The Clean Energy Target has been replaced by the National Energy Guarantee, Elon Musk built a giant lithium battery in South Australia, Tony Abbott thinks Global Warming might be a good thing, and our power bills keep climbing. With such a sustained hold on the news cycle and glaringly obvious (and serious) issues at stake, frustration and fatigue at energy policy is understandable.
When we’re being inundated with doomsday statistics and the political merry-go-round on policy, it’s difficult to feel as though consumers have any control or influence. However, as we discovered, options exist and we don’t necessarily have to sacrifice profitability or reliability to make the transition to sustainability.
The current state of energy in Australia and how we compare globally
The role of government and policy
Economics and the power of the consumer
Opportunities for businesses
Predictions for the future
Domenic Chiavone, General Manager - Commercial, BidEnergy
Scott Bocskay - Chief Executive, Sustainable Melbourne Fund
Dr Rebecca Yee - Business and Research Development, Biofuel Innovations
Matt Coleman - GM Network Solutions, Greensync
Let’s start with the main players
Understanding the energy ecosystem - the way it operates, the roles and responsibilities of different players and whether these relationships are driving, or hindering, our transition to renewable energy - is essential for any consumer. These are the key players in the market:
Generators: the producers of electricity using either coal or renewable sources (e.g. sun, wind)
Distributors: owners of the infrastructure and networks that deliver electricity to homes and businesses (the grid)
Retailers: buy electricity from generators and sell to consumers
Australian Energy Regulator (AER): regulator of the wholesale electricity and gas markets, and is part of the ACCC
National Electricity Market (NEM): where wholesale electricity is traded in eastern and southern Australia, servicing 10 million customers in five regions
Of our electricity bills, 28% goes to retailers, 38% goes to generators, and 34% to distributors. There are currently three coal-fired generators in Victoria, and over 300 registered generators supplying 97% of the electricity to the NEM. The remaining 3% is supplied by the 1.6 million homes and businesses that have installed solar panels on their roofs.
BidEnergy, Biofuel Innovations, Sustainable Melbourne Fund, and Greensync represent a new generation of disruptors offering expertise and technology to Victorian businesses aiming to improve consumer understanding of the energy market and drive consumer demand for renewable sources.
Policy vs Economics: Cutting through the talk
Australia’s energy, particularly in the last 12 months, has gone from (at a least a perception of) cheap and reliable, to an ‘energy crisis’ responsible for untenable pressure on household budgets and businesses profit margins.
Poor policy is often blamed for this reversal of fortunes - specifically, an inability of rotating federal governments to develop policies that effectively addressed emerging issues with distributors and the coal-powered sector, and facilitate our transition to renewable. So, what should the role of policy and government be? There are two schools of thought:
1. Government can, and should, do more
Australia is aiming for 25% renewable energy by 2025 - we’re currently at 20%. When compared with other countries such as New Zealand (80%) and Norway (98%) and our status as one of the world’s worst contributors to greenhouse gases, a 5% increase over 7 years is arguably insufficient.
Similarly, it’s believed the AER should be playing a greater role in the market, interfering more in order minimise inefficiencies, waste and negligence between retailers, distributors and generators.
2. Less is more - get out of the way
Changing policy takes time, and regulators are incapable of the innovation required to address current concerns. The real solution lies in engineering and economics.
The private sector is no longer focused on fossil fuels and coal, they are directing their efforts, and funds, to renewables. Even large retailers and generators, while still trying to get the most out of their existing assets, are investing in renewable (AGL invested $1 billion in 2017).
The increase from 0% to 3% solar contributions from consumer generated power occurred in 6 years (2010-2016), and the AEM predicts energy demand will stagnate over the next 20 years - despite population growth - as more and more consumers resort to generating their own power. Those who believe government should get out of the way, instead expect change should - and will be led by the consumer.
Both viewpoints find common ground in agreeing that there is a role for government and policy, and we’re seeing this play out the most effectively at a state and local government level.
Putting the “power” in your hands
Despite talk of being ‘consumer-driven’, the energy market is still strongly dictated by decisions made at an industry level. Though this doesn’t mean that consumers are without options.
For any-sized organisation, having access to digestible data on their energy consumption and billing is key to making informed choices on their retailers and energy sources.
Companies like BidEnergy and GreenSync are demystifying convoluted price structures and billing, by offering businesses data aggregation and automation to help them minimise costs - a service and knowledge that has traditionally been the exclusive arena of outsourced consultancies. By making this information easy to understand, and accessible, these platforms are helping businesses make more informed decisions, change behaviours and ultimately creating greater equality in a notoriously inequitable system.
There are approximately 66 square kilometres of industrial roof space in Victoria. If all of those roofs were covered with solar panels, they would contribute a third of the NEM electricity supply.
Renewable technology is now not only sophisticated enough to be commercially viable, it is also presenting as an essential alternative option for businesses that want to grow but can’t because the grid (existing distributor infrastructure) can’t support the supply of additional power.
New and emerging technologies are also providing businesses with more environmentally-conscious options. For example, Biofuel Innovations conducts research into waste valorisation streams, providing businesses with a locally-produced alternative to fossil fuel diesel. This has huge potential to transform the way that logistics operates and contributes to the environment, and business costs.
So should - and how can - businesses transition to renewables?
The shift to renewable sources can feel like falling off a cliff - there is infrastructure to install, new providers, finance to secure and then it might be some time until it proves commercially viable. The good news is that while, like any systems change, the transfer is falling off a cliff, the cliff is actually not terribly high, and it’s becoming more dangerous not to jump.
Take our earlier example of the grid being unable to support business growth - distributor infrastructure requires upgrading, the cost for which will be passed on to the customer. However, renewable technology is now sophisticated enough that - when installed - has the potential to generate enough power to offset cost increases and even capitalise by storing additional power and off-selling to the retailer.
The key to taking advantage of the benefits renewables have to offer is minimising the risk posed by investing capital that may not return quick enough. Organisations like Sustainable Melbourne Fund are working with businesses to finance their sustainable projects, providing flexibility in loan terms to bring forward commercial viability, ensuring positive cashflow sooner.
The next five years: predictions from optimists, pragmatic optimists and frustrated early adopters
Australia has more homes with solar panels than anywhere else in the world, indicating that despite our global reputation and inept policy, we are a nation seeking to make the transfer to renewable - customers, and technology, are maturing past early adoption. Decentralisation will be crucial to ensuring that transfer occurs - replacing four of five large refineries, with several more smaller generators contributing to the grid.
Enabling decentralisation to take effect lies in a regulatory and investment shift - better enabling the customer to make the changes that many are already trying to do, in spite of industry road-blocks. Regulation will need to consider how transfers are coordinated, so that it takes away any risk to grid stability (which does - and will for the foreseeable future - provide essential services to the system).
Victorian Energy Saver – pricing breakdown & industry players