Better Questions: From Strategy to Execution amid the Energy Transition

It is a reality of life that difficult problems require thought and analysis to overcome, and the field of electricity policy is no different. As Christopher Hitchens once said "the essence of the independent mind lies not in what it thinks, but how it thinks". Calling the word “disruption” out as loudly as one can, while useful for turning heads in the general direction of the incoming force, provides neither a view on the issues arising, how one should prioritise them nor the range of actions that would deal not only with the immediate but the long term problems arising. As an industry, we have suffered from a plague of specious commentary – much of it intuitively appealing but ultimately unable to be borne out in fact – relating to everything from generation mix through to smart homes. 

Like most complex issues, the line between reasonableness and fiction lies within a cacophony of noise, making the paths of those tasked with action almost impossible to navigate. It is not enough for public commentary to simply call out the need to concentrate in the face of certain change. Solutions are what is required. As Kennedy said, "too often we enjoy the comfort of opinion without the discomfort of thought".

The way in which we generate and use electricity is changing, but there are some first order realities that we need to accept. Firstly, we cannot have more than 50% of our energy produced by renewables unless we have either rotating inertia available (coal, gas or hydro power plants), or we are able to overcome the current gaps in communications speeds that make large numbers of interconnected batteries unable to bridge the gap. The next ten years will require markets to reward rotating inertia for being there when we need it, while encouraging and developing new markets for frequency and support which will attract and develop new technologies. 

Secondly, to encourage and connect the vast numbers of small renewable energy facilities into the system will require a new collaborative deal to be struck between transmission and generation. While aspects of this discussion have opened up through COGATI, there are a number of smaller issues to be dealt with: marginal loss factors need to change; the industry needs more current information on prospective new plant that is being built; and we need more transmission competition to ensure that margins start to reflect the prospect of new entrants. Longer term challenges are rapidly moving into nearer horizons and an investment drought awaits us if we cannot truly integrate our environmental aims, technological possibilities and economic means.

Thirdly, we need to decide who will own and run the platform for distributed energy, what the optimal network architecture will be, what the allowable edge versus cloud parameters for system security will encompass, how communications and cyber protection will work hand in hand, and how the funding paradigm for the new investment to enable it will be struck - one which will reward but not insulate networks from asset base movements consequent to a flattening of the peak. This will be the work of scalpels, not broadswords in the fields of rule making, regulation and investment decisions, and will stretch the boundaries of the original intent of the Energy Markets Agreement that binds our States, the Commonwealth and our energy institutions.

Fourthly, the time is rapidly coming for hydrogen and new energy. In the former, expect scale to occur first in ammonia production and in "clean gas" over the next 3 years, and as capital costs decline, to see gas to power emerge as a market post 2025. With Government assistance, these dates will be beaten. It is not folly to imagine a world post 2030 where heavy localised vehicles will be hydrogen fuelled and where light vehicles will be electric. Both will form part of an integrated, decentralised and inextricably connected power system aided by liquid technologies, IoT and machine learning.

Moving into and through the energy transition between now and 2030 will cause large shifts in the value of traditional companies and new entrants – both added and lost as markets shift and adjust. There is not always a first prize for those who invest in new markets, but there is a penalty for being last. Human capital in these times of transition matters, and companies who invest in the right skills, experience and technology will fare better than those which don’t. 

To arrange a meeting with one of our team, or to provide your comments on our approach to the upcoming energy transition, please message me directly or leave your comments below.