Skip To Main Content

Anna Collyer

Beyond here, there be batteries

14 November 2024

Anna Collyer, AEMC Chair

Monash University launch of The storage imperative: powering Australia’s clean energy transition (implications for the NEM) White Paper 

 

Thank you for the welcome, Shreejan. 

I, too, acknowledge the custodians of the land on which we meet, the Wurundjeri Woi-wurrung and Bunurong/Boon Wurrung peoples of the Kulin nation. 

I pay my respects to their Elders, past and present.  

It is a real pleasure to speak with you today about this latest development in the research partnerships we have been progressively developing in recent years.   

I am excited about where we might find ourselves in the future, but first, let me look back briefly to where we have come from and how quickly it has all changed.  

Back in the late 1990s, I was a partner in my law firm with responsibility for energy clients.  

It was part of my job to induct young lawyers in our practice into the idiosyncrasies of Australia’s power system. 

I would tell them: electricity is an unusual product because first, supply and demand need to be balanced instantaneously and at all times, and second, you can’t store it.  

And, with some exceptions, that was a fundamental truth of the grid at the time.  

You could store gas in a pipeline, but electricity was either there, or it wasn’t. 

Well, times change, and in our current stage of the energy transition, they change at a very rapid rate of knots.  

The very existence of energy storage is a major indicator of how differently the market operates now and – even more so – into the future. 

One of the famous origin stories of the Australian energy transition is that public Twitter bet, between Elon Musk and Mike Cannon-Brookes. 

In a very Australian kind of scenario, a wager between two billionaires plus a ready and willing state government gave us the rapid construction of South Australia’s Big Battery.  

When it was switched on in November 2017, Hornsdale was touted as the biggest lithium-ion battery in the world. Today, Hornsdale isn’t even the biggest battery in South Australia - Torrens Island currently has that honour.  

But compare the 250MW at Torrens Island to the 850MW Waratah super battery currently under construction in NSW, and it’s a neat snapshot of how far we have come in a very short space of time. 

What was once impossible is now essential.  

AEMO wants to see 22GW of combined storage in the system by 2030 - and that’s just at utility-scale. If you’ve heard me speak before, you know how important it is to us that the role of consumer energy resources, or CER, is recognised and supported.  

The consumer, as I like to say, will be our hero on the road to net zero. 

At the end of 2023 around 250,000 Australian households and small businesses had installed batteries. That’s a strong number, but nothing like the 3.7 million rooftops currently sporting solar panels.  There’s still a long way to go for domestic batteries to significantly soak up the glut of solar we see in the middle of many days. 

Price is a major factor for most consumers, but our own research suggests 2025 is the year domestic batteries reach the affordability tipping point, so this may help.  

Another path for consumers may be to share their battery with a virtual power plant. This can decrease their payback time, and it helps the sector by entering those small batteries into the utility-scale storage equation.  

In whatever ways we reach Australia’s storage goals – and I am confident we will – the impact of batteries in the NEM is already upon us and only becoming more important. 

So, what does that mean for us as the market’s rule-maker? 

It means we are facing interesting and important problems and we need to cast our net widely for inspiration and advice.  

We need to understand how storage performs in a market that continues to evolve with the growth of variable renewable energy as we all work towards a net zero emissions future.  

  • How will battery operators behave in this new market?  

  • How will stored-energy consumers behave? 

  • How do we value the energy that sits there waiting to be needed?  

  • How do we value the energy that batteries extract from a system when it’s overloaded with solar, compared to the value of batteries charging up at other times?  

  • How will different storage providers compete with each other?  

  • And what current market mechanisms already work for storage, and what completely new, or adapted tools do we need? 

We have very recent and specific AEMC examples of the step change from the old to the new paradigm.   

Our primary market modelling tool, PLEXOS, depends upon short-run marginal costs to determine the bids it assumes for modelling the wholesale market.  

In recent exercises, PLEXOS has struggled to make sense of the growing battery storage participation. For the time being, we’ve included parameters to give us some answers, but this tool will benefit hugely from the kind of research that Monash has now undertaken.  

Your work will help us to better understand the drivers and limitations on how storage may behave in the market.   

In another example, among our stakeholders, we know of companies that are juggling a dozen different contracting models for storage.  

This is a stark contrast to the fairly standard contract models we have used in the industry to date.  

Is this almost experimental model of contracting just a stage we are going through? Or will storage prove to be the kind of product that always requires an individualistic approach to contracting? Better understanding of the economics of battery storage may also help clarify these questions. 

It’s a turbulent time – but turbulence is in the nature of revolutions, and our energy revolution is no different.  

Speaking of revolutions, I sometimes think of old photos from the turn of the previous century, with the Industrial Revolution still underway and a myriad of old and new transport systems all in play.  

In a busy city street in the 1890s or 1900s, you’d have seen a startling array of transportation competing for street space.  

There would be people pushing handcarts alongside people riding horses, as well as teams of horses pulling public buses and private carriages, and even bullocks with cargo drays. And they shared the streets with more and more mechanical transports like bicycles, electric trolleys, steam trains, and the occasional petrol car.  

In some cities, like Melbourne, certain tramlines started out with horse-drawn streetcars, which then became motorised with steam engines, before being converted to run on the electric cables that won the technology race here.  

Now, like that earlier transport revolution, we live in a time when many technical and economic possibilities are jostling to become the dominant way ahead.  

Figuring out how to get the best outcomes while all those new factors are still emerging – which is part of my job – means roping in all the resources we can.  

And this brings me back to you.  

We aren’t the only energy system in the world grappling with questions about storage, but the sheer scale of Australia’s grid, and our variable renewable energy growth, mean that many issues are being faced here for the first time, globally. And, given the magnitude and complexity of change in the transition, we at the AEMC know we can’t answer every question alone.  

Cooperation with researchers is essential and Monash has, in our view, been a very successful example of this cooperation.  

The research behind this white paper will feed into the wide mix of considerations for us and other policymakers. This will be very helpful alongside the perspectives from our every-growing range of stakeholders, including jurisdictions, industry, consumers and market bodies. 

At a bigger picture level, some of you know we are working on an MOU with Monash to continue our research relationship. We also see this process as a potential model for our connections to other institutions. 

Since this work began back in 2021, we have expanded our interest in and support for academic research in many ways.  

We have created what we call the ‘research@aemc’ initiative to bring together academics and policymakers effectively and in a coordinated way. 

Under this banner, we have several programs of work, if any of this sounds interesting to you, please don’t hesitate to get in touch with us. 

  • Twice a year, we host an academic ‘mini-conference’ that brings together experts and policymakers in an intimate forum on a single-focus, big-picture topic. Along with other institutions, we have had several presenters from Monash including Yolande Strengers, Gordon Leslie and Darryl Biggar. 

  • We also hold a regular Breakfast of Champions. We invite academics to present us with early-stage research, and in turn we can share industry experience to help inform the research agenda. A win-win for both sides.   

From Monash, again, we have had Gordon Leslie as a breakfast presenter, and we welcome others who may be interested.  

  • We are setting up a postgraduate research program to bring talented PhD students into the industry. Perhaps there are even some of you in the audience today? 

  • And finally, we are working on a broad AMEC academic partner program. We want researchers to better understand our problems and where we most need your assistance - just as Monash identified our need, back in 2021, for research exploring the economics of storage. We also want to know who in the research sector is best placed to potentially help us when we have an issue.  

The energy transition in Australia and around the world offers opportunities to all of us working in the sector, that none of us might have expected at the start of our careers. Again, I remind you how very confident I was in the 1990s of the fact that electricity simply could not be stored. 

Giant batteries are just one way that the energy transition has changed the work of economists, engineers, lawyers and researchers.  

As Alan Finkel sometimes puts it, if we succeed in this transition it isn’t just a once-in-generation or once-in-a-century achievement. When we reach our low emissions goals, the change will be a once in human history event. 

There is tremendous work being done amid the very necessary uncertainty of change. I am sure you will forgive me for saying that I find the challenges ahead even more exciting. 

Congratulations on this research, Guillaume and the team, and we look forward to exploring even more of these ‘interesting’ questions in future. 

Thank you. 

 

Related Articles

Monash white paper

Strengthening Australia’s energy & renewables workforce: challenges, opportunities & changing the status quo

11 September 2024

Anna Collyer, AEMC Chair

Women in Renewables Summit, Sydney

Thank you for your welcome and for the pleasure of being able to address such a tremendous group today. 

I pay my respects to the Elders of the Gadigal people, on whose land we meet. In today’s context of diversity, inclusion and gender, I particularly acknowledge First Nations women everywhere, and the role they have played in the custodianship of the earth and waters we rely upon for energy today. 

As Minister Bowen put it earlier this year, the transition will have failed if First Nations people are not engaged at its centre.

As the program says, I’ve got the great pleasure of kicking off this conference by speaking about some challenges for women, and for diversity in general, as well as our related opportunities for shifting the status quo in the energy sector. 

And I would like to be clear at the outset that when I speak about the challenges for women, I am very mindful that similar challenges exist for many other under-represented groups in our sector. 

I’m also mindful that while I have my own take on those challenges, some of what I present today will inevitably be familiar to many of you. 

There are times when we all channel America Ferrera’s frustrated character from the Barbie Movie when she describes the impossibility of being a woman. And yes, I know the Barbie Movie is ageing a bit in pop culture terms, but I am the proud owner of a full set of Eco-Barbies and I absolutely loved that film. So, please bear with me because it won’t be the last time I mention it!

The scene I am thinking of goes something like this: 

You have to never get old, never be rude, never show off, never be selfish, never fall down, never fail, never show fear, never get out of line. 

It's too hard! 

It's too contradictory … and nobody gives you a medal, or says thank you! 

And it turns out, in fact, that not only are you doing everything wrong …but also everything is your fault. 

Some critics took issue with that monologue as an oversimplification, but in one interview I read, Ferrera countered:

We can know things and still need to hear them out loud.

And as the monologue goes on to say, if even a plastic doll finds it overwhelming, what hope have the rest of us got? 

So – while we probably all feel the challenges I’m going to describe are pretty familiar, I do feel it’s worth saying them out loud. Importantly, though, apart from the challenges I also want to be sure we discuss opportunities, and hope. 

I want to share what I believe is the very real likelihood of change for the better in our workforce. There is a ‘secret sauce’ behind my belief, and it’s hidden in the title of this conference, but I will come back to that shortly.

Firstly, another favourite quote of mine, from one of the leaders of the international gender equality movement for energy, Canadian Isabelle Hudon. 

Isabelle makes the case for ensuring a diverse workforce in energy by pointing out the enormity of the task ahead of us to reach net zero by 2050. 

‘We must harness all possible talent,’ Isabelle says, ‘to discover the breakthrough solutions that will transform energy and the world.’ 

There is no value, in other words, in leaving half of the world’s great ideas on the sidelines just because the people having them aren’t traditionally found in energy sector jobs.

I believe we can be more diverse. I believe we can be more inclusive. And I believe our workplaces can be safer and more supportive regardless of gender 

But, most of all, I believe we can achieve these outcomes by meeting our global goal of Equal by ’30, which aims for 50% representation of women in our energy workforce by 2030.

Now, obviously we aren’t going to magic up hundreds of thousands of female electricians and engineers in just five years. While STEM careers are a critical area of focus in improving gender equality in the energy sector, we won’t get to 50% by focusing just on STEM. 

We will also need many more people who have what I call ‘power skills’, if you’ll pardon the pun. 

These are skills like collaboration, creativity, problem-solving, innovation and inclusiveness. 

They are indeed powerful skills for any industry, and they appear very often among women working in helpful fields like:

  • lawyers to help design and implement regulatory change 
  • economists to help understand and prepare the new market
  • communication experts to help us bring communities along the energy transition journey
  • and sales and marketing professionals capable of packaging new electricity products in offers that make it easy for customers to participate in the market in ways that benefit them and the power system overall.

So. Where do we stand in 2024? 

Women are underrepresented across the board in energy, from technical roles to executive positions. By best estimates from WGEA and other sources, women make up less than 25% of the workforce in the energy sector. 

While we currently lack some of the detailed data we’d like, I could still confidently sketch a pretty shallow bell curve showing women across all possible energy roles. 

In my imaginary chart, you’d have a reasonable bump if you placed regulatory and not-for-profit jobs in the middle but a nearly flat line at either end if you put trades on one side and CEOs on the other. 

On the other hand, if we change the chart’s axis to only look at women in renewable energy organisations, the numbers are more encouraging – around 40% in total and a more visible appearance in leadership roles. 

And this, as I see it, is the secret sauce – because the renewable energy component of the overall energy sector is growing and must grow even further and faster. 

While we’re all used to hearing AEMO’s integrated system plan numbers, an essential plan to move us forward, for some purposes I prefer to look at the bigger picture. Net Zero Australia’s modelling says renewables must grow 40 times beyond the NEM’s current capacity for clean fuel production. 

That growth will contribute significantly to our skilled workforce expansion from about 100,000 today to between 700,000-800,000 people by 2060.

And the wonderful thing is that – for a whole range of reasons that may have very little to do with sunshine, water or wind – many renewable energy enterprises are already within cooee of 50% representation of women in their workplaces. 

Just one of those reasons could be because research shows us diverse and inclusive teams are significantly better at innovation. And innovation is the lifeblood of a successful, emerging industry like renewable energy.

Renewable businesses may have once been the ‘hippy fringe’ – as I’ve heard it said with various degrees of affection – but they are absolutely mainstream now, and on their way to being the dominant power source around Australia and the world. 

That means, increasingly, regardless of gender, the ‘suits in the room’ for energy sector decision-making are more likely to come from a culture that accepts diversity and inclusion. And that aspect of renewable energy offers us the chance to change everything.

By the very nature of this conference, many of you come from organisations that have implemented a thing or two that really works to build gender balance and—I hope—a broader focus on other forms of diversity. 

You are also likely to be values-driven, seeking to create a better world via the energy transition and perhaps feeling additional stress because of that challenge. 

And all of you will be here to find more and better ways to support women and other under-represented people seeking to play their part in the energy transition.

At the end of my talk today, I am going to assign each of you a task based on that.

But first, let’s do the job of diagnosing our key challenges: I picture them as three big buckets of barriers to more diverse representation across the sector.

These buckets hold:

  1. problems relating to physical and psychological safety
  2. issues relating to unconscious bias and interpretations of merit
  3. and systemic barriers connected to child-bearing, parenting and other forms of caring.

The first of these barriers is the existence of physical and psychological safety for all women in the workplace.  I’ve been fortunate to have not experienced open discrimination or worse behaviour in my career. Unfortunately, I am sure the same can’t be said for everyone in this room. Overcoming this is absolutely fundamental. 

Until we can openly identify and resolve safety and welfare issues, no amount of leadership and empowerment in other areas will attract and retain women in our sector in great numbers, especially out in the field. 

The release of new Respect@Work requirements will hopefully help ensure this baseline exists in all workplaces. I am sure other expert speakers here today will focus on this and related safety discussions.

One thing I would like to share from my perspective is an opportunity that we have found to improve psychological safety at the AEMC.

We are very fortunate. We have maintained gender equality across all seniority levels for some years, and we would like to think that physical and psychological safety is our minimum standard for all employees. But - is it? We didn’t want to make that assumption. We also didn’t want to equate gender equality with diversity and inclusion: it helps, but it’s not the whole picture.

In recent staff surveys, we detected some concerns — particularly from younger staff members — about their confidence in expressing ideas that might not fit what senior staff were discussing, and about the consequence of being ‘wrong’. 

Now – we all like to think we are open to new ideas, but we probably also like to think that our experience has taught us what will work. 

As we explored these concerns, we realised it’s all too easy to unintentionally or subconsciously send dismissive messages in our choice of words, the way we sit in a meeting, or the way we react to an unexpected outcome. 

And when we do send those messages, we can make someone feel less safe to speak up. 

We are a small organisation with a huge workload of rule changes crucial to enable the market for the transition, and we simply can’t afford to miss any good ideas – especially if they are a bit left field. 

While we have a strong record of listening to our stakeholders and changing direction when they convince us of a better way – we really want to ensure our staff understand this attitude applies to them too. 

All of this has led us to an extensive training program for our directors and managers to help ensure their team members all feel psychologically safe to share their ideas and to make and learn from mistakes. 

So now to my second bucket of barriers – the challenging issues around unconscious bias and merit, which tend to show up in places like recruitment, pay, and promotion. I do have some experience here!  

When I started as a lawyer in the early 1990s, the firm I joined had two female partners out of around 50, or 4%. That was notable because to have any women as partners then was considered a big deal.

By the time I was appointed a partner in 2001, we were up to 17% female, and when I retired from the partnership in 2020, we had reached our then-target of 35%. 

The firm recently announced it has reached the agreed goal of 40-40-20: a minimum of 40% each male and female partners, with flexibility for the remaining 20%. 

There were many, many actions contributed to this, but a large part of it was breaking down what merit really looked like, and addressing the tendency to perceive a good hire as ‘someone who looks like me’. 

So where are the opportunities for the energy sector here? For a start – let’s accept that targets work. That’s probably music to your ears!

As a sector, we are already particularly focused on targets. There’s a quite elegant analogy—in my view—between our net zero emissions target for 2050 and the Equal by 30 target for gender equality 2030. 

Setting a target, especially a tough one, forces us to step back and examine the barriers to achieving that target, and what we need to do differently to overcome those barriers. 

Targets force us to question our assumptions, undertake research, make bold choices, and move ever forward, being accountable for our goals.

Those diversity goals might look different right now in a transmission company, say, than in a hydrogen start-up or a community battery manufacturer. Your targets might be different if you start from a 90/10 gender split versus a 60/40 split or if you have gender equality overall but poor representation in leadership. 

However, the principle remains the same no matter your starting point. The opportunity to set an ambitious target and openly discuss ways to reach it is a very practical way to challenge the status quo and make a change. 

As I mentioned, the AEMC is sitting happily on a 50/50 gender representation at all levels of seniority, but again we don’t want to rest upon those laurels. 

We maintain vigilance with regular check-ins on things we know help us keep to that level, like pay parity and career progression. 

Pay parity is a good example, because it’s such a straightforward thing to do. Annually, our HR people basically run a spreadsheet that looks at pay across roles and genders. For a powerful tool, it is, I’m told, a very simple exercise. 

It gives us data we can examine and compare, holding ourselves accountable from year to year.

Finally, to my third bucket of barriers, which I think of as the structural issues that arise from the fact that women bear children and, more broadly, remain the dominant carers in our society. This one is very close to home for me. 

My husband James has been the primary caregiver for our children and our family since I went back to work when our eldest was 6 months old, close to 20 years ago now.   

This arrangement has given me enormous freedom in pursuing my career but has been both a joy and a challenge for James as he stepped outside what was considered normal for men as fathers. 

The ability for families to have real choices about who does what is another critical step for enabling women to pursue careers. 

So, one of the simplest of opportunities here is to level the playing field for new parents so that it becomes equally possible for women to return to work after having children. 

As a society, we’re slowly recognising how important it is for women that we normalise the opportunity for men to be primary or equal-time caregivers. 

WGEA’s latest paid parental leave figures emphasise how unequal this can be. Just under two-thirds (63%) of employers fund paid parental leave, and only a third of them offer it universally to men and women. Even when PPL is available, men account for a small – albeit growing – proportion of people taking it: 14% at the most recent count. 

If your organisation is not one of the two-thirds offering universal PPL, or if the proportion of male staff taking it up is very small, that’s an opportunity to challenge the status quo, and see real change for your employees’ families.

At the AEMC, we offer 12 weeks paid parental leave to all primary carers regardless of gender and we pay superannuation throughout both paid and unpaid parental leave. 

And, while this is more of a quirk than a trend, last I checked, we actually had more men on PPL than women. 

Conclusion – call to action

In conclusion – you may have picked up that I am a glass-half-full person. I do believe we will reach these targets, both for net zero and for women.

But like everyone, I have days… and then I have days. 

If I return to my favourite Barbie movie moment, the moment just before that America Ferrara monologue speaks to us all, too.

In that scene, Margot Robbie as Stereotypical Barbie is face-down on the floor having, as Weird Barbie describes it, an existential crisis. 

She doesn’t feel pretty, she doesn’t feel smart, she can’t do brain surgery, she’s never flown a plane, and no one on the Supreme Court is her. 

She sobs: I’m not good at anything.

And who hasn’t had a day like that? We all feel like that sometimes.

This is where the speech I quoted from earlier begins, with the line: 

It is literally impossible to be a woman.

And with that, the very fictional but relatable character played by America Ferrara lifts Barbie up and gets her to keep going, because this work is just too important to stop.

So this is my challenge to you all: 

Keep going. 

It’s too important to stop. 

The inclusion of women and other under-represented people throughout the energy sector is essential for us to get where we are going.  

We need every available talent and every kind of perspective, applied to the fundamental transformation of the energy sector if we’re to reach net zero by 2050. 

We all need to diagnose our organisations’ barriers to equity and diversity. 

We need to learn from others how we can do things differently to overcome those barriers, and then we need to put real resources behind the solutions. 

Before you leave this conference, the task I have for you is to do two things.

First, think of something good that is happening in your organisation to support diversity and inclusion. 

I know you can find something you’re proud of, even if it’s quite simple, like some of the examples I’ve given you from the AEMC. 

In other words, what is your secret sauce that is making a difference, be it small or large? 

Maybe it’s an attitude rather than a policy, maybe it’s just in your team and not yet in your overall organisation. It doesn’t matter – every sign we have of improvement in diversity is worth noting. 

So I want you to look for an opportunity today or tomorrow or back at the office, to share your thing, your secret sauce. 

Perhaps you can do that with someone new, who you haven’t spoken with before.

Second, I have a task for when someone tells you about something good that’s happening in their organisation. 

Well, of course you can tuck that away as it may well be helpful in your workplace too.  But also: tell that person they are doing a great job.

Lift them up.

Being a woman – especially in the traditional spheres of the energy sector – may feel impossible at times. So whenever there is an opportunity to build someone up and support them, take that opportunity.

Do what I hope I’ve just done in this speech – share specific examples and tell people they are great.

Change is not only possible: I think it’s inevitable. 

And a good part of that inevitable change belongs to the expansion of renewable energy organisations that already lead the way in gender inclusion. 

I hope you can all find ways to nurture and bring the culture of diversity and inclusion with you across the sector as you grow. 

Thank you.

Keynote: Supporting consumers’ journey to net zero: no hero walks alone

12 June 2024

Anna Collyer, AEMC Chair

Australian Energy Week, Melbourne Convention Centre, 12 June, 2024

Introduction

I, too, acknowledge the traditional owners of Naarm, the Wurundjeri Woi Wurrung people of the Kulin Nation, and thank them for their care and custodianship of this land by the river for many thousands of years. 

I pay my respects to their Elders, past and present and hope that, together, we can build a new national energy system that benefits us all. 

The story:

On a recent sunny Sunday afternoon in Melbourne, I was standing with some other mums on the sidelines of our daughters’ Aussie Rules game. 

In between enthusiastic barracking, we were chatting – as you do – and, without them knowing anything about my job, the mum on my left, Clara, was talking about some house renovations they’re doing. They wanted to include solar panels in the deal, but the decisions were, frankly, doing her head in.

The mum on my right, Jane, chimed in: ‘Don’t talk to me about solar! We got panels last year and Brett - (her husband) - is still completely obsessed with the app’.

And so, I ‘fessed up and said to them: ‘This is actually what I do for a living – it’s so interesting to hear about your experiences!’

Clara, the one with the reno, immediately asked me to recommend the best brand of panels because it was all so baffling but, alas, I definitely wasn’t the right person to ask about that! 

And then Jane, the one with the energy app husband, kind of rained on my parade even more by saying: ‘Honestly, I couldn’t care less about the solar. I just want to run the dishwasher without a drama.’

It turns out, in Jane’s house, Brett carefully programs the dishwasher to run in the middle of the day so it’s free from the sun. 

Then, two things happen:

  1. The kids put their breakfast things in the dishwasher – good teenagers, very good parenting: right? But then,
  2. If they don’t click the dishwasher door shut, it fails to run at lunchtime –bad teenagers! Major parenting drama!

Thinking about it after the game, I pictured Jane’s and Clara’s households as running the full gamut of our highly valuable, but highly diverse, population of CER tech owners and would-be owners: 

  • In Jane’s home, we have the opposite ends of this continuum – from the new energy fanatic of flexible load on one side, all the way over to those who really have other things on their mind.
  • And in Clara’s home, we have the confused middle ground between those two extremes. People who want to make the right choices, but are lost in the confusion of so many competing yet similar options.

In other words we have those who are obsessed, those in a mess, and those who – completely understandably – just couldn’t care less.

As a postscript…

At the girls’ match the following week I caught up with Brett, who immediately pulled out his phone and showed me exactly how many kilowatts every one of his panels were punching out right that moment.

Jane rolled her eyes, and said, ‘Look, I’m happy to save money, I’m happy to save the planet, I just don’t want to talk about it anymore… Have you got any gossip instead?’

CER context

Now, CER’s definition certainly covers Australia’s 3.5 million rooftops with solar, but it’s so much more. CER is also domestic batteries, electric vehicles, pool pumps, hot water heaters and, yes, it’s even Brett’s programmable dishwasher. 

CER can be anything that you own in your home or small business that produces or stores energy. 

But more run-of-the-mill or ‘dumb’ appliances can also be a consumer energy resource: because we are interested in anything where you have a choice about when and how you use energy.

Rooftop solar is a powerful element in that CER list, but it’s a mistake to think it’s the only tool we have. 

While we expect around one in two Australian homes will have solar panels by 2040, that still means about half of Australian homes won’t. 

The half that do have panels will be tremendously helpful in getting us to net zero by 2050, if we get the set-up right now.

But the real challenge is to build a reduced-carbon power system that integrates those millions of tiny rooftop generators, and also captures the rest of the list. That means EVs, pool pumps, hot water systems, clothes dryers, washing machines, dishwashers and more. 

It also means, importantly, how and when customers choose to use energy. Because that is the way we will be able to ensure that people living in homes without a lot of fancy CER kit can benefit, too. 

Regulating for innovation and disruption

And, like so often in this extraordinary period we find ourselves working through, the answer to our problem must be innovation. To paraphrase Albert Einstein: we won’t solve new challenges with old ideas. 

It might sound strange coming from a statutory authority, but innovation, and even disruption, are very much what we have in mind when we put our thinking to new frameworks for the energy transition. 

This is especially true for CER. 

Australia is leading the world in growth and adaptation of CER technology. 

The amazing thing is this means we have an immense resource to help us get to net zero if we integrate it well. The hard thing is that almost every choice we make as a sector is being made here, by us, for the first time, before anywhere else. 

This is the new reality. This is just business-as-usual now.

And if your thinking, or your company’s strategy, is still about modifying what you’ve always done rather than creating a better way: you need to catch up. 

You need to be the Uber, not the taxi; Apple, not Kodak. 

And I’ll return to this point at the end.

We are all working at the intersection of two enormous revolutions: environmental, and technological.

In times like these, agility and courage count for a lot, and that is hard. But one of my personal mottos comes from the old movie, Ben Hur: to rise, you must do difficult things.

The blue sky piece of the puzzle

I spoke to this conference last year about putting the energy transition puzzle together. 

I talked about ways of thinking and working that can bring together many different and unknown pieces on the table, and how we need to keep a wide view and check in with other players if we’re going to finish this work with net zero emissions from energy by 2050.

I’m returning to our jigsaw puzzle this year.

However, instead of the whole picture – which others today will cover admirably – I am going to zoom-in to this one, tricky, section of how we can make CER work for everyone. 

You might want to think about it as the ‘blue sky’ of the energy transition puzzle.

The AEMC is working on four very specific and interconnected puzzle pieces that all have critical milestones in the next few months, and, together, set up a framework of opportunity. Opportunity to innovate, opportunity to disrupt, and opportunity to be the business that is smart enough to give customers what they need, before they’ve even realised they wanted it.

These four pieces of work include rule changes and a review, and they include some typical AEMC titles so let me get that out of the way right now. 

The rule changes are:

  1. Accelerating Smart Meter Deployment. 
  2. Unlocking CER Benefits Through Flexible Trading 
  3. Integrating Price-Responsive Resources into the NEM. 

And then the fourth is the new review, with a working title of Electricity pricing for a consumer-driven future.

I’ve tied these four pieces together because they will work so closely to create that opportunity framework and be a platform for innovation – by you. 

This is, if you like, our chance to support you, on your own hero’s journey.

Consumers who invest in CER kit like solar panels and home batteries want at least two things: lower bills and lower greenhouse emissions. Their degree of passion for each of those things may vary, but paying less and doing something good for the planet and their grandkids are consistent themes. 

And the consumers who can’t invest in this kind of CER tech? Unsurprisingly, they also want lower bills, and to help the planet.  

You only have to think about how we have embraced recycling our garbage to see how willing people are to do their bit when we make it easier for them. 

With the right support and rewards, appliances in our homes that can be used flexibly will become a resource that’s equally valuable for consumers and the grid. 

These four puzzle pieces are designed to help you to help them. 

I have previously put forward consumers as the hero on the road to net zero, but no hero makes the journey alone. 

What we recognise with this regulatory work is that energy service providers can and should be the Buzz Lightyear helper to Toy Story’s Woody, as the Australian consumer: Woody may have the special cowboy boots with Andy’s name on them, but you’ve got the wings, and it’s up to you to help him fly. 

Let me show you how we see this coming together for consumers, for you, and for the grid.  

Smart meters

Firstly, accelerating the smart meter rollout is a crucial enabler of the transition in Australia.  

Smart meters are the digital foundation for a modern, connected, and efficient energy system. 

We need many more of them than we have now, and we need them soon, and we need them to work as we hope they will: turning power into knowledge for the benefit of everyone from AEMO and distributors, through to tenants in homes without solar. 

And we’re not starting from scratch. Australia’s millions of rooftop PV systems already use smart meters and inverters that talk to the grid. 

The meters are a physical point of connection and information about how to save money, and they offer access to new kinds of retail products that can create further savings. 

New retail offers, like time-of-use tariffs, might interest anyone with a smart meter. 

Once you can see how your home actually uses electricity, it’s easier to choose energy-saving moves like programming different run times for your pool pump or getting a plug-in timer for your old washing machine.

Both our smart meter review – and this related rule change to implement the rollout – considered additional customer protections including:

  • providing notice of changes in tariffs, 
  • information on the impact of changes, 
  • preventing upfront installation costs, 
  • and privacy.

However, in this round of consultation, we have heard ongoing concerns for customers seeing unexpected changes to their tariffs when smart meters are installed. 

Now, it is critical to the success of the rollout, that we work through concerns raised about how retailers may be applying demand and time-of-use tariffs in unexpected ways. 

And we expect we will need to push back the final determination to give us time to do this well.

This does not mean we are stepping away from smart meters, or away from the importance of accelerating the rollout. 

It does mean that we are aware of the fears arising from some customers’ early experiences and that we do not want to blindly push ahead without considering what more we can do to address concerns and avoid a multiplier effect.

Pricing review

I mentioned a pricing review, and while this will be broader than the smart meter concerns, it will commence in parallel with our work on tariffs linked to the accelerated smart meter roll out. 

We will be extremely mindful of how any changes we make in the context of the smart meter rule change will need to transition to a future world we are still considering. 

That rule change needs to ensure we maintain the social licence to undertake the accelerated smart meter rollout, because any future tariff design will depend on customers having the data that smart meters provide.

The traditional thinking around tariff reform is sound: we want to reduce the peak demand because we have to build our infrastructure to the peak. So, if we can reduce the peak, we can have less infrastructure and lower costs for all. 

One way to do that is that is if people can change how much energy they use during the peak, and the traditional way to prompt customers to do that is to make their energy more expensive then, and less expensive at other times. 

But, is that traditional thinking working now?

Are the signals actually getting through that tariff maze, and all the way to customers? 

What's the role of retailers in all of this? 

Will it work at all once we have half the customers with solar panels and batteries, and half without? 

And – importantly – what is it that the customer really wants? 

Well, there is no one customer, we all know that. We have Janes and Bretts and Claras and many others besides.  Different categories of customers who want different things. So, what’s the best way to achieve those things for all of them?

The pricing review will step back to examine some of these structures, and whether they work now and into the future. 

This piece of work is one where the journey is as important as the destination and there will be many opportunities for engagement, so I’d encourage you to get involved.

Unlocking CER benefits through flexible trading 

The next piece in this bit of the puzzle, meanwhile, is our Unlocking CER benefits through flexible trading rule change, which is heading towards its final determination. 

This is the one that is designed to allow for ‘flexible’ CER loads, like EVs, and potentially expanding to other things if we want to get more sophisticated. 

It means your flexible load can be separately metered away from your ‘passive’ loads such as lights and fridges.

This is a first step in creating more options for consumers in households and businesses to be able to use and manage flexible loads, as they choose. 

It opens up a new way to develop and access innovative retail offers, for everyone.

In fact, for commercial and industrial customers, we’re looking at how they can also choose a different service provider for those different loads.

They’re already doing it now, using a workaround, so we’re considering formalising those rules to make sure they work for everyone.

It means you, as the retailers of today or the household energy management companies of the future, can develop ways to give consumers the option to use their CER in the grid, and be rewarded for it without having to think about it too often or too hard. 

Integrating price-responsive resources into the NEM

And this rule will work alongside the next related rule change, Integrating price-responsive resources into the NEM, which is up to the draft determination stage.

This reform provides greater integration to the wholesale market of price-responsive resources like community batteries and virtual power plants, as well as the ways customers may want to use energy but where they don’t want to formally sign up to something like a VPP.

Now, this is an area where many retailers are already doing innovative work (as we have already heard this morning). 

Virtual power plants are growing alongside domestic battery take-up, and there are many retail opt-ins rewarding customers for responding to peak demand. 

Like, maybe your retailer sends you a text, offering enticing credits for reducing usage in a specific hour or day. 

But this is currently invisible to AEMO, who asked us for this rule change. The market operator is currently doing its planning on both a five-minute-by-five-minute basis, and on a long-term basis, without the benefit of all of this additional information. 

If we have more integration of those activities back into the wholesale market, then the operator can take them into account more seamlessly, be able to plan more effectively, and that will save both money and emissions for everyone. 

Zooming out on the puzzle

Let me zoom out again. 

We expect the combined strength of Australia’s CER will deliver at least 20 per cent of our energy transition solution by 2050 – and that’s just based on the technologies and behaviour choices we know about today.

And if we can get this right, there are big, big savings to be made that deserve to be shared more widely. A range of highly credible studies now estimate that the net benefit of effective integration is at least $1 billion and as much as $6.3 billion by 2040. 

I admit that, towards the end of last year, I was concerned that CER was a long way from getting the percentage of our collective attention it deserves.

Happily, I believe that has turned a corner. 

In March this year, after considering the final work of the Energy Security Board on CER, all energy ministers committed to reforms under a National CER Roadmap that will deliver:

  • new consumer protections, 
  • greater integration into the grid, and
  • nationally consistent technical standards, including enabling vehicle-to-grid technologies. 

This is new and noteworthy for the sector, in that there is agreement, direction, and high motivation to complete this highly complex and interdependent mosaic of work. 

The taskforce charged with the roadmap will build on a large body of existing and ongoing work by the AEMC and other market bodies. And we will all continue to drive interrelated reforms that aim to integrate CER into the grid and realise its full potential. 

And of course, it’s not only government bodies working on CER integration and capability. 

A quick glance at ARENA’s website, for example, or almost any university, displays the many innovations being developed and tested by commercial and academic bodies. 

Conclusion

So now I look ahead, to another Sunday afternoon sideline watching some future Aussie Rules game with Jane and Clara – maybe one of our daughters has made it all the way to the AFLW!

In this future Sunday picture, the AEMC has clicked the four immediately essential CER jigsaw pieces into place in the larger energy puzzle, and we have opened the way to that framework of opportunity for you energy service providers to take up.

What I want to know, is who will be the space-savvy Buzz Lightyear, powerful and technically astute, ready to make things easier and more successful for our consumer hero, Woody?  

Which of you will disrupt the sector, innovate the sox off the platforms we build for you, and give customers a reason to choose to share their CER kit or the way they use their flexible load for their own benefit, and the lasting benefit of the NEM?

I’m just imagining things here, but: which of you takes up our CER flexible benefits rule change and makes it incredibly simple for our footy mum, Jane, to change her power use without once having to look at Brett’s app?

Who finds a way to get timers out to people with old appliances, so they can share in the benefits of time-of-use tariffs, in contrast to the stories we are hearing lately? 

Who develops a system that offers versatile tariffs to nurses, and fire-fighters, and FIFO workers that match their shifting hours at home? 

Who, among you, are the disruptors who take the chance to break the old ways of thinking and leap ahead in this sector as a result?

Will you be the Apple… or will you be the Kodak?

Thank you.

Consumers the hero on the road to net zero

09 October 2023

I’m very pleased to be back for this important summit, here in Sydney, or Warrung, on the land of the Gadigal people of the Eora nation. I pay my respects to their Elders and to any Aboriginal and Torres Strait Islander people present today.

As the original owners and custodians of the grounds and waterways we now rely on for our power system, Indigenous Australians have an important role to play in the energy transition.

I note, too, that some of the most interesting remote power initiatives underway today involve Indigenous enterprises such as Original Power, and the First Nations Clean Energy Network, which is led by a young Yorta Yorta woman, Karrina Nolan.

Last year I spoke to this summit about the crucial role in the transition for customer energy resources, or CER.

CER is Australia’s 3.5 million rooftops with solar, but it’s also domestic batteries, electric vehicles, pool pumps, hot water heaters and more. Anything that produces or stores energy, or where you have flexibility about when and how it uses energy.

In fact, CER comprises the majority of what we used to – and sometimes still do – call DER… you’ll never miss a good alphabet soup moment in the energy sector.

I’m pretty fond of this acronym though, because the change from D for Distributed to C for Consumer was a very deliberate choice to remind everyone that customers are at the heart of this part of the energy revolution.

So, that’s CER: and I warn you, I’m singing the same song again this year – but louder.

And I do know others are singing it too.

I’m encouraged that, very recently, we’ve seen public calls for the AEMC and other market bodies to move faster.

I agree!

We can all do better. And I’ll speak to some of that now.

So, here’s what I’ll cover with you today:

  • Firstly, as I said, I remain concerned that CER isn’t getting the attention it deserves. CER will be at least 20% of our energy solution, but it is not getting 20% of our attention. That has to change.
  • Secondly, as we all know, the frameworks for the old thermal generation are no longer fit-for-purpose and we are in an emerging regulatory landscape now where, to play on the Einstein quote, imagination is just as important as knowledge. So I’ll take this opportunity to explain some of the new architecture we’ve been building to effectively integrate CER into the future of the NEM.
  • And thirdly, rule changes are only one part of the process. We can’t do it all. Today, I’ll be calling on Australia’s governments to increase their focus in this space with some immediate and practical steps.

Now, why am I so focused on CER?

A better question would be, why isn’t everyone MORE focused on CER?

Consider the scale of what we’ve got here.

Australia’s households and businesses have invested in CER at rates unparalleled across the globe.

In terms of generation, small-scale rooftop solar systems currently provide over 20 GW of capacity across the NEM. That’s more than four times the current capacity of Snowy Hydro, and it’s not slowing down.

Also think about:

  • EVs sales this year topped the Bloomberg mass adoption tipping point, and on track for 30% of sales by 2027.
  • AEMC research shows most domestic batteries will hit the affordability turning point by 2025, years ahead of predictions.
  • real estate searches for electrified and energy efficient homes are surging, and developers like Mirvac are marketing net zero homes.

And these changes point to two things:

First, the risk created by the potential strain on the grid to meet increased demand as we swap out petrol and gas appliances for those powered by electricity, and on the flip side, the potential opportunity to meet that demand, and more, through the way customers use their own energy assets

This is the secret sauce of CER – that it punches well above its weight.

The stronger our CER is, the more confident we can be about supply, and the less back-up infrastructure we need to build at utility-scale.

I’ve said it before, consumers are the heroes on the road to net zero.

Here are just three practical ways their CER can build our confidence and reduce the cost of the transition:

  1. Solar panels provide low-cost energy to their owners and to the grid, where non-CER owners can also benefit from time-of-use tariffs made possible by their smart meters.
  2. CER devices that are flexible loads – like EVs and electric hot water heaters – can give us more efficient ways to use our existing network infrastructure because we can charge them at times of the day we have excess capacity in the grid. This reduces our spend on the kind of grid augmentation that would otherwise be passed on to customers.
  3. And thirdly, all customers benefit from lower costs when CER like household batteries can join virtual power plants, because that helps AEMO and the networks be able to effectively use those assets to operate the system more efficiently.

There is a high-end estimate that a CER-supported power system could save Australians as much as $6.3 billion,

Crucially, those savings benefit all customers, not just the owners of CER.

So what have we been doing to support the integration of CER and reach those goals?

At the Commission, we’ve been working on the rules we need to build a market architecture suitable for CER. The same is true of the former ESB since its formation in 2017.

It’s always easy to ask why more hasn’t been done, but let’s remember the pace of change in the energy sector now has us all thinking in dog years!

For example, it was only two years ago we released the DER Access and Pricing review that revolutionised the way Australia treats CER.

Before then, distribution networks were only obligated to deliver electricity to households.

Since then, networks have a regulatory obligation to receive exported energy from customers.

This shift from one-way traffic to 2-way flows was a fundamental reimagining of how our system works. But of course, there was more work to do.

Metering

This year we completed a landmark review of electricity metering, and we’re now commencing work on fast-tracking the rule changes we recommended, including a 100% rollout of smart meters by 2030.

We’ve been saying for a long time, smart meters are crucial enablers for the energy transition, and particularly to share the benefits of CER.

One of the most important things smart meters do is to give households – without solar PV – access to the benefits of time-of-use savings from their retailers, when they can use electricity at times of day when we have all that excess solar in the grid.

Another important enabler for CER integration is the data from smart meters, which is foundational to a more connected, modern and efficient energy system.

The sharing of that data with distributors will help manage supply and reduce future spending on expensive poles and wires.

Flex trading and VPPs

We’re also continuing to work on market settings to get better demand-side involvement. The wholesale demand response mechanism was an interim measure, and yes, we know the benefits have been limited.

This year we’ve forged ahead with other market processes that unlock the full value of CER, for the benefit of CER-owning customers as well as the reliable, secure operation of the system.

Our CER benefits rule change opens the door for retailers to offer different products choices to customers. For example, you might choose one product  for your family’s EV charging and another for your main household use.

The rule potentially goes further for large energy customers, like supermarkets and hospitals. The idea is that that they can not only choose different products to keep their costs down, but they can also select them from multiple service providers, beyond their main retailer.

In this way, new service providers can help large customers use flexible load such as refrigeration and air conditioning to manage their costs.

Integrating price responsive resources

We’re also now consulting on ways that energy companies can better integrate CER into the NEM via the aggregation of price-responsive resources like virtual power plants or VPPs.

VPPs have been around for some time, but the rapid increase in solar and batteries has the potential for them to be bigger and more sophisticated.

The real value of this growth, which we are seeking to capture, is in the well-managed sharing of the stored energy, rather than the current more ad hoc approach to integrating CER.

Whatever we’ve achieved in preparing the way for CER, there is always more to do.

And this is where I remind you that Australia’s booming adoption of CER – including and beyond rooftop solar – puts us in an extraordinary position globally.

When I speak to international colleagues, it’s clear we are miles and years ahead of their thinking with our two-way integration of CER.

But that means we don’t have any examples to follow here. We are, step-by-step, inventing and implementing entirely new fields of policy and engineering.

And from an AEMC perspective, we are doing that shoulder-to-shoulder with our stakeholders from industry, governments, and consumers, in as transparent and collaborative way as we can.

It’s what we are known for.

And if that comes with a small time-penalty, it also brings a huge payoff for the eventual merit and durability of the changes we recommend.

And speaking of recommendations brings me to my final point – what we are calling for our governments to do when I present the ESB’s final report to the energy ministers next month.

This report’s CER focus combines years of work from the three market bodies – the AEMC alongside AER and AEMO.

It identifies six key priorities we are calling on governments to take forward now.

In order to action those priorities, we first call on governments to form a CER Taskforce, mandated with clear terms of reference to drive the outcomes across an intense 12-month period.  

CERTS

Our time is short here today, so I’ll just talk briefly to two of those six priorities.

The first is an extremely important review the AEMC has led into CER technical standards.

The ability of CER to safely and securely contribute to the grid relies on the extent to which devices like solar panels and batteries operate consistently and predictably.

CER standards have traditionally focused on safety, but the rapid connection of new devices to the NEM means AEMO increasingly requires equipment to meet standards for security and reliability.

In simple terms, setting technical standards can reduce instances of devices tripping and interfering with connections to the grid.

Sadly, as I have said before, our millions of tiny rooftop generators don’t come with millions of tiny engineers to manage them… but CER tech standards are the next best thing.

Our review has 10 recommendations for reform, and nine of them can be actioned immediately, and without the need for law or rule changes.

You can view them on our website.

The 10th recommendation is for the body or bodies charged with setting and enforcing the tech standards.

We need an enduring national regulatory framework to set and enforce CER technical standards. We identified four potential pathways for the Ministers to consider next month, and they will take the work on from there.

Getting this part of the regulatory framework right will give networks and AEMO greater operational certainty. It’s another important enabler for CER integrating with the grid.

Consumer protection

The second of the six priorities I’ll mention today is the Review of Consumer Protections for Future Energy Services led by the AER, whose chair, Clare Savage, will speak to later today.

It recognises the existing National Energy Customer Framework does not cover all the potential new businesses attracted to the opportunities that connected CER devices could offer to the market.

The review recommends an updated framework with robust consumer protections and straightforward resolution processes.

It seeks to balance the need for innovation, with the need to build customer confidence to take up those new innovative services, by ensuring the right protections are in place.

This reform would require changes to national energy laws, beyond the scope of the rules, so again, we are now calling on governments to lead the way.

The AER consumer protection review also points out the risk of adding more layers to the already complex electricity market.

This is a tune we often hear from Energy Consumers Australia, which tells us information overload is a significant barrier to greater CER participation.

Consumers are already in overwhelm about electricity, so – pardon the power pun – no wonder they switch off.

But they are also missing out on something we’ve been good at in the past – a shared narrative for the transition, what it means for customers, and important community behaviour change that can deliver benefits for everyone.

And this is my final call to governments today – to help the sector build the social licence or ‘social trust’ we need for CER by supporting a new narrative to bring everyone along on the energy transition.

I’m not talking about adding to the overwhelm. I’m thinking something simple and relevant like Slip, Slop, Slap – or, if you remember water shortages in Melbourne, you’ll know not to be a Wally With Water!

We have been very good at encouraging mum-and-dad investors in CER.

In this new phase, we need to be just as good at engaging the uniquely Australian participation of millions of mum-and-dad generators, because that’s the role they’re now playing in our system.

However, you don’t need to be a dermatologist to understand slip slop slap, and you shouldn’t have to be an engineer to understand the message about your equipment contributing to the grid.

­***

As the Chair of both the former ESB and the new Energy Advisory Panel, as well as the Australian Energy Market Commission, I understand, better than most, the complex and intersecting challenges that CER presents.

My job is to push reform that’s required to unlock the benefits of the rapid uptake of CER, while also reducing risks resulting from the speed and scale of the change.

But at this stage of the transition, governments need to take the lead in a coordinated and decisive way to give us:

  1. a CER taskforce with clear terms of reference to deliver on our six priorities across 12 months, including…
  2. consistent technical standards and consumer protections to minimise risks and maximise participation, and
  3. an overarching, national narrative about the energy transition in general and CER in particular, to support social trust and encourage participation.

I’ll be thinking about all of this as I go back to ministers in November to sing the CER song again.

We all need to go faster. We can all do better. We all need to improve on where we’re at right now with integrating CER – industry, consumers, and government.

But as I said before, bear in mind that Australia is at the cutting edge of the deployment of this technology globally.

So it’s also important to get this right.

And that means working steadily and meaningfully together.

We have to get onto it – and we have to build each other up as we do.

I look forward to returning next year to a choir in full voice, singing the CER song.

Thank you.

 

Solving the energy puzzle, together

20 June 2023

Australian Energy Week, Melbourne, 20 June 2023

Anna Collyer, Chair AEMC

*check against delivery

 

Thank you, Daniel. And thanks to all of you for the welcome.

I also acknowledge the traditional owners of Naarm. The Wurundjeri Woi Wurrung people of the Kulin Nation. They have met, shared stories, and built relationships on this land by the river for many thousands of years.

I respect the knowledge and care that Elders past and present of all First Nation communities hold for the lands and waters that we now rely on to generate and transmit our power system.

Every jurisdiction in Australia is in some way working to bring indigenous peoples’ unique needs and ideas into the energy transition.

I hope we see this participation grow ever more meaningful in the future – I believe the transformation will only be stronger as a result.

Now, I know what is top of mind for everyone here today are the challenges facing consumers from cost-of-living pressures, including ongoing increases we’re seeing in retail energy prices.

I’m sure this conference will give us an opportunity to talk about immediate actions that can help alleviate those pressures and what more we can do to support all customers, right now. At the same time, these real challenges provide us with an important focus as we transition to a net zero grid.

The conference theme is achieving the transition at least cost, not any cost – something I hear regularly from my friend Andrew Richards at the EUAA. This concept is the basis for my opening remarks today. I want to talk about the enormous and complex challenge of getting Australia to net zero and doing it in a way that minimises costs for energy consumers.

And – if you’ll pardon my pun – I plan to use a puzzle analogy to bring the pieces together.

Like many of you, I have a fond family tradition of jigsaw puzzles. Whether it’s holidays, sick days, or the dreaded lockdown days, most of us can remember working on a jigsaw at least once.

My family’s most recent effort was a picture of that war effort factory icon, Rosie the Riveter, but I’ll get to my gender equity piece later this morning! For now, I’ll apply the universal jigsaw experience to the enormity of the energy transformation in Australia.

Our challenge – while far more serious than any puzzle – does have similarities.

When you begin a jigsaw, you know exactly what you’re making: that’s the picture on the box. In this case, the picture shows Australia at net zero carbon emissions by 2050.

A common start to jigsaws is to place all the edges before getting stuck into the middle. Sometimes, though, edge pieces remain hidden until you make enough progress to reveal them among the unplaced pieces. For a time, you just have to accept the gaps and look for other wins.

Without stretching this analogy too far: in energy terms, there are many unknowns still ahead of us, so we can’t yet detail every single step of the plan between now and 2050. We’re working hard to turn over all the puzzle pieces – but in areas like operational security, for instance, we really must expose more knowledge before we can commit to the next steps.

What we do have joined up, is the bottom edge that is anchoring this energy puzzle. That’s the unprecedented alignment of Australian governments based on our plans to get to net zero. With that baseline edge completed, we can more confidently fill in plans – the outside edges if you will – for all energy stakeholders.

There are other similarities between jigsaws and our work in energy, like:

  • being worked on by people who find solutions from different angles, and
  • featuring leaps of genius from unexpected players (in my case my 82-year-old mother!) who walk by and instantly spot that one connecting piece you’ve been hunting forever...

The good news for my energy analogy is that – with a puzzle on this scale, and so many connections and discoveries still waiting for us – there are more than enough pieces for everyone to play a part.

So let me move on to some highlights from the AEMC and the ESB – soon to be the Energy Advisory Panel – that connect with the sector. As I do, I hope you’ll identify places that your own puzzle pieces could add to the ever-growing picture.

This year I’m using three themes to help capture the many interrelated activities underway. Those themes – transformation, resilience, and innovation – will shape the rest of my talk today.

Transformation

National energy objectives

To begin with transformation: the introduction of emission reduction objectives to the national energy objectives is one of the most significant changes in the history of our energy markets. In fact, this is the first change of any kind to the objectives in 15 years. We’re expecting the amendments sometime this year.

So, what will this mean?

Well, for clarity: emissions reduction won’t form a separate, additional objective. It will be incorporated into each of the three national objectives – for electricity, for gas, and for energy retail markets.

This brings a new dimension to the Commission’s decision-making. In future, we will balance emissions reduction outcomes in the same way that we currently balance the existing elements: price, quality, safety, reliability, and security.

But – also for clarity – this doesn’t mean emissions reduction trumps the other elements in the objectives. We’ll continue to balance all criteria on a case-by-case basis, and to look for the most efficient and affordable way to achieve our energy objectives, including in relation to emissions reduction.

In the Commission’s most recent strategic reset, we recognised the critical role of emissions reduction as the context in which all our work was being undertaken. This gives us a welcome, additional structure in which to consider emission reduction.

But before that begins, we have work ahead of us! And we will need your input on the framework to embed emissions targets into our workstreams. Please, keep an eye out for draft papers later this year.

Another transformative change is how we approach the massive task of expanding transmission with the greatest possible efficiency and effectiveness.

If I return to the puzzle analogy – transmission is less about pieces of the puzzle, and more like the concept of interlocking shapes that hold a jigsaw together. Without those connecting tabs and sockets on each piece, the puzzle would fall apart. I’m sure you’ve all heard the line: there’s no transition without transmission!

The Transmission Planning and Investment Review we have just completed focused on getting those new connections funded and built.

Rule changes to apply those recommendations are underway, with more to come. You’ll also be hearing from Daniel Westerman shortly, about where AEMO is at with its planning process.

Transmission Access Reform

Meanwhile, the ESB’s work on Access Reform is about getting the maximum usage and value from new and existing transmission. Or, to put it colloquially – how do we get the biggest bang for our buck?

The existing transmission network was designed to serve a relatively small number of traditional generators, located close to fuel sources, be that coal, gas, or hydro.

In contrast, our myriad new renewable generators are typically spread over large open areas with high levels of sunshine and wind.

They must be complemented by dispatchable plant – including storage and, potentially, flexible load. And the whole lot must be connected, as efficiently as possible, with at least 10,000 km of new poles and wires.

Another consideration – given the nature of our energy markets – is that those connections should also work across state borders. This has been highlighted recently by the rise of state government Renewable Energy Zones.

We absolutely welcome the contribution and the benefits that jurisdictions bring to their REZ schemes in terms of jobs, growth, and reaching our net zero goals. But we also need these Zones to be part of a wider, coordinated plan that avoids excessive and inefficient construction, funded by consumers in their energy bills and taxes.

Access reform aims to send signals to investors on:

  • first, the best place to set generation, storage and dispatchable assets, so we only build essential transmission and other assets
  • and second, the best way to bid into the market – so that we get the least cost combination of assets contributing at any point in time.

The reform’s purpose is to have the market support decisions that give better outcomes for everyone when deciding where to build and how to bid.

National access reform would support Renewable Energy Zones in ways such as:

  • stronger incentives to invest in these schemes
  • confidence that investment cases won’t be undermined by subsequent projects outside a REZ
  • and, providing for a mix of assets within REZs, particularly storage, that maximise the value of investment.

We think this can build value in REZs, and, ultimately, get energy to customers as efficiently and affordably as possible. We presented this to Ministers in February, and we’re about to take the next stage of the work back to them.

In terms of our jigsaw puzzle – this is one of those times when there is room for every kind of approach. State-driven renewable energy zones are welcome participants, and this also speaks to the strength and value of our national partnerships.

And that brings me to my next theme today: resilience.

Resilience

Resilience can mean a lot of things to different people. Today I’ll use it in relation to the reliability of our power system.

With winter upon us and 12 months on from the market suspension, in addition to affordability, reliability is also at the top of our minds.

Last year when I spoke at this conference, I said I would always now measure my time in the energy sector in two sections – the time before, and the time after, June 15, 2022. There are people who still wince when you bring up the suspension – I might have just spotted a couple of you in the audience!

The pain was very real – but, so was the response, which was managed incredibly well, particularly by Daniel and our colleagues at AEMO.

I’m not going to be the person who jinxes us by talking up the solutions since that time, but I will say that there are structural changes in place that stand us in good stead if we were to face similar circumstances.

These include:

  • the Government’s introduction of coal and gas caps in response to global commodity changes
  • the Commission’s changes to emergency price settings so more generators can meet their costs within the administered price cap regime, and
  • the ongoing compensation claims process and the significant communication effort around that work.

This all means that, if the same situation arose, we’d expect to see more generators would continue without disruption.

Rethinking reliability

In years to come, the 2022 suspension will show up in uni exams, and give energy veterans that ‘where were you on the 15th of June’ moment at conference dinners. But, looking ahead, we do have a broader suite of actions underway to support the resilience of the system in the short, medium, and longer terms.

Speaking immediately, we’ve extended the application of the interim reliability measure to both the Retailer Reliability Obligation and to AEMO’s ability to enter into long-term reserve contracts. This wasn’t popular with everyone, but it ensures we have some conservative signals in place as we work towards more enduring outcomes.

In the medium term, we have a number of jurisdictional schemes like the NSW Road Map and the Commonwealth Capacity Investment scheme that will do a degree of the heavy lifting on getting replacement assets in place – but not necessarily the whole task.

This brings me to our Reliability Panel’s recommendation on the market settings for the period 2025 to 2028.

The Panel proposed a gradual increase in the market price cap over this period.  We see that as – potentially – a complementary measure to the work jurisdictions are doing to promote investment.

We have confidence in the Panel’s analysis and judgment but that doesn’t mean the decision is pre-determined. We’re conscious there were divergent views on the Panel and the Commission needs to test the proposals in a wider context.

We will carefully consider, when balancing reliability and affordability, whether there are net benefits to customers of increasing the market price settings.

And then in the longer term, how are we going to keep incentives flowing for investment in the assets the sector needs?

That’s why the Reliability Panel has now kicked off its next major review – looking at whether we can apply the current standard to make judgments about reliability in this new kind of power system? The hypothesis is: it’s no longer fit for purpose.

A standard for reliability that is based on average outages isn’t very helpful in the new paradigm of an energy sector comprising such an eclectic mix of assets, and increasing variability in the weather caused by climate change.

This review looks toward the end of this decade and asks:

  • what form could a new standard take?
  • what targets would we attach to the new standard to measure performance?
  • and – what tools could the market employ to give that standard effect?

We also assume governments don’t want to keep investing indefinitely. We want to get back to an equilibrium where the market can send the kind of signals that result in the assets it needs.

And of course – you can’t talk about reliability without affordability. The balance of those twin desires will guide the new standard discussions, just as it does all our work in this area. And on that note, I also refer you to AER Chair Clare Savage’s speech this afternoon about protecting consumers.

DIY reliability

And let’s not forget, there’s a quiet kind of ‘DIY reliability’ revolution underway on millions of Australian home and business rooftops. Increasingly, customers are self-funding reliability to some degree.

We are now nudging 3.5 million small solar PV panel systems; a world-leading per capita level of generation. And some solar installers report that recent growth in EV sales is adding even more interest in rooftop PV. Prospective buyers, they say, are adding potential petrol savings to the usual calculations around reducing power bills.

Even more interesting, our AEMC economists have shown the tipping point in domestic battery affordability will land in 2025, much sooner than expected. In fact, we’ve found some battery brands are already priced to deliver payback within eight years, which is the standard we use for affordability.

And there’s more.

Today only 72,000 or so homes and small businesses in Australia have batteries. Our analysis says that if installation only continues at the rate of the past three years – we will see more than 1 million homes with batteries by 2030. That’s about 10% penetration of the domestic market.

This doesn’t include the expected boom in household charging from EVs – which you can also think of as ‘mobile batteries’. Looking to the 2030s, we may see home battery installations slow down, replaced by the convenience of two-way EV charging.

Innovation

And that brings me to my third theme for today. As an optimist, this is my personal favourite: innovation.

Consumer energy resources like rooftop solar, electric vehicles and batteries are a rich field for innovations of both the technical and behavioural variety. We need both kinds to reach our net zero goals.

In jigsaw puzzle terms, consumer energy resources are like those highly detailed sections that you gradually complete and bring together to help join up the whole. You know that moment? Where you suddenly discover there are in fact six different shades of blue that can help you nut out the puzzle! 

Those connections are complicated – but very rewarding, and best completed with many participants. We have significant work to do to make sure those connections are possible.

AEMO’s step change scenario relies on a five-fold increase in contributions from distributed solar resources, much of it from consumer-generated energy. We need tools and incentives that can enable and inspire millions of consumers to choose to share the power they generate in such a way that it supports the overall grid.

If we can do this well, we can save by needing to build fewer large-scale assets. We can share the benefits of consumer assets in a way that reduces – not increases – the energy divide.

I said before, there’s no transition without transmission. I might also add, the consumer is the hero on the road to net zero.

At the Commission we have four key pieces of consumer energy resource work in front of us:

  • First, our review of CER technical standards is nearly complete. I’ve said it before – we have an extra 3.5 million tiny generators on our rooftops, but we don’t have 3.5 million tiny engineers up there to service them!
  • Secondly, we’re also close to completing our review of smart meters. If knowledge is power, smart meters literally turn power into the knowledge consumers need to decide if, and how, they participate in the new energy markets.

And then I want to touch on two more:

  • One is underway. It aims to unlock the benefits of consumer energy resources through flexible trading. This opens up new management options for householders and businesses.
  • The next one will commence soon. It’s called the Scheduled Lite Mechanism, which just describes a low-cost, light-touch way to participate in the markets.

Seen together, these reforms present a platform to allow customer assets into the system, at a time and in a way that they can have the most impact. From both a large and small consumer’s perspective – we need to understand which incentives and safeguards would encourage participation.

And for the aggregators and other businesses that will be instrumental in this platform, we’ll work out what are the clearest signals that they can follow to know what the market needs and to create the best outcomes for their clients and the system.

The groundwork for a two-way market has already been laid, of course, with many pilots underway. Just a few examples you might want to look up are:

  • a joint venture VPP project between Vicinity and EnelX
  • an ARENA-funded flexible load project led by Shell Energy Hub, enlisting supermarkets and others
  • and both AEMO’s Project EDGE and Ausgrid and Reposit’s Project Edith – for which I have a soft spot as it’s named for a pioneering female electrical engineer.

Trials like these are great opportunities for us to learn by doing. At their best, they also help pinpoint regulatory, operational, and commercial barriers so we can refine the market design solutions we need.

There are many innovative projects out there right now. There will not be one single way to solve a puzzle of this scale, we need every good lead we can get.

Conclusion

Diversity and inclusion

Which brings me back to Rosie the Riveter, in a roundabout, puzzle-solving way.

An exciting thing for me personally this year was to be appointed one of Australia’s first Global Energy Equality Ambassadors. Energy – you may be shocked to learn – has one of Australia’s lowest female representations of any industry. The only lower sectors are construction, and mining.

One of the scheme’s objectives is to reach gender equality in this sector by 2030 – the Equal by 30 initiative. Currently, many government and renewable energy organisations are close to that mark, but sadly it’s more like 20% for the rest of the sector and far worse than that in the trades and senior leadership.

This is a cause very dear to me. There are some practical solutions that I’ll happily speak to at length another time. But for now, something else about gender diversity struck me early in my ambassadorial tenure.

I was listening to Canadian diplomat Isabelle Hudon speaking of the enormous task ahead of us in the energy transformation. Isabelle says:

  • ‘we must harness all possible talent to discover the breakthrough solutions that will transform energy and the world’

It was the ‘all’ that struck me. ALL – possible – talent. Not only including women. To finish this tremendous puzzle in front of us and match the net zero pictured on the box, we have to seek the broadest possible range of skills, ideas, and actions.

We have a lot of very complex problems to solve. If you’ve heard me speak before, you know how strongly I believe in bringing together and really listening to different perspectives.

That means diversity. Diversity and inclusion, because without inclusiveness, diversity alone can form a very lonely path.

Whether it’s gender, culture, age, ethnicity, education or life experience, countless studies show we get better solutions when we embrace a wider range of perspectives in our work.

I can think of several times since I started with the Commission that a dissenting stakeholder view led us to a much better solution than we’d have found without being challenged in our thinking.

It’s part of our strength. We are continuing to work on ways to improve our inclusiveness both with staff and stakeholders, and I’d like to see that approach embraced more widely in the energy sector. 

So, before I say goodbye to Rosie the Riveter, let me just say to those expressing fears about workforce shortages blocking the energy transformation’s construction rollout – perhaps this is one case where we can learn from lessons of the past

Millions of women around the world proved themselves capable of reskilling and operating in a vast range of electrical, mechanical, scientific, and industrial roles during both World Wars.

We have another massive national and global effort ahead of us, and it might be time to think differently about what staffing an energy workplace looks and feels like. I really hope we’re not leaving up to 50% of our potential workforce on the sidelines for the sake of:

  • setting meaningful recruitment targets
  • guaranteeing safe work environments
  • and – at the very least – when we do actually hire women in the field, getting some female portaloos out there too!

And so, like a jigsaw puzzle, the energy transformation will keep challenging us to fill in problematic blanks by uncovering:

  • new ways of thinking
  • new ways of looking at our sector
  • and new ways of collaborating and drawing in fresh talent.

As in a jigsaw, sometimes we make huge headway in one sitting, other times a single small piece fitted in place is an almighty achievement. The key is – we all have pieces to contribute.

One day, you’ll look back at the completed energy puzzle, in all its vast complexity. You’ll each know the satisfaction of pointing to the pieces you placed. And you’ll see how you helped to match the picture on the box, which shows we reached net zero by 2050.

Thank you, and enjoy your conference!

 

Helping us to help you: opportunities for large energy users in the transformation

16 May 2023

EUAA Conference Keynote, Melbourne, 16 May 2023

Anna Collyer, Chair AEMC

*check against delivery

 

Thank you, Brian.

I, too, would like to acknowledge the Wirundjuri People of the Kulin nation, on whose lands we are meeting today, and pay my respects to their elders past, present, and emerging.

It’s a timely reminder that the enormous work of the energy transformation is now, and will continue to be, crossing over First Nations lands.

Thank you also to the EUAA team for asking me back to this important event.

I’ve been thinking about last year’s conference and reflecting on the difference a year makes…

Although – and I’m sure you’re feeling this too – these days, one year ago is almost like ancient history so perhaps we need a new measure of time to mark the pace at which the transition is moving along? Something like the concept of ‘dog years’ might help us capture the acceleration of the change.

Back in 2022, I spoke to this conference about some of the major works underway at the AEMC, the ESB, and across the sector. I focused on the infrastructure-enabling Transmission, Planning and Investment Review, and the reliability-enhancing Essential System Services workstreams.

I spoke about the need to get the balance right between the reforms and investment we need to reach net zero targets with a reliable and secure energy system, and delivering it all at the right time and as cost-effectively as possible for both small and large consumers.

A great deal has happened in those projects I discussed last year. Our transmission review is completed, for instance, and rule changes are already in progress, but I can assure you that the need for balance will continue to be at the front of our minds throughout the transition.

Balance is also an important aspect of another major change since last year, the inclusion of emissions reduction targets in the national energy objectives. This is a fundamental reform proposed by the energy ministers. It will significantly change the way we work at the AEMC, because all our decisions have to meet the relevant energy objective.

The three national objectives, as you know, cover electricity, energy retail, and gas. The emissions reduction component of the energy objectives will be one of several considerations the AEMC will be required to balance in making its decisions. The other considerations are the existing elements of price, quality, safety, reliability, and security. All of these are to be balanced in the best interest of consumers.

We support this change and we’re currently developing a proposed framework to embed emissions targets into our workstreams. We are also updating our internal decision-making framework and determination templates.

Once the legislative work is done, we will be consulting with you on the guidelines, later this year.

With so much underway, and so many interrelated and interdependent projects, we find it helps to organise the bigger picture under themes. Our three themes this year are transformation, resilience, and innovation.

We must fundamentally transform the power system – as you are all experiencing that’s well underway. It comes in many forms but most noticeably in new infrastructure, with billions of public and private sector dollars pouring into the construction we need.

I was told recently that while energy projects have for many years sat at around 20% of the national infrastructure pipeline, within the next five years this will leap to 70% of the total national effort – it may even go higher.

But no matter how much we build, the system must work in new ways and the changes must be resilient. There are many ways to apply that word to the sector:

  • Market resilience, where supply and demand are well-matched, and few interventions are needed to provide efficient services.
  • Or policy resilience, where jurisdictions are in broad alignment and decision-makers have confidence in their advice and delivery.
  • And finally, social resilience, where consumer benefits are clearly paramount and include energy equity across all communities.

And the third theme, the element that’s got us this far, and needs to take us much further, is innovation. New ways of thinking, making, acting, and combining processes that accelerate the deployment of the massive changes we need to meet our goals.

So today I’ll use those themes to talk about some important work as it relates to large energy customers such as yourselves. These are all areas where we particularly value your input and participation.

I’ll share with you:

  • First, how Transmission Access Reform could support the energy transformation with a more efficient, coordinated approach to the vast amount of renewable energy coming online.
  • Second, some of the strategies we’re working on for market resilience, including the proposal we have received from the Reliability Panel to increase the Market Price Cap as an investment signal.
  • And third, how innovative reforms are opening the way for large customers to save money with Consumer Energy Resources or CER.

In each case, I want to reiterate that customers, and in particular large customers, are front of mind for us as we progress this work.  I also want to invite you to help us to help you, and I’ll be using these examples to draw out those opportunities as we go.

Transformation

I will start with Transmission Access Reform, as an enabler of the transformation.

This is a fundamental reform. It has been in the making for the lifetime of the NEM.

While our transmission review was about getting the transmission connections funded and built, Access Reform is about getting the maximum usage and value from the transmission we build in this new grid, where variable renewable energy is the primary power supply.

To set the scene, as you know, renewable energy appears in vastly more locations than thermal power stations. The existing transmission network was designed to serve traditional power stations, which were often located close to coal seams or urban areas.

In contrast, renewables are typically spread over large open areas with high levels of sunshine and wind. They also need to be complemented by dispatchable plant – including storage and flexible load. And the whole lot must be connected, as efficiently as possible, with 10,000 km of new poles and wires.

Another consideration – given the nature of the NEM – is that those connections should also work across state borders.

This is something that’s been highlighted by the rise of state government Renewable Energy Zones. (I did mention that we’re at an interesting stage…)

It’s a completely rational step for governments to be heavily invested in a transformation as significant as Australia’s energy transition. We absolutely welcome the contribution and the benefits that jurisdictions bring to their Renewable Energy Zone schemes in terms of jobs, and growth, and reaching our net zero goals. But we also need these Zones to be part of a wider coordinated plan to avoid excessive and inefficient construction with costs that will be borne by consumers in energy bills and taxes.

One way to understand the goal of Transmission Access Reform is to think about how roads work. We build roads to enable traffic, but we don’t build a separate road to connect every possible point A to every possible point B.

Why? Because roads are expensive to build and maintain, and we would create a wild scrabble of wasteful infrastructure. Instead, we plan and build commuter corridors and arterial connections to connect people to important sites like schools/hospitals.

If you’re a town planner or a property developer, the existence of various types of roads sends a signal about where to build new services and population centres.

In this analogy, Renewable Energy Zones are like regional towns. They contain a lot of useful services that people need at different times and in different ways. You might follow a highway to get close to the town, but you don’t then need a highway to reach each doctor, baker, or plumber that’s based there, when you want to access their services.

In the same way, as we shift from a few big thermal generators to lots of smaller renewable sources, no matter how they are organised, we want to avoid underutilised, expensive connections. Access reform is intended to send signals to investors on the best place to set generation, storage and dispatchable assets, so we only build the transmission we need.

Given the challenges that we have faced with transmission access reform, we have sought to work with industry to find a win-win solution, that will take us a step forward from where we are now.

Having presented this to Ministers in February, we have a preferred design, which we are seeking to refine for approval at the Ministers’ meeting scheduled for mid-year The preferred Transmission Access model combines priority access with a congestion relief market.

It would support Renewable Energy Zones in a number of ways, such as:

  • strengthening incentives for investors to participate in these schemes
  • giving Zone participants confidence that their investment case will not be undermined by subsequent projects outside a Zone
  • and still allowing market participants to connect outside of Renewable Energy Zones, without disrupting the coordinating efforts of the scheme
  • but it would also remove opportunities for subsequent-connecting generators to free-ride on transmission investments in these Zones, without contributing to them.

We think this can build the value in Renewable Energy Zones and, ultimately, get energy to customers as efficiently as possible at the lowest cost. It’s about the best bang for buck for everyone at this stage. We’re seeking to achieve a coordinated and efficient process over individualistic behaviour.

We are realistic about what success looks like and believe we can get there. We don’t want to let perfect be the enemy of good. However, it’s not done and dusted. Hearing your voices in support will really help us to get to an outcome, which, while not perfect, will be good, and better than the status quo.

Resilience

Having mentioned a market response to transmission access, I’ll move to our resilience theme, and how we go about keeping the system reliable and secure during this once-in-a-century build-out.

At the AEMC we are thinking about the market and looking at the settings in the short-, medium- and long-term and how they provide both investment and operational signals that support reliability.

We have three priority workstreams focusing on reliability as we transform to a very different energy market.

First, the Commission is in the midst of reviewing the Interim Reliability Measure, with the final report due at the end of this month. And we also have a consultation paper out for the Retailer Reliability Obligation.

Second, the Reliability Panel is currently considering the most appropriate form of expressing the reliability standard to encourage new investment that will deliver a reliability system at a level customers will value. That, too, has a consultation paper currently available.

Both the Interim Reliability Measure, and the Reliability Panel’s work, seek to deal with the emerging risk of low-probability but high-impact events, as we transition to a power system dominated by VRE, and a changing weather system affected by climate change.

The third area is one I wanted to explore a little further with you, as it pertains to a topic close to your hearts – pricing, and the impact price has on reliability and investment. The market price cap has traditionally been a mechanism designed to send long-term investment signals. 

The Reliability Panel has recommended that we progressively increase the market price cap and cumulative price threshold. The intention is to reach the level required to incentivise new entrant investment, consistent with the current reliability standard, by the final year of the review period.

The proposed changes are intended to encourage investment in the kind of new generation needed to ensure reliable energy for consumers as we move to supply most of the grid with variable renewables.

There are some strong opinions about this in the energy sector. It’s now the Commission’s job to consider whether that is indeed what an increase to the market price cap and cumulative price threshold would achieve.

We have confidence in the Panel’s analysis and judgment, but that does not mean the decision is pre-determined. We’re also conscious there were divergent views on the Panel. At the Commission, our role now is to test the proposals in a broader context. We will carefully consider whether there are net benefits to customers of increasing the market price settings.

I note the Panel’s work indicated the increased settings would deliver the reliability standard, but with an accompanying 3% price increase from 2025 to 2028. It’s also important to note that the Panel’s terms of reference were for the energy-only market.

In our considerations we will particularly focus on investigating retail price outcomes and interactions with government schemes.

For instance more investment should achieve better reliability and bring down average retail prices, compared to a situation without that investment, while government schemes supplement market outcomes and are paid by consumers or taxpayers, depending on the structure.

Some of the key questions we’ll be asking are:

  • where should those costs be borne, and
  • what are the exit paths for governments in these scenarios?

We released our consultation paper on increasing the cap last week and we will be listening closely to all our stakeholders – most certainly including the EUAA. For now, I’d ask you to read the paper, discuss the possibilities, share your thoughts, and allow us to do the work.

Innovation  

And that brings me to my final theme for the day – innovation.

In a world where daily we are exceeding some of the wildest dreams of energy inventors, no field is richer in innovation than Consumer Energy Resources. And the title is an important tip: not too long ago we called anything that wasn’t at utility level, DER – or distributed energy resources. You’ll still see that sometimes as people work out the distinctions in this new world.

But Consumer Energy Resources really tells the story – Australia’s energy transformation hinges on consumers. That means customers like you, personally, and like your businesses, as large energy users.

In fact, the transformation hinges on consumers doing more than just making their own power. The AEMO ISP and all our other modelling and rule development relies solidly on the idea of consumers being engaged in a two-way market. Innovation comes into play throughout that activity.

If you were a domestic consumer audience, I’d certainly lead off with our recent work reviewing smart meters. That’s because their availability and functionality will be a crucial enabler for so much of our energy transformation. If you’re interested in metering, our final report will be out at the end of August and I’m very keen to share it.

However, you’re here today as major energy consumers with many more zeroes in your power bills than any of us personally want to imagine! And so, I’ll point you to other work that’s also innovative and exciting, and to some examples of the kind of initiatives we expect to see in front of you, in future.

Three of the tools we have developed, or are developing, with particularly strong business applications in Consumer Energy Resources are:

  • First, Rules that support innovations to integrate storage into the NEM
  • Second, Rules that unlock the benefits of flexible trading of consumer-resource generated energy for their owners and the NEM
  • And third, Rules that cater for scheduling at a ‘lite’ level - which will be a necessary addition to the market as we rely more and more on dispersed and disparate sources of renewable power and widespread storage.

All three of these concepts – integrated storage, flexible trading, and scheduled lite – offer opportunities for large users to manage their energy costs to an unprecedented degree.

Rather than go into the nitty-gritty of each rule, I thought I’d share a couple of examples of projects that have come to my attention that demonstrate the principles behind our rule changes, and may be enhanced as we finalise more of our Consumer Resource market innovations.

Shell smart energy hubs

Last October, ARENA announced $9.1 million in funding to Shell Energy Australia (Shell Energy) to support a project worth around $33 million in total.

It’s called ‘Commercialising Smart Energy Hubs’. Some of you may even be involved.

According to Shell and ARENA, this work acknowledges that flexible demand services have been limited due to perceived barriers. These include insufficient market revenue for customer return on investment, and the initial high cost of deploying equipment.

The project’s aim is to implement energy load control across at least 40 commercial and industrial customer sites to demonstrate an estimated 21.5 MW of flexible demand capacity.

Supermarkets and shopping centres in NSW, Queensland and Victoria will be involved because of the heating and cooling opportunities from their large thermal loads.

Supermarkets and shopping centres also, as many of you can attest, have a strong industry imperative to move to sustainable outcomes where possible.

Shell says they will build each participant a whole-of-site solution to optimise their energy system, including heating, ventilation and air conditioning, refrigeration, electric vehicle charging control, and onsite solar PV and storage.

As ARENA says, demand flexibility offers a way to reduce the load on the grid during busy periods, reducing energy costs, lowering peak demand and moving energy loads to when there are high amounts of renewable energy. It can be implemented in real-time in response to market signals, generation shortfalls or network constraints.

We understand that there’s a pilot underway at Chernside, with the aim of being the first shopping centre in Australia to be carbon neutral. If successful on a larger scale, the Shell Energy project aims to directly unlock 417 MW of flexible demand and be a catalyst to realise 1 GW of commercial and industrial flexible demand capacity across the NEM as soon as the end of 2025.

I believe this is the first C&I project ARENA has funded for whole-of-site optimisation. It shows the potential growth for energy demand management to deliver market, ancillary and customer benefits through the control of energy load.

Vicinity and Enel X

But maybe that model doesn’t sound right for your business, so here’s another idea to explore. In January, the property development group Vicinity Centres, and Enel X, which is an onsite battery storage and Virtual Power Plant service, announced a joint venture.

They plan to pilot onsite batteries at two of Vicinity’s centres: Broadmeadows Centre in Victoria and Lake Haven Centre in NSW. Together, their capacity is more than 5MW, and it’s expected to be in play by the middle of this year.

They say that their pilot expands on Vicinity’s existing energy strategy using solar, automated demand management, and now batteries, and aims to maximise energy production and reduce reliance on the grid. This appears to be an approach very much within the scope of our rule change proposals for unlocking flexible benefits.

Their project describes each party’s role as follows: Enel X is responsible for procuring, operating and optimising the batteries to generate the most value from the energy markets, while Vicinity provides access to its infrastructure and manages the engineering, procurement and construction process.

The participants say this project could help Vicinity reduce costs by optimising their batteries’ charge and discharge. They will store excess renewable energy when spot prices are low or negative, and generate when the local network is peaking, and prices are high. And then, Virtual Power Plant integration will introduce new revenue streams, such as frequency support, which helps to stabilise the grid.

If Vicinity expands across its other centres, the group says it has the potential to deploy more than 50MWh of battery storage or the equivalent of 5,000 home batteries.

We’re very encouraged when we see work like this ramping up participation in the transformation for a new range of consumers.

While we’re continuing our work to make space in the NEM for more and more innovative approaches, there are enormous opportunities for large customers on both sides of the meter, right now.

However, we can only make the opportunities possible – it’s your job to take them up. The energy transformation – now well underway – goes far beyond the concept of ‘sustainability strategy’ as you may have understood them in the past.

This should not be greenwashing – this is sensible business practice to manage costs and embed your business in a new and growing marketplace.

As regulators, we know we can learn a lot from projects like the ones I’ve mentioned, as well as hearing from you what barriers you perceive to participate. For example, the Shell project I mentioned includes the exploration of useful regulatory changes within:

  • the Wholesale Demand Response Mechanism (WDRM),
  • the Reliability and Emergency Reserve Trader (RERT)
  • and state-based certificates such as the NSW Peak Demand Reduction Scheme (PDRS).

We really welcome discussions of that kind.

Conclusion

Now, what messages do you take away from these updates – what are the next steps for you?

I hope what you’re hearing is that we are asking for you to lean in – when you help us, it makes it easier for us to help you.

And the help we’re seeking includes:

  • Responding to our consultation later this year, on embedding carbon targets into the national energy objectives.
  • Also, supporting the work we are doing on Transmission Access Reform: it may not be a perfect solution, but it is robust, and a necessary step to keep the transformation moving at pace.
  • And, letting us explore on the market price cap: we acknowledge the concerns some of you have raised, and we’re testing the proposal against the work we want it to achieve for resilience.
  • And, finally, getting actively involved in managing your energy costs through the many innovative Consumer Energy Resource opportunities being created, and let us know what else we can do in this space.

I hope I can return to you in 2024, to see how the next batch of dog years in energy terms have treated us all and to celebrate the way you will be embracing the many innovations coming to help us, thick and fast.

Thank you.

Imagination meets opportunity – thinking differently about building our energy future

27 April 2023

National Infrastructure Awards, Sydney, 27 April 2023

Anna Collyer, Chair AEMC

*check against delivery

 

Let me also acknowledge the traditional owners of the land where we are meeting tonight, the Gadigal people of the Eora nation. It’s even more important that we recognise all first nations people in Australia, when so much of the work of the energy and infrastructure sectors occurs on their custodial lands.

Thank you very much Rob for the introduction, and to Adrian, Sir Rod, and the rest of the Infrastructure Partnerships Australia team for maintaining this wonderful event.

I’m very excited to see the results of the awards tonight and I congratulate every one of the finalists – to be included on this program is itself an enormous achievement.

Red flags

In the 1800s, English regulators faced a big problem with technological change.

There was a growing demand for motorised vehicles, which meant, among other things, replacing the inherently good sense of horses with the obviously poor judgement of humans.

Horses were the AI, sat-nav, speed-limiter and rechargeable battery of 19th-century road transport.

Humans knew a lot about what made horses go, why they might stop, what breeds best suited what purposes, and what their capacity was for the transport and energy tasks we set for them.

But, at that time, humans knew very little about how humans might behave in the new technology of horseless carriages. And so, as a regulatory response, the Red Flag Act was born.

Among other things, the Red Flag Act limited motor vehicles to two miles per hour in a city, when a bicycle could do 10.

Two mechanics had to travel with the car, and a man with a red flag had to walk 60 yards ahead of the vehicle, both to warn other road users and to send back signals to the car about any traffic in front.

Officials at the time noted that a consequence of the Red Flag Act was to kill off investor interest in developing the market for horseless carriages.

Regulatory efforts to manage the change had effectively blocked all the real advantages of the technology.

By the late 1890s most jurisdictions with Red Flag rules in the UK and America had softened or repealed them, and so here we are today: with horses mostly relegated to recreational pursuits, and driverless trains and cars perhaps poised to finally remove those pesky humans from the equation altogether.

The present tense

We’ve all learned a lot of lessons about accepting the pace of technological change since then.

Where I sit as an energy sector regulator, we also like to think we’ve learned a lot about the ways regulation can enable change safely and fairly, without applying red flags.

Nothing, however, could prepare anyone in our sector for the place we find ourselves now: in the thick of a planetary technological, industrial and social transformation.

Australia’s agreement to a target of net zero carbon emissions by 2050 is behind us. There is unprecedented alignment between Australian governments to meet that target, replace fossil fuels, reduce emissions, and slow global warming.

We’re no longer anticipating the energy transition. We’re in it, in the present tense. And it can be an untidy stage - a place of extreme innovation and equally extreme uncertainty.

As the Cheshire Cat said to Alice in Wonderland, if you don’t know where you’re going, it doesn’t matter which road you take.

Well, we do know, now, where we are going.

While the targets are ambitious, their existence allows us to define the very problems that might stop us from achieving them, and that helps us to think differently about what roads we need to take.

Energy and opportunity

Energy has always been a significant part of the economy, but what happens in the energy sector doesn’t stay there anymore.

The energy transformation represents a crucial focus for us all:

  • Firstly – because it is by far the largest contributor to carbon emissions. Around 75% of all emissions come from the fossil fuels the world burns for electricity – it’s a global no-brainer to prioritise energy emissions.
  • Secondly – because we already know what to do to fix it. Compared to the complexity of, say, embedded carbon in construction or methane from livestock, the way ahead in energy is relatively clear: more renewables, more firming, more transmission.
  • And thirdly – if we in the energy sector do our job and decarbonise the power network, we make it easier for everyone else to reduce emissions by electrifying as much as possible.

Along the way, the energy transformation is creating extraordinary, once-in-a-generation opportunities for builders and investors to participate.

And you are stepping up. In the next 5 years, energy projects will jump from 20% now to 70% of Australia’s infrastructure pipeline. There are various projections for the total spend to shifting Australia to a renewable, reliable system by 2050. The figure our economists are standing by is $274 billion, both public and private funding.

In this rapidly changing period it might feel safer to sit back and wait for clearer opportunities to come.

But as Albert Einstein said: Imagination is more important than knowledge.

With nearly $300 billion at play, the time is right for imagination to find opportunity to build knowledge and innovate.

Scale of transition

I’ll talk tonight about some of the issues that might be holding us back – social licence, workforce and investment confidence.

But first, I’d like to spend a moment on the sheer scale of the transformation work ahead.

At last year’s oration, to demonstrate the magnitude, Dr Alan Finkel coined a new unit of energy measurement.

Far beyond kilowatts and gigawatts, he called this unit the ozziewatt, where one ozziewatt represents a year’s worth of electricity generated in Australia.

To replace fossil fuels, we need to generate three annual ozziewatt hours pretty much entirely from solar and wind. Renewables last year represented about 15 minutes of an ozziewatt hour, which meant a 12-fold increase was required.

Alan also factored in Australia becoming a green hydrogen superpower by 2050 – and since making energy takes energy – we would need a system capable of generating a massive 25 ozziewatt hours of power – in just over 25 years.

But the payoff, in his dream scenario is that

  • electricity would be cheap for everyone,
  • manufacturing would thrive on smart energy and smart exports,
  • and little children would be told stories about the bad old days when there used to be power blackouts.

Acceleration

Only 12 months later, I’d say that, fortunately, we’re heading towards Alan’s dream scenario. In just one year, that 15-minute portion of renewable energy in an ozziewatt hour has grown to 20 minutes.

So, we’re already down from a factor of 12 to only nine-times the increase, to meet our renewables target.

It’s still a challenge, but already, and increasingly, more achievable.

And while he was cautious about reliance on batteries last year, Alan in his words is now a ‘battery groupie’.

If you know Alan, you know that’s an evidence-based epiphany! He wrote to us last week about improvements in batteries based on private and public investment here and overseas, and he said:

“Now, I would be surprised if anything will compete with batteries for short and medium- duration storage (up to 12 hours) and, in future, it might be batteries and nothing else, all the way out to 24 hours.”

As he goes on to say, the boom in battery availability might substantially influence our understanding of where we need new poles and wires.

Efficient, grid-scale batteries, placed close to renewable generation, may speed up the transmission build by concentrating efforts and reducing distances.

And that means sending renewable energy into the grid, faster and more flexibly and reliably, which will be good news for all of us. When I look at other advances since his 2022 oration, there are too many encouraging examples to list – here are just a few that point to an accelerating pace:

  • EVs outsold petrol in Australia’s medium car category in the first quarter of this year, even ahead of the recent government paper on emissions and Sydney has just switched on the country’s first power pole EV charger, in Glebe.
  • China doubled its solar installations in 2022 to 414 GW. It’s a great leap forward of another kind: they now claim nearly 50% of the world’s solar capacity.
  • Every week there’s another innovative storage announcement. Apart from continuing improvements to lithium batteries, others are emerging with compositions ranging from salt to timber to single cell organisms
  • Victoria has launched Australia’s first major offshore wind zone, set to increase that state’s renewable energy generation by 500%.
  • Australia’s first green hydrogen microgrid opened this February in Denham, WA, and just down the road from here tonight, Barangaroo South recently became our first carbon-neutral city suburb, thanks to technologies including maggot farms run with AI and robotics.

The how is hard

I’m an optimist by nature – perhaps not all of you will share my enthusiasm for the significance of these individual achievements.

I’m certainly not underestimating the challenges ahead, but whether you’re part of the energy sector or not, I’m sure you’ve all got examples of dreams that were called impossible – until they weren’t.

As another surprisingly serious builder - Dolly Parton - once said: Some of my dreams are so big they would scare you.

So think back, to other times when imagination has met with opportunity.

I’m reliably informed that if you’d been in this room 15 years ago proposing a single-deck, fully automated, turn-up-and-go train for this city, you’d have been laughed all the way to the dessert trolley.

Yet here we all are, with Sydney Metro nominated for other innovative work tonight, and so many more extraordinary changes in Sydney’s rail network underway that you won’t find the four-year-old North West line surprising at all.

Unless you worked on it yourself, in which case I’m sure you remember exactly how hard the progress was!

Barack Obama had a plaque on his desk that read, ‘hard things are hard’.

The ‘how’ stage of any major work is hard. It requires imagination, an eye for opportunity, and a good dose of grit to stay the course.

Challenge 1 – social licence

Which brings me to the first of the three hard issues facing the energy sector in the current times: social licence.

I started this oration with a story of horseless carriages and the Red Flag Act. While that’s a story about regulation and technological change, it’s also about people, and fear, and what governments do until we reach what we now call social licence.

There are three areas of social licence particularly affecting our sector at present:

Infrastructure - transmission

Our physical infrastructure is the first, and I’m sure we can learn from other builders in this room about innovative engagement with landholders and communities.

I always like to acknowledge the work of the Australian Infrastructure Commissioner who is working away in the background supporting transmission providers in improving the way they engage with landholders and communities.

At the AEMC we’ve been working on a very specific social licence issue under our Transmission Planning and Investment Review.

That’s because 10,000 kilometres of new poles and wires are going to cross land at a rate we haven’t seen since electricity was introduced to this country.

But it’s harder than that historic effort – because back then, much of the transmission was installed by governments who were bringing power to people for the first time.

Since then, most new transmission has been in relatively short bursts, dealing with fairly small numbers of landholders each time.

But the scale of the new connections will involve far more landholders and surrounding communities: remember we need to connect nine times the current amount of renewable energy to the grid, not just a handful of large thermal generators.

Our recommendations aim to support communities and offer cost-recovery to give transmission providers confidence that they can invest in meaningful and productive engagement.

We’re moving quickly ahead – Minister Bowen last week submitted a rule change request based on our recommendations, and we have more work underway in the review to further improve engagement between transmission providers and communities.

Broader social acceptance

Then, there’s the broader question of societal understanding and acceptance of the significant changes the energy transformation brings.

Again, this makes me consider the horseless carriage style of social licence, because regulators didn’t drop the Red Flag Act just because it was deterring investment.

Society as a whole came to accept that cars and trucks and buses served a useful purpose and could be managed safely at increasing speeds, as well as the changing costs and responsibilities for roads and vehicles

And that acceptance is a form of universal social licence that removes red flags.

We can all contribute to this normalisation of energy changes.

Nationally, while climate education is present in many ways, energy transition education is a work in progress.

Energy Consumers Australia is working with the Commonwealth on a public literacy campaign focused on assisting households to manage their power bills. In light of impending price increases.

ECA has an excellent record in consumer communication, and we look forward to seeing this added support for users to understand and control their energy and future campaigns to support households across the energy transition.

A simple way for large energy users to contribute to that social understanding and acceptance is to share your own decarbonising journey – you need not have reached net zero to send the signal you’re on your way.

I’m thinking of well-publicised examples like Woolworths committing to powering all operations on renewable electricity by 2025, or Brisbane FourX factory’s recent switch to 100% solar power.

When big brands set up public expectations, it helps normalise the transition for everyone, showing decarbonisation in action in a myriad of ways.

Of course, regulators are rightly concerned about greenwashing…

But where there are genuine and demonstrable steps being taken to achieve net zero, this can help normalise the transition for everyone, showing decarbonisation in a myriad of ways.

Just transition

Then there’s another kind of infrastructure evolution happening at the household level, which brings up questions of social licence as part of a just transition.

A recent Newgate report this week found most Australians feel positive about our transition to renewable energy and the net zero target.

Most also supported individual changes they might make to help get there. 55% would be happy to fully electrify their homes, and 65% expect to choose EV or hybrid cars for their next vehicle within 10 years.

But there’s a large question mark over how many people can receive the full benefits of the energy transition at this stage.

While 3.4 million Australian rooftops are already under solar panels, and growing by around 300,000 installations per year, many homes and businesses don’t have that advantage.

Renters, strata bodies and people with too many large trees all face different barriers to accessing the solar revolution. Innovative answers are needed to create a more just transition.

We are working on a rule change which aims to unlock the benefits of rooftop solar and other customer assets - for the benefit of both the individual customer who invested in those assets but also for the mutual benefit of the grid and therefore the wider community.

We are aiming to give customers more ways to use and manage their energy and to create incentives for new businesses to enter the market to help customers get the most out of the solar panels and other energy assets.

And on the flip side we want to enable innovative mechanisms to harness the wealth of unused energy from millions of rooftops together with other energy assets within the grid itself, for the benefit of customers with those assets and those without.

As a recent example, the University of NSW Solar shift project showed it was possible to coordinate multiple household water heaters to act as a mega battery, without anyone having to take cold showers.

If we get this right, we can all benefit from these household resources, and do so in a way that no one gets left behind.
 

Challenge 2 - Workforce

The next issue I’d like to discuss is workforce, and the shortage of skilled workers that has been an Australian headline for most of our adult lives.

The problem is compounded by both the disruptions of the pandemic and the demand for additional workers to help us meet growth in energy-related construction.

Of course, workforce is complicated. Of course, it depends on your industry. Of course, you’ve all undoubtedly got great recruitment strategies underway.

But… as one of Australia’s ambassadors to the global Energy Equality Initiative, I really hope you’re not leaving 50% of the potential workforce on the sidelines for the sake of a few additional portaloos for female staff in the field!

When it comes to gender balance, the energy sector is the third worst sector in Australia, only falling behind mining and – you all know this – construction.

We can claim around 40% female participation in the clean energy sector, and I’m pleased to say the AEMC has women at least 50% at every level of seniority.

But in the broader energy sector that representation falls to more like 20%, and in senior leadership roles, and in the trades, it’s far worse.

We have a lot of very complex problems to solve, and a lot of plant to build. So why does it matter who does it?

Two major reasons: numbers, and capacity.

We can’t afford to leave half the potential workforce on the sidelines. We simply won’t have enough people to get the work done.

And we also can’t afford not to harness every available talent to the energy transformation.

So, it remains a priority for us to add to the total pool of engineers and electricians by making those careers more attractive to women.

But, as we also move away from the traditional shape of the energy sector, and towards reliance on new technologies and CER, there are so many more skills we need to add to the mix. We used to call these soft skills: things like

  • negotiation,
  • collaboration,
  • communication,
  • inclusiveness, and creativity.

I prefer to call them ‘power skills’ – pardon the pun and, they’re essential skills when you have jobs ahead of you like developing social licence for 10,000 km of new poles and wires, for instance.

Or coming up with the kinds of management services that will benefit households with solar, and parlaying that into a more easily orchestrated grid.

Diversity

Balancing workforce also goes beyond a male/female lens.

The Australian Diversity Council has some great work on the business case for diversity and inclusion – finding it is strongly linked to innovation.

Bringing together different perspectives, whether it’s gender, culture, age, ethnicity or life experience, adds to an organisation’s effectiveness and innovation.

We simply get better solutions when we embrace a wider range of perspectives.

So how are we going to reach a healthier level of diversity and inclusion in our sectors?

Setting an ambitious target is a good start.

I have a whole other speech on that, which I’d be delighted to give to anyone who wants to do more to meet diversity objectives.

But, at a minimum, please at least make sure you’ve got enough portaloos…

Challenge 3 - Investment

And finally, let’s talk about investment, and the interesting times we find ourselves in with public and private investment in the energy sector.

The story of the Red Flag Act shows how governments can impede or support investment in technological transitions.

So what are the respective roles of the public and private sectors as we replace fossil fuels with renewables, storage and transmission.

Puzzle pieces

Given the scale of the energy transformation, it’s understandable and rational that governments are stepping forward right now.

It’s also understandable that private sector investors are concerned about how they fit into the puzzle that's worth, as I’ve mentioned, $274 billion.

We’ve got a bit of an untidy moment here – where there are calls for government to intervene both more, and less.

More – because there is concern that the US Inflation Reduction Act might pull too many resources away from Australian projects.

And less – because the recent return of state corporations like the State Electricity Commission of Victoria, and the rise of initiatives like the Queensland Energy and Jobs Plan, could leave private investors feeling crowded out.

Progress

It’s important to remember this is new for everyone…

  • and we’re all heading in the same direction,
  • and there are more than enough puzzle pieces for everyone to share.

In fact, public funding tends to take a partnering or complementary role, taking on projects that are less attractive to private investors.

For instance, the NSW Energy Security Corporation is explicitly focused on hard-to-invest technology geared toward reliability - like pumped hydro and community batteries.

Government is also doing necessary work in areas like negotiating the safeguard mechanism, and building carbon emissions targets into the National Energy Objectives.

And Federal Treasurer Jim Chalmers recently hosted a Roundtable of leading energy experts and investors, including banks and global asset managers, no doubt include some of you in this room, to supply some of the blue sky thinking needed for Australia to take the opportunity of becoming a renewable energy superpower.

The Government has stated that it sees the journey towards net zero as a once in a lifetime opportunity for Australia and is seeking to uncover investment opportunities across the national economy.

Certainties

In considering those opportunities in the energy sector, there are some areas where we have a degree of certainty.

Along with death and taxes I’m very certain that our current fleet of coal fired power stations will retire. I’m equally certain that we need our replacement assets in place before this happens so we don’t risk reliability of supply.

I’m also certain that overall system demand for electricity will increase, as other sectors decarbonise by electrifying.

And I’m certain we need a mix of assets to meet the needs of the system, wind, solar, firming, short and long term, and assets to keep our system secure.

Uncertainties

Not everything is clear of course.

And with a nod to the spirit of the Red Flag Act, governments also have a role - at this ‘present tense’ stage - to protect customers from the risks of transformation.

One of the most important conversations happening right now and dominating my news feed (if not yours) is in relation to gas and its current and future role in the energy mix.

70% of the gas produced in Australia is exported to other countries. 25% is used by households, commercial and industrial users and 5% is used in power generation.

Based on what we know right now, gas remains part of our power generation mix, although rarely used, throughout the period of the ISP.

We know governments are introducing measures to support households electrifying their gas usage and we know some commercial and industrial processes can be electrified while in others gas will be hard to replace.

What this presents is a challenging mix of need for gas in some areas, reduced use of gas and its supporting infrastructure in others and risks for customers and investors arising from both.

What I hope to see though is through the current debate on price caps, domestic reservation and codes of conduct is a plan for what we need and what we don’t and how we’ll protect customers along the way.

Because that will provide us with a much clearer picture of how we balance the path along our journey to net zero.

Your puzzle pieces

Returning to my earlier puzzle-sharing analogy – my strong advice is not to wait too long to choose which of the energy investment pieces you can fit together! Others are certainly joining in.

Take note of just three:

  • There’s Brookfield’s $18 billion deal to buy Origin Energy and turbocharge its decarbonisation pace
  • Then Transgrid, which recently picked up a $385 million federal underwrite for a massive bundled procurement across the HumeLink, VNI West and EnergyConnect projects
  • Or look at Acciona, committing to a second, 1000 megawatt, $2billion wind farm at Herries Range, in Queensland.
  • Notably, Acciona can roll on the same kit and workforce immediately to Herries Range, once they complete the nearby MacIntyre wind precinct, which is a similar size.

Call to action

So, take a wide view of these kinds of investments alongside the sharp uptick in energy infrastructure projects in the pipeline…

I note that actions sometimes speak louder – and more confidently – than words.

Speaking to the investors in this room: please, don’t wait.

Look for the meeting of imagination and opportunity I’ve been talking about. It’s all around us now.

And to all of you, innovate, and participate.

Either directly in energy, or in cutting emissions in your own field of work as far as you can.

Conclusion

With a final word on the Red Flag Act… and hasn’t that been the lawyer’s gift that keeps on giving tonight!

I pointed out that the outcome back then, like our goal now, is for governments to get rid of red flags as society and capital become ready to take the reins.

The private sector has a strong and permanent role in the energy transformation.

Many of you are builders, but none of you would be in this monumental world of infrastructure unless you were dreamers too.

You, of all people, know the joy of leaving something special behind in your work.

I promise you, there will be no greater opportunity in this century, and certainly not in your generation, to build things that really change the planet.

Whether that’s the energy sector’s building of new transmission, generation, storage and markets or whether it’s infrastructure employing low emissions plant and investing in the innovations that will resolve the embedded carbon issues in construction.

There’s more than enough work for all of us to make a mark.

Earlier I quoted Einstein’s saying, that imagination is more important than knowledge.

The second half of his quote is less well-known: Knowledge is limited, he said, but Imagination encircles the world.

You can’t put a plaque on saving the world, but you’ll look back at what you’ve built and you’ll know what you did. Thank you.

Women in Energy: Targets and transformation

09 March 2023

Thank you, Minister, for the introduction.

I will also acknowledge the Ngunnawal people as the traditional owners and custodians of this land and pay my respects to their elders and all First Nations people present.

Given our purpose for gathering today, I particularly acknowledge Indigenous women leaders, including Karrina Nolan, thank you very much for your very passionate speech. I’ve had the opportunity in my career of working with Aboriginal and Torres Strait Islander women leaders and have always learned an enormous amount and I thank them for that.

I was incredibly honoured to be asked to be an Equality Initiative Ambassador, alongside Nicola Falcon from AEMO, and I wanted to speak to you today from that position – so don’t worry, I won’t be spruiking transmission access reform! <

However, this is a chance for me to  speak to some things I’m very passionate about, and they are:

  • the ambition to achieve equal representation in the energy sector by 2030
  • why I think that’s important
  • and how I think we might go about getting there.

I’m very conscious that when I’m speaking about these incredibly important issues, they are also deeply personal. So, while I’m going to talk to you from my own experience and my own thoughts, I’m very aware that people in the audience have their own experiences and their own views – and really, that’s the beauty and value of diversity and the reason we are here today.

Getting to net zero

Let me start by adding my voice to the ‘why’ we’re aiming for Equal by 30 and then give some observations on the ‘how’ do we get there.

There’s a beautiful quote from Isabelle Hudon, co-chair of the Global Equal by 30 campaign, who said “we must harness all possible talent to discover the breakthrough solutions that will transform energy and the world”.

For me this is an intersection of two areas of passion:

  • firstly, the urgency needed to undertake the fundamental transformation of the energy system to get us to net zero
  • and secondly, the need to harness diversity in all aspects and at all levels across our sector in order to achieve that goal.

Moving away from traditions

To start with – this is really about the numbers. We need as many people as possible contributing to the transformation. So, if we look at the roles in our sector that have traditionally been male-dominated – like engineering and the trades – the ambition of getting more women involved in those areas is absolutely critical.

We have a lot to build and we need the workforce to do it. It can only help to add more women in these roles - otherwise we simply won’t have enough people to get the work done.

Overcoming the barriers to those STEM qualifications and careers for women remains a permanent priority for all of us.

But as we also move away from the traditional shape of the energy sector, and into reliance on new technologies and consumer energy resources, there are so many different skills we need to add to the mix.

Things like – going into communities and appreciating their positions, and actually gaining social licence for the 10,000 kilometres of new poles and wires we need.

Things like – working out what are the new services we need to invent to help households get the best out of their rooftop solar or batteries.

And of course, there’s scope for extraordinary technological innovation in storage and generation, and to keep the grid stable, which means working with creativity and collaboration between research, development, investment and regulation.

I saw an amazing piece on the news this morning, out of Monash Uni, about the idea that there’s an enzyme made by bacteria in the air that can split hydrogen molecules to make electricity.

I thought to myself, ‘wow – science fiction to science fact!’ But that’s what we need, right? That kind of research and innovation is how we’re going to get through.

All these aspects of the energy transformation call for the kind of power skills (pardon the pun) that women tend to be absolutely fantastic at. Things like creativity, collaboration, problem-solving, innovation and inclusiveness.

Diversity inspires innovation

And when it comes to my part of the world, delving briefly into regulation, there are a lot of very complex problems to solve.

As anyone who has heard me speak before will know how strongly I believe that this can only be done by bringing together different perspectives, whether it’s gender, culture, age, ethnicity or life experience. Countless studies show we get better solutions when we embrace a wider range of perspectives.

A great study from the Australian Diversity Council has shown that inclusive teams are 10 times more likely to come up with innovative solutions.

Getting to equal by 30

So how are we going to get to that diversity, at least in gender? I think setting an ambitious target is a good start.

There’s an elegant analogy between our net zero target for 2050 and the Equal by 30 target for 2030. Setting a target, especially a tough one, makes us step back and look at what are the barriers to achieving that target and what do we need to do differently to overcome those barriers?

But I promised I’d stick to our main purpose today, so when it comes to the gender equality barriers I tend to think of them in three buckets.

The first is the need for physical and psychological safety for women in the workplace. I’ve been extremely fortunate in my career to have not experienced harassment, open discrimination’, or worse behaviour. But unfortunately, I bet the same can’t be said for everyone in this room and achieving this is absolutely fundamental.

Second are the challenging issues around unconscious bias and merit, which tend to show up in places like recruitment, pay, and promotion. I do have some experience here! When I started as a young articulated clerk in the early 90s, the firm I joined had two female partners out of around 50 – or 4% - and to have any women as partners then, was considered a big step.

By the time I was appointed a partner we were up to 17% female representation, and when I retired from the partnership in 2020 we had reached our then target of 35%. There were many, many actions that contributed to this, but a large part of it was breaking down what merit really looked like, and addressing the tendency we all have to think that a good hire is ‘someone who looks like me’.

And the third bucket is what I think of as the structural issues that arise from the fact women have children, and more broadly remain the dominant carers in our society. Again, this one is very close to home for me as my husband James has been the primary caregiver for our children and our family since I went back to work when our eldest was 6 months old – our kids are now 17 and 15.

This has given me enormous freedom in pursuing my career and has been both a joy and a challenge for him as he steps outside what has been considered normal for men as fathers. The ability for families to have real choices about who does what is another critical step for enabling women to pursue careers.

Practical steps

So, what are some of the things we can do to address these barriers?

We do have some excellent practical steps already laid out by Equal by 30 and other streams of the Equality Initiative.

More broadly, WGEA the Diversity Council, Chief Executive Women and others have evidence-based actions for anyone seeking to improve diversity.

AEMC examples

I thought I would share some of our actions at the AEMC, where we are lucky to have a strong gender balance – three out of five Commissioners are women, three out of six on the executive team, 10 out of 21 of our director level leadership group, and 55% of staff overall identify as female.

We’ve had a pretty good overall gender balance for about 10 years, but we can’t afford to be complacent and continue to strive for improvement in our diversity and inclusion.

First, we have been working on psychological safety through our Conditions to Thrive program.

It’s critical that we as a Commission engage with the diverse views of our stakeholders and bring them into our consideration of the problems we’re trying to solve. If we want our people to do that externally, we absolutely must make sure that we’re behaving that way internally too. We have been gathering data to support our current state and areas for further leadership work in this area.

Second, in relation to unconscious bias, one thing we do is to run pay and progression gap reviews, including monitoring for unconscious bias, for instance, affecting part-time staff. A simple example of this is a comp-ratio analysis to check for systemic disadvantage in our pay structures.

And for the third bucket, traditional disadvantages relating to childbearing, we offer 12 weeks paid parental leave to all primary carers regardless of gender - to normalise equal participation in child rearing.

And still in this bucket, I’m really pleased to say that yesterday we let staff know we’ll be plugging a crucial gap by voluntarily paying super throughout both their paid and unpaid parental leave, so they are not left behind financially because of choices they want to make that suit their family.

Conclusion

Let me leave you with this in conclusion: It is a huge challenge to meet both our net zero targets and our gender diversity targets but I’m very much a glass-half-full person, and I am optimistic we can get there on both fronts.

The inclusion of women throughout the energy sector is essential for us to get where we are going. We need every available talent, and every kind of perspective, applied to the fundamental transformation of the energy sector if we’re to reach net zero by 2050.

In order to harness that talent in our organisations we need to diagnose our particular barriers, learn from others how we can do things differently to overcome those barriers, and then put real resources behind the solutions.

I suggest we kickstart the process of learning from each other this afternoon.

What’s one thing your organisation is doing for women in energy that my organisation could learn from?’

I look forward to learning lots of new things with you all.

Thank you.

Empowering the consumer for a net zero world

11 October 2022

Good morning to you all, from wherever you are attending, and thank you to the Australian Financial Review and Deloitte for hosting this important conference.

Standing here in central Sydney, I acknowledge the Gadigal people of the Eora nation, the traditional owners and custodians of the land on which we’re meeting, and I pay my respects to their elders past, present and emerging.

I’m wondering how everyone is feeling after the opening day of the conference yesterday? Are you in the optimistic or pessimistic side of the world? For my part, I continue to feel a genuine sense of optimism as we convene this year.

That’s not to downplay in any way the very real issues we have been discussing affecting energy users and providers right now.

The pandemic, climate change, ageing generators, Russia’s invasion of Ukraine … all have reshaped the global energy landscape and nations are grappling with the consequences.

In July at the Sydney Energy Forum, the head of the International Energy Agency described this as the first truly global energy crisis. Where every traditional fuel source is impacted – coal, gas, oil – and everyone is feeling the effects.

And our East Coast energy crisis continues to hit household and business power bills. Affordability is a critical, ongoing concern.

So in this context, why am I optimistic?

To begin: here in Australia, for the first time I can remember, we have a broad consensus about the path to net zero.

And consensus is important because the future is coming, we have to face it together – and we are.

There’s a clear commitment to 43% emissions reduction by 2030 – and with the early closure of Loy Yang A not long after that, you could say the energy transition in Australia has begun in earnest.

We also keep edging closer to international consensus in many ways. Despite naming this a global energy crisis, the IEA is confident that clean energy is key to resolving the situation. Taking it to another level, the US Energy Secretary recently called clean energy a ‘global peace plan’. No one, she said, has ever been held hostage for access to the sun or wind.

My second reason for optimism is, despite the magnitude of what’s ahead of us, the energy sector is not only facing the decarbonising future, we are absolutely making progress to be ready for it.

At the AEMC we’re working through the challenges systematically.

My focus today is on household consumers, and our work for them:

  • Last year’s reforms included better NEM integration for all kinds of batteries and two-way energy storage - including those we have not yet invented. We also delivered integration reforms for CER, with a two-way grid where distribution networks must accept exports into the system.
  • This year we’ll complete a major review on smart meters – a foundational reform to connect consumers’ behaviour to their energy usage and generation.
  • And, next year we’ll finish the review of existing technical standards affecting hardware, connectivity, and consumer protections for more than 3 million rooftop generators. We’ll also look at Flexible Trading Arrangements, opening the market for third-party businesses to help consumers manage the energy they use and create.

The fact is that net zero is going to fundamentally change our lives, in ways we haven’t yet imagined.

But many of those enormous changes will be made in very small ways by non-experts in homes, small businesses, and on the road. 

We – as consumers – drove the early years of Australia’s energy transition with our enthusiastic adoption of rooftop solar, and it will be consumers who – literally – bring the transition home by managing energy use and creation in the future.

And that brings me to my third reason for optimism – I believe consumers are up to the task of transformation that weighs on our next three decades.

And the reason I believe that is: the Lesson of the Mobile Phone.

Everyone knows about the house bricks that were the first mobile phones in the 1990s. Back then, they were just another way to make a phone call.

We couldn’t imagine how smart phones would transform our lives – They’ve changed how we work, shop, date, and file documents; how we manage money, fitness, schedules, and memories; how we stay informed, in touch and entertained.

They rendered so many household staples obsolete – the camera, the street directory, photo albums, record collections, and answering machines, to name a few.

Something devised simply to make phone calls on the go has become a tool that manages almost every facet of our lives – and we can’t live without it.

I bet every one of you could reach for your smart phone right now!

And the change happened because consumers took to apps like ducks to water. We liked making calls from anywhere, sure, but it was when apps offered the combination of convenience and control in one device that smart phones really hit their straps.

We want to make it possible for consumers to take the same role in the electrification process.

Now you might think, cynically, of the years we’ve spent urging consumers to engage with detailed bills, or visit comparison websites.

Alternatively, you may be dealing with complaints about falling feed-in tariffs or rising bills, and wondering how much more engaged consumers can possibly be!

But.  These are energy’s ‘house brick years’ in mobile phone terms. Solar panels and even electric cars are just a piece of equipment, doing a single job.

In the same way apps changed our attitude to mobile phones, the electrification of everything will change our household attitude to energy.

And how will that happen?

We heard yesterday that AEMO’s Integrated System Plan’s Step Change scenario forecasts a 9-fold increase in grid-scale wind and solar capacity by 2050, with storage capacity to increase by a factor of 30.

In addition to changing the methods of energy generation, the ISP is looking at a near-doubling in electricity usage by 2050.

The reason is that electrification will be a key enabler for other sectors such as transport and manufacturing to reach their net zero emission objectives. The effect on households will also be transformational.

Within our children’s lifetimes, petrol cars and gas stoves – like answering machines and street directories – will become things of the past.

While some may access renewable gases, many households will shift from multiple fuel sources to one, delivered in a single electricity bill. It’s worth considering the difference that could make in our behaviour.

That consolidated power bill may or may not be larger than current spending – but it will definitely be simpler than juggling two or three different fuel costs. This alone, I suspect, will focus our attention and make us seek more control over our energy.

So… when I talk about ‘empowering consumers’? It’s more than just an energy pun!

Apart from more conscious consumption, a significant aspect of the move to net zero is CER – the growing role of households as power generators and storage services.

Australia’s world-leading rates of rooftop solar adoption drive substantial benefits for the customers who adopt them, as well as for the whole energy system.

Rooftop solar and behind-the-meter storage could potentially drive down demand on the system, even as electrification increases the load.

The ISP notes that consumer systems such as this could account for nearly 20% of total underlying demand and the ESB notes that the more CER we have, the less new capacity the grid needs, with a potential $6bn benefit to Australia.

All of which makes it even more imperative to ensure household consumers can navigate the energy market seamlessly.

Now these things won’t happen overnight - but they will happen! We speak often about social licence these days – because we must transition in a way that works for consumers.

This means addressing barriers that may prevent some consumers accessing the tools of the new energy market, and looking for enablers that work. In recent research by the Energy Security Board we came up with four big consumer barriers.

An overarching barrier is simply lack of interest. Of course, energy is getting a lot of public interest lately, but even bill-shock doesn’t mean we’re all ready to ‘participate’ in the energy transition. Many people just want to drive their car and power their home without much fuss or cost.

However, there are insights into what can interest customers from the way households go about installing solar panels.  Reducing costs is certainly an enabler, but so too is tackling climate change and another part was about taking more control.

A second barrier is the way we communicate about electricity.  For many consumers, the energy transition – and the role they will play in it – is just a lot to digest.

On that note, I applaud Energy Consumers Australia’s recent PlugIn website, which gives independent, practical and clear advice for consumers on buying and using new technology.

It’s also the reason we have dropped DER – distributed energy resources – and adopted the ECA’s way of describing these assets – CER or consumer energy resources. It helps keep focus squarely on the customer in all our work.

A third barrier is equity, which manifests in many ways.

  • The cost of solar panels, let alone household batteries and EVs, is out of the question for many people.
  • As a renter, your access to solar power is dictated by the will of your landlord.
  • There can be technical or legal difficulties installing EV chargers in apartment buildings that don’t affect free-standing homes.
  • And it can still be a barrier to getting solar panels if you live somewhere with a lot of big trees.

Three million rooftop generators is a lot – but it’s not everyone. We have to make plans that don’t build an even bigger energy division based on wealth and location.

And finally a barrier is trust – the last fortnight has shown us how fast consumer trust can be destroyed… and we know that energy companies already aren’t high on customers’ trust list. 

Bringing consumers along on the transition means earning trust and continuing to deserve it.

Now, there’s a perceived tension between introducing innovations and protecting customers … But I think another way to look at this is: customer protections bring trust, and trust is what allows innovation to catch hold.

So – what are market bodies all doing about this?

Well, we at the AEMC along with AER, AEMO and ARENA – your friendly sector alphabet soup – are all working on the jigsaw puzzle, and the ESB is taking a coordinating role to make sure the pieces fit together.

Earlier I ran through the AEMC’s progress with systematic reforms to empower consumers to participate in the NEM.

I mentioned that this year a major focus is our review into smart metering. This is a foundational reform, in that the NEM needs a saturation level of smart meters across households and businesses before we can introduce other significant advances necessary to reach net zero.

And yes, I’m aware there is much more sophisticated technology out there – but meters certainly don’t preclude the advance of that technology.

The reality is that we can’t just leapfrog this stage – we will always need something to measure energy, and smart meters are an excellent leveller: they give us a baseline to work with across the grid. But at around 30% take-up, without Victoria, we’re well below the saturation we need.

Smart meters offer all customers enhanced ways to engage with the market right now, as we continue up the tech curve. Even if you’re not generating your own power, relating your smart meter readings to your energy use naturally engages you with the system.

So we are now working with stakeholders to accelerate smart meter deployment in the NEM so that:

  • Consumers get data about their household energy use, and
  • Providers, in a secure way, can get information they need to provide better service to consumers.

For consumers – smart meters turn power into knowledge.  The informed choices they can then make will open the way to greater retail options.

An example is the ‘solar sponge tariff’ in South Australia, which literally soaks up excess solar from eligible customers during the day in return for much cheaper rates overall. This only works because of smart metering.

However, if we think about the four barriers I mentioned before, smart meters tick every box:

Firstly, interest – meters are boring! We ran research with ECA at the start of our review and this wasn’t a big surprise. Not only do people find them boring, they find them so boring that our researchers estimate a third of people who have smart meters don’t even know they’ve got one.

Which raises a big question about that second barrier: communication. We may see something like a solar sponge tariff as a benefit, but our research also showed customers doubt that new offers via smart meters would really save money.

It’s also hard to find out how to get a smart meter even if you are one of those engaged customers who actually knows and cares about them.

Third, think about cost and equity. Many people who could really benefit from the data and retail options a smart meter offers, can’t install one as they are renting or in high density dwellings with body corporate concerns. And the potential cost of a smart meter was by far the most common issue customers raised in the research.

Of course, there’s a significant saving to be passed to consumers if we accelerate the rollout of smart meters, which is by avoiding the costs of house-to-house meter reading and the errors in estimated reads.

But with new technology comes risk and the barrier of trust.  Consumers must feel comfortable and confident about the smart meters on their premises and especially, on the back of the Optus data breach, that their information is secure.

Providers will need to demystify the new energy market to:

  • gain customer buy-in,
  • present benefits that are both meaningful and safe,
  • and earn trust at every step of the way.

I suspect energy sector innovators who crack this nut will do very well.

Which brings me neatly to my final point, about innovation, and of course, innovation in the energy world is nothing new.

In fact, I was recently told a story that the vacuum cleaner was invented to soak up excess electricity supply during the day – being pitched to women as labour-saving devices but in truth, perhaps inspired really by load management!

The point being – our evolving market settings must keep offering opportunities for innovation to surface and thrive.

Much of what we do at the AEMC is aimed at setting up the right framework so innovators can go forth - and innovate.

Our work on smart meters, flexible trading arrangements and CER technical standards, for example, all seek to build rewards for greater innovation.

Encouragingly, there is plenty of work underway in this space, including the AER’s new innovation toolkit and ARENA’s innovation fund.

But I understand that founders and start-ups have many, many competing priorities and that engaging the regulatory regime is not high on the list. I feel we can do more to foster innovation across the whole energy ecosystem.

Looking at sectors where innovation has thrived, such as tech start-ups and fintech, the common denominators have been collaboration and mutual support.

And today I’m announcing the AEMC is jumping on this bandwagon.

We are actively engaging innovators and establishing an Innovators Forum, because we want to hear from you, and we want you to hear from each other. If you want to be part of it – come and see me, we’re ready to talk.

In fact, I envision more and more innovators’ hubs in our energy world, sharing ideas, leveraging expertise and developing solutions for a smoother transition.

What kind of competitive advantage can this create for the Australian energy sector on the global path to net zero?

And most importantly, what can come out of those hubs of innovation for consumers?

In conclusion, let’s return to the Lesson of the Mobile Phone, but now let’s add innovators to the picture, as well as consumers.

Just like mobile phones, the hardware in the energy transformation has come first. There were early adopters of the house bricks, just as we’ve had early adopters of solar panels, household batteries, electric vehicles, and smart meters.

And there were innovators – who looked at mobile phones as a hardware product and kept making them smaller and smaller. They looked at reducing costs, creating payment plans, building new aspects like touch screens.

We’re seeing similar focus on hardware in energy products, for instance, as solar panels become larger, lighter, and more efficient.  The energy sector is making progress on costs and efficiency for household and industrial batteries.

But that’s still an early phase in the Lesson of the Mobile Phone.

The second step for innovators with mobiles was when a new breed of inventor leapt past the hardware and saw what the equipment could deliver from software.

These are the ‘There’s an app for that’ years, when consumers were educated: first in what an app even was, and then in what it could do.

Initially – that meant email, and Plants vs Zombies.

And we’re heading into that phase for energy, although we still have a long journey ahead of us.

But let me give you an example of low-hanging fruit – of the ‘there’s an app for that’ variety. I said the rollout of smart meters in the NEM was a foundational reform. Can you imagine the potential for app development in the smart meter sphere, to truly connect consumers to their energy use in meaningful, and real time, ways?

Because once we’ve empowered consumers with affordable, accessible hardware, with useful and user-friendly software, we’re on the road to embedding energy use and creation behaviours into the culture.

In the same way that my teenagers conduct their social lives through a myriad of apps and are connected to their school, work and friends in ways I couldn’t have imagined, we will see a generational shift in how people naturally engage with energy at home, in business, and on the road.

Mobile app innovators worked out that consumers were desiring more and more convenience and control from their devices, and that meant quite simple and ‘boring’ things like traffic and the weather became valuable tools – assets that could be sold, monetised, socialised or game-ified.

In the same way, I expect energy innovators – whether in apps or other as yet unseen forms – will take what consumers now find complex, costly, or dull, and make it an indispensable part of savvy energy engagement in the future.

If that change in behaviour seems too much to hope for – just remember what’s now at your fingertips the next time you reach for your phone.

Thank you.

Developing hydrogen in the NEM

30 June 2022

CEDA - Developing the NSW hydrogen industry, Four Seasons Hotel Sydney

Anna Collyer, AEMC & ESB Chair

*check against delivery

 

Introduction

Thank you for your welcome and for the great conversations and speakers we’ve enjoyed over lunch.

I begin by acknowledging the Gadigal people of the Eora Nation, the traditional custodians of this land. I’d like to pay my respects to their Elders - past, present, and emerging - and extend those respects to all Aboriginal and Torres Strait Islander people present today.

I’d also like to note that NAIDOC Week begins this Sunday, with the theme, Get Up, Stand Up, Show Up – an invitation to us all to go beyond acknowledgements and good intentions.

First Nations people are affected in so many ways by the energy sector – land access, respect for cultural sites, hiring opportunities, remote connections and retail policies, to name just a few.

Next week AEMC staff and commissioners will be hearing from Marlee Silva, a young Gamilaroi/Dunghutti writer and podcaster. I hope your organisation, like ours, will use this NAIDOC prompt to get up, stand up, and show up – working out how we can turn thoughts into action.  

The difference a few weeks make

I see many familiar faces here, and I know some of you heard me speak about hydrogen not long ago at the Adelaide conference.

This – I can assure you – is not that speech: because what a difference a few weeks can make!

Before the market suspension, hydrogen was important. Now? I won’t hesitate to call it urgent.

And I say that to you as the chair of the AEMC and the ESB, with both bodies being technology-agnostic. At the AEMC, we often say we don’t back winners – our job is to create settings that allow the market to choose the winners.

This is still true, but with hydrogen’s potential to firm and strengthen so many aspects of the NEM, it’s hard to picture any ‘winning’ solution that will get us to net zero without it.

A worthy pursuit

That you’re gathered here suggests you already understand the reasons I’d say that. Felicity and Darren have also added to this discussion over lunch.

Permit me a few minutes for my own top four considerations for hydrogen, based on a safe, decarbonised future power system:

First, reliability - Hydrogen is set to become the largest industrial customer for electricity in the NEM’s history. It’s a very flexible customer, who is well-placed to provide demand response services to the grid. And, if you then use hydrogen-fired power stations to make energy and give it back to the grid on demand, it effectively works as a massive storage system.

Second, security - unlike most customers, hydrogen electrolysers can quickly turn on and off, helping to balance supply and demand and stabilise the frequency of the system.

Third is affordability – and this is the kicker today. Hydrogen needs power to create power – and it needs far more power than we currently have.

Making the leap to green hydrogen is expensive, and a challenge we all have to consider. The potential is recognised in AEMO’s ISP today, but so is the prohibitive cost. As a result, AEMO sees hydrogen as very much a long-term goal for domestic use, largely limited to transport fuels, and not until the 2040s.

And yet, there are economies of scale – the more we build the better we get at it, so we all hope the price will come down. NSW is aiming for close to $2 a kilogram by the end of this decade.

My fourth and final consideration is social licence. So far, hydrogen comes to us with less social and political baggage than almost any other power option.

Broadly speaking, most of us agree that developing green hydrogen is a worthy pursuit.

Big and bold

So, hydrogen presses a lot of buttons for the NEM – some of them are buttons we haven’t installed yet, although we are well on the way.

Nationally, we’re on a journey of a thousand miles for hydrogen, and while we’ve made some leaps, there are many small steps that will get us there.

The AEMC’s hydrogen review is one of these small steps, allowing hydrogen blends into the existing gas pipelines. What this means producers can run real-life pilots, which is what we need to help bring that cost down.

Elsewhere, big and bold plans are afoot and need to be:

  • backed by research and innovation,
  • driven by both government and private sector investment,
  • and supported by regulatory frameworks.

I’m quite taken by Minister Kean’s NSW strategy foreword, where he calls the plan a

promise to embrace the future and harness human ingenuity and creativity, to do the right thing by our planet and leave no one behind.

Regulating for invention 

Ingenuity and creativity are things that, believe it or not, we can regulate for.

At the AEMC we can’t know exactly what shape a net zero power system will take, but we can define the problems we need to solve to get there. Then, we use market settings, or rules, to create rewards for people who find the solutions.

This is how we make space for innovation – by setting out the challenges as clearly as we can and delivering incentives for participation.

Hydrogen is no exception to this process. As AEMO reflects in its ISP predictions, hydrogen as we know it now is just too expensive – ingenuity and creativity are essential to make it a real player.

And there are new markets on the way that will cry out for the kinds of innovations we’re seeing in the development of hydrogen.

For example, a potential capacity market, new essential system services markets, or even a possible market for transmission congestion relief.

Electrolysers, or in some cases hydrogen power plants, could provide services in these new markets.

Thinking of the NSW strategy – like the hydrogen hubs beginning in the Hunter and Illawarra, or the new gas/green hydrogen-powered Tallawarra B power station – it’s easy to see how they could find applications in these new markets beyond the straightforward production of energy.

I’m pleased to say that across the NEM, and indeed Australia, other jurisdictions are also very active and committed to research, strategy, investment and construction.

South Australia’s $600m Whyalla project is another bold move.

While Western Australia and Queensland have significant hydrogen construction underway or imminent.

Show us your creativity

So, we’re making the frameworks that open up market opportunities – now we want to see your creativity and ingenuity deliver the solutions.

And one of the exciting things about setting up markets that reward innovation is when you see how invention begets invention.

The prospect of our markets rewarding innovation means this is happening all the time in hydrogen and other areas – the urgency of the energy transition is driving a new age of invention.

New products appear and in turn prompt other ingenious concepts – or a process emerges that exists only because someone saw possibility in an apparently unrelated innovation.

Innovation examples

I’ll give you a recent example, because I just found the process so interesting.

After the hydrogen conference I mentioned earlier, a Toshiba delegate got in touch, and asked if he could update our team on an unusual electrolyser project with the promise of very high efficiency.

The project is a bit like bringing together two Lego kits – say Harry Potter and Star Wars. Each kit works well alone, but when combined, you can build something amazing – like a Millennium Falcon full of Hogwarts classrooms.

In essence, this Toshiba project captures spilled renewables in long duration thermal energy storage, which produces heat to add steam to drive a highly efficient electrolyser.

This electrolyser has been in development for quite a while. The need for steam is what sets it apart. The question has been, how to get the heat without adding to the cost.

They’re testing a couple of options, including Miscibility Gap Alloys – MGAs – which were developed by Newcastle University right here in NSW.

MGAs are stackable blocks – which inspired my Lego analogy – that have many possible applications and I’m interested to see where else they might show up.  

It’s early days for this Toshiba project -- it’s early days still for hydrogen -- but every step takes us further on that journey of a thousand miles.

Conclusion

As I finish, I want to return to Minister Kean’s words from the NSW strategy.

Leave - no one - behind.

That really resonates with me.

The National Energy Objectives are all about seeking the long-term best interests of customers.

What we find, as we implement the P2025 reforms, is that placing consumer benefits at the front of our considerations helps everyone. I’d like all of us to bear that in mind on this journey towards hydrogen power.

Let’s take the chance, while we still can, to really focus on who – and where – we want our consumers to be, and how we can deliver to them reliably, securely, and affordably.

When consumers are our focus, we create stronger markets that naturally reward innovation and encourage investment because there are customers waiting for those solutions.

When consumers are our focus, our collaborations are more effective and deliver more meaningful and direct ideas to our work programs.

And when consumers are our focus, it’s of course easier to build social licence because we are always thinking about what will attract them and repay their trust.

Thank you.

 

 

Related Articles

Review into extending the regulatory frameworks to hydrogen and renewable gases

Hydrogen: the new Australian manufacturing export industry and the implications for the National Electricity Market (NEM)

Hydrogen: the role of the hydrogen production industry in providing system services to the NEM

DWGM distribution connected facilities
Subscribe to Anna Collyer