Power play switching to back-up renewables capacity

The new focus of Australia’s chief energy industry bodies is building back-up capacity for renewables: encouraging investments in resources that kick in when the sun isn’t shining, the wind isn’t blowing, or demand spikes, says the woman now in charge.

Anna Collyer, the first double-chair of the Australian Energy Market Commission and Energy Security Board, sits at the apex of the industry groups that decide how Australians keep their lights on in the transition to renewables.

“The current market rewards assets for providing energy – or when they turn on – but what we want to do is provide a more stable revenue stream that supports new investment in (capacity-building) assets,” she says, like batteries and pumped hydro. Or, down the line, hydrogen gas blends pumped through the natural gas network.

“Those are the kind of resources we want to value by putting in this capacity mechanism that rewards those assets, in effect, for being available to fill those gaps.”

Ms Collyer is not being prescriptive; indeed, she is adamant that the AEMC and ESB remain technology-neutral during the transition.

Despite more than 20 years’ experience advising governments, institutions and private bidders on the energy industry, the one-time lawyer is the first to admit she doesn’t know all the answers in this “unknown future”.

Neither does the ESB nor its member bodies the AEMC, Australian Energy Market Operator or Australian Energy Regulator.

Yet Ms Collyer says they know how to get there: by inviting innovation. “Opening up the possibility for innovation is something we’re really focused on in our market setting, policy and law-making work,” she says. “We’re not wanting to dictate answers, but we’re providing the opportunities for those answers to emerge.

“We’re providing incentives (through reform) so people who are in the business of coming up with innovative, interesting ideas have got the signal that it’s something … worth doing, and they are given the opportunity to do that.”

Through her career, from 20 years as Allens law firm partner to energy reform expert, Ms Collyer has seen customers and investors become the driving force in the transition to renewables for two reasons: economics and climate change. Take the uptake of solar panels around the country.

“There were some good subsidies in place that made that a really smart decision,” she says. “But that was also customers wanting control and wanting to do something about climate change.”

The same factors drove an ­action-packed week leading into March when Origin announced early retirement of the Eraring power station and soon after Mike Cannon-Brookes and Brookfield launched a multimillion dollar takeover bid for AGL, flagging plans to accelerate closure of its power stations.

It was a reminder of how quickly the industry is shifting to renewables, and increasingly will, Ms Collyer says, as alternative sources fill demand, customers and investors move their money, and more power stations become redundant. “It calls for a fundamental change to the system, and we do believe renewables will be a huge part of it,” she says. “But they don’t do everything.”

It’s going to take a mix of renewables and gas-fired technology, until the market is weaned green, to fill the 2880 megawatt gap left by Eraring in 2025.

“We’re making a fundamental change to the system, and there’s so much going on that’s below the radar to ensure the system stays safe and secure,” says Ms Collyer, who describes the transition to renewable energy as like a speeding car hurtling down a runway beside a “half-built aeroplane” that we need to finish constructing and jump aboard before we run out of tarmac.

 

By Georgina Noack, originally published in The Australian on 27 April 2022.