Hard thinking, not quick fixes, key to Australia’s energy future

Solar, wind, fossil fuels and nuclear may all have a role in Australia’s energy future, but we need to get the policy settings right to ensure cost and carbon emissions fall while supply remains reliable.

That was the consensus at “Beyond 2020: Designing a new energy future”, a forum convened in Melbourne by Nous Group as part of the celebrations of our 20th anniversary.

I was pleased to facilitate the November 27 panel on this important issue. Joining me in the discussion was Audrey Zibelman, the CEO of the Australian Energy Market Operator, Grant King, the former CEO of Origin Energy, Richard Bolt, the former Secretary of the Victorian Department of Economic Development, Jobs, Transport and Resources, and Simon Smith, the head of Nous’ utilities, energy, infrastructure and resources practice.

The future mix of Australia’s energy supply has been a contentious political topic, but our panellists argued it was unhelpful to seek pre-emptive transitions to or from any source. Instead, Australia needed a mix of energy sources, with carefully planned and managed transitions to ensure reliable supply.

Grant explained that Australia’s resource endowment meant the country exported four times as much energy as it consumed domestically, and that the country would continue to be a coal exporter beyond 2040. He argued that Australia’s uranium supply meant it should be open to nuclear energy, and that renewables could be complemented by gas.

“Clearly renewables will play a very significant role,” he said. “I expect gas to play a bigger role for longer than people might imagine. I can’t see how we have high take-up of renewables without the stability that gas can provide.”

A century into the future, Australia’s power supply will be largely renewable, Richard argued, but over the next 20 years we should expect fossil fuels to remain dominant while their emissions intensity falls and zero-carbon alternatives build up. He said there was a strong case for hydrogen as a fuel source, and that Australia was well positioned to become a global supplier of hydrogen to the energy-dependent northern hemisphere.

“If you look at all the decarbonisation challenges we haven’t got answers for – things like steel-making and cement-making, heavy transport, air transport, shipping – all seem susceptible to one basic answer: hydrogen,” Richard said.

As head of AEMO, the organisation responsible for operating Australia’s largest gas and electricity markets and power systems, Audrey is grappling with the technical challenges of integrating a variety of energy sources.

She said that in recent years Australia had become a global leader in the uptake of rooftop solar panels, but this distributed energy generation created challenges.

“Right now the best way to manage rooftop solar is with storage at the grid scale but nobody can make a business model around that, because our markets and regulatory regime do not accommodate it well,” she said. “We expect 30 to 40 per cent penetration of distributed energy resources and electric vehicles across the country, which is really changing the complexity and structure of the system.”

Discussing the potential of batteries to help intermittent energy sources become more reliable, the panel explained that lithium ion batteries had limitations but that flow batteries, which use tanks of electrolytes, could be more useful.

Even if flow batteries prove to be a large source of storage in the long-term, there is a case for using low-emissions fossil fuel sources of power to back up the variability of renewables as their share grows above 50 per cent.

“During two weeks of cloudy and calm weather, if you have a battery system dependent on the power from renewables to charge it, and they’re both dead, then you’ve got nothing; that is like civilisation coming to an end,” Richard said. “So we actually need to have storage systems that are independent of the thing they’re there to back up. That’s why is has to be a different technology.”

Given the inevitable changes in energy sources, it is difficult for regulatory settings to keep pace. Simon argued Australia needed more sophisticated and nimble governance arrangements.

“Everyone’s talking about all these new technologies, but nobody knows which ones will be successful for which purposes at what price,” Simon said. “The big lesson is that we’ve had an inflexible framework that hasn’t allowed or encouraged innovation, experimentation, new technologies, new business models.”

With $400 billion in investment in Australia’s energy sector anticipated over the next 20 years, Richard made the case for greater central coordination.

“One of the things we’ve got now is a very large rate of investment, and a lot of that investment needs to be tightly synchronised and coordinated, which is not a case for central overriding planning but it is a case for investments to be choreographed so they add up to a coherent whole,” he said.

In seeking to take the politics out of the energy debate, Grant said expertise rather than strong opinions needed pre-eminence.

“This is a complex industry which needs really strongly skilled people, evidence-based progress, step by step,” he said.

“Let’s not get distracted by grand vision, let’s take each of those steps, well thought-through, well executed. That builds confidence. People will stand back, chill out, let the professionals get on with the job. We’ve got to in effect stand back from these massive big visions of transforming things.”

The full discussion can be heard on NousCast.

Published on 11 December, 2019.

This article was originally published on Nous Group’s website