Where’s the next market disruption coming from? It’s an ominous question that was pitched to an expert panel on Day 1 of the All-Energy conference in October. It’s not all doom and gloom, however, with the panellists finding lots to be hopeful about.
Panel participants (above, left to right):
- Jim Cox, board member, Australian Energy Regulator
- Dan Sturrock, investment director, ARENA
- Michael Benveniste, head of commercial and strategy, Powershop
- Alison Rowe, CEO, Moreland Energy Foundation
- Rachel Watson (panel chair), general manager Pacific Hydro and CEC chair
- Ben Burge, executive director energy, Telstra
- Frank Tudor, managing director, Horizon Power
The technology wave
ARENA investment director Dan Sturrock sees disruption everywhere in many varying forms. “The big theme is technology improvement and cost reduction,” he says. “You overlay with the changing market dynamics, new policies, the Finkel Review and the work AEMO’s doing with the other regulators and you get this collision of new technology and changing regulatory landscape.”
The result is a sense of chaos but where interesting challenges are popping up day after day. The economics of large-scale solar are seen as a problem that’s already been solved and ARENA is moving on to find and fund solutions to the integration issues highlighted in the Finkel Review: the role of large-scale batteries, concentrated solar thermal, electric vehicles, internet of energy, peer-to-peer trading, micro-grids and energy productivity. “It’s just getting busier and busier, and a lot more complicated.”
Crowd power
Consumers are pushing for change, says Moreland Energy Foundation CEO Alison Rowe, and gone are the days where they’ll just take what’s given. “People want energy independence and a transition plan that’s built for their home,” Rowe says. “But what is right for one home is not right for another.” Solutions could be found in systems where homes on a street are connected so that solar energy can be traded among them, renters included.
“Imagine a street with 20 houses, where eight have solar and there is centralised battery storage,” she says. “How do we share that energy equitably, how do we charge for it and how do we as a single node tap back into the grid and as a street pay that one-off cost. There’s a real flavour and need for people to take control of their energy.”
Business risk
Telstra executive energy director Ben Burge reminded the audience energy has always been one of the most volatile commodities on the planet, but in Australia the issue has become critical over the past four years as pricing risk has been harder to hedge. Industry can pass on rising electricity costs to customers, but there’s a point where customers will rebel. A company that can source its own energy generation will have an advantage. “When your underlying commodity cost has effectively tripled in the last four years, it’s incumbent on us to do something about it,” says Burge.
As a provider of an essential service to all internet addicts, Telstra does not want to breach its mission critical reliability standard. “When you turn the power off people get grumpy,” Burge said, “but when you turn off the Facebook feed, then you know true hatred.”
There have been at least three near-miss blackouts since the power was knocked out in South Australia in September last year, he says, where residents in some states were 50 milliseconds within having the same experience (Telstra’s 5G network has a signal round-trip of less than 15 milliseconds).
Telstra is a 1.5TWh user of energy, with hundreds of megawatts of standby generation capacity and more than 1GWh of battery back-up and Burge is hopeful that the company will one day be able to participate in a sophisticated electricity market where demand response is rewarded and rates are set every five minutes, not half hour. “It will be a choppy road between now and then but we’re very positive.”
Off-grid opportunity
Lessons can be learned from the far flung reaches of Australia’s spindly networks, says Horizon Power managing director Frank Tudor. As solar PV and storage becomes more affordable it gets to a level where it makes sense for distributed energy resources to be orchestrated, he says. (Horizon has been building micro-grids to replace expensive transmission sometimes destroyed by fire.)
“The problem about getting the most out of these assets really devolves to one of trying to do it at a local level, and that’s when you get micro-grids coming to the fore,” he said.
If groups of system owners can present themselves to the grid as a single entity, then those groups can in turn be managed as a federation of micro-grids. In Western Australia, Tudor hopes that projects by Horizon in designing and implementing micro-grids in towns and regions where energy is very expensive will be testing grounds for new pricing structures, technology and regulatory structures.
At Onslow, Horizon is spending $150 million to replace infrastructure and also convince every customer to install solar and storage so that the residents produce at least half the town’s energy. “We think it’s going to be the future,” he says. “But there are certain barriers, including technology in terms of intelligently connecting customers and giving them signals so they can optimise their own configuration of DER to make sense of the system themselves.”
Turn the light on
Any changes to pricing models will require action by regulators, and Australian Energy Regulator board member Jim Cox senses the spotlight moving his way. “There is more policy uncertainty now than at any time over the past 20 years,” he says. It is a challenging time, but also an exciting time. “There are a lot of very good things happening and I think our role of regulators is not to get in the way of these things happening,” he says, listing demand management, self supply, embedded networks, community renewables projects and energy services.
There’s just one problem: consumers are generally uninterested in energy and swamping them with information may possibly only induce paralysis about choice. The transition to a new system needs to be managed in a way the community can accept, he says. “All of this is made much more difficult by the increase in electricity prices.” Cox says the AER is looking at how pricing can be made to be more reflective of where and when energy is consumed, “and then we will be better able to encourage things like micro-grids, demand management, energy efficiency where it can best take place,” he says. “There is nothing more powerful than cost-reflective pricing but it’s something communities have had a lot of concern about.”
A cost-effective demand management scheme is also on the agenda, to address the suspicion that networks have such a strong incentive to build transmission that they’re unlikely to make it easy for users to use less energy. “We think there’s a lot of truth in that,” he says, saying the AER is working out ways to encourage demand management where it’s in the consumer’s interest. “We are bringing in the new world, allowing it to happen, but we’ve got to be aware energy is a very sensitive issue and there are a lot of concerns about inequality of outcomes and regulators have to be aware of that and ensure a transition will take place at a speed the community can accept.”
Catch a buzz
Energy was “boring” for the last 100 years, says Tudor at Horizon, and is going through a painful transition that’s seeing it splashed all over the news like hot gossip. If all goes to plan, it will be delegated by consumers to the “not interested” category just as soon as the dust settles, whenever that will be. “In another 30 to 40 years energy will be ubiquitous, the marginal cost will be zero, it’ll be basically on the fabric and infrastructure of everything we see and we’ll have solved the problem,” Tudor says.
“Right now there are security issues, there’s a lot of marketing going on, there’s a lot of change and transition, people are engaged. One of the tell-tale signs that we’ve actually cracked the problem will be disengagement of the community, then it will become boring and we will have moved into that final phase.”
Outside the rules
OK, so energy might become boring but the services that come from energy may become really exciting, says Rowe. When electricity is cheap and plentiful, supplied by optimally managed distributed resources, the possibilities are endless for new and unimagined services. Innovation never came from following rules, she says, “it came from sitting outside the rules” and then letting regulators do their thing. “I think we’re getting caught up in this mindset of, we can’t do this because of the current regulations and we need to wait for them to change. And I want to challenge that and say, what do we want, what do we desire, what do we know we need, [then] trial it, create it and then go and influence regulators.”
On tap
Energy underpins everything in the economy and we need it to work, says Tudor, but not everyone will want to invest in clean energy systems. “There will be a lot of people who simply ask for it as a service,” he says. “I think we are heading towards a lot of aggregators that sit between the wholesale market and bringing residential customers in, so you don’t have to pay for it yourself. You can sit back and know that it works and it underpins the economic infrastructure.”