, letting consumers choose what they want (like 30kW solar) and having excessive intrusion of public opinion in policy formation.

Sobering views expressed by David Ryan of Herbert Smith Freehills raised uncertainty caused by differing agendas of Federal and State policies. According to him the National Electricity Rules are not fit for purpose. States are using their own powers to create regimes for transmission planning and approvals, cost recovery, access schemes and generator connection. Private capital is essential but is stymied by barriers that the government should remove, in particular in regard to social licence, land acquisition and finding solutions to key project gap risks. Major impediments mentioned by Ryan included a lack of clarity in biodiversity requirements. This has seen to a treacle like approval process for wind farms. It seems that much of this can be summed up as ‘renewables are good, but not in my backyard’. Highlighted areas included capacity constraints, slow connection approvals, and that consideration should be given to alternate transmission line construction, for example a PPP-style model as used by the NSW government for REZ infrastructure. Commercially, bankability of projects requires long-term offtake agreements and this is affecting offshore wind and pumped hydro schemes.

AEMO’s 2026 ISP currently in progress will include specified locations for new generation in order to provide realistic guidance for capital investment. This appears to gel well with above comments. However, referring to the above panel discussions, the role of consumer energy resources (CER), although to be given a new scope as mentioned by Westerman, lacks specifics as to how it would operate in the overall transmission space.

Victor Finkel, of McKinsey Consulting pointed out that domestic solar is one bright spot in Australia’s energy landscape, “whereas the gas needle has not moved” and utilities being reluctant investors. Stephanie Unwin of Horizon Power stressed the importance of CER in distribution grids. She was a panellist in a panel including Rik de Buyserie of ENGIE, Guy Chalkley of Endeavour, and Brett Redman of Transgrid. Redman worried aloud about the slow investment in transmission infrastructure, a clear lack in project coordination as well as technical security issues. Contrary to the view that one can’t lose in transmission investment, Redman indicated that performance is below that in super funds. De Buyserie took issue with the very slow project approval processes and summed this up as “everyone wants renewables but not in my backyard”.

Anna Collyer of the AEMC accented the role of CER and smart meters in the energy transition. She stated “consumers are the hero in the road to net zero, but no hero walks alone”. She made particular reference to flexible CER market participation, for example by way of VPP. Justin Oliver of the AER rumbled worry stones about the oligarchic nature of transmission infrastructure and the need to strictly control network costs. He made mention of the increasing capital needs of distribution networks as they are being increasingly challenged by EV and batteries. He sees the big challenge in the renewable transition as shifting consumer demand although he thinks that many retailers will still shield customers from demand driven price variations.

Damien Nicks of AGL, who made a solo presentation expressed a strong note of optimism, mentioning that his company has 12GW of projects in the pipeline with 5.8 GW committed. Nicks stressed the importance of the energy contribution of AGL’s 4.5 million customers who generate 30% of the energy requirement, and the importance of V2G in the future, referring to the contribution made by vehicle batteries in the UK, where some 200,000 customers are involved. Interestingly, Nicks made little of the generally held view that coal-fired base load is inflexible, noting that Bayswater flexes between 30 and 70% of capacity.

Mark Collett of Energy Australia seemed less upbeat. Energy Australia has 1.6 million customers. Collett points to slow project approval processes. VRE projects are not coming on line fast enough and transmission projects are lagging behind. Furthermore returns on VRE are too low at 5% and require the intervention of government in order to boost investment. Collett accented the essential role of gas in the energy mix.

Gas is often cast in the role of bête noir, and in a panel discussion led by Telstra’s Ben Burge, the role of gas in a hypothetical example of an environmentally responsible company wishing to reduce its CO2 imprint on the planet was made eloquently. The aim of a carbon footprint reduction must answer to commercial realism. The theoretical case presented sketched a limited land area available in addition to roof area for the generation of solar electricity. Various scenarios presented including availability of surplus electrical energy from a neighbouring property with the aim of balancing internal rates of return against CO2 reduction. Complementing electricity shortfall with gas energy presented the best trade-off. Although playful in style, the seriousness of commercial realism rather than purist notions was made very plain.

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Victor Finkel from McKinsey also stressed the importance of gas although the heavy lifting in the energy transition would be done by electricity, the more so because of conversion of many industrial processes to electrical energy. His company foresees Australia’s future in steel making, replacing coking coal with electrical energy and hydrogen.

No plenary session would be complete without a reference to AI, and more broadly without information system technology. The increasing complexity of dynamic distribution networks lends itself as suitable testbed. Unsurprisingly Amazon has entered this arena. Damien Buie of Amazon’s AWS company described an information system and complementary AI such as UK-based Octopus Energy’s Kraken platform covering some 40 million accounts and integrating with distribution SCADA. Buie’s presentation was echoed by Arun Biswa of IBM.

To conclude: this plenary session can be regarded in the light of ‘sleepers, awake!’ Our resources of wind and solar, notwithstanding, the general takeout has to be that a far more integrated, holistic approach is required for our renewable transition, free from political or carbonless ideation.

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