For Paul Budde, the energy sector doesn’t need a transition, it needs a transformation – and it’s going to have to get used to sharing, collaborating and co-operating if it’s going to achieve the new energy future Australian customers want.
Already, Prime Minister Malcolm Turnbull’s time in the top job has sparked interest in smart city advocates; those who believe the key to Australia’s energy transformation lies in new infrastructure systems and, more importantly, a new leadership mentality.
The customer has already become the disrupter. But for the customer to become the focus of change, the energy sector must first show leadership, drop the silo mentality and create open systems. This is where Paul Budde comes in, the Smart Grid Australia CEO who’s spent the past 30 years helping transitioning industries evolve their business models.
“It’s easy to say, ‘you have to transform’, but what does that mean? You can’t build smart cities if you don’t have smart products, and you can’t develop smart products if you aren’t a smart company,” he says.
As director of an independent research and consultancy company, and co-founder of the United Nations Broadband Commission for Digital Development, he’s one of the world’s leading telecommunications management and marketing consultants. While he’s quick to point out he’s no engineer, Paul’s confident looking at energy from a holistic business model perspective will allow the sector to strategise in a revolutionary way, rather than the antiquated top-down methodology that has driven decision making for the past 50 years.
Central to his theory is the idea the people are ready – it’s industry and governments that need to set the pace.
“When you look at all the discussions about energy, climate change and carbon impact nationally – and internationally with the UN Conference on Climate Change in Paris – countries are setting high targets. But in reality, it’s the communities and the cities on the ground that have to implement them,” he says.
“There are positive strategic discussions happening at a federal level and, at the same time, lots of cities working on their own sustainability plans, but there is a huge disconnect.”
Indeed, cities don’t typically have the budget to do a lot, and there’s a reluctance for governments to pass on power and money down the stream. This is why Malcolm Turnbull’s focus on Australia’s cities – also celebrated by the academic and urban planning community – has re-invigorated Paul’s confidence in a connected Australia.
“Mr Turnbull agrees with the implementation of smart cities and this is a very, very important step because it shows leadership. We’ve missed this in the last couple of years,” he says.
“Under his leadership, some of the initiatives that took direction a couple of years ago are going to be revitalised. They may have other political collars on them, but hopefully we’re going to be able to go back to what we were doing a few years ago and reignite the issue of smart energy and smart cities.”
The energy sector may be at the centre of debate surrounding consumer expectations, but it’s not the first industry to have to evolve. Twenty years ago, the telecommunications industry was up against similar hurdles. Largely anti-internet, it had not fully conceptualised the smart phone and the possibilities of hand-held technology. Nevertheless, in time, it took its declining profits in mobile communications and invested in mobile broadband – where the future of communications continues to look strong.
Rather than protecting existing businesses and fighting rear-guard battles, Paul says, with the right kind of leadership, the energy sector has the power to be produce the ‘Googles’ of tomorrow.
“Can this sector produce the next Microsofts, Facebooks and Skypes of this world? The answer is yes. Of course, there are massive challenges,” he adds.
“Consumers are already reducing energy, so the companies are getting less revenue. They are getting hit over the head regarding gold plating and it’s causing a big headache for the industry. But at the same time, what you hope is visionary leaders will stand up and say, ‘yes, this is happening on one side, but where are the opportunities on the other side?’”
Recently returned from a trip to Europe and Asia, Paul has seen the possibilities first hand. The Netherlands, for example, has identified huge potential in empowering communities and businesses to make and take free energy through renewables and clever shared-systems.
Alliander, the largest energy grid management company in the Netherlands, is behind a hugely successful community development where a large football stadium generates and shares solar power with a neighbouring academic hospital – and vice versa. As the stadium doesn’t use a lot of power during the day, its surplus energy goes to the academic hospital, which, in turn, exchanges energy with the stadium at night. What’s more, the excess energy is fed into the suburb at no cost to the consumer.
“In Amsterdam, streetlights have wi-fi, which regulates local transport, public lighting and also provides internet to people in the street,” Paul says.
“They have set up an industry platform with real close co-operation between transport infrastructure, council infrastructure and telecommunications infrastructure and energy networks, all playing a role to become more efficient and together adding value to their own businesses as well as to the citizens of Amsterdam.”
Then there’s Malaysia’s largest electric utility company, Tenaga Nasional. Despite having MYR 99.03 billion worth of assets and serving more than 8 million customers, it no longer identifies as a utility, but rather as a smart city company.
“They have all sorts of new business models where they build systems for villages, communities and even cities, in a similar situation to Amsterdam. They have the assets, and then utilise that infrastructure to get the most out of it as possible,” he says.
“In my advisory role with the UN I also see schools in Africa that don’t have electricity, but suddenly there is an enormous push for mobile telephony. So the mobile company puts solar panels on top of a school so people can charge their mobiles. But at the same time, the school gets free energy.
“These are the smart projects happening around the world. This is where you see leaders thinking outside the box and exploring new opportunities, rather than simply trying to protect incumbent businesses.”
It’s a complete overhaul of both business cultures and technology. And the Australian market better get busy, because if it doesn’t, Paul says someone else will step up to the mark.
“You can’t stop progress. Take solar for example; you can’t stop solar. You can ask government to put taxes on it, but in the end water flows around rock,” he says.
“People will find renewables and they will use renewables. It’s good for the country, it’s good for the city and it’s good for the people. But you still need infrastructure to manage that. That’s where operators can facilitate.”
In fact, this is where the energy companies are in the best position to drive change. Japan is just one example. With the help of the government, Japanese utilities have driven the uptake of electronic vehicles and facilitated the infrastructure to support the grid.
“Look at the start of our previous government; they facilitated the start of solar panels and it was an avalanche. Suddenly we went from being the lowest ranked country in the world for solar to the top for personal PV. If you drive a new trends, you also drive new business,” Paul says.
“But input from all stakeholders is essential if we want a true smart city.”
Giving a nod to Victoria’s smart meter roll out, Paul acknowledges Australian companies have certainly tried to move towards a more connected energy landscape. But despite their smart phones and real-time data readers, he says the average consumer still has no clue about how much energy they consume, and what devices use too much power.
“There are no systems they can plug into. The entire issue with the so-called smart meters is an obvious example. If you compare that with Malaysian smart meters, which are open and available to others for all sorts of smart city applications, Australia’s technology has so far been a closed shop,” he says. “Customers are ready to change, but unless there are open systems in place they can tap into, what can they do? At the moment, there is a smart meter, but the only one who can read it is the energy company. What’s in it for the homeowner or the business owner or other smart companies who want add further value to such an infrastructure?
“We could learn from the telecommunications industry here, in terms of the benefits of an open system. It’s ridiculous an energy retailer in Victoria needs three to four systems to facilitate the customers from the various players. There is no interoperability. And because of this war between retailers and distributors, there is little interest in making life easier for the customer.”
In a nutshell, industry isn’t pushing for interoperability, and government isn’t asking for it. Again, Paul goes back to the importance of good leadership. What’s more, he wants an open system that invites young entrepreneurs, renewable players, telecoms, big IT companies, tech start-ups, and everyone else with a good idea to the table.
“Why do we have water meters, gas meters and electricity meters? Can’t we combine these? We can only be smart about our networks if we collaborate and stop working in isolation,” he says.
“Look at the digital economy. Why is it so successful? It takes about 80 per cent of existing costs out of the old business models. The same can apply to the electricity industry.
“We used to be one of the most efficient energy networks in the world, but now we are one of the most expensive because we are looking at gold plating in isolation. We didn’t look at whether we can use what telecoms companies, at what other cities are doing, or what other sectors we can team up with.
“If you want to save costs, this silo mentality needs to go. We must take on a more holistic and broad approach.”
There are examples where various sectors are making headway in this area. Paul points to Canberra where the government is set to trial ‘smart parking’, where parking inspectors will be alerted to drivers overstaying in paid parking through in-ground sensors. It will run using the public wi-fi network recently rolled out around the city.
Then there’s Ergon Energy’s step forward in the solar business. But, as Paul points out, “these examples are still project based, and not the answer for the community as a whole”.
There will still be a place for the grid in this new energy future – people will continue to need safe and reliable power, and an interconnection to keep the various hubs together. But those operating the grid will have to start having very different conversations. It has to become bi-directional, a network of all sorts of energy interchanges.
“I’m sure we are putting too much hope on Malcolm Turnbull, he says with a smile. He has a still largely conservative party to manage, so he will have a difficult time to even convince his own people,” But progressive industry leadership can assist the Prime Minister in his drive to create a Smart Australia, Paul says.
“The PM’s own personal announcements and attitudes are a real boost to leadership in this space, and it will stimulate the energy industry to think differently.
“Despite the internal political fight, if leadership keeps going in this direction, change will come. Nobody wants to be in a third-rated country. We, the people, are ready… we need the leadership we deserve.”