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Creating clarity during the energy transition

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      June 11, 2024 | Melbourne Convention and Exhibition Centre

      Australian Energy Week 2024

      June 12, 2024 | Melbourne Convention and Exhibition Centre


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      Generation & Storage, Policy & Regulation, Transmission & Distribution — 13 mins read

      Can we build it?

      The Governor of the Reserve Bank has described transitioning away from fossil fuels as “an immense challenge” for Australia – and, if anything, he is understating the problem. “Humungous” might be a better word, not least because there is no “with one leap, Jack was free” solution to this task.

      Frank Calabria, CEO of Origin Energy likens the magnitude of investment and construction to the wartime reconstruction effort.

      For much of the past decade, the political problem was discussing whether or not to tackle the carbon emissions issue. The change of environment in politics since May has dealt with that and now stakeholders of all persuasions are confronted by a Mount Everest of a task just to deal with domestic electricity and gas supply in a world that, for energy affordability and security, is very badly under the pump – enduring, authoritative voices say, the worst global crisis since the 1970s.

      Nationally and internationally, this is a multi-jagged-edge affair. The most immediate Australian challenge is meeting the Federal Government’s commitment to reduce electricity carbon emissions by 43 per cent in the next eight years with renewable energy to provide 82 per cent of supply in the eastern Australia’s market, the NEM.

      Frank Calabria has rightly issued a call for an “honest dialogue in the community” of what needs to be done to achieve these twin targets, declaring we need “much more than virtue signalling” to get there.

      “The community will not congratulate us for that if, on the way through, we deliver poor reliability outcomes or unsustainable price increases,” Calabria adds.

      He also declared “there will be limits to the magnitude of price increases the community can absorb over the next few years on the premise decarbonisation will result in cheaper and cleaner energy over time.”

      Avoiding this pit of pain will require “greater co-ordination and collaboration between retailers, transmission and distribution companies, regulators and advocacy groups, and State and Federal governments.”

      It is not rocket science to forecast that one of the biggest issues will be access to the expert workers and critical infrastructure in a world where many other countries will be pursuing the same task.

      Richard Lowe, the chief executive of Lumea, says there is already fierce international competition for equipment for renewables projects. He describes the necessity of having Lumea staff on the ground in Philadelphia (USA) to ensure that vital parts are secured for transport to Australia.

      The difficulty in securing the vital components for renewable generation and transmission is already being signalled by companies on the development front line of the transition. Countries such as France, Germany and Belgium are bidding using a “whole of country” 10-to-15-year procurement approach to clean-energy supply chains and are thus ahead of Australia according to Transgrid’s head of major projects, Gordon Taylor.

      Some companies are calling on government to take more assertive action to shore up access to clean energy components. It’s hard to see what effective steps policymakers can take quickly in this regard. Any policy enacted will place extra burdens on our local energy stakeholders, and inevitably on taxpayers and consumers, risking negative feedback from voters.

      An insight on this issue was provided in late November in media interviews given by Paul Barrett, chief executive of electrolyser technology company Hysata.

      He declared: “Australia needs a big, bold policy to match the United States’ recently announced Inflation Reduction Act – in reality a clean energy bill – that supports sovereign manufacturing to ensure Australian companies can service the Australian market.”

      And he warned: “There is real possibility that Australia, which doesn’t have significant sovereign clean-tech manufacturing capacity, may lag the world in access to core renewable technologies in the volumes we need as a huge portion of global manufacturing capacity will be servicing overseas markets.”

      A similar reflection came from Bess Clark, CEO of Marinus Link, which is working on the second electricity and telecommunications interconnector between Tasmania and Victoria.

      She told a conference: “The project will be undertaken in two chunks under the current timetable, with the first section to be completed by 2028-2029, and the second and final part earmarked to be completed by 2030-31.” But, she said, demand for cables used in land-based projects, and undersea cables, is rising fast around the world. “One of our suppliers tells us that their assessment is that by 2030, there will be twice as much demand for high voltage direct current cable and equipment as supply in the world -- and that’s with significant increases in supply capacity being invested in right now.”

      Other media coverage has quoted Tony Wood, the Grattan Institute energy policy program director, as asserting that “one of the biggest shortcomings in Australia’s current posture is the lack of a nationally co-ordinated strategy involving close collaboration with industry, as well as State and Federal ministries overseeing energy, critical minerals, technology innovation and manufacturing.” Adding: “No one in government has got their head around all the pieces.”

      Just as we need to rev up and start building more generation, this policy vacuum has resulted in a slowing in new projects. According to a report by the Australian Energy Regulator, new capacity additions in the September quarter were the smallest in five years.

      Which brings us back to the Reserve Bank Governor, Philip Lowe. In his “immense challenge” address to the Committee for the Economic Development of Australia, he pointed out that the significant investment in renewable energy around the world is not being met by investment in existing energy sources that are “depreciating quickly.”

      And he added: “It is difficult to make predictions, but it’s probable that the global capital stock that is used to produce energy will come under recurring pressure in the years ahead. If so, we could expect higher and more volatile energy prices during the transition to a more renewables-based energy supply.”

      This, of course, is the big political rub in Australia. The electricity supply transition to renewable energy, including the massive investment in new transmission to support giant developments onshore and offshore winds and provision of storage, has been sold to the community on a promise of lower-cost power.

      That seems increasingly unlikely over the rest of this decade when the factors canvassed here are taken into account.

      All of this will be grist to the mill at Australian Energy Week 2023 with speakers across the spectrum of supplier investment, consumers large and small and policymakers debating with analysts, regulators and policymakers.

      Keith Orchison AM has been engaged on the Australian energy scene for 42 years, including a quarter century as CEO of the Australian Petroleum Exploration Association and of the Electricity Supply Association of Australia.

      Keith Orchison

      Energy Monthly

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      June 11, 2024 | Melbourne Convention and Exhibition Centre

      Australian Energy Week 2024

      June 12, 2024 | Melbourne Convention and Exhibition Centre


      September 3, 2024 | Aerial UTS Function Centre | Sydney

      Industrial Net Zero Conference 2024

      New call-to-action