Melbourne Convention and Exhibition Centre

Anna Collyer, AEMC Chair

 

Introduction

Thanks Mathew and good morning everyone.  It’s a pleasure to be here with you this morning, both in the room and virtually.

I’d also like to acknowledge the traditional owners of the land where we’re all respectively meeting today, and pay my respects to elders’ past, present and emerging.

After having the privilege of advising many of you in the audience over the past 20 years, I’m thrilled to be talking to you today as the new chair of the Australian Energy Market Commission.  I’ve had a whirlwind few month - I’ve met with stakeholders, contributed to the ESB P2025 work, got up to speed on a raft of rule changes and spent time getting to know our team.

I’m excited to have made the leap from my role as a partner at Allens law firm advising Governments and industry participants, to one where I can make a different kind of contribution to the evolution of the sector.  And what a time to be able to do that!

While I don’t underestimate the challenges for one minute, I also see the huge opportunity for all of us working together to create something new which will deliver great outcomes for energy customers.

It’s also an honour to be one of your first plenary speakers at this conference and what I’d like to do is take the opportunity help set the scene.  I know that we’ll be spending the next few days discussing and debating the challenges and opportunities I’ve just mentioned.  So rather than me focussing on ‘what’ should we be doing, I’d like to spend some time with you this morning talking about ‘how’ we can best work together to achieve these outcomes for energy customers.

I’m going to start by telling you a bit about the photo that is on screen. 

I took the photo a couple of weekends ago at my daughter’s Lacrosse match.  She had an away game and as it turned out the grounds were next to the Gardiner’s Creek urban wetlands that my husband James had been involved in designing and planting back in the 1980s.  So, the two of us took a walk while the team was warming up to have a look.

For completeness I’ll note that on this beautiful Autumn Melbourne morning, our older teenage son was still at home fast asleep in bed.

I originally took this photo as the wetlands had to be built around the transmission tower and I wanted to show how well that had been done.

We all have our strengths and I would suggest that photography isn’t one of mine.  Luckily, market design isn’t done in photographs.

What you can’t see in my image, which I’ll ask you to imagine, is a wonderful landscape of Australian native plants, complete with wetlands, ducks, a bird hut and lots of walking trails.  It was developed as part of the extension of the south eastern freeway.  Melbournians in the room will be familiar with that freeway and the south eastern suburbs it passes through.  The vision for the wetlands area was for it to be more than just a buffer but to create this kind of urban sanctuary and it involved a lot of planning and plain hard work to turn that vision into a practical reality.

And so, after taking the photo I started to make some links with what I intend to share with you today, which centres around collaboration, innovation and pragmatism.

We’ve already reflected this morning that our energy sector is going through a fundamental transition.   The grid is decarbonising at a rate of knots.  We are working on complex changes to the way we deliver energy.  Customers are getting more actively involved in the energy system through changes in the way they like to produce and use electricity.

And of course, we don’t have a single homogenous customer.  I’m sure there are people in this room or who have solar panels and home batteries and use their app regularly to see how much it is saving them.  However, we also have families for whom energy is a significant and challenging part of their household budget.  We have huge users like aluminium smelters and steel mills, who have to compete internationally to sell their products.  And I’m sure you can think of many more.

All of us in this room have a collective goal, and a responsibility, to make the energy transition deliver successful outcomes for energy customers.  The pace of change is greater than any of us predicted, our work is complex and urgent and there is an enormous amount to do.

In this context, I want to talk to you about how I see the AEMC working with our market body colleagues, with jurisdictions, with all of you and most importantly with customers, to deliver the best possible  outcomes for customers.

At the AEMC we’re shifting our ways of working to meet the current challenges.  And the way we want to work with you can be characterised in a similar way to the design, planting and development of the urban wetlands you can’t quite see in my photo.  There’s three things we want to do.

First, we want to be more forward thinking – we need to have a vision of the future and design towards it

Second, our solutions need to be more pragmatic – solutions that will deliver the outcomes we’re looking for, and we need to be prepared to change if something is not working

Third, we want to be more collaborative – we need to listen to and learn from the vast range of perspectives on these issues, which will contribute to coming up with better solutions.

I’m going to illustrate this with examples of some of the most important things we’re working on at the moment:  Essential System Services and Distributed Energy Resources.  And, as these three objectives are also pretty resonant with a good innovation process, I’ll also draw on some of my recent experience as head of innovation at Allens.

Forward thinking

As I’ve been meeting with stakeholders and asking what they want from the AEMC, this is the one that comes up the most often.  How did the rules get so out of date with what is actually happening in the system?  What we really want from the AEMC is to be more forward thinking in its approach.

Of course, this isn’t necessarily easy in such a rapidly changing system.  And energy is certainly not on its own here.  One of the initiatives I was most proud of as head of innovation was a partnership Allens formed with the UNSW law school:  the Allens Hub for Technology, Law and Innovation.

A group of academics had come together to consider exactly that question – how can the law get better at dealing with rapid changes in technology and the innovation that goes along with it?

They were looking at things like the development of increasingly intelligent AI and how to manage the huge proliferation of data we are now able to gather.  Whenever I had the chance, I would always say that the energy sector is in exactly the same boat.  The changes in technology and customer preferences and the opportunities for innovation are the hallmarks of many other sectors that have been through the kind of disruption and transformation we’re seeing now.

So how can we try and get ahead?  How can we be more forward thinking?

I’ll use essential system services to illustrate how we’re thinking about this objective.  I believe it’s the most important thing AEMC is working on right now.  These are a suite of services we have defined, that are necessary to keep the system stable as we shift from our traditional generation fleet to new technologies.

As with our wetlands example, I think the starting point for us to be forward thinking is to have a shared future vision of what we are trying to achieve.

You could call it the light on the hill.  Without a light on the hill, it’s easy to get stuck in the weeds, to lose your way in the dark or take the longer road.

In this case, setting that shared future vision is the role the ESB has played in developing the P2025 report. I believe the outcome of this work will provide us with that high-level picture of where we are heading.  From an ESS perspective, the ESB work has done the heavy lifting in unpacking something that was  simply part and parcel of producing energy by synchronous machines to defining  this suite of inter-related services that we are now working on.

Forward thinking applies as much to implementation as it does to planning.  Once the design work is done, the activation takes time – not as a fault but as a necessity of sequencing.

The wetlands vision was achieved through designing and then methodically planting many different species over time – if you’d done it all in one go, various aspects would have failed, with not insignificant consequences that could have been avoided.

As with the energy market, we’ll be making constant step changes towards achieving our vision.  As Kerry Schott has said, we can’t do it all at once in a big bang.  So while the ESB’s P2025 program continues, we’ve been working in parallel to deliver the most urgent ESS changes – because they just can’t wait.

At the moment we have multiple inter-related changes on the go  There are also other related changes in play which impact on our work, such as the reliability part of the P2025 work.  We’re very conscious about how much is going on for stakeholders and we’re trying to balance working in manageable individual pieces, while still keeping hold of the bigger picture and how it all fits together.  We want to make this easier for you and will keep working on ways to demonstrate how we are moving towards the long-term vision as we work on each piece of the jigsaw puzzle.

Another way to be more forward thinking is to ensure our rule changes allow for innovation. Defining the suite of essential system services was a critical step in moving towards our future state.  The reason we have done it this way is so that our frameworks will allow those services to be provided by new technology in the future, without us knowing exactly what that is today.  By defining the outcome, we want rather than the precise way it is to be provided, we’re encouraging innovation in order to allow for the best way of delivering those services to develop over time.

The final thing I want to mention in relation to how we can be forward thinking is the idea of putting rules in place before we need them.  Although this sounds obvious, I’ve quickly discovered it can be a hard thing to do.  We’ve got a couple of rule changes on the go at the moment where the feedback we’ve had from stakeholders is that we don’t think we need those changes yet.

With the fast-paced change of this energy transition, I can see why some stakeholders feel uncomfortable about the uncertainty of any challenge emerging.  Conversely, if those challenges do arise, they’ll do so very quickly, and it may not be possible to develop a solution in time.

So, we are balancing two risks here.  The first is the risk of making a potentially significant and costly change which is not eventually needed.  The second is we don’t make a change and when the circumstances arise where it is needed, we don’t have it.  So, we’ll be aiming to be forward thinking while balancing these 2 risks and we’re looking at different mechanisms like trials, transition periods, trigger mechanisms and other devices to do this.  This is something that will be important for us to continue to grapple with as the pace of change accelerates.

Pragmatic

Which leads me nicely into my second objective which is for the AEMC to adopt a more pragmatic approach to its work.

In a period of rapid change, many of the issues we’re trying to solve do not have one right obvious answer – and I’ve been heartened that many of the stakeholders who I have met have agreed on this.

We are predicting both the future problems as well as the potential solutions to those potential problems.  And sadly, none of us has a crystal ball.  Modelling and data and analysis can give us a lot of insight but at the end of the day we need to make judgement calls on what we think is going to happen.  We also need to be prepared to take stock and change tack when things aren’t working.

If I draw you back to the wetlands again, they started with a mathematical formulation of what species should be used, in what combinations, to deliver the optimal outcome.  Funnily enough, the people doing the actual planting had to get a lot more pragmatic than that as they worked with the reality of digging, planting, ground conditions, weather conditions, you name it.

Then, over time, species which were planted may have thrived, or not.  Where they weren’t doing well, instead of being sentimental or fixated on one solution, the approach was again pragmatism.  They would take out what wasn’t working, observe what was working and use this knowledge to try something different.

I’m going to illustrate our thinking about being more pragmatic by our work on metering.  My old Allens team will be laughing at me talking about metering.  It’s something I’ve worked on for many different clients over many years.  And it’s not easy to convince a junior lawyer that metering is a fun and interesting thing to work on.  However, as I would tell them, and as we all know, metering is all about data, which is absolutely fun and interesting, and important.

Data is a key ingredient for our future market.  Smart meters can help unlock the potential of batteries, rooftop solar and electric vehicles.  Data can help new service providers, with appropriate customer protections, help customers get the most out of their assets.  Data can help us with better forecasting and predicting the future and support better choices and policy design.

In 2014 the AEMC made the Power of Choice rule change which was designed to use competition to drive a greater uptake of smart meters.  I think we would all agree that we haven’t seen the results we would have hoped for.  So, we’re currently undertaking a review which will relook at our objective and how it can be achieved. 

And we’re going to do some things differently this time.

First, we want to be clear that we do have a shared objective of what we should be aiming to achieve.  We’re going to be working closely with Energy Consumers Australia to engage with consumers in a different way on this review.  We’re not going to ask them what they think about metering.  I think we all know what customers think about metering.  In fact, I’m ashamed to say that I live in Victoria and do not actually know where my smart meter is located.  However, what we do think customers can tell us about is how much they value the things we think smart meters can deliver.

Second, we’re going to apply more pragmatism in our analysis of the problem and potential solutions.  Sound economic principles and technical precision will remain our starting point.

However, we want to give more focus to practical realities – like the fact that metering is the last thing most consumers want to think about -  as well as weighing up the benefits we want to achieve with the costs of pursuing those benefits by a particular means.

This is another area where I’ve had a lot of stakeholder feedback as something that needs to be a critical component of our thinking.  On all our reforms we’ll be working closely with AEMO so we can get the best understanding of system costs, and will look for your input on this too.

And third – in the same way that the wetlands team was not sentimental or attached to a species that wasn’t working, we will be pragmatic and be prepared to do something differently if our original solution isn’t working.  Of course, our first best option is to make the right call on all of our work.  But given the pace of change around us, I want us to not to get hung up on making a change if it becomes clear that’s the right thing to do.  On metering, we do have to start where we are, as we don’t have a sheet of blank paper.  However, within those boundary conditions, we’re absolutely open to finding a different solution which will get a better outcome for customers. 

You can expect that we’ll be applying this type of pragmatism to all of our future work as we sharpen our primary focus to that work that delivers the best outcomes for customers.

Collaborative

Last but certainly not least is collaboration.  Solving complex problems requires different perspectives. 

After nearly 4 months of meeting stakeholders I’m very clear on two things:  first, everyone in the energy sector is passionately committed to improving the energy sector, and second everyone in the energy sector brings a different perspective to the best way to do that.

Now, I don’t have any insights to offer on the work that went on to develop the extension to the south eastern freeway or how that led to the development of the Gardiners Creek wetlands.  But I’m guessing if I went back in time I’d find some decisions that had to be made taking into account a range of strongly held diverse points of view.  You can imagine people at the end of the extension may have had a different view to the residents of the suburbs it had to pass through.

In the same way as we have strongly held diverse points of view on the best approach to something like facilitating greater integration of solar panels.  So I’m imagining that it was a collaborative approach considering those diverse points of view that resulted in something that ultimately provided benefits to all stakeholders.  Which is the same thing we’d like to aim for here.

In our context let’s look specifically at how we’ve been taking a collaborative approach on distributed energy resources.    

Starting with customers, the AEMC has always been committed to a customer focus.  However, what is changing is that the nexus between Australia’s energy rules and mum and dad energy customers is getting closer.  Many of those customers are now generators as they sell their excess solar back to the grid, which gives them a direct linkage that wasn’t there before.

So in terms of collaboration this is going to have to look very different.

We’re going to stop those activities that aren’t adding value and look for other and better ways to engage with customers.

Those involved in customer engagement will tell you the science of how to do it has really shifted in recent years and we’ll be aiming to modernise our processes. 

Engagement with customer advocates is invaluable to us and we derive enormous benefit collaborating with Energy Consumers Australia, for example of the metering work I’ve referred to earlier, as well as our current DER Access and Pricing reforms.

This is in fact a great example of broader cross sector collaboration.   Last year a group of four proponents requested that we consider reforms to DER – they were St Vincent De Paul, The Australian Council for Social Services, the Total Environment Centre and SAPN.  They were brought together by ARENA’s Distributed Energy Integration Program. The proponents all want to integrate and enable more distributed energy but from slightly different angles – equity, keeping the network stable and decarbonisation.

The collaboration the ARENA program engendered in seeing industry, consumer groups, and governments work together on these issues is something we wish to learn from and continue to bring to all our work.

I also want to mention jurisdictions in this context – states, territories and the Commonwealth are also key to our collaborative approach.  You don’t need me to tell you that the environment the energy sector is in is radically different to the one in which the NEM was established.  However different it is, the value of national frameworks, interconnectedness, learning and improving from one another in a Federal system still hold true.

Right now, Australia’s energy system is changing faster and more substantially than anywhere else in the world.  All Governments are deeply concerned about how we manage that and cope with those changes to deliver for consumers.

While each state and territory has slightly different priorities, goals and risks in terms of price, reliability and emissions that doesn’t prevent reform as long as we are pragmatic, collaborative and forward thinking.  Our work and that we do with the Energy Security Board is absolutely critical in that. The support Ministers are providing for the Post 2025 work is fantastic and repeated to me every time I meet with an Energy Minister around Australia.

It may go without saying but collaboration with our market body colleagues in AEMO and AER is critical.  We each have a distinct and important role in the energy sector and in the energy transition.  The best outcomes will be achieved by collaborating effectively with each other.  We have some great examples of how we’re doing this already. On all of the ESS work we have been working closely with AEMO, given the critical perspective of the system operator on how to solve these issues.  On our DER access and pricing work we’ve worked closely with the AER, given their critical role in implementing decisions under that reform.  In each case we believe we got better outcomes by working through the issues with our different points of view.  I’m really looking forward to working with Daniel and Clare and their teams as we move forward.

Last but of course not least is all of you.  As I said, I’ve met a lot of you in the last few months and all of you do have different perspectives and strongly held views.  However, I do like the phrase that none of us is as smart as all of us.  We think part of our role at the AEMC is to hear all of those perspectives and navigate through those disparate views.  We hope you agree that the AEMC has always been committed to extensive consultation to deliver rigorous rules and advice.

Your input is vital for is in our work, and we’ve heard from you about the sense of change fatigue you’re experiencing. We’ll keep trying to find new methods of collaborating with you, whether it’s through working groups like we have set up for our system services work, ad hoc roundtables which were really beneficial on our current DCA rule change  or using technology to make our forums much more accessible and efficient like we did last week for DER access and pricing.

We’re also keen for one on one opportunities with you as we know how important this is to build trust.  And for those of you who have offered lunch and learns for our teams, our response will always be ‘yes please’. 

Conclusion

Let me come back to my photo now and our enjoyable Sunday morning.  As we were walking in the park, a woman who was also taking a walk through the area stopped and smiled at us.  She didn’t know us and certainly had no idea James had been involved in the development of the wetlands.  However, she was just wanting to share with someone, which turned out to be us, that she had never been there before but that it was a wonderful experience and she was so happy to have discovered it.  As you can imagine that was also pretty wonderful for my husband to hear. 

Wouldn’t it be fantastic if that’s how our customers felt about the energy services they were receiving?  That they were surprised and delighted to realise what a great service they were getting without perhaps having thought too much about it.  I know the delight of walking through a beautiful urban sanctuary on a sensational Autumn morning may be too high a bar for energy services, but we do want customers to be happy and pleasantly surprised about how easy new services are to access and use, to not worry about their bill impacting their weekly budget or their international competitiveness and to appreciate perhaps without noticing how we’ve gone about ensuring we can facilitate decarbonisation of our grid.

We’d like to work with all of you to deliver those outcomes for customers.  Just like the wetlands team  30 years ago we recognise we need to be forward thinking and have that picture of the future, we need to be pragmatic and get our hands dirty and do what works and we need to collaborate as we recognise that it’s not just one person or one voice that solves problems in times of complexity.  Its how you harness the wisdom and abilities of many to get to that long-term future.  That’s my aim as chair of the AEMC - and I’m looking forward to working with all of you to deliver great outcomes for customers.