Energy Magazine June 2020

SIGNS OF HOPE for the post-COVID world

Hydrogen’s role in decarbonisation

Providing the deep storage Australia needs

POWERING REMOTE COMMUNITIES:

WA’s distributed plan

Solis-110K-5G

Solis Commercial & Industrial PV Inverter

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Maximum efficiency up to 98.7%

Power generation revenue increased by 3.5% year-on-year

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String-level monitoring to improve O&M efficiency

I-V curve diagnostic technology could diagnosis the MW-power

plant within 5 minutes

Support night reactive power compensation

Optional AFCI function can identify faults in the arc current to avoid 99% of the fire risk

Support up to 150% DC/AC ratio, reduce system LCOE

Support PV “Y” connecter

Support 185mm2 aluminum AC cable

Optional PLC communication, save cable cost

As I sat down to write the Editor’s Welcome for this issue of Energy, I felt compelled to reflect on my welcome from the last issue, released in March.

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It was almost bizarre to read that welcome; written just three months ago, with no mention of coronavirus or the seismic change that would hit our professional and personal lives in a matter of days.

In the weeks and months since COVID-19 began to make its mark in Australia, taking us into lockdown and a completely changed way of life, we’ve been through many stages of the crisis.

There was the initial stage of rapid response, where we shifted ways of running our organisations to allow social distancing, and in particular, the isolation of critical energy industry personnel (the people that literally keep the lights on around the country).

Then, as we moved to lockdown, we had to quickly set up the industry for working from home wherever possible, while also carrying on with the provision of our essential services without interruption – almost as if we weren’t dealing with the extensive level of change that we were.

Now, at the time of going to print, lockdown restrictions are easing, and we’re taking our first tentative steps into the new, post-COVID world.

We know there will be challenges –there will be steps forward, followed by steps back. We won’t be returning to business as usual any time soon – if ever.

But despite the gravity of the situation, throughout the crisis period, there have been signs of hope. Neoen is moving forward with the construction of Australia’s biggest solar farm in Queensland; the Federal Government has implemented the $300 million Advancing Hydrogen Fund; the Queensland-NSW Interconnector has been given the greenlight; and the $10 billion Surat Gas Project in southern Queensland has been sanctioned.

These are all critical projects for our industry; and now, in the current environment, they will also be critically important for the national economy.

The energy industry will have an important role to play in Australia’s recovery from the impacts of coronavirus.

Beyond the projects outlined above, many are also calling for the transition of Australia’s energy market to be a cornerstone of the country’s path to recovery.

We’re in the fortunate position of being part of an essential services industry, and one where there are opportunities amidst the challenges. And hopefully, when I write my next Editor’s Welcome in another three months, there will be more positive news to report for our industry.

POWERING REMOTE COMMUNITIES

42 Western Australia launches roadmap for DER integration

46

TRANSFORMERS AND SUBSTATIONS

46 Fast and easy partial discharge testing with the Omicron MPD 800

47

ENERGY TRANSITION

47 Australia has the capacity to lead the coal phase-out – but it won't happen any time soon

50

SOLAR

50 Slashing emissions and setting examples

ENERGY NETWORKS

54 Barriers to entry into the electricity generation sector: insights from an investor survey

OIL & GAS

58 Negative oil prices = lower electricity prices?

60 Signs of hope as Arrow sanctions Surat Gas Project

62 Global oil market crash: the implications for energy around the world

NEW CEO APPOINTED AT WESTERN POWER

Western Power has appointed a new CEO following an extensive recruitment process.

Western Power announced that Ed Kalajzic had been awarded the role.

Board Chair, Colin Beckett, said Mr Kalajzic stood out as the most qualified candidate to lead Western Power.

“Mr Kalajzic’s strong record of leadership and experience, his drive, and detailed knowledge of the Western Australian business landscape clearly demonstrated to us he is the right person to lead the company,” Mr Beckett said.

“I take this opportunity to thank our Acting CEO Dave Fyfe for his fine

leadership during the COVID-19 crisis. Western Power under Dave’s stewardship has earned high marks around the country for a steady approach to business during very uncertain times.”

As required by the Electricity Corporations Act 2005, the Western Australian Minister for Energy, Bill Johnston, confirmed his agreement with the Board’s decision.

Mr Kalajzic, who has been Western Power’s Chief Financial Officer since October 2019, said it was a great honour to lead one of Western Australia’s major companies during a period of significant change.

“I don’t think you could imagine a more disruptive time to take the helm of a business,” Mr Kalajzic said.

“But I’ve been so impressed by the way our 2800-odd staff members have risen to the challenge of the times and adopted new and innovative ways to keep the lights on for our 2.3 million customers.

“I’ve seen this innovation in many areas during my time so far at Western Power, and that gives me confidence we can continue to be the trusted energy source for Western Australians for decades to come.”

Mr Kalajzic commenced at Western Power in October 2019 as Chief Financial Officer and is experienced in financial and strategic management skills, as well as capital management, strategic planning, finance, accounting and business transformation.

RENEWABLES COULD JUMPSTART ECONOMY, CREATE 50,000 JOBS

The Clean Energy Council has laid out a plan to leverage Australia’s renewable energy and energy storage potential to jumpstart the nation’s economic resurgence from the COVID-19 pandemic.

A Clean Recovery outlines a plan to leverage accelerated investment in renewables to drive Australia’s economic recovery.

The Clean Energy Council said that the current pipeline of investment could create over 50,000 new jobs, lower power prices, and inject over $50 billion worth of investment to revitalise economic activity in regional and rural communities.

Clean Energy Council Chief Executive, Kane Thornton, said that A Clean Recovery is an opportunity to transform Australia forever, cementing the nation’s position as a clean energy superpower.

“There are currently hundreds of large-scale wind and solar projects that have been identified with planning approval and are well placed to proceed quickly,” Mr Thornton said.

“Bringing forward these projects could deliver over $50 billion of investment, more than 30,000 MW of capacity and more than

50,000 new jobs in constructing these projects, along with many more indirect jobs.”

A Clean Recovery could also empower energy customers and drive down power prices by supporting even more Australian homes and businesses going solar and installing household batteries and driving down their power bills.

“This isn’t about a handout for industry, when government is directing scarce taxpayer funding to other essential services and areas,” Mr Thornton said.

“There is an enormous appetite for private investment in clean energy that can be unlocked through smart regulatory reform, sensible energy policy, investment in the grid and energy storage.”

Adopting the measures laid out in A Clean Recovery would boost Australia’s economy with over $50 billion of new investment, tripling the amount of large-scale renewable energy installed in Australia, with the vast majority of projects located in rural and regional areas.

Crucially, it could also cement Australia’s position as a global energy superpower and leading exporter of renewable hydrogen, securing export revenue and jobs for the 21st century.

“A Clean Recovery could build on the recent success of clean energy. Over the past three years, there has been over $20 billion worth of new large-scale wind and solar projects committed, equating to 11,149MW of capacity and creating over 14,000 new jobs,” Mr Thornton said.

Accelerating the clean energy transition remains a major challenge worldwide. For the Clean Energy Council, the massive disruption brought about by COVID-19 also creates an opportunity for Australia to accelerate this shift to clean energy and prepare the country for the future.

A Clean Recovery argues that renewable energy remains one of the few investments that can both deliver economic growth and carbon abatement.

LANDMARK PPA SIGNED FOR AUSTRALIA’S LARGEST SOLAR FARM

Renewable energy producer

Neoen has signed a 352MWp power purchase agreement (PPA) for Australia’s biggest solar farm.

The contract will enable Neoen to build the 460 to 480MWp Western Downs Green Power Hub near Chinchilla in South East Queensland, delivering clean energy into Powerlink Queensland’s transmission network.

This is CleanCo Queensland’s second renewable energy offtake agreement since its establishment in December 2018, and it will contribute over 30 per cent of the energy required for CleanCo Queensland to meet its target of 1GW of new renewable generation by 2025.

Neoen Australia’s Managing Director, Louis de Sambucy, said, “We are excited to work in partnership with CleanCo, with whom we share the same long-term vision.

“The electricity produced by the Western Downs solar farm will complement CleanCo’s hydro energy production and it will be our first project in Queensland.

“We are fully committed to delivering this landmark deal by making the most of the region’s excellent solar resources, the use of the latest technology and our experience in delivering solar farms on time and on budget.

“We look forward to Western Downs becoming a lighthouse project in achieving excellent regional economic and local community outcomes that will be needed in the aftermath of COVID-19’s impact on the economy.

“This will also help the Queensland Government work towards its ambitious target of 50 per cent renewable energy by 2030.”

As Queensland’s publicly-owned clean energy company, CleanCo Queensland is focused on activities that help to improve electricity affordability, contribute to achieving the state’s 50 per cent renewable energy target by 2030 and create new investment and jobs in regional Queensland.

The Western Downs Green Power Hub will be a major contributor to those objectives. It will generate energy to power 235,000 Queensland homes, or enough to power every home on the Sunshine Coast.

CleanCo Queensland’s inaugural CEO, Maia Schweizer, said, “This is an exciting initiative which is delivering a better future for Queensland.

“We’re delivering affordable, secure and clean energy, which is powering new jobs right across our state.”

Powerlink Queensland Interim Chief Executive, Kevin Kehl, said the Western Downs Green Power Hub is extremely well positioned to connect to the national grid via Powerlink’s transmission network.

“This project will bring Queensland to 2000MW of large-scale renewable generation connected to the transmission network in the state,” Mr Kehl said.

The $570 million investment by Neoen is expected to create up to 400 jobs for the local and South West Queensland area when construction begins in July 2020.

Connection will be via the Western Downs substations via a new overhead line, with energy generation scheduled to start in the first quarter of 2022.

As per its strategy, Neoen will also be the long-term owner and operator of the project, sharing the ongoing benefits of this development with the local community.

The establishment of a Community Benefit Fund will provide opportunities for local community-building initiatives totalling $100,000 every year for the lifetime of the project.

Neoen is also working closely with the Traditional Owners, the Barunggam, to go well beyond current best practice for Indigenous participation, targeting ten per cent of the project’s economic benefits, including employment, training and supply chain outcomes.

Neoen’s Chairman and Chief Executive Officer, Xavier Barbaro, said, “We would like to thank CleanCo Queensland for putting its trust in us.

“The signing of this first power purchase agreement for a Queensland project fully illustrates our willingness to extend our leadership in Australia, our first country in terms of capacity installed.

“As one of the world’s leading and fastest-growing independent renewable energy producers, we are committed to delivering affordable, reliable and clean energy to communities through our wind, solar and storage projects, in Australia and in all our geographies.”

ENERGEX’S GREENSLOPES DEPOT TO KICK OFF

Work has started on the $32.5 million redevelopment of Energex's Greenslopes depot, creating a boost for construction jobs.

Queensland Energy Minister, Dr Anthony Lynham, said Queensland-based builder Alder Constructions was on site in May 2020 to build a new workplace for more than 200 Energex field, design and project staff.

“The building will house existing staff from the Greenslopes depot, as well as additional Energex staff from other Brisbane locations.

“This includes 100 field and rapid response crews to deploy around the clock, whether it’s for power issues after storms or to assist at emergency scenes.”

Member for Greenslopes, Joe Kelly, said construction would

provide dozens of tradespeople jobs throughout the life of the project.

“With more construction in the area and additional Energex staff based in Greenslopes, there’s no doubt local businesses will also benefit from additional people working nearby,” Mr Kelly said.

The 5000 square metre office building on Barnsdale Place at Greenslopes replaces the existing building built in the 1970s.

Construction work on the new project is expected to be complete by mid-2021.

Once completed, the new site will increase light vehicle parking to 130, cater for nearly 80 response vehicles and work seamlessly with the existing 3000 square metre warehouse.

Queensland’s publicly-owned electricity companies – Powerlink, Ergon, Energex, CS Energy, Stanwell Corp and CleanCo – will invest more than $2.2 billion on capital works in 2019-20, supporting up to 4900 jobs.

FEDERAL GOVERNMENT IMPLEMENTS ADVANCING HYDROGEN FUND

The Federal Government has established a $300 million Advancing Hydrogen Fund to position Australia as a world leader in hydrogen production and exports.

The new fund will finance projects focused on growing a clean, innovative and competitive hydrogen industry in Australia. It is the Government’s first financing fund that is dedicated to hydrogen projects.

The fund will back projects that align with priorities under the National Hydrogen Strategy. This includes areas such as advancing hydrogen production, developing export and domestic supply chains, establishing hydrogen hubs and backing projects that build domestic demand for hydrogen.

The Advancing Hydrogen Fund will be administered by the Clean Energy Finance Corporation (CEFC) and will provide concessional finance for projects that will support a national hydrogen industry.

Finance Minister, Mathias Cormann, said the Government is drawing on the energy and financial markets expertise of the CEFC, which has invested more than $7.7 billion in clean energy so far, to help drive investment in hydrogen.

“This new fund will be a catalyst for the future growth of Australia’s hydrogen industry, which has the potential to boost Australia’s energy security, while creating more new jobs across the country and becoming a major new export industry,” Mr Cormann said.

“There are many innovative Australian organisations working to advance the hydrogen industry and this fund will support that work. Our Government is very committed to backing technological advances in the hydrogen industry.”

Energy and Emissions Reduction Minister, Angus Taylor, said the Advancing Hydrogen Fund met a commitment in the National Hydrogen Strategy, launched at the COAG Energy Council meeting in November 2019 to build Australia’s hydrogen industry into a global export industry by 2030.

“The Australian Government has a strong commitment to building a hydrogen industry which will create jobs, many in regional areas, and billions of dollars in economic growth between now and 2050,” Mr Taylor said.

“Importantly, if we can get hydrogen produced at under $2 a kilogram, it will be able to play a role in our domestic energy mix to bring down energy prices and keep the lights on.

“Our hydrogen industry has the ability to make a tremendous positive impact both at home and overseas.

“From cheaper energy bills and job creation in regional Australia, to playing a role in reducing global emissions both at home and in countries that buy Australian produced hydrogen, the industry’s potential cannot be ignored.”

Mr Taylor also noted that, according to Bloomberg New Energy Finance, this $300 million fund, along with the recently opened $70 million Renewable Hydrogen Deployment Funding Round administered by the Australian Renewable Energy Agency (ARENA), is one of largest commitments to the hydrogen sector made by any government in the world.

Australian Hydrogen Council CEO, Dr Fiona Simon, said, “The government clearly recognises that we can’t take the foot off the accelerator – this pandemic is temporary, but our need for energy is permanent and growing.

“We must improve community and industry energy efficiency by harnessing the power of hydrogen.

“Researchers and innovative businesses across the country are working flat out to deliver hydrogen applications and large-scale supply. Australia needs to have the most efficient and cost-effective energy mix to fuel industry and community requirements, and hydrogen has a crucial role.

“The National Hydrogen Strategy set out that a hydrogen industry would be pursued, and these funds show that the strategy has real commitment. The strategy is a solid plan to build our domestic markets and exports back to the highest possible levels after an economic downturn or any change in global energy preferences.

“Hydrogen can help us to solve our energy dilemma through providing high volumes of energy to industry, cities and homes across Australia and address energy security.

“The Federal Government has taken a step which will give confidence to many business and research institutions that hydrogen is a national priority and will be supported in the future.”

The Government has set an economic goal for hydrogen of ‘H2 under 2’ – that is hydrogen at or under $2 per kilogram – the first technology goal in the Technology Investment Roadmap. That’s the point where hydrogen becomes competitive with alternative energy sources in large-scale deployment across our energy systems. This goal is essential to drive down the cost of new technologies, and the Advancing Hydrogen Fund will help to achieve this price point.

The Government has issued the CEFC with a revised investment mandate, to make up to $300 million available for the Advancing Hydrogen Fund.

APPEA Chief Executive, Andrew McConville, said the natural gas industry was well-placed to assist in the development of a largescale and innovative commercial hydrogen industry, both in using natural gas to produce hydrogen and using gas infrastructure to process and transport hydrogen.

“Australia’s LNG export success story means our industry has the technology, expertise, and commercial and trade relationships to make hydrogen exports a reality,” Mr McConville said.

“There is tremendous interest globally in hydrogen as a new, cleaner fuel. Australia is well-placed to capitalise on our already abundant natural advantage.”

The Australian Government, through the CEFC, has delivered significant projects in the energy efficiency, renewable energy, transport, agriculture and energy-from-waste sectors, facilitating almost $28 billion of clean energy projects Australia-wide since its inception.

In total, the Government has now made available over $500 million in support for hydrogen projects since 2015. These industry partnerships will help develop tangible solutions allowing hydrogen to have a future role in providing affordable and reliable energy for all Australians.

POWERCOR’S BUSHFIRE SAFETY DEVICE GRANTED FINAL APPROVAL

Energy Safety Victoria has officially approved a safety device installed in Ararat by electricity distributor Powercor.

Victoria’s energy safety regulator confirmed that Powercor’s Rapid Earth Fault Current Limiter (REFCL) device at the Ararat Zone Substation is fully compliant.

Powercor’s REFCL program is being rolled out in three phases, with the first completed last year.

The Ararat REFCL is the first device to be formally completed as part of phase two.

While the device was first switched on in December 2019 and has been operating in its most sensitive setting on Total Fire Ban Days since, the ESV compliance approval marks the final stage of the Ararat installation.

Powercor REFCL Technical Director, Andrew Bailey, said Ararat was one of ten zone substations supplying numerous communities across the Powercor network to now have the device installed.

“The REFCL device is part of our broader bushfire mitigation program and is already keeping communities safer,” Mr Bailey said.

“While the Ararat safety device is in operation all year round, on days of Total Fire Ban it operates at heightened fault sensitivity, in line with regulatory requirements.”

When the device operates, crews patrol the line to determine the cause of the fault and ensure it is safe for the community before switching power back on.

While this can mean it can take longer to restore a fault on a Total Fire Ban day, it provides added protection to communities and reduces the risk of fires starting from powerlines.

The Ararat Zone Substation supports 6699 customers within the region, supplied by four feeders and 793km of power lines.

REFCL devices are being installed in some of the state’s highest bushfirerisk areas as directed by the Victorian Government’s program in response to recommendations from the Victorian Bushfires Royal Commission.

On 21 November 2019, which was Victoria’s first code-red declared Total Fire Ban day since Black Saturday, REFCLs

detected and activated for six permanent faults and 32 temporary faults. Between October 2019 and the end of March 2020, there were 18 Total Fire Ban days in western Victoria.

On these days, REFCLs activated 13 times for permanent faults and 75

temporary faults. Other communities that will receive REFCLs under phase two are Ballarat North and South, Bendigo, Charlton and Terang.

These are required to be compliant by ESV by 1 April 2021.

SIGNS OF HOPE FOR THE POST-COVID WORLD

As we’ve moved through the stages of responding to COVID-19, there’s plenty to remain positive about in the energy industry.

It’s now been more than three months since we started to seriously feel the effects of the coronavirus here in Australia. We’ve moved through the various stages of lockdown, and are now slowly starting to chart the course to recovery. The economic impacts of the crisis have been immense, and the energy industry has not been immune. Here, we take a look at how the crisis has unfolded and impacted the energy sector, and look ahead to some of the opportunities this unprecedented event will provide us with moving forward.

In the first weeks of the unfolding COVID-19 crisis, federal and state governments moved quickly to establish a coordinated national approach to managing the impacts of the pandemic, fully supported by industry associations and energy utilities.

Federal Government initiatives were announced, a number of the state governments announced payment freezes or subsidies for household and business energy bills, and energy retailers moved quickly to provide support to customers experiencing hardship.

The Federal Government, through the Australian Energy Regulator (AER), also quickly set reasonable expectations of energy companies to protect households and small business customers during the COVID-19 pandemic.

The Australian Energy Council (AEC) confirmed that energy retailers were ready to provide scalable, accessible and tailored assistance to all affected customers. AEC Chief Executive, Sarah McNamara, also welcomed the AER’s recognition that the viability of energy businesses must be protected.

“For that reason, over the coming months, a whole-of-sector response is vital to achieve the best outcomes for

customers. We look forward to working with the AER and other market bodies, governments and stakeholders on the best ways to share the risks and costs across the sector and work through these expectations,” Ms McNamara said.

Energy Networks Australia CEO, Andrew Dillon, backed up these comments and said networks were working to assist customers.

“Networks continue to discuss with governments, regulators and retailers about the best ways to support customers through this difficult period,” Mr Dillon said.

“Energy networks understand many households are also facing challenging circumstances. With many customers now working from home, networks are doing what they can to minimise the impact of planned outages for critical work and to keep them as short as possible.

“Safely keeping the lights on and the gas flowing for the months to come is critically important, and networks are continuing to undertake critical works to keep energy supplies safe and reliable.”

Together with ENA, the AEC devoted significant effort in the immediate aftermath of the pandemic on maintaining the safety of energy industry people, ensuring the security of the energy system, and supporting customers who were experiencing difficult circumstances.

“Safety is always our top priority. Energy companies have undertaken a range of measures in response to this pandemic to ensure its workforce, assets and energy supply are protected,” Ms McNamara said.

“There continues to be industry-wide consultation on pandemic preparations and necessary responses with AEMO in regular discussions with generators, network and transmission companies and gas companies.”

Pandemic response measures underway include:

» Ensuring essential supplies, including the stockpiling of fuel supplies

» Reviewing any scheduled plant or network outages for maintenance and assessing the need and potential for rescheduling

» Further restricting access to control rooms and limiting access to areas required by critical staff

» Splitting of teams and establishment of multiple, separate teams

» Rostering changes

» Non-contact and social distancing for shift changes

» Implementing new working arrangements, including having staff work remotely when feasible

» Monitoring of essential service providers

» Maintenance of personal protective equipment stocks

The ENA also moved to remind customers that part of keeping the lights on and gas flowing during these uncertain times is continuing to carry out scheduled maintenance works across our networks. Many utilities have reported frustration from customers having their services shut down during this challenging period; however Mr Dillon reminded customers that “there is a need to continue critical maintenance to protect lives, prevent damage to properties and keep the power on for the future”.

Ensuring a steady stream of supply

In the upstream energy sector, the Australian Petroleum Production & Exploration Association (APPEA) and Australian Pipelines and Gas Association (APGA) are both working with members, governments and energy users to ensure the delivery of essential gas supply to local customers.

APPEA Chief Executive, Andrew McConville, and APGA Chief Executive Officer, Steve Davies, confirmed members were taking all steps necessary to ensure the production and delivery of gas supplies continued.

Mr Davies said the upstream and pipeline industries had robust operational integrity measures in place at all times, but were vigilant to the additional challenges posed by COVID-19.

“We are ensuring good information flows and open channels of communication as they are absolutely essential elements of the response in this rapidly changing situation,” Mr Davies said.

“We are continuously monitoring the situation and are taking appropriate precautions to ensure the energy we need in our homes, commerce and industry is delivered.”

A word from the frontline

The country’s energy utilities have been quick to reassure customers that they have the necessary precautions in place to maintain supply while protecting the safety of employees and the community.

Common themes in the response from energy utilities have been strict isolation protocols; limits on face-to-face interactions where possible; additional cleaning of sites and workplaces; additional personal protective equipment for staff; telephone contact with customers before crews arrive; and phone notification of future outages, rather than face to face.

Other measures include increased infection control measures, ceased business-related international travel, and teleconferences rather than face-to-face meetings where possible.

Most companies have also established separate locations, backups and staffing in critical service areas like control rooms; and have limited access to, and contact between, those teams to sustain customer operations in the event a case is confirmed.

Changing demand

Another element of the changing pandemic operating environment is the shifts in demand that have occurred as a result of the pandemic.

The Australian Energy Market Operator (AEMO) has advised that they expect that reductions in demand may continue to increase incrementally over time at current levels of restrictions, with some states likely to exhibit changes in demand.

Some potential COVID-19 demand impacts have now been recognised in Victoria, where average demand reduction during morning peaks reached eight per cent (approximately 400MW) for the first time over a working week in the state.

The midday trough fell five per cent (approximately 200MW) from pre-COVID-19 levels on weekdays, and three per cent on weekends (approximately 100MW), and rooftop solar variability makes it uncertain if the demand reductions are from COVID-19.

Elsewhere across Australia, COVID-19 demand reductions continue to be observed in Queensland and New South Wales, which have seen further falls in demand over the weekday morning and night-time, while reductions continue to be lower on weekends.

As restrictions are progressively lifted, demand is expected to increase, as has been demonstrated in overseas cases, including, most prominently, Italy.

In addition, AEMO expects that as cooler weather prevails, Australians might see an increase in load volatility, reflective of a greater proportion of residential (weather sensitive) load on the grid. All regions except Queensland are expected to see a lift in maximum and minimum demands during the cold weather.

It’s important to note that Australia, overall, has seen only moderate reductions in demand as a result of the pandemic.

An evolving industry

Despite the challenges the industry has been facing, many industry bodies and commentators are also viewing the pandemic, and the changes it has brought with it, as a chance to implement the changes we have been needing as an industry for a while now.

According to Matt Rennie, EY’s Power & Utilities Leader, the energy transition will not stop because of COVID-19; it will stall, and then accelerate.

“There is no doubt that one of the big winners from the current COVID-19 crisis will be battery/solar companies and virtual power plants,” said Mr Rennie.

“Our research shows that batteries and solar energy on households will reach cost parity with the grid next year.

“As the economy re-opens, we expect to see a boom in home electrification. This will place more pressure on AEMO, and network companies, to get the necessary frameworks and regulation in place to deal with bi-directional flows on the network.”

The Clean Energy Council meanwhile is arguing that the clean energy industry should be a key part of the economic recovery from the crisis.

It has released a report, A Clean Recovery, which highlights the fact that an enormous pipeline of wind and solar projects across Australia should be brought forward to:

» Create over 50,000 new direct jobs –and many more indirect jobs – in the construction of these projects, and an additional 4000 ongoing jobs in operations and maintenance.

» Triple the amount of large-scale renewable energy installed in Australia. Over 30,000MW of new capacity would be built, on top of the existing 16,000MW of renewable energy generation in the National Electricity Market, accelerating Australia’s shift to a grid dominated by clean energy.

» Drive down power prices and empower energy consumers with rooftop solar and household batteries.

» Inject $50 billion worth of investment into the Australian economy, particularly in rural and regional areas where these projects are located. This investment would be delivered by investors and allow government to direct scarce taxpayer funding to other essential services and areas.

For its part, the Australian Energy Market Commission (AEMC) has stated that the COVID-19 crisis should serve as a reminder of the importance of reform – including striving for a more secure, reliable and cheaper energy system.

According to AEMC Chair John Pierce AO, right now, the Commission is doing its bit by helping to ensure the power system is resilient enough to deal with what the crisis brings.

Along with energy market body colleagues Clare Savage and Audrey Zibelman, Mr Pierce has been consulting exhaustively on plans to both protect consumers and to ease the regulatory pressure on industry during the pandemic.

“At the same time, we are deeply committed to ensuring that important energy market reforms are progressed in a way that accommodates and responds to the conditions that we all now find ourselves in,” said Mr Pierce.

“As well as keeping the lights on during the crisis, it is crucial that we continue working on reforms that will help position Australia for a successful recovery when the crisis recedes.

“The three market bodies, with our distinct roles and shared objectives, are working together to ease the path of transition.”

According to Mr Pierce, it’s important that all three bodies remain focused on what we want our energy systems to look like post-crisis. He also noted that work to

unlock innovation made possible by new technologies and digitalisation is going ahead, albeit with considerable flexibility.

In particular, Mr Pierce signalled a continued commitment to the implementation of five-minute settlements, as well as the ongoing reform of the frequency control frameworks.

Key focus areas for the AEMC in the weeks and months to come include the security of the grid system, as we move away from baseload power to intermittent resources; and security of supply, particularly on peak demand days.

The path forward

As the industry, and indeed the world, moves past the initial phases of the crisis, which involved deep shock, significant

challenges and considerable change, the next step will be adjusting and adapting to the new normal we find ourselves in.

The most important priorities of keeping the lights on, and protecting our most vulnerable customers, have been achieved remarkably well, given the circumstances we have been dealing with.

Pleasingly, and as outlined in this article, the industry’s governing bodies seem intent on focusing on the opportunities that present themselves as a result of the enormous change we’re going through.

Like any industry, and like any individual, the path ahead won’t be easy. But there are signs of hope, and exciting new projects and objectives to focus on and work towards as we begin the path of recovery from COVID-19.

As many industries have moved to having employees working from home, demand profiles across the National Electricity Market have been shifting.

COMPASSIONATE AND POSITIVE LEADERSHIP DURING COVID-19

Mere months after his appointment as the new CEO of Powershop and Meridian Energy Australia, Jason Stein was faced with a baptism of fire: a devastating global pandemic. Energy magazine spoke to Jason about Powershop’s strategies to support customers through COVID-19, his visions for the company, and how to find opportunities amidst disaster to create a sustainable future for Australia.

Since it was founded in 1998, Meridian Energy, along with its retail arm, Powershop, has grown to break ground in the Asia-Pacific region’s renewables space: Powershop is now Australasia’s largest 100 per cent renewable energy generator, Meridian Energy achieved the largest IPO in New Zealand, and the company is also the largest electricity generator in New Zealand.

Expanding its operations to Australia in 2003 and founding Meridian Energy Australia in 2007, the company has continued to drive the development and operation of an integrated energy business underpinned by renewable energy generation.

In November 2019, Jason Stein, a long-time employee of the company, was appointed as Chief Executive for Meridian Energy Australia and its subsidiary, Powershop Australia.

Taking over the role from Ed McManus, Jason has assumed leadership of both Powershop and Meridian’s Australian renewable generation business.

After working for Meridian for almost 12 years, Jason has developed a wealth of knowledge and experience across all aspects of the company. He previously held the position of General Manager of the Office of the Chief Executive, where he was General Counsel and Company Secretary, accountable for the Sustainability, Legal, Regulatory, Government Relations and Communications functions.

But when he relocated from Wellington to Melbourne to begin his new role as CEO of Meridian Energy Australia and Powershop Australia, Jason hardly expected he would soon be steering the company through a global pandemic.

With empathy, positivity and determination, Jason has swiftly adapted to changing conditions to enable Powershop to continue supporting its customers through unprecedented challenges.

Stepping up to lead the way on climate change

Jason is obviously extremely passionate about the prospect of delivering affordable renewable energy to customers.

When asked why he wanted to take on

the Chief Executive role, Jason cited the importance of renewable energy uptake amidst the global climate crisis.

“The opportunity to lead this organisation at this particular stage of the climate change conversation was a huge reason for me to take the job,” Jason said.

In May, the Australian Energy Market Operator released its Renewable Integration Study, suggesting that wind and solar resources could, at certain times, provide as much as 75 per cent of Australia’s energy by 2025.

The study shows that while there are technical challenges to maintaining system security as Australia increases its reliance on renewables, it already has the capabilities to meet those challenges.

For Jason, Powershop’s role is to provide a clean option for the increasing number of energy customers who value long-term ecological sustainability.

“We are really focused on helping Australia move to renewable generation, and giving customers a choice to choose an energy provider that puts the environment at the heart of what it does and is doing good things,” he said.

“Fundamentally, I actually do believe that Australia needs more renewables in our generation, and we are committed to continuing to invest in that. And the continued investment over time will help decrease energy costs for Australian households.”

Jason said he wanted Powershop to lead by example, making positive change both internally and externally.

“We do strive to do the right thing for our customers and for our employees, and for our stakeholders as well, regardless of what the industry as a whole is doing.”

What Australians are looking for in a power provider

At such a unique time in history, the energy sector is not only highly competitive, but also rapidly evolving. Power providers must recognise that customers’ needs and preferences are changing with the times.

For Jason, Powershop’s strategy shows that when a provider articulates a

compelling reason for customers to join up, it becomes a self-fulfilling prophecy.

“Australians are looking for energy providers that support the values that they support, so Powershop is focused on giving Australians the choice of an energy provider that aligns with them,” he said.

“We’re focused on ensuring that customers know we're doing the right thing for them and the environment, and ultimately, the more customers we get, the more we can invest in renewables. And that's what we'll continue to do.”

For Jason, it is inevitable that more people will start choosing their power providers with sustainability in mind, and that customers will start to lead the way towards greater renewable uptake in Australia.

Seeing the impacts that carbon emissions are starting to have, and the response we’ve had after the summer bushfires – it will cause more people to think about where their energy comes from.

Compassionate, customer-centred support during COVID-19

Tragically, Australia’s devastating bushfires have not been the only disaster to severely impact the energy sector this year. The COVID-19 pandemic has presented unprecedented challenges with global ramifications.

Right now, however, the immediate priority for Jason is for the sector to band together to mitigate the impacts of the pandemic, built around an empathetic, customer-centred approach.

To achieve this, Powershop is supporting its customers and continuing to work on its customer support programs and initiatives. The company is regularly reviewing these initiatives to ensure that they are appropriate and actually meaningful for the people who need them.

“I've been pretty impressed by the really positive way that all in the industry have been dealing with COVID – and in particular the customer focus at this time,” Jason said.

“Many of our customers are facing great pressure and anxiety at this time. From my perspective, it's wonderful to see the industry being human with customers and showing compassion.

“We're trying to help those people with things like payment plans; but over and above that, when I think about the people in our team assisting these customers, it’s about showing them empathy and kindness above all else.”

Energy sector collaboration crucial for customers

Beyond the tragic deaths of over 200,000 people worldwide, the COVID-19 pandemic has also wrought havoc on the global economy. It’s been estimated that approximately eight per cent of Australians – or 1.6 million people – lost their incomes in the first week of lockdown.

For their part, energy retailers are working on numerous measures to assist customers experiencing financial hardship as a result of lockdown.

This has been assisted by new interim authorisation from the ACCC for the sector to cooperate on developing relief measures to residential and business customers.

“There has been distinct collaboration, and plenty of industry initiatives that are working well – and collaboration across all parts of the industry isn't always easy,” Jason said.

Nevertheless, the challenges presented by COVID-19 are unprecedented.

“The reality is, our customers are going through a once in a lifetime problem. Our customers are very loyal to us, and we want to repay that loyalty by helping them in a meaningful way.”

In such extraordinary circumstances, Jason said energy retailers have a responsibility to support Australians through uncertainty.

“It’s also really important that we recognise our role, as a power provider, in helping the economy when we get through this, to allow smaller businesses in particular to get through to the other side of this crisis. Making sure that we have adaptable and flexible plans for those customers is really critical.”

Adapting fast, staying nimble: leadership during a crisis

The nation-wide lockdowns mandated by state and federal governments to combat the pandemic have, of course, required major changes for Powershop’s staff. The

company’s customer support team, based in a small provincial town in New Zealand, have all transitioned from a call centre environment to working from home.

This transition was made easier by the fact that, well before the pandemic hit, Powershop had already been testing the possibility for its staff to work from home. Staff only need a work laptop, which allows the platform to seamlessly transition to any location.

“It was actually a part of our regular thinking about how we deal with crisis,” Jason explained.

“We have a good sized call centre, but we aren't super large, which allows us to be agile and nimble. We still kind of have that startup mentality, and we actually managed to get everyone working seamlessly from home over a day or two.”

Jason gave a shout out to Powershop's frontline staff, whose work he described as “brilliant”.

“It isn’t easy working from home when you’ve got children there, but these guys have been the unsung heroes, quietly and calmly getting on with keeping the business running smoothly.”

Leading the more than 90 staff of Powershop and Meridian Energy Australia through an unexpected global crisis is an extremely daunting prospect. But Jason said his familiarity with the business from almost 12 years’ service has made leadership during this time much easier.

“I know the business well, I've been around the Australian market for a number of years. And I’ve known the executive team for a number of years. So it's been very seamless.”

Jason said the organisation’s emphasis on fostering a highly collaborative and connected culture also assisted in managing COVID.

“We've accelerated the use of our existing technology to keep the team connected and informed and engaged. We've actually maintained all of our regular team routines and rituals, such as our usual, twice weekly all staff meeting.”

And that means the entire business – including workers at the top of wind turbines.

“We also do things like continuing our regular kitchen table trivia, it’s just all happening online now. In fact, this week, I had my first ever experience of a virtual lunch to farewell a really long-standing employee.”

Jason said he and his team are tuned in to those possible impacts of the pandemic

on culture and wellbeing, particularly as a result of working remotely. Management regularly checks in on staff and is providing strategies and initiatives to support the team as well as the business.

“For me personally, I want to keep in touch with most people, either directly or indirectly. So I've seen or heard from almost everyone in our business since lockdown,” Jason said.

“I guess in a personal way, it's my real firm view that as an organisation, in the long run we'll actually be judged by how we demonstrated empathy, positivity and put our staff and customers first.

“As a leader, I still really believe that call to action is right. It's important to demonstrate kindness and respect, but with a real focus on the positive opportunities that arise.”

Positive thinking: creating opportunities amidst disaster

The devastating impacts of Coronavirus have disrupted 2020 plans and sparked widespread debate about the ‘new normal’ – and what the sector will look like in a post-COVID world. Jason believes part of this process of readjustment and recovery will necessarily involve deeper thinking about the environment and people's impact upon it.

For Jason, the key to making the most of any crisis situation is focusing on the positives.

“We do believe that as a result of this unexpected event, opportunities will arise,” he said.

In order to take advantage of these opportunities, Powershop is continuing to develop its pipeline of renewable energy projects in Australia, so it can increase the size of its generation – either through its own development opportunities or through acquisition.

“We announced a few months back that we would purchase a development opportunity in New South Wales, and we continue to look at others that are at various stages. We have a very active development team who are looking to shift the dial there – we’re not sitting back and waiting for things to happen,” Jason said.

“What hasn't changed is our commitment to build a sustainable energy future for Australia. So we're still focused on growth, and ultimately, our focus remains on making a real difference for Australia by investing in renewable generation, and giving customers the choice to buy from a company they can be proud of.”

INCLUSIVE ENERGY: SUPPORTING CUSTOMERS WITH DISABILITIES

With one in five Australians estimated to be living with a disability, it’s important for companies to be inclusive and understanding to the needs of their diverse customer base. Energy bills can be confusing at the best of times, but for some Australians, understanding the difficult language that comes with their bills can be a daunting task. With a new set of guides developed by AGL and disability support organisation Scope, customers now have access to important information about their energy usage and bills.

For customers it’s important that they have access to important information concerning their bills, so that they can make informed choices about their usage and payments. Unfortunately, there can be a lot of information that is difficult for people to understand, with walls of text and unfamiliar words causing stress for customers.

In an effort to be more inclusive and sensitive to the needs of consumers, energy company AGL has developed a set of guides which aim to assist customers in understanding their energy bills. In collaboration with disability support organisation Scope, the easy English guides were developed with the aim of providing accessible information using simple language, clear fonts and images.

The easy English guides were designed using evidence-based best practices, including employing and liaising with people with low English literacy, to create a simplified source of information without unnecessary jargon.

The guides were developed for a range of audiences, including the estimated 44 per cent of Australians who have difficulty reading and writing, including people with intellectual disability and people from culturally and linguistically diverse backgrounds. With large, clear fonts and images, the guides are also a useful tool for the elderly and people with low vision.

By providing customers with information written in easy English and accompanied

How to save energy and save money

Energy Efficiency Guide

Easy English

by helpful images, people are able to do everyday tasks like banking, paying bills, and using online services.

AGL Customer Advocate, David Bland, said that the guides help empower people to make informed decisions when it comes to their energy usage and bills.

“Energy is complicated, and bills are at times difficult to understand, so it’s so important we meet the needs of all of our customers,” Mr Bland said.

“We conducted research with the University of Melbourne and the Thriving Communities Partnership into improving access and support for consumers with cognitive disabilities.

“We have developed eight guides, covering reading bills, energy efficiency and payment support options, in a style that provides understandable and concise information for people with low literacy.”

With people currently spending more time at home, understanding how to be energy efficient and save money is a big priority. With the assistance of the easy English guides, customers will be able to engage with their usage and make informed decisions for themselves and their families.

To further assist customers who speak little English or who have a different first language, AGL has also translated some of its easy guides into commonly spoken

languages including Chinese, Vietnamese, Italian, Korean and Arabic.

The guides themselves break down different topics, highlighting common difficult words in blue and providing helpful explanations. They also highlight important information with images and provide information on who to contact in an emergency. There is also a section at the end of each guide where customers can write further notes to assist them in the future.

AGL has also made the guides on energy efficiency available to other energy companies to help them assist their own customers and to maximise the benefits of the guides across the community.

“We are sharing our energy efficiency guide with other energy retailers, generators and network operators so they can also help their customers understand how they can manage their energy use,” Mr Bland said.

By providing consumers with tailored information, customers are able to experience a better quality of customer service and feel more empowered when it comes to their energy usage and bills.

Adapting to the needs of customers is an important step to become a more inclusive world.

Low emission natural gas

Powering Australia to a clean energy future.

Natural gasNaturally part of every day.

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Brighter is an initiative of the Australian Petroleum Production & Exploration Association. Authorised by S Browne, Melbourne.

TASMANIA:

Australia’s National Electricity Market (NEM) is undergoing a major transition, from dependence on fossil fuel, to predominantly using renewable energy. Accurately predicting what the future power system will look like is incredibly difficult, particularly in a time of rapid change. Yet it is clear that the variable generation renewables provide will need to be backed by sufficient flexible supply options (such as storage) to ensure the reliable electricity Australian customers expect.

This is where Hydro Tasmania’s Battery of the Nation project, and the deep storage opportunities it offers, comes in. The project is not a new one – it was first flagged in 2017, and has regularly formed a part of the national discussion regarding the changing energy market since then.

Battery of the Nation is about investigating and developing a pathway of future development opportunities in hydropower system expansion, including pumped hydro.

Tasmania has significant potential in the future development of wind and hydropower, coupled with more transmission and interconnection. Through Battery of the Nation, Tasmania could make a much greater contribution to the NEM, delivering more clean, reliable and affordable energy.

Tasmania is well placed to support the transition of the NEM, and has set a renewable energy target of producing 200 per cent of its current needs by 2040.

Tasmania’s naturally favourable topography and existing hydropower system provide an ideal opportunity to develop cost-effective deep storage pumped hydro that Australia needs to manage uncertainties and achieve a reliable future NEM.

What is deep storage – and why do we need it?

Deep storage is energy storage with the ability to operate over many hours as an optimal, least-cost choice, able to manage realistic uncertainty in the power system. It will play a critical role in efficiently supporting Australia’s energy transformation.

The Australian Energy Market Operator (AEMO) first started using the term “deep storage” in 2019, in discussions about the different sorts of storage requirements the market of the future would need.

“Up until recently storage was just storage, but the market planner last year started to point to big differences between what you might call shallow and deep storage,” said Christopher Gwynne, Battery of the Nation Project Director for Hydro Tasmania.

“Shallow storage essentially is storage that is less than four to six hours worth of storage in terms of its duration. Deep storage has a longer duration, greater than twelve hours.”

As the market transitions to having more input from renewable sources, these forms of short, or shallow storage, are the ones we need in place first – and they’re the ones we’re already starting to see on the market, in the form of projects like the Hornsdale battery in South Australia, and smaller, distributed batteries.

But according to Mr Gwynne, most of the analysis that’s going on around the world is showing that as markets move further into their transformations, longer, deeper storage options are required in order to maintain a stable and reliable power system.

PROVIDING THE DEEP STORAGE AUSTRALIA NEEDS

“What this means is that by the mid to late ‘20s, we’re going to need some of these longer duration, deep storage assets to start to come into the market,” said Mr Gwynne.

“The value of this type of storage is in the fact that it’s better placed to manage longer term variations in supply, like what we might see during a wind drought, or a successive number of days of low solar output in the system.

“When dealing with these conditions, you’re going to need deep storage to help manage the reliability of the system.”

Potential sites and timelines

When it comes to the sites Hydro Tasmania is considering for hydro storage development as part of the Battery of the Nation initiative, Mr Gwynne is very clear on the fact that all sites under consideration need to have a clear linkage to the mainland.

In the case of Battery of the Nation, this is in the form of the concurrent Marinus Link project, a proposed 1500MW capacity undersea electricity connection to link Tasmania and Victoria.

This project, proposed by TasNetworks, would be delivered in two stages – in the first stage, 750MW would come online around 2027, with another 750MW a year or two after that. Hydro Tasmania is looking to have a Battery of the Nation pumped hydro site online to coincide with the launch of the second cable.

“The reason for this is because you have to remember that the whole existing hydropower system in Tasmania is like one big deep storage asset already – and it’s a deep storage asset that has excess capacity in it at the moment,” said Mr Gwynne.

What that means is that when the first Marinus Link cable is connected to the mainland, it will essentially be able to utilise the existing Tasmanian scheme to bring additional storage capacity to the Victorian market in particular.

Hydro Tasmania’s infrastructure at Lake Plimsoll.

“The reason why we can do that is because when that first cable is built, a lot of wind and solar development will be stimulated, not just in Tasmania, but most likely in Victoria as well,” said Mr Gwynne.

“So all of a sudden, Tasmania isn’t relying on our hydro systems to keep the lights on all of the time anymore – we’ll have new sources of supply to assist in doing that. That then allows us to better use the storage attributes of the hydro system, which is a much better use of that asset, rather than providing baseload energy all of the time.”

Hydro Tasmania is then looking at commissioning a pumped hydro site to come online when the second Marinus cable is connected.

“We’re currently looking at three sites, and each of these is in quite intensive feasibility assessment at the moment,” said Mr Gwynne. “We’ve got two in the north-west, one at Lake Cethana and one at Lake Rowallan. They’re both lakes that are in our existing hydropower scheme, we would augment them to be able to manage a new pumped hydro station. The third site we’re looking at is on the west coast, in our existing system again, parallel to the current Tribute Power Station. That site would effectively be connecting up two existing reservoirs we have in our scheme, and we’d be building a new pumped hydro station there.”

The next step for Mr Gwynne and his team is to narrow the three sites under feasibility down to one, which will happen over the next 12 to 18 months. Conveniently, this timing lines up with the Final Investment Decision on Marinus Link – so when the market makes its decision on this project, Hydro Tasmania will be ready to pull the trigger on its preferred site and commence construction.

Who still needs convincing?

Given the benefits Battery of the Nation has to offer, and the clear need we will have for deep storage as we transition to cleaner sources of energy, it does raise the question: who still needs to be convinced that this project will be a necessary part of our future energy system?

“One of the challenges that we’ve had with this project right from when I started, which was back in 2017, was that there was a really low level of awareness in the broader national market on how the Tasmanian power system worked, in particular the hydro system,” said Mr Gwynne.

“That’s not a criticism; it’s just the fact that no one really needed to know how it worked, because it was a physically separate system in the NEM.

“So when we started talking about the potential of pumped hydro development in Tasmania, many people assumed that the hydropower system in Tasmania worked exactly like the existing Snowy scheme, and looked at it through that lens. However, they’re very different systems.”

According to Mr Gwynne, Snowy has never been used like baseload generation. Its role in the market has never really been to keep the lights on 24/7, it’s been there to fill the gaps when other forms of generation weren’t able to do the job.

For Hydro Tasmania however, its role has always been quite different. It has had to keep the lights on, and because of this, it is a very different system to Snowy.

“Because these differences aren’t widely known, our focus has been on building an understanding of what the potential looks like in Tasmania, and why this should be a project that figures in the market of the future,” said Mr Gwynne.

“We’re also building an understanding of the benefits that will come with building another interconnector between Tasmania and Victoria.

“It’s only when you understand the power of the hydro system that sits at the other end of the cable, and the potential for what it could do when we start to reach higher levels of renewable energy penetration in the system, that’s when you start to fully appreciate the benefits that come from building another interconnector.”

According to Mr Gwynne, the conversations that are happening in the industry and the market about these two intertwined projects are critically important right now, as we start to take the first steps towards the renewable energy future we’ve long been talking about.

The future is uncertain and we need sound supply options

Key strategic decisions in coming years will shape the NEM for decades to come; and yet, the same factors that are prompting the critical infrastructure decisions are also the source of substantial uncertainty.

Increasing levels of low-cost wind and solar will result in increased need for flexible supply, such as storage, to maintain reliability.

Deep storage provides a robust plan for the future NEM. As the supply options in the power system become more variable, storage will need to play an increasingly important role.

Importantly, for over 100 years, Hydro Tasmania has managed the challenges of ensuring reliability in a power system dependent on weather-driven renewable energy. This provides a strong understanding of how longer storage duration supports more flexible operating choices.

Hydro Tasmania is quick to point out that there is a role for all storage types in the energy market of the future. The role for deep, longer duration storages will be in maintaining system reliability. For the market we wish to have in the future, Battery of the Nation is of vital importance.

HYDROGEN’S ROLE IN DECARBONISATION: ENSURING A RESPONSIBLE TRANSITION

by Dr Daniel Roberts, Leader, Hydrogen Energy Systems Future Science Platform, and Dr Justine Lacey, Research Director, Responsible Innovation Future Science Platform, CSIRO

Australia is blessed with vast energy resources, many of them renewable. Some of the nations to which we export our coal and gas are not so fortunate and are grappling with how to transition from a reliance on these imports to lower-emissions alternatives. As a result, people are now exploring how hydrogen could play a role as Australia navigates its own transition to cleaner energy.

Hydrogen may seem new to some, but it has been used for almost a century as an industrial feedstock. For decades, scientists have been espousing its virtues more broadly as a carbon-free energy carrier, suitable for use in transport, domestic and industrial energy applications. The challenges with transitioning this concept from the lab to industry have largely been in the areas of economics and infrastructure, which meant that for a long time, hydrogen energy applications have remained in the realm of research and development.

But much has changed.

The cost of wind and solar PV have decreased significantly. Electrolysers (which use electricity to produce hydrogen from water) are now larger and more affordable. And fuel cells and storage for hydrogenpowered cars are lighter and more efficient. In the context of renewable energy export, there are new technologies supporting the storage and distribution of hydrogen at scale. Hydrogen now has the very real potential for use in transport, power generation, smoothing out grid fluctuations, storing energy in off-grid applications and export. In addition, hydrogen demonstration projects are already taking place at scale across the value chain in Australia and around the world.

To decarbonise our energy systems, CSIRO is looking at the responsible innovation of hydrogen technologies as well as the technical challenges. For successful adoption, there needs to be social awareness and acceptance. (Image credit: CSIRO.)

It seems at first glance that hydrogen may well be the decarbonisation silver bullet whose time has now come. Many involved in the rapidly-growing hydrogen sector would support this notion, and from a technical perspective, hydrogen systems have the potential to have significant positive impacts. Of course, there are challenges to realising these: those related to cost and technological readiness are welldocumented, and most roadmaps and action plans are clear on the pathways to address them. There remain, however, some non-technical challenges that need to be managed. Where and how we source the hydrogen and the motivations behind it, for instance, are already complex issues. Issues like these, along with the range of perceptions that exist regarding safety, impact the acceptance of these new technologies by the public – and we know that community and public acceptance is required if large-scale activities are to be supported.

The colour of hydrogen

A spectrum of colours of hydrogen has emerged. Black and grey are often used to describe hydrogen made in the ‘traditional’ way from coal and natural gas, respectively (with brown sometimes thrown in if the coal is a lignite). If the carbon dioxide from these processes is captured and stored, then the hydrogen is blue. Green hydrogen is made from renewable energy. The discussion around the colour of hydrogen is relevant in the context of a responsible transition towards net zero emissions and is already emerging as a divisive theme. Hydrogen’s benefits are technically achievable. But using green hydrogen, at the scale and costs needed by short-to-medium term global demand projections, is assessed by many as being difficult.

One response to this has been the use of grey and blue hydrogen as a means of supporting cost-effective, large-scale projects, increasing the green content as costs fall and availability increases. Central to the success of these projects is the matter of trust: what will be the driver to move away from cheaper, lessgreen hydrogen in the future?

Who is allowed to play?

The discussion around the colour of the hydrogen we use represents just one of the challenges faced as hydrogen moves from an ideologue’s dream to an emerging industrial reality. It follows from the arguments above for using a grey-blue-green transition pathway that for the transition to be successful at scale it is likely that we will need large companies to be part of it, and in many cases, to be leading it. This is certainly the view of the IEA as discussed in its report on the oil and gas sector and the energy transition1. Such organisations would bring momentum,

1 https://www.iea.org/reports/the-oil-and-gas-industry-in-energy-transitions

scale, and influence; however, some also bring a fossil fuel history that is deemed by many as unwelcome in the new age of renewable hydrogen.

As carbon-intensive companies transition to include (often green) hydrogen into their business plans, a related aspect that needs to be considered is a social license to operate. We know how important social license is from our experience with onshore gas and other contentious energy activities. If societal expectations are encouraging these companies to make the transition to renewable energy supply, how might that translate into consumer demand for new hydrogen opportunities as they emerge?

These discussions show how even though hydrogen is usually communicated as a good news story, there are many aspects that can be perceived as negative. This is important for recognising why different stakeholders might initially respond in different ways to new and sometimes unfamiliar hydrogen technologies. Understanding how different stakeholders make sense of the roles, benefits and impacts of hydrogen energy systems is important for understanding their long-term uptake and acceptance.

Bringing the people along: the importance of public acceptance

For successful adoption, hydrogen energy needs to be accepted and supported by government, industry and communities, and we have seen how this might not be as simple as initially thought. Understanding the societal and community impacts of new hydrogen energy systems, including concerns about safety and the environment, alongside the economic opportunities that are emerging, are important in this regard. And while we can point to plenty of benefits, it does not necessarily follow that Australian communities are ready to make the shift.

Research tells us that while the public has a generally positive attitude towards hydrogen energy, their current awareness of hydrogen and its potential uses is low2. There are certainly positive perceptions of the environmental benefits of hydrogen energy systems, especially those based on renewable energy; however, there is also a range of negative views about safety, cost and efficiency, as well as where the hydrogen comes from.

Building awareness about safety measures, standards and regulation is required to create a sense of acceptable risk (like that with other fuels) to support more positive attitudes towards hydrogen as an energy source. This presents an opportunity for effective communication and collaboration about the potential for hydrogen in Australia, but also to integrate the safety case into planned activities and outcomes of demonstration projects – such as that done by the H21 suite of projects in the UK3. Such an approach will allow researchers, industry, government and communities to work together to determine whether these new hydrogen energy systems are safe, sustainable and acceptable.

At CSIRO, we are conducting research to understand how community values, aspirations and needs can inform fit-for-purpose communication strategies about the industry and specific projects, especially for remote and regional Australian communities. We are also supporting co-design of engagement strategies in partnership with hydrogen demonstration projects.

By pursuing a communicative, collaborative approach to hydrogen, we can ensure new innovations in hydrogen energy are developed in ways that will deliver benefits to our everyday lives and support the development of a responsible hydrogen industry for Australia – one that allows hydrogen to play a significant role in decarbonising power, transport, and industry around the globe.

2 Ashworth, P., Witt, K., Ferguson, M., & S. Sehic (2019) Developing

3 https://www.h21.green/

HOW TO BUILD AN

Hydrogen’s potential, both domestically and on the international export market, is well documented, however there has been little focus on how hydrogen is produced. Here, we take a closer look.

Central to the production of hydrogen is an electrolyser, a highly complex piece of equipment that can’t simply be bought off the shelf.

Through the process of electrolysis, an electrolyser uses electrical energy to convert water into its composite parts – hydrogen and oxygen. The oxygen is returned to the air and the hydrogen is stored in pipeline assets for use. When the electrical energy comes from a renewable source, such as solar or wind power, the hydrogen has no carbon footprint.

The first electrolyser to be installed in New South Wales is currently under construction. Commissioned by leading energy infrastructure company Jemena, the 500kW electrolyser will produce renewably generated hydrogen gas to power the Western Sydney Green Gas (WSGG) project, a $15 million project jointly funded

on a 50 per cent basis by Jemena and the Australian Renewable Energy Agency (ARENA).

The WSGG project will be the most comprehensive hydrogen demonstration project in Australia, and will showcase the utilisation of renewable energy to generate hydrogen via electrolysis; the storage and coupling of hydrogen gas with natural gas in existing pipeline infrastructure; and hydrogen vehicle refuelling infrastructure.

In 2019, Jemena engaged Australianbased ANT Energy Solutions, specialists in the design, development and integration of renewable energy systems, in the procurement of the electrolyser. Its construction is taking place in Belgium by Cummins (formally Hydrogenics), an international leader in designing, manufacturing, building and installing industrial and commercial hydrogen generation, hydrogen fuel-cells and

MW-scale energy storage solutions.

The overseas manufacturing process is due to be completed mid-year and despite the global impacts of the COVID-19 pandemic, installation in Western Sydney is still on course for later this year.

To find out how an electrolyser is made, Energy spoke to Marcoen Stoop, Sales Director Asia Pacific, Cummins to understand more about this highly complex, and significant, piece of engineering.

What sort of raw materials and resources go into making an industrial electrolyser?

At the heart of the system is the cell stack, which splits water into hydrogen and oxygen. It requires a power control for the DC supply to the cell stacks, sensors, valves, and an automation system to function optimally and in a safe manner. The piping and vessels are mainly stainless

AN ELECTROLYSER

steel, and a water treatment unit and cooling system are also required.

The electrodes are the key elements of the electrolysis stack. The choice of material (on the surface) of the electrodes is currently limited to the precious metals of the platinum group. The content is quite low thanks to advanced coating techniques. Many of our R&D efforts are about limiting the use of precious materials, as well as exploring lower-cost alternatives without sacrificing performance of the equipment.

Jemena has ordered a 500kW electrolyser – how does this compare with other orders you have globally, and what sort of hydrogen output can Jemena expect to see from this electrolyser?

500kW input power for the electrolyser corresponds with a hydrogen output of approximately 100Nm³/h, or enough to power approximately 250 homes.

An artist’s impression of what Jemena’s Western Sydney Green Gas project will look like.

A sample of what Jemena’s electrolyser may look like inside its container.

We have approximately 500 units installed worldwide with most of our customers using the hydrogen in their industrial process. Their required flow of hydrogen typically varies between 10Nm³/h and 200Nm³/h.

Can the size of the electrolyser be scaled up if required in the future?

The setup in the container for Jemena allows for the installation of two cell stacks. That means we can add an extra stack of 500kW if required in the future. The system can then handle a power input of 1MW, which would result in a hydrogen output of 200Nm³/h. The largest size stack which we can currently install in our outdoor (containerised) units is 1.25MW input. So, a total of 2.5MW (500 Nm³/h) can be realised with a single outdoor setup.

How long has Cummins been producing electrolysers?

Cummins was established in 1919 and today employs more than 61,000 people globally. The Belgium facility has been active since 1948, and we started by building atmospheric alkaline electrolysers before moving to pressurised alkaline electrolysers some 25 years ago. We started commercialising a new technology called ‘PEM electrolysis’ five years ago, and the one for Jemena, which will be the first electrolyser in New South Wales, is one of these new generation models.

How different is the process of creating an electrolyser on an industrial scale compared to what we may have learned in school?

For those who enjoyed science lessons at school, they’ll remember the experiment where hydrogen is made from applying a DC current to water and then seeing bubbles of hydrogen and oxygen. On an industrial scale we face a lot of challenges implementing the similar principle that we experienced in the classroom into a highflow automated machine. Safety, purity, flow and reliability are the most important factors here. We have to design and deliver systems that are automated and produce a high purity of hydrogen (99.999 per cent). There are strict safety design standards

and the design also has to conform to the country of installation.

Where do you see this technology heading? Do you anticipate significantly increased demand for electrolysers as utilities around the world seek to add hydrogen to their energy mix?

With the increasing global interest in hydrogen as an energy carrier, we see a trend towards larger capacity systems. We are currently constructing a 20MW plant in Canada, the world’s largest, with other global projects of similar size following suit. The technology is market proven and continues to advance. The Hydrogen Council projected that fuel cell efficiency will likely reduce fuel consumption by 20 to 35 per cent as the technology is further refined over the next ten years. It is also expected that the fuel costs per kilogram of hydrogen will fall as distribution and retail infrastructure scale up. This seems quite reasonable given the significant cost reductions already achieved in the last decade with electrolysers, refuelling stations, and fuel cell costs cut significantly. If electrolyser manufacturing continues to scale up, and costs continue to fall, then over the next few decades the trajectory is for cost parity with current natural gas prices such as in Brazil, China, India, Germany and Scandinavia on an energy-equivalent basis. It is on course to be cheaper than producing hydrogen from natural gas or coal with carbon capture and storage.

What will be the trigger for large-scale, mass production of electrolysers internationally?

There has never been a keener appetite for energy transition than right now. With public demand for climate action growing, policy and business leaders are increasingly pushed to find a green gas solution. In the global race to display green credentials, we are seeing an increasing number of governments put financial and policy muscle behind lower carbon initiatives, and businesses are aligning on new purpose-led frameworks which put environmental sustainability to the fore.

This is especially true of the transport industry, where fuel cell advancements and decreasing hydrogen prices can make heavy duty trucks cheaper to run than diesel by 2031. The cost of producing hydrogen from renewables is primed to fall, but demand needs to be created to drive down costs, and a wide range of delivery infrastructure needs to be built. That won’t happen without government targets and subsidies.

Are there any nations/organisations that you consider to be leading the way in hydrogen/electrolyser technology?

Several regions of the world, such as Germany, Japan, California, China and Australia, are at the forefront of this movement.

Once the electrolyser is constructed, what are the testing measures and storage/transport requirements?

Our service department tests each unit according to certain procedures, which include pressure testing, flow, purity, alarm tests, visualisation and calibrations of sensors. We also have a complete FAT (factory acceptance test) procedure which can be witnessed by the customer. This typically takes two days and this way the customer is certain that everything is functioning well before it is packed and shipped.

The hydrogen industry is gathering pace, what sort of career opportunities do you envisage in the future in this space, and what will be the key skills required?

There will be growth and opportunities amongst renewable electricity suppliers, industrial gas producers, electricity and gas utilities, automakers, oil and gas companies, major engineering firms, and cities.

Although many high-tech industries require highly skilled workers, these emerging hydrogen and fuel cell industries will also require a wide variety of occupations at all skill levels for production, plant and fuelling station operations, technicians, and so forth.

To find out more about Jemena’s Western Sydney Green Gas project, visit www.jemena.com.au

To find out more about ANT Energy Solutions visit www.antsolutions.com.au

To find out more about Cummins visit www.cummins.com

PURE HYDROGEN, ZERO EMISSIONS

At ANT Energy Solutions, we use only the best technologies in our custom-made renewable energy systems for the creation and use of Green Hydrogen as a 24/7 energy source. Using both state-of-the-art PEM or alkaline electrolysers from our partner Hydrogenics, a simple, robust interface splits water into hydrogen and oxygen. The created hydrogen can then be used immediately or stored for future energy requirements.

ANT Energy Solutions is serious about next generation electrolysers and are passionate about creating effective products and solutions for Australia’s transition through the supply of reliable, renewable and secure energy supplies. With a research and development program supported by the government Cooperative Research Centres Projects (CRC-P) grant, scaled down electrolysers are being developed which will allow for greater flexibility and affordability for energy consumers than ever before. This is ANT Energy Solutions commitment to providing real energy security for Australia and our trading partners.

www.antsolutions.com.au

Electrolysers

RENEWABLES: BREAKING RECORDS AND LEADING THE WAY FOR ECONOMIC RECOVERY

Despite policy uncertainty and transmission and connection challenges, the number of large-scale renewable projects underway in Australia at the end of 2019 increased, according to a new report by the Clean Energy Council (CEC). The report found that while the future pipeline is slowing, there is still considerable activity underway, and the CEC is optimistic that the country’s renewable energy industry will be well placed to lead the recovery from the COVID-19 pandemic.

According to the Clean Energy Australia Report 2020, 2019 was a big year for the Australian renewable energy industry, with 89 projects under construction or financially committed to –compared to 87 in 2018 – creating almost 11,000 jobs and delivering 7.6GW of new clean energy capacity. In total, 4.4GW of new renewable energy capacity was installed.

Clean Energy Council Chief Executive, Kane Thornton, said, “Last year saw the construction of 34 new large-scale renewable energy projects, adding 2.2GW of clean energy to the grid. This represents around $4.3 billion in investment and the creation of more than 4,000 new jobs.

“Renewable energy is now responsible for almost a quarter of Australia’s total electricity generation, and the industry continues to grow and evolve as we transition to a cleaner, more affordable and more reliable energy system.”

A record breaking year for wind and solar

In total, renewable energy was responsible for 24 per cent of total electricity generation in 2019, up by 2.7 per cent from 2018. For a brief period in November, renewables passed 50 per cent of total generation in the National Electricity Market, an occurrence that is expected to become increasingly common over coming years.

According to the report, the wind sector had its best ever year in 2019, with 837MW of capacity added across eight new wind farms, accounting for more than 35 per cent of Australia’s renewable energy generation and overtaking hydro as the leading source of renewable energy.

Solar also saw record capacity added, with the large-scale solar sector accounting for almost two-thirds (1,416MW) of new capacity added in 2019 across 27 solar farms.

Projects underway

As of March 2020, there were 96 projects under construction or due to start construction soon. These projects are expected to deliver over 11,253MW of new renewable energy capacity, create

14,678 direct jobs, and deliver over $20.4 billion in capital costs. New South Wales has the most projects underway (28), followed by Victoria (21) and Queensland (16).

According to the report, while solar accounts for approximately 60 per cent of the new projects being built (5,769MW), a majority of new capacity (6,196MW) will come from the 30 wind farms under construction or financially committed to.

Some of the biggest project underway include:

» Dundonnell Wind Farm, VIC, 336MW

» Stockyard Hill Wind Farm, VIC, 530MW

» Moorabool Wind Farm, VIC, 321MW

» Murra Warra Wind Farm, VIC, 429MW

» Coopers Gap Wind Farm, QLD, 453MW

» Darlington Point Solar Farm, NSW, 275MW

» Coppabella Wind Farm, NSW, 295MW

» Riverland Solar Farm and Storage, SA, 330MW

Planning is also underway on the world’s biggest solar farm outside Tennant Creek in the Northern Territory. The $20 billion Sun Cable project is proposed to involve a 10GW solar array spread over 15,000 hectares, supported by a 22GWh battery, and will export the power generated to Singapore. The project is only in the earliest planning phase, but already has a number of high-profile investors.

Addressing challenges

Mr Thornton said the achievements of 2019 were even more impressive considering the significant challenges the industry is currently facing.

“After more than a decade of unstoppable growth, 2019 saw a 50 per cent downturn in new large-scale renewable energy investment commitments – with grid congestion, erratic transmission loss factors and system strength issues creating barriers for project developers and impacting investor confidence.”

While energy regulators are working hard to address these issues, Mr Thornton said a quick resolution was essential to ensure the industry’s momentum could be restored and Australia’s future energy supply secured.

Additionally, with the COVID-19 pandemic having a significant impact on the economy, Mr Thornton said that the Clean Energy Council is lobbying federal, state and territory governments to ensure that renewable energy and energy storage is a key part of their COVID-19 response packages.

“The renewable energy industry is uniquely placed to lead Australia’s recovery from the COVID-19 crisis. In addition to providing much-needed stimulus to the Australian economy, we can insulate households and businesses from high electricity costs while also ensuring that we meet our emissions reductions obligations.”

Despite facing some considerable challenges, Mr Thornton said he strongly believes the industry has a bright future.

“There is still a strong pipeline of renewable energy and storage projects and enormous customer demand for rooftop solar and batteries. These will be critical in replacing Australia’s aging coalfired power stations, meeting Australia’s climate change targets and ensuring affordable and reliable power supply,” he said.

PD10

Vermeer developed the PD10 Solar Pile Driver to meet the industry need for quick-working, accurate equipment. It has been specifically designed to meet the tight tolerances demanded by commercial solar contractors.

Featuring native Carlson GPS machine guidance – co-developed by Vermeer and Carlson – the PD10 offers high precision and outstanding overall tolerance, well within most construction tolerance specifications. This feature greatly decreases the amount of onsite surveying needed, resulting in significant cost savings and reduced fatigue on surveying personnel.

Features:

» GPS guidance

» Auto-plumb correction

» Laser-controlled post-depth-control

» Wide track pad to minimise jobsite disturbance

» Dual joystick controls

» Efficient ground drive

Equipment for contractors to remain competitive

Despite the slowdown in investment of new projects, the strong pipeline of projects underway or financially committed to, as well as optimism about the future of renewable energy in Australia, ensures there are still plenty of opportunities for contractors.

The key to contractors increasing their chances of winning work is using equipment that is reliable and cost-effective, mitigating unexpected expenses from project delays or machinery failure. For large-scale solar farms, the installation of piles has the potential to throw a project off track. It is common for piles to be installed using a back-hoe and auger, however this is a timeconsuming process which becomes even slower when working with hard terrain.

T755 TRACK TRENCHER

Vermeer's T755 Track Trencher provides the versatility to excavate different types of terrain and materials, including heavy rock, while improving worksite safety by constructing smoother, safer walls over long distances.

Features:

» SmartTEC performance software helps optimise productivity with real-time machine control prompts, as well as monitor and record functions encouraging proactive machine maintenance and operator performance analysis

» Elevated rollover-protective module cab featuring LEXAN glass, filtered and pressurised air, and heating and air conditioning. Its vantage point allows a virtually unrestricted view of the boom, trench and conveyor

» Optional oscillating track frame that allows the track to follow the ground’s contour ensuring a vertical trench on slopes up to ten degrees

» Rotary power trencher drive motor and splined headshaft for lower speeds and higher torque, providing superior ground penetration and low chain wear

» Optional remote control

Purpose-built solar pile drivers, like Vermeer’s PD10, are an alternate installation method, and as they are designed for the renewable industry, they have the accuracy and size variability required. This means piles can be installed cheaper and quicker.

For wind farms, being able to excavate and prepare the site for installation quickly is a key benefit to efficiency. A track trencher like Vermeer’s T755 is ideal for excavating the uneven and hilly terrain a lot of wind farms are built on with its oscillating track frame allowing the track to follow the ground’s contour to create a straight vertical trench. Its low speed, high torque, splined headshaft motor has superior ground penetration, and the dual chain and dual sprocket system helps stop chains slipping or falling off, reducing downtime.

By investing in the right equipment, contractors can offer greater productivity, and better time and profit margins, putting them in the position to keep winning work in what could become a competitive market as the sector waits for another increase in investment.

For

SUPPORTING THE TRANSITION TO HIGH LEVELS OF RENEWABLES IN THE NEM

With the Australian Energy Market Operator (AEMO) forecasting that as much as 75 per cent of Australia’s energy could be provided by wind and solar generation by 2025, actions need to be taken to ensure their full potential can be realised and system security maintained. To address these challenges and provide a roadmap forward, the AEMO has released the Renewable Integration Study (RIS), the first stage of a multi-year plan to maintain system security in a future National Electricity Market (NEM) with a high share of renewable resources.

Focusing on the time period up to 2025, the RIS evaluates the technical challenges associated with reliance on high levels of renewable energy resources and the actions that must be taken. The findings and actions in the report reflect the AEMO’s day-to-day experience operating the NEM, and the results of extensive modelling and analysis.

A low-cost and reliable NEM

In its Integrated System Plan (ISP), AEMO identified a number of futures for the NEM that maximise consumer benefits at the lowest system cost, while meeting reliability, security and emissions expectations. Under every scenario, the NEM’s leastcost future involved large increases in renewable generation with dispatchable generators, large-scale and distributed energy storage, demand side participation and sector coupling – such as with gas and transport.

The RIS takes these projections as given and investigates in detail the challenges in the short term of maintaining power system security while operating this resource mix at very high instantaneous penetrations of wind and solar generation. It recommends actions and reforms needed to keep operating the NEM securely, now and as the power system transitions.

It builds on international approaches to operating power systems with high penetrations of wind and

solar generation, while recognising Australia’s unique challenges, and identifies opportunities for Australia to continue developing world-leading expertise. The goal is to identify opportunities to break down barriers and maximise value for consumers from the NEM’s growing renewable fleet.

AEMO’s Managing Director and CEO, Audrey Zibelman, said, “The Renewable Integration Study makes it clear that today’s operating approaches and market frameworks are becoming less effective as the NEM continues its transformation to world-leading levels of renewable generation.

“Australia already has the technical capability to safely operate a power system where three quarters of our energy at times comes from wind and solar energy generation.

“However, to do so requires changes in our markets and regulatory requirements, otherwise, AEMO will be required to limit the contribution of these wind and solar resources to 50 or 60 per cent of electricity supply at any point in time, even though they are the lowest cost way of providing electricity.”

A changing NEM

The NEM already has 17GW of wind and solar capacity installed, with some parts of the NEM having among the world’s highest levels installed, including one of the highest levels of residential solar.

By 2025, it is expected to have transformed even further. AEMO’s Draft 2020 ISP forecasts, in its central scenario, that by

2025 there will be 27GW of wind and solar – both utility solar and distributed PV – generation capacity in the NEM. This scenario does not yet take the effects of COVID-19 into account.

RIS analysis found that, in the next five years:

» The NEM will continue its transformation to world-leading levels of renewable generation. This will test the boundaries of system security and current operational experience.

» If the recommended actions are taken to address the regional and NEM-wide challenges identified, the NEM could be operated securely with up to 75 per cent instantaneous penetration of wind and solar.

» If the recommended actions are not taken, the identified operational limits will constrain the maximum instantaneous penetration of wind and solar to between 50-60 per cent in the NEM.

Beyond 2025, AEMO has not identified any insurmountable reasons why the NEM cannot operate securely at even higher levels of instantaneous wind and solar penetration, especially with ongoing technological advancement.

Recommended actions and identifying challenges

Based on the learnings contained in the RIS, AEMO recommends the following actions are prioritised, agreed and implemented well ahead of 2025:

» Continue the design and deployment of the Energy Security Board’s (ESB) Market 2025 reform program with particular focus on ahead and system security services markets.

» New standards and settings to maximise the potential contribution of distributed solar PV.

» Construction of required transmission resources identified in the ISP.

“Given the pace and complexity of change in the NEM, the study highlights the need for flexible market and regulatory frameworks that can adapt swiftly and effectively as our understanding of the changing power system evolves. This is going to be particularly important in the areas of technical standards and frameworks for sourcing essential system services,” Ms Zibelman said.

The report highlights five focus areas and the associated key challenges and actions, including timing and status:

» Secure system operation with increasing uncertainty and complexity.

» Managing the system impact of the NEM’s world-leading and growing levels of distributed solar PV.

» Managing frequency.

» Maintaining system strength.

» Keeping balance in a system in which energy supply is increasingly variable and uncertain.

Working with stakeholders to support the transition

In recommending actions and highlighting positive potential outcomes, AEMO does not underestimate the extent of work that will be required to successfully adapt the NEM.

“The findings of this report have far-reaching implications for the energy sector in Australia now and in the coming years,” Ms Zibelman said.

“AEMO looks forward to working closely with stakeholders to explore the findings and actions arising from this report and develop an integrated program of priority focus areas to support the energy transition.”

With the RIS, AEMO aims to provide foundational engineering perspectives for the ISP, Energy Security Board (ESB), industry, market institutions, and policy-makers. Its technical perspectives will ideally inform future investments, regulations and market designs to securely operate the NEM power system with very high instantaneous penetrations of wind and solar generation.

To read AEMO’s full Renewable Integration Study, visit https://www.aemo.com.au/energy-systems/major-publications/renewable-integration-study-ris

FINDING AND DEVELOPING THE NEXT BIG THING

International investors are on the hunt for Australian startups who are building technology solutions to address Australia’s pressing energy efficiency, optimisation, and emission challenges. If you have the idea that could help transform the energy industry, an accelerator program is a fantastic way to quickly bring your idea to life.

Two such investors, Brinc and Artesian, recently launched an Australian Clean Energy Accelerator Program, uniquely designed to support Australian startups that have fully developed solutions, have established product market fit, and are ready for commercialisation.

The program is supported by Artesian’s Clean Energy Seed Fund to invest in scalable, high-growth startups, encouraging innovation and creating opportunities in the development of clean technology.

Brinc and Artesian are looking for the next generation of clean energy startups in three main areas: energy efficiency technologies, electrical grid innovations, and renewable energy solutions specifically designed for the Australian Market.

Applications will be accepted throughout the course of 2020, and startups will be admitted to the program on a rolling basis. This format allows for a more tailored curriculum and hands-on support, designed around the unique needs of each startup.

Energy is going to be a huge focus for Brinc in 2020. Together with Schneider Electric, Brinc has already co-invested in

two energy startups through their program in Hong Kong. The partnership allowed Schneider Electric executives to have meaningful interactions with the selected startups through the program and the program was designed to create a facilitated path towards either a partnership, pilot or commercial opportunity.

That’s the model Brinc is looking to replicate her in Australia. Right now, Brinc is in active conversations with a number of major Australian energy companies to try and work together, and ultimately give startups access to industry partners and potential customers from an early stage.

The offer

Through the Clean Energy Accelerator Program, Brinc and Artesian will offer $260,000 in seed funding, in exchange for equity in the startups they choose to work with. The offer is a combination of cash ($150,000) and support ($110,000) through the program and post-program.

The program will focus on facilitating commercial agreements with larger-scale

Australian energy companies, in order to help scope and secure pilots and proof of concepts, while also opening up growth opportunities locally and internationally for companies.

Upon completion of the program, Brinc will continue to support company growth through business development, the provision of capital raising guidance, and by ensuring a deep connection to the growing Brinc family of founders globally.

Artesian will also provide follow on capital to companies that demonstrate traction. Beyond this, companies can benefit from Brinc’s Services division in China to source components, identify relevant factories, and set up robust supply chains required to fulfil orders to their customers.

This is a key benefit of working with Brinc – the close relationship the firm already has with international manufacturers, a particular benefit for startups looking to manufacture a physical product.

“We specialise in working with companies that are looking to develop a product,” said Brinc Associate Kimberley Lam. “We have connections to manufacturing facilities in China, and can help our startups develop a supply chain in China.”

About the investors

Artesian Venture Partners (AVP) is Australia’s largest and most active early-stage venture capital firm that focuses on the Asia-Pacific region, with offices in Sydney, Melbourne, Singapore and Shanghai.

The accelerator program will be supported by Artesian’s Clean Energy Seed Fund, which aims to invest in scalable and high growth startups to encourage innovation and create opportunities in the development of clean technology.

Through the program, Artesian hopes to contribute to and help grow the dynamic clean energy startup ecosystem in Australia.

Artesian also currently backs Brinc’s Greater Bay Area (Hong Kong and Mainland China) accelerator programs and together have invested in 57 startups.

Head of VC at Artesian, Luke Fay, said, “Artesian is very excited that Brinc has identified an opportunity in Australia around clean energy technology.

“Brinc brings a wealth of knowledge and program expertise across clean energy, manufacturing, food technology, and hardware and IoT. It has global experience working with startups in Hong Kong, China, Spain, Bahrain, Poland and India.”

Brinc Founder and CEO, Manav Gupta, said, “If our forefathers had looked up, instead of down, our energy landscape would be very different than what it is today.

“We would have significantly fewer issues than we do today due to climate change and a warming world. We have an opportunity to reimagine technology stacks, business models, hardware and software applications and services, data gathering and analysis, and so much more in the energy space.

“We’re excited to back the best climate and energy game changers in Australia as we all work towards developing a more sustainable foundation for our growing energy needs.”

Brinc’s portfolio includes 110 startups with a total cumulative value of over $US250 million.

In addition to the Clean Energy Accelerator Program, Brinc runs eight other programs focused on hardware and IoT, manufacturing, food technology and alternative protein.

Applications are now open for the Australia Clean Energy Accelerator Program. For more information, head to https://www.brinc.io/accelerators/energy-aus

RISING WASTE LEVIES PROVIDE OPPORTUNITIES FOR HIGH-ENERGY USERS

In the face of COVID-19, never has there been a more important time for Australian manufacturers and high-energy users to implement lower cost alternative energy-from-waste solutions.

With the Victorian Government being the latest state to announce an increased waste levy as part of its long-awaited circular economy policy, ‘Recycling Victoria’, businesses now have even more incentive to investigate the potential of energy-from-waste for heat and electricity.

CEO of ResourceCo Energy, Henry Anning, says increased waste levies help deliver an even lower energy cost solution for manufacturing businesses.

Victoria’s new landfill levy is set to almost double from $65.90 to $125.90 over three years, and follows an agreement reached between all states and territories, to work towards a national harmonisation of waste levies to further reduce and recycle waste.

The Waste Management and Resource Recovery Association of Australia Chief Executive, Gayle Sloan, says the structural changes occurring to the waste and resource recovery industry provide a fantastic opportunity for manufacturing businesses to look for and introduce new energy solutions.

“Using residual waste material for energy is a proven and successful solution across Europe and the UK,” Ms Sloan says.

Mr Anning says Australian businesses have significant opportunity to reduce long-term energy costs, risk and emissions by turning to alternative fuels.

“During the COVID-19 pandemic, manufacturers are revisiting their future long-term business planning, looking for new solutions – so now is the right time to consider using alternative fuels,” he says.

“RescourceCo Energy can help manufacturers set-up the infrastructure and technology to utilise heat and electricity from recovered fuel from waste.

“It’s about having a unique solution to the requirement for heat in manufacturing, and providing businesses with an over 90 per cent renewable heat source as an alternative to gas, coal or electricity.

“We manufacture process engineered fuel (PEF) from commercial and industrial (C&I), and certain construction and demolition (C&D) materials. These are primarily waste timber materials and also include non-recyclable plastics, cardboard, paper and textiles.”

It’s a successful formula that has been in place across Europe for more than two decades, delivering improved environmental outcomes by reducing greenhouse gas production.

Major Australian manufacturing businesses Australian Paper and Orora have realised the opportunity energy-from-waste presents and are progressing with their own projects.

“ResourceCo Energy can partner with large energy users to install alternative energy infrastructure within their operations to provide lower cost, renewable heat or electricity. We fund, build, own and operate the energy plants, taking this risk and capital cost away from the user.

“Our approach is about cementing long-term agreements and providing options to manufacturers. Should the energy user wish to own the energy plant, they can also just source the fuel from us.

“The energy-from-waste sector can play a significant role in delivering lower cost alternative energy solutions across Australia as our economy seeks to rebuild post COVID-19.”

For more information on the solutions ResourceCo offers, head to www.resourceco.com.au or contact Henry Anning at henry.anning@resourceco.com.au

WESTERN AUSTRALIA LAUNCHES ROADMAP FOR DER INTEGRATION

Rooftop solar panels, batteries, electric vehicles and microgrids are transforming Western Australia’s electricity system. These small-scale devices, known as Distributed Energy Resources (DER), present challenges and opportunities for the way electricity is produced, managed and consumed in the state. In response to these challenges, the government has developed a DER Roadmap to ensure it can integrate growing levels of distributed resources into the state’s electricity systems in a safe and secure way.

Western Australian Energy Minister, Bill Johnston, released the state’s Distributed Energy Resources Roadmap, produced by the government’s Energy Transformation Taskforce.

The DER Roadmap is an Australian-first, five-year plan that outlines the actions the Western Australian Government must take over the next five years in order to meet these challenges and harness the potential for cleaner, more affordable energy.

Actions will include pilots to determine the best ways to overcome technical, regulatory and market barriers to integrate DER into the South West Interconnected System (SWIS), including additional community batteries.

The roadmap has been developed with significant input from industry, and will be implemented with collaboration from Energy Policy WA, Western Power, Horizon Power, Synergy and the Australian Energy Market Operator (AEMO).

A leader in sustainable energy DERs are devices that can either use, generate or store electricity, and form a part of the local distribution system, serving homes and businesses. DERs can include renewable generation such as rooftop solar photovoltaic (PV) systems, energy storage, electric vehicles (EVs), and technology to manage demand.

Customers in the SWIS are installing DERs at outstanding rates. Now, almost one in three households in the SWIS have a rooftop solar PV system installed, with

Solar panels are increasingly popular in Western Australia, both in urban and rural areas, which is causing challenges for the state’s electricity system.

around 2000 households adding a new system each month.

Customers choosing to install DERs are already enjoying the benefits of lower electricity bills, and are contributing to decarbonising the power system. As DER capabilities improve and technology costs continue to fall, customers will be able to enjoy new and greater benefits from their DER.

DERs also offer additional opportunities that complement and amplify the benefits of customer investments. These opportunities include services that help

ensure the security and reliability of the power system, and innovative business models that offer new value for customers.

However, the speed and scale of the uptake of DER is presenting serious risks to the power system.

If not properly managed, high levels of DER, most notably rooftop solar PV, will impact customers by eroding the security and reliability of the electricity system, leading to higher costs and an emerging divide between those that can afford to install DER and those that cannot.

The continued uptake of rooftop solar PV will see daytime demand fall to levels at which there is significant risk that the stability of the SWIS will be compromised – this is forecast to occur around 2022. In response, AEMO will be required to intervene more frequently and to a

greater extent to maintain system security, increasing costs for customers.

DERs are also contributing to technical issues at the distribution network level. The existing network was not designed to handle large amounts of generation from rooftop solar PV, which is now flowing two ways and causing problems for network operation as the physical limits of infrastructure are reached.

Without improving DER integration in the network, resolution will require costly infrastructure investment by Western Power, or imposition of limits on the size and number of rooftop solar PV systems customers can install on the network. Neither outcome is good for customers.

If DERs are to become a central component of the power system, they need to be fully integrated into the operation

of the power system and actively provide support, in a manner similar to larger generators.

As well as low demand in the middle of the day causing system security issues, the system load profile also features high peak demand and associated costs to service that peak.

Existing flat electricity tariff structures are increasingly unsuitable because they do not reflect the true cost of electricity supply, particularly as more DERs are installed. There are minimal incentives under these existing tariff structures for customers to use their energy in a way that helps keep supply costs at a minimum and ensures the system is stable and secure.

Furthermore, customers who install DERs contribute less than their share of system costs, and are disproportionately

benefiting from lower bills. This means customers who are unable to access DER are cross-subsidising those who can. In short, the current tariff structures are incompatible with a high-DER energy system.

A vision for the future

The Energy Transformation Taskforce has a vision to solve these problems now and set the system up for a high-DER future. Addressing these challenges through integration and orchestration of DER involves measures to manage the risks and realise new opportunities across the entire electricity supply chain.

The Taskforce’s vision for DERs by 2025 is a future where DERs are integral to a safe, reliable and efficient electricity system, and where the full capabilities of DERs can provide benefits and value to all customers.

There are three parts to this vision:

1. A safe and reliable electricity system where customers can continue to connect DERs, and where DERs support the system in an efficient way

2. DER capability can offer value throughout the electricity supply chain

3. DER benefits are flowing to all customers, both with and without DER

The DER Roadmap is the set of actions, action owners and timeframes required to realise this vision. The roadmap outlines the way to achieving key milestones on the journey, and will:

Address the imminent danger of system stability issues occurring as soon as 2022

Upgrades to DER functions and settings (like those for inverters) will see DERs automatically help mitigate network and system disturbances, rather than exacerbate them.

Grid support measures by Western Power will assist in maintaining system security and reliability, particularly in the short term. Improved visibility of DERs for Western Power and AEMO will further support this.

Distribution battery storage deployment, provided by a range of parties, will provide a cost-effective way to manage network and system issues caused by DER, and offer customers new opportunities to access storage.

Pilot tariff structures that support a highDER future

Current electricity tariffs are contributing to inefficient and inequitable outcomes for customers, and the power system. A high-DER future is not sustainable under current tariff structures.

It is important to pilot potential new tariff structures that are more sustainable, reflecting the underlying cost of energy services and incentivising efficient use of the system. That is, pilots for tariff structures that incorporate time-based price signals with low rates during the day when there is excess rooftop solar generation, while signalling for peak demand and the associated costs to support the peak.

This will provide insights into how customers respond to alternative tariff structures, including how they use and invest in DER (e.g. battery storage) under those tariffs.

Ensure customers are protected and are provided with clear and simple information

Customers can continue to install DERs, and access information that helps them make choices about how they use electricity and better manage their costs.

The protection of customers, including data protections, will be maintained even as changing business models provide new electricity services and customer offerings.

Build a future where DER is an active participant in the power system

The roadmap sets out the requirements for the integration of DERs into electricity markets, so that customers may eventually provide services that support the system and are rewarded for doing so. This will lead to the natural evolution of Western Power and AEMO’s roles and the introduction of innovative ‘DER aggregators’ to the system.

The coordination of many individual customer DERs by aggregators will allow customers to participate in the provision of services that benefit the power system, but in a simple way. The development of mechanisms that allow DER to provide these services and receive payment will open up new value streams for customers, and lower system costs.

Electric vehicles are a form of DER that will have a significant impact on the electricity market into the future.

CHARTING THE PATH TO SUCCESS

Below are the priority actions outlined in the roadmap, which will coordinate and enable the efficient integration of DER into Western Australia’s power system.

2020

Distribution storage

Western Power PowerBank installations commence, providing opportunities for network and customer benefit whilst adding to power system stability.

Distribution network visibility

Distribution network visibility program commences to enhance the understanding of distribution network power flows and constraints.

Inverter settings and functionality

SWIS-specific autonomous inverter settings that provide better performance during disturbance events are enabled.

Customer engagement

Customer engagement program commences on challenges and opportunities of the high-DER future.

DER orchestration pilot

A comprehensive VPP technology and market participation pilot has commenced, testing the incorporation of aggregated DERs into the Wholesale Electricity Market (WEM).

Tariff pilots

Pilots for alternative tariff structures have commenced, demonstrating value to consumers who can move electricity use to the middle of the day.

Grid response

Investment in grid support technologies (including reactors, storage and voltage control equipment) by Western Power is contributing to maintaining system stability on low demand days.

Distribution System Operator (DSO)/Distribution Market Operator (DMO)

DSO/DMO roles, functions, practical operations, regulatory requirements, as well as costs and benefits have been identified.

2021

Distribution storage

Western Power has identified emerging network needs and has access to network storage services from the market.

Tariff pilots

Learnings from tariff pilots are guiding the transition to new pricing, driving system-efficient behaviours and investment in storage that have the potential to lower energy bills.

System operations

The System Operator’s dynamic system modelling adequately incorporates DER and arrangements adequately address power flows during system events.

DSO/DMO

Changes to wholesale market arrangements necessary to enable the participation of DER in the WEM via a DER aggregator are introduced.

Customer engagement

Customer engagement program continues.

2022

Network investment process

An amended Access Code is providing increased opportunities for DER innovators to provide services to Western Power and receive revenue for doing so. Inverter settings and functionality

Communications-linked inverter standards are enabled, providing for DER orchestration and the capability to participate in multiple markets.

DER orchestration pilot

A comprehensive VPP technology and market participation pilot has tested the incorporation of aggregated DERs into the WEM (including market dispatch and settlement arrangements).

2023

DSO/DMO

DSO and DMO go live in the SWIS, with DERs able to respond to meet network needs as well as be dispatched into the WEM, and be compensated appropriately.

Distribution storage

Distribution storage continues to be deployed under a variety of business models, and can access value across the supply chain.

2024

DER Roadmap complete

» DER is being leveraged for value across the supply chain, including to secure the network and providing value to customers

» Innovative business models with appropriate licensing are providing value to customers and the system as a whole

» The DSO and DMO are coordinating effectively to ensure customers can continue to connect their DER into the future

FAST AND EASY PARTIAL DISCHARGE TESTING WITH THE OMICRON MPD 800

The new MPD 800 universal partial discharge (PD) measurement and analysis system from Omicron represents the next generation of the company’s widely-used and innovative MPD PD testing technology.

Enhanced and newly-added hardware and software features ensure highly-sensitive multi-channel PD measurements for reliable, industry-standard PD testing on a variety of electrical equipment, such as motors and generators, power cables and power transformers.

The versatile MPD 800 system accurately detects and localises insulation defects, and helps users to reliably assess the risk of failure in electrical equipment during research and development, factory testing, site acceptance testing, as well as in-service troubleshooting for effective maintenance planning.

Powerful noise suppression and PD source separation techniques ensure reliable analysis in areas with high levels of interference. The configurable MPD 800 software enables users to select only the PD measurement and analysis features they need for specific PD tests and individualised reporting.

The MPD 800 provides IEC and IEEE standard-compliant PD testing on:

» Rotating electrical machines (motors and generators)

» Power cables (terminations and joints)

» Power transformers

» Switchgear

» Industrial drives

» High-voltage components (i.e. bushings, insulators, capacitors and busbars)

Benefits of the system include:

» One PD testing system for all types of electrical equipment and components

» Robust and flexible for use in laboratories, testing bays and in the field

» Synchronous, multi-channel PD measurement and gating capabilities

» Advanced noise separation and PD source separation techniques for reliable analysis

» Configurable user interface for individualised PD testing and reporting

For more information, head to www.omicronenergy.com/en/products/mpd-800/ or email info.australia@omicronenergy.com

AUSTRALIA HAS THE CAPACITY TO LEAD THE COAL PHASE-OUT –BUT IT WON’T HAPPEN ANYTIME SOON

by Dr Kamila Svobodova, Research Fellow, Centre for Social Responsibility in Mining, University of Queensland

A realistic pathway for the world’s transition away from coal has been presented by University of Queensland researchers who identified contradictions and constraints in 118 nations’ efforts, country by country. Here, Dr Kamila Svobodova argues that while countries like the United States, China, Russia and Australia have a responsibility to lead effective change, it is more likely countries such as Germany, Canada and Iran will.

Demand for global climate change action is at its peak, but the acceptance of radical emission reduction strategies is not pervasive. Such a strategy relies on a rapid and unprecedented global-scale solution, and an active cooperation or leadership of a handful of countries. These countries, including Australia, have the responsibility and capacity to carry the world through a transition period. However, they face major uncertainties in targeting global versus national interests, following a continuous increase in their energy consumption.

Is Australia’s lagging position in energy transition unalterable? Definitely not, but a realistic strategy for international emissions reduction must recognise that the constraints and contradictions within the current Australian context are unlikely to be overcome in the near future. These constraints are also present in other countries.

Dr Kamila Svobodova.

In our paper, Complexities and contradictions in the global energy transition: A re-evaluation of countrylevel factors and dependencies, we expanded the literature on coal phase-out by designing a multi-level assessment framework. Based on country-level capacity, ability and urgency to transit, the framework examines the potential of 118 state nations to phase out coal and their roles in the global energy transition. Based on their economic health and dependency on coal, the framework divides countries into four groups labelled A-D, and then refines these groups by analysing each countries’ carbon contribution. Identifying countries with similar conditions provides a picture of global transition capacity, which can reveal potential roles, path direction and speed of change.

As I hinted earlier, Australia currently finds itself alongside what the study identifies as the “Recalcitrant Nations” (Group A1). These countries are economically healthy, highly dependent on coal and are top or major emitters. Since human and economic development in these countries is high, they are all capable and, more importantly, responsible for leading the transition from coal to renewables. China, the United States of America, Russia and Japan join Australia in this group. As you will see, while these countries differ in their economic structures and energy dependencies, their approach to a coal phase-out is remarkably similar.

Before I examine those countries, I will talk about Australia’s coal phase-out efforts. Apart from the nationally stated Renewable Energy Target, which will expire in 2020 with no replacement revealed yet, the

Federal Government has tabled no policy to move the phase-out of coal beyond the domain of market forces. The Australian Energy Market Operator’s modelling, which suggests two-thirds of coal-fired energy will be out of the system by 2040, does not alter this. Only a more rapid scenario would be compatible with the global two-degree scenario. In a choice between imperfect alternatives, the Australian Government appears to be gravitating towards maintaining a cautious balance of market protectionism with a façade of supporting incremental investments in cleaner energy alternatives.

The United States also has no federal plan to phase-out coal in power generation. In fact, the current administration has vowed to revive the coal industry and kick-started this by moving to repeal the previous administration’s Clean Power

Australia’s economy is heavily dependent on coal exports.

Highly dependent on coal

Economically healthy (A)

Top and major emitters (A1)

Medium and low emitters (A2)

Recalcitrant nations

Late stage transition leaders

Economically less healthy (B)

Top and major emitters (B1)

Medium and low emitters (B2)

Late stage transition followers

Diagram showing the classification of countries in the report.

Plan. In line with other recalcitrant nations, the United States has not declared a 2050 target for renewable energy. Two years ago, the Federal Government even introduced tariffs on the import of solar panels that led renewable energy companies to freeze or cancel investments of US$2.5 billion.

Similarly, in Russia, there is no public agenda for phasing out coal. Like the United States, Russia has focused on strengthening its own energy security, through policies that encourage the development of renewables that only marginally increase their share in the national electricity mix. In fact, the Russian Government aims to increase the share of coal in electricity generation from 16 per cent to 17 per cent by 2035.

China can be seen as a pivotal nation in the post-Paris era due to its population and global economic ambitions. The Chinese Government has no public phase-out plans for coal but has stated its intent to reduce the share of the country’s overall energy mix from 64 per cent in 2019 to 58 per cent by 2020. This move reflects the urgency with which action is needed. Some other efforts have also had an impact, such as strict requirements for the construction of new coal power plants, the country’s 20182020 Air Pollution Plan, or the allocation of 30 billion yuan (US$4.56 billion) to support coal mining regions in their transition from coal economies. One can assume that if

Less dependent on coal

Economically healthy (C)

Top and major emitters (C1)

Medium and low emitters (C2)

Early stage transition followers

Early stage transition leaders

the country makes significant progress in phasing out its dependency on coal, the key measures on economic health and energy mix would happen at an incremental pace.

Clearly, Australia belongs to this recalcitrant group. But does it have to be? Probably not. Given Australia’s unique context, policymakers could try to push the country into another group, such as the “Early Stage Transition Followers”, accompanied by countries such as Germany, the Netherlands or the UK. Germany, which is frequently identified as a frontrunner in the transition to renewable energy, is a prime example of why any realistic phase-out plan would need to be long running, complex and account for national differences beyond carbon contribution. Although Germany’s carbon footprint may not be as small or as quickly decreasing as some Scandinavian countries from the “Early Stage Transition Leaders” group, it remains the only major industrial economy that has steadily decreased its reliance on fossil fuels. This success is the result of a two-phased transition. The country pushed ahead with its now much-duplicated feed-in tariff system, which enabled citizens, municipalities and cooperatives to participate in the energy transition. This led to more than 40 per cent of the country’s clean power-producing facilities being owned by citizens, farmers

Economically less healthy (D)

Top and major emitters (D1)

Medium and low emitters (D2)

Late stage transition followers

and cooperatives. The second transition phase focuses on managing the increasing renewables inventory while controlling cost and access across the system.

Could Australia adopt a similar approach to Germany? It is unlikely. Germany and Australia have different types of economies and energy dependencies, and a very different political and industrial culture. As the largest manufacturing economy in Europe, Germany’s coal is primarily used in energy production. Australia’s coal economy is driven by exports. Furthermore, cultural differences, especially regarding climate change, are evident. Germany has a long-lasting good relationship between trade unions, miners and states. This brings trust for future transition plans. A fundamental part of Germany’s successful initiative is the wide-ranging climate change consensus. More than 90 per cent of German citizens support an expedited approach to energy transition. This level of popular consensus is atypical in modern democracies. Germany’s major political parties all largely agreed on the same phase-out strategy. Neither of these things can be seen in Australia.

A realistic coal phase out plan for Australia must be different, driven by different strategies but similarly as in Germany, built on long-lasting trust and understanding among key players.

SLASHING EMISSIONS SETTING

The City of Onkaparinga in South Australia has taken a leadership position when it comes to greenhouse gas emissions, adopting solar PV and a range of other technologies to green its energy supply and reduce the carbon dioxide emitted across the entire council area.

EMISSIONS AND EXAMPLES

With more than 170,000 residents, City of Onkaparinga is South Australia’s largest council area by population. The council has been committed to reducing its carbon footprint for decades, and is home to a community heavily invested in renewable energy. So, while it was pleasing to learn the council had slashed its corporate greenhouse gas emissions by 42 per cent over the past decade, it wasn’t a surprise.

The drop (from 15,065 tonnes of CO2e in 2010-11 to 8733 tonnes in 2018-19) comes in the wake of a slew of energyreduction projects.

One such project saw the council change 12,000 streetlights to 14-watt LED technology in 2018, which slashed the lights’ electricity use by 40 per cent (and reduced emissions by 1900 tonnes of CO2e).

Other projects included a Green Buildings Initiative, which aims to reduce energy and water use, waste and greenhouse gas emissions from all council owned buildings over time.

Two of these flagship buildings are the McLaren Vale and Fleurieu Coast Visitor Centre, and the Woodcroft Community Centre.

Boasting features such as solar PV systems, passive design (such as external shading, high performance glazing and rammed earth construction), solar hot water systems, electric vehicle charging stations and smart building controls, these buildings have become “Green Hub” demonstration sites to inspire the community.

The council’s emissions reduction over the decade was boosted by the increase in renewable energy use at state level. Council’s electricity consumption has also dropped by 37 per cent since 2010-11.

Mayor Erin Thompson says the emissions reduction is a fantastic result for the environment, demonstrating how the council's long-term commitment to reducing our carbon footprint is paying off.

“City of Onkaparinga has been serious about reducing its carbon footprint for a long time, and we’ve been measuring our emissions since 1998,” she says.

“The 42 per cent reduction is really pleasing, but the work doesn’t stop here. We’ve been involved in a number of significant projects since to further reduce our emissions and future-proof our region from the impacts of climate change.”

City of Onkaparinga replaced 12,000 streetlights with 14-watt LED technology in 2018.

Other exciting energy-reduction projects completed or underway in 2019-20 include:

» Installation of 1000 solar panels at three of council’s high energy consuming sites (which will save over $80,000 per year and reduce council’s footprint by 161 tonnes of CO2e annually)

» Installation of devices at a number of sites to remotely monitor electricity consumption and solar PV generation using real-time data

» Circular procurement targets prioritising the use of recycled materials in council projects

» The use of 10,000 tonnes of recycled asphalt in road works across the city

» The first South Australian road built using recycled soft plastics and glass

A corporate emissions target will be brought to elected members by the end of 2019-20, which will be included in a Climate Change Response Plan currently under development.

The reduction announcement follows news that a new material recycling facility will be built in the City of Onkaparinga through the Southern Region Waste Resource Authority (a subsidiary of Holdfast Bay, Marion and Onkaparinga councils), delivering more major benefits to the environment and economy.

But the council’s energy-reduction projects are just one part of the renewables story in southern Adelaide.

In early 2019, Vicinity Centres laid and connected nearly 5000 solar panels at Colonnades Shopping Centre, which sits alongside City of Onkaparinga’s main council offices at Noarlunga, with the 1.8MW system being the region’s largest commercial installation.

The City of Onkaparinga council area also has a higher overall proportion of residential solar installations at 39.8 per cent, compared to the rest of the state at 33.1 per cent.

In fact, Morphett Vale/Woodcroft was the top postcode in SA for household solar installations in 2017 and 2018, and more than 50 per cent of our rural areas are now powered by the sun.

Local governments across Australia have key roles in addressing and adapting to climate change, and helping communities to reduce emissions.

In southern Adelaide, City of Onkaparinga looks forward to building on its successes and slashing its carbon footprint for decades to come.

The McLaren Vale and Fleurieu Coast Visitor Centre has become a Green Hub demonstration site to inspire the community.

BARRIERS TO ENTRY INTO THE ELECTRICITY GENERATION SECTOR: INSIGHTS FROM AN INVESTOR SURVEY

by Alan Rai, Director, Baringa Partners, and Senior Fellow, Macquarie University

Research recently undertaken by Alan Rai and Tim Nelson has identified the common barriers to investment in electricity generation in Australia. Here, Alan outlines some of the findings of the research, and provides suggestions to remove the barriers that are holding large-scale investment back.

Three key trends have occurred over the 21 years since Australia’s national electricity market (NEM) commenced:

1. Entry of more than 6GW of gas-fired plant over the decade to 2009, with more than half of this (3.6GW) entering in 2008 and 2009 alone. This investment occurred in response to state-based policy signals – namely, Queensland’s 18 per cent gas scheme and NSW’s greenhouse gas abatement scheme – and to the drought-induced electricity spot price spikes of 20072008 (see Figure 1).

2. Exit of baseload plant over a relatively short period: between June 2014 and June 2017, over 4.1GW of coal-fired plant exited. This unwound all the excess baseload capacity existing at the time of the NEM’s commencement. These exits occurred suddenly and unexpectedly, contributing to the

1 While the term “dispatchability” does not have a universal meaning, it incorporates notions of controllability and flexibility. Dispatchability is the extent to which a resource can be relied on to follow a target in relation to its load (for demand-side resources) or output (for supply-side resources).

Figure 1. Net entry and exit of large-scale plant across the NEM, year to 30 June. Source: Authors’ calculations based on data from AEMO and from the AER.

doubling in wholesale prices across the NEM between 2016 and 2018.

3. Entry of variable renewable energy (VRE) wind and solar PV plant.

Between July 2012 and June 2019, over 7.5GW of utility-scale wind and solar PV entered the NEM.

There are two other key findings from Figure 1:

1. A declining volume of new-entrant VRE generation since mid-2019.

2. Virtually no entry of dispatchable plant1 (such as gas-fired generation and hydro plant) since 2017, despite record high electricity prices during 20172019. This stands in stark contrast to the supply response to the 2007-2008 price spikes. This lack of entry resulted in wholesale prices over 2017-2019 remaining at levels well above that of 2007-2008.

To understand the reasons for these drop offs in new-entrant capacity, I asked various generation-sector investors, in late 2019, for their views on why there has been a drop-off in new-entrant capacity. The key findings from these discussions are briefly discussed below, as well as the associated policy implications, with more details available on request.

Stating the policy-implications punchline upfront: policymakers need to be mindful of the interaction between economic theory and real-world financing considerations when designing big-picture reforms, such as the Energy Security Board (ESB)’s post-2025 work program, to avoid any unintended consequences.

Themes covered

The discussions covered the following two themes:

1. The relative importance of various factors cited as preventing the entry of plant into the NEM.

2. The impact of these barriers to entry on the cost and availability of debt and equity finance, and changes in the availability and cost of finance over the preceding 12 months.

I spoke with corporate members of the Clean Energy Council (CEC), and ‘full’ members of the Australian Energy Council (AEC). In total, 18 organisations provided their views. Collectively, these 18 organisations invest in or operate around one-quarter of installed utility-scale generation capacity in the NEM. These

Cited barriers to entry into the generation sector

Connection requirements

Electricity spot and/or contract prices too low

Insufficient network capacity relative to generation capacity

No emissions policy certainty/no "green" price signal

System security constraints on output

Government intervention in generation (e.g. "big stick", Snowy, UNGI)

organisations relate to one or more of the following categories:

» Project debt financiers

» Project equity financiers

» Vertically and/or horizontallyintegrated developers of VRE and traditional plant

» Independent (i.e. non-integrated) VRE developers

» Independent (i.e. non-integrated) battery storage developers

Finding #1: prioritisation of barriers to entry

Investors were asked to prioritise eleven barriers to entry (see Table 1). These eleven barriers were informed by various studies, including the Finkel Review, the Grattan Institute, and recent analysis. In decreasing order of importance, the top three barriers identified by investors were:

1. Concerns about the ongoing trend towards longer and more complicated grid connection processes, especially for new-entrant VRE plant, given their asynchronous nature. This issue is not NEM-specific, but rather it is a global issue.

2. An insufficient amount of network capacity relative to the amount of generation capacity installed at various locations, an issue particularly acute for VRE plant given both the tendency for new-entrant VRE plant to colocate with incumbent VRE plant, and the correlated nature of VRE output (greatest for solar PV, but also for wind). Insufficient network capacity

Pace of energy sector reform too slow

Technology-induced stranding risk

Pace of energy sector reform too fast

Regulated retail prices (DMO, VDO)

Reliability price settings (e.g. MPC) too low

has resulted in higher congestion and higher electrical losses, the latter exacerbated for wind and solar PV generators: in Australia, the best wind and solar resources are typically where there are relatively low amounts of existing network capacity. Examples of these locations include solar PV in far north Queensland, and wind farms in north-west Victoria, with the latter area often referred to as the “rhombus of regret”.

3. A lack of a continued “green” price signal, either in the form of a carbon price or an extension of the large-scale renewable energy target (LRET). This is in light of the LRET’s existing target for the 2020-2030 period, projected to have been met in October 2019. These findings are consistent with those of the CEC, Infrastructure Partnerships Australia, and MinterEllison.

Finding #2: trends in the cost of equity and debt finance

The key findings can be summarised as follows:

1. Compared to the prior 12 months, the cost of raising debt and equity finance (i.e. the weighted average cost of capital, WACC) for generation had increased for three-fifths of investors (and unchanged for the remainder). Three-fifths of investors also observed an increase in their hurdle rates visà-vis the prior 12 months. The hurdle rate reflects the return required by the project developer, is often

Table 1. Barriers to entry into the generation sector.

set well above the corresponding WACC, and is more important than the WACC in terms of whether projects get approved for investment. More recently, costs of new-entrant generation have risen further due to COVID-19. Supply chain disruptions and a sharply depreciating Australian dollar have raised the cost of imported electrical equipment (such as solar PV panels and wind turbines), while highly dislocated funding markets, especially for bank loans and corporate debt, have raised funding costs.

2. An investment-grade off-taker was not essential to obtaining debt finance on reasonable terms. This finding is consistent with the growing trend towards merchant VRE. Between 2017 and 2019, 2.4GW of fully merchant VRE projects entered the NEM. Also during this period ten existing wind plants (with total 0.6GW capacity) ended up with merchant exposures following the expiry of their long-term power purchasing agreements.

3. What-if analysis of WACC impacts from: a. replacing the existing marginal loss factor regime with a compressed loss factor regime. Four-fifths of investors consider

this change would decrease their WACCs, by 100-150 basis points per annum (p.a.), or 10-15 per cent of initial WACCs.

b. replacing the existing regional pricing approach with nodal pricing and financial transmission rights. All investors consider this would increase their WACCs, in the order of 200 basis points p.a. (an increase of 20 per cent).

Implications for policy makers

These findings have the following policy implications:

» Policy design should prioritise removing the largest barriers to entry, such as increasing network capacity in ways that minimise the risk to consumers of overbuilding. In this regard, ongoing efforts by the ESB to streamline and quicken regulatory investment tests, as part of the broader “actioning the ISP” work program, are appropriate and necessary.

» There is a need to give market participants sufficient time before implementing fundamental reforms. This need is a pragmatic one, cognisant of the financing models

used for generation projects, namely the predominant use of both longterm contracts and relatively shortterm debt. Fundamental reforms implemented too quickly or without the requisite design details fleshed out can trigger force majeure clauses in long-term contracts, and create refinancing and re-contracting risks for existing projects, increasing the risk of asset stranding and debt default.

In summary, big-picture policy reforms need to pragmatically consider the interaction between:

» Real-world financing models, in particular the widespread use of hedging contracts and debt finance that are both shorter in duration than the useful lives of generation plant, which creates rollover and refinancing risks for generation projects, and

» Economic theory in relation to providing efficient price signals to incentivise the right types of resources to be built at the right times in the right locations, albeit at the ‘cost’ of increased complexity and in turn higher cost of capital and barriers to entry, and reduced competition

This article is based on a paper authored by Alan Rai and Tim Nelson, currently under peer review in an academic journal.

There has been virtually no entry of dispatchable plant, such as gas-fired or hydro generation, since 2017.

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NEGATIVE OIL PRICES = LOWER ELECTRICITY PRICES?

by Chris Gilbert, Senior Economic Advisor, Energy Networks Australia

Oil prices went negative for the first time in history during April, with May future contracts for US West Texas Intermediate crude oil falling to never-before seen lows, dragging down Brent crude futures with them. Here, we take a look at some of the wider energy implications of massively reduced oil prices.

Flatlining industrial demand, fuelled by the COVIDinduced US industry shut down, led to storage facilities reaching capacity and having nowhere to store oil. In great news for hip pockets, this could eventually have the flow-on effect of reducing energy bills.

Liquefied Natural Gas (LNG) prices tend to follow Brent crude oil prices but with a lag of about three months.1

If LNG exports from Australia fall in line with global LNG prices, use for domestic supply looks much more attractive. With more gas staying onshore; we might expect downward pressure on wholesale gas prices and a reduction in gas-powered electricity generation costs, that could lead to lower electricity generation costs.

The extent to which cheaper natural gas prices influence electricity wholesale prices largely depends on how often gas generators running on cheaper natural gas can displace other, now more expensive forms of generation in the wholesale electricity market.2

Lower wholesale gas and electricity prices will mean lower bills for customers as long as these savings are passed through to retail prices.

DER impacted

The rapid descent in oil prices serves as an interesting example of how interlinked the energy market can be.

Falling wholesale electricity prices, from any oil price effects or simply lower demand could, for example, even influence the path of investment in Distributed Energy Resources (DER).

If lower oil prices do lead to a fall in wholesale electricity costs and end-use electricity tariffs, the value of electricity produced and consumed by solar PV will fall, making it less likely that households and businesses will invest in DER.

Non-essential spending – particularly on large capital items – is likely to dry up and limit investment in DER.

DER investment is down, but the ability to produce and install DER technologies is also likely to have fallen as well.

DER equipment could become relatively more difficult to access, with some borders closed and supply chains disrupted. Additionally, qualified installation personnel may in some cases be unable to work due to COVID restrictions.

However, more households are working from home and are benefiting in the short term from selfconsuming a higher proportion of electricity from their DER. Despite the incentive of better

utilisation, working from home doesn’t seem to be a strong enough incentive to spur investments in DER, as new solar installations in March seem to have plummeted (though March installation data may still be trickling in).

DER take-up at risk?

While it’s clear DER uptake rates have fallen, the exact factors at play are opaque.

If the repercussions of COVID persist, it’s likely that the trajectory of DER uptake will be noticeably impacted.

The Australian Energy Market Operator (AEMO) produces a few different scenarios that attempt to model DER uptake in different economic, policy and technology conditions.

The ‘central’ scenario reflects current policy settings and technology trajectories, where the transition from fossil fuels to renewable generation is led mainly by market forces.

There are other upward and downward scenarios, for example the ‘step-change’ scenario, with aggressive decarbonisation targets and strong technology improvements, or the ‘slow change’ scenario, where economic conditions are challenging, investment is lower and living standards are protected over pursuing structural reform.

There’s no doubt that over the last couple of months there’s been a broad economic shift towards the ‘slow change’ scenario, but the scale and persistence of the shift remains to be seen.

We’ll have to wait until the dust settles before we have a better picture of how DER uptake is likely to track in the months and years ahead.

Figure 1. Monthly installations, installed solar PV capacity and average system size, January 2012 – March 2020 (Source: Clean Energy Regulator data, Australian Energy Council analysis).

SIGNS OF HOPE AS ARROW SANCTIONS SURAT GAS PROJECT

In a welcome boost for the industry, Arrow Energy has sanctioned commencement of the first phase of its Surat Gas Project (SGP) in southern Queensland, with construction set to begin this year.

Arrow’s sanction decision follows the final investment decision (FID) for phase one of the SGP from its shareholders, PetroChina and Shell.

Arrow CEO, Cecile Wake, said, “The decisions by PetroChina, Shell and Arrow demonstrate commitment to and confidence in Queensland and the Australian market at a time of global economic turmoil from COVID-19 and against the backdrop of sustained low oil prices.

“This significant investment comes at a critical time and will cement Arrow’s position as a major producer of natural gas on the east coast,” Ms Wake said.

“The Surat Gas Project is the first large-scale CSG project in Australia to be underpinned by a significant infrastructure collaboration and gas sales agreement, together with a suite of supporting

agreements, which have been put in place between Arrow and the Shell-operated QGC joint venture.

“This agreement enables the use of capacity in QGC’s existing gas and water processing, treatment and transportation infrastructure, reducing the impacts on landholders, communities and the environment and ensuring that more gas can be economically developed.”

Ms Wake said Arrow would this year commence construction of more than 600 phase one wells, and is on track to deliver first gas from the project in 2021. Over the full 27 year life of the Surat Gas Project, Arrow expects to develop around 5TCF of natural gas.

“An initial 200 construction jobs will be created during phase one, with an anticipated further 800 construction and operating roles over the life of the Surat Gas Project,” Ms Wake said.

“Arrow recognises the current uncertainty caused by COVID-19 and oil-price volatility, and will ensure that its development plans retain sufficient flexibility to manage these evolving challenges while bringing more gas to market.

“The decision to sanction phase one of the Surat Gas Project and commence construction this year is good for Queensland. It will mean more jobs, more opportunities for local companies and other economic benefits for regional Queensland, which has been home to Arrow for more than 20 years.”

Arrow currently operates five gas fields in the Surat and Bowen basins in southern and central Queensland, respectively, and produces the equivalent of more than 40 per cent of Queensland’s total domestic gas demand.

“This FID is the result of extensive collaboration between not just Arrow and the QGC joint venture, but also with landholders, communities and the State Government.

“In taking this investment decision, Arrow is enlivening those collaboration arrangements for the benefit of Arrow and its shareholders, the QGC joint venture and all Queenslanders,” Ms Wake said.

“Importantly there have been sustained efforts by Arrow, its landholders and local communities to jointly develop tailor-made ways of working on high-quality black soil with minimised impacts, which will be the foundation of positive co-existence into the future.

“We sincerely appreciate the efforts of all involved, including the State Government, to bring Arrow to this point, and we look forward to safely and successfully delivering the first phase of this exciting project.

“In these challenging COVID-19 times, Arrow remains committed to operating its

business and executing this project safely and responsibly to protect the health and well-being of its people and all of the regional communities where we operate,” she said.

“The utilisation of QGC’s existing upstream pipelines and treatment facilities enables Arrow to significantly reduce development costs, making Surat Gas Project competitive and economically attractive,” said Maarten Wetselaar, Integrated Gas and New Energies Director at Shell.

Shell Australia Chairman, Tony Nunan, said “The Arrow joint venture partners’ decision not to build another two trains on Curtis Island provided the opportunity to create this alternative pathway to market for the resource. The approach we have taken to this investment is aligned with Shell’s focus on actively managing all operational and financial levers to deliver sustainable cash flow generation. It reflects our disciplined approach to capital spend, which takes a long-term view of the

ARROW AT A GLANCE

fundamentals of supply and demand.

“QGC has reached strong and stable production since its start up in December 2015, and Arrow has the strong technical capability to develop the Surat Basin fields innovatively and efficiently.

“QGC supplied 16 per cent of the demand in the Australian east coast domestic gas market in 2019 and celebrated its 500th LNG cargo. Gas from Arrow will provide more supply to both Australian domestic customers and export markets.”

Arrow, as the developer and operator of the Surat Gas Project, is currently seeking Expressions of Interest (EOI) for services to support operations and project activities related to the Surat Gas Project, including specialist road construction services and off-plot construction services.

Construction of the project will commence later this year, with first gas sales expected in 2021.

Arrow Energy is an integrated coal seam gas (CSG) company that explores and develops gas fields, produces and sells CSG and generates electricity.

The company has been safely and sustainably developing CSG since 2000 and supplying it commercially since 2004, currently producing the equivalent of more than 40 per cent of Queensland’s domestic gas demand from its five CSG fields in the Surat and Bowen basins.

Arrow is working to meet the growing demand for cleaner burning fuels.

Arrow is owned 50/50 by Shell and PetroChina (a subsidiary of China National Petroleum Corporation).

GLOBAL OIL MARKET CRASH: THE IMPLICATIONS FOR ENERGY AROUND THE WORLD

There have been many economic victims to COVID-19 around the world, and arguably one of the biggest has been the global oil market, which has crashed into negative territory for the first time in history. We spoke to Peter Kiernan, Lead Analyst for Energy at The Economist Intelligence Unit, about the price crash, and about some of the longer term implications for energy markets around the world.

With the massive drop in global oil prices, what are some of the downstream impacts you expect to see in energy industries around the world?

The current oil price crash is a function of both collapsed demand and oversupply, which makes this latest scenario a little unusual. The price crash of 2014 was mainly a supply story, the one before that, in 2008-09, was about demand. But this time we have demand collapsing because of COVID-19, while key exporters decided in early March to fight a battle over market share. This was a recipe for disaster for oil prices. As a result, refineries will have to cut runs in the face of collapsed demand, upstream operators will have to make drastic cuts to capital expenditure, and proposals for key infrastructure projects, such as LNG projects, will be put on hold (if not yet with an FID). If producers do not cut supply quickly enough, stocks will build rapidly and global storage capacity will be reached, forcing them to cut back on output. This is because the demand is

not there to take barrels and no-one has anywhere to put them. However, this is quite disruptive to the industry, as shut-ins are costly for producers, while downstream players are affected as well, in refining, distribution, and storage.

What do you expect to happen with global LNG prices in response to COVID-19?

Natural gas prices have been falling, although they have already been weak, especially in the US, where natgas is trading at less than $2/MMBTU. Prices in Europe and Asia are under pressure as well. Oil-indexed LNG prices will fall, narrowing the difference with spot prices, thus there will be pressure on exporters, such as Australia. The impact of this is that proposed projects for liquefaction capacity expansion are likely to be delayed, especially where such projects are more expensive, such as Australia and Canada. Some mooted projects in the US will be taken off the board as well.

What do we need to see globally to see oil prices lifting again?

Because the contraction in demand is so severe, and could be as much as 20-25 million barrels per day, which is 20-25 per cent of total demand, it will take very severe supply cuts to lift prices sustainably above $40/bbl. For that to happen, demand will also have to recover, but this is unlikely until the second half of this year. Therefore OPEC exporters, Russia and others would need to collectively cut output, and this includes the US where doing so is difficult from a regulatory angle. Once storage capacity is reached, producers will have to shut-in production, which eventually will have a price impact. Even without a mandated cut, US output will contract this year as prices are too low for shale producers to continue growing output. Eventually the market will play its part if mandated cuts are not enough to restore balance between supply and demand, but there will be a lot of disruption along the way.

Will there be any winners in the energy industry as a result of COVID-19?

There are no winners, but some will lose more than others. In an environment of demand destruction, higher cost producers will suffer more, such as the US shale sector, Canada and Brazil, while lower cost producers, such as Saudi Arabia, can expect to weather the storm better. This is probably what the Saudis banked on in early March, but it is likely they did not appreciate the extent to which demand was going to collapse. Otherwise, oil producers that depend less on oil revenue for their economic health will not lose as much as those that are more dependent, although most in OPEC are in the latter category.

What changes to global energy demand do you expect to see as a result of COVID-19?

This is an unusual situation as the demand contraction has been caused by the necessary response to the devastating COVID-19 outbreak. Travel bans, stay at home orders, flight cancellations, lockdowns, shut downs of non-essential industries and disruption of supply chains have all been the norm. Oil prices have collapsed, and theoretically this is good for the consumer, but it matters little when

economies are in lockdown and people can’t drive or fly, shops are closed or factories closed. It remains to be seen whether this will have a long-term impact on consumer habits in terms of fuel consumption, but it is worth noting that air quality has improved during this crisis in many cities, and this may not be forgotten when the world emerges from this global health crisis.

Do you think the crisis will cause importing countries to start to look at the security of these arrangements, and potentially renewable alternatives that could make them less reliant on imports?

While low prices are good for huge oil-importing economies, such as China, Japan, and several in South East Asia, they are still subject to the volatility of oil and gas price swings, and those that have the resources to do so will continue to make efforts to limit oil consumption growth (China and Japan). Importing economies may also use this opportunity of low oil prices to cut back on fuel subsidies, which many did last time. I think that exporters face a dilemma, in that the oil market seems to be in short-term turmoil while it faces a longer term existential crisis, and that is of peak demand. They will therefore need to inoculate their economies from

over-dependence on fossil fuel exports, and diversify, which will make their economies more resilient in the long term.

What impact will the pandemic have on exploration and development in the energy industry around the world?

Upstream players will cut back on their capital expenditure budgets, and this means less spent on exploration and production for the foreseeable future. It will take some years before we see the effect of this, but clearly the majors, such as ExxonMobil, and others, such as the smaller shale players, have already made big cutback announcements for 2020, as you would expect given the sharp crash in oil prices. Eventually as oil prices recover this will change, but we must remember that this is the second price crash in five years, and the last price crash resulted in expenditure cutbacks as well. The US shale sector, for example, will find that the willingness of the financial sector to fund its activities will ease off, which has implications for shale’s future growth potential. Oil and gas majors may find that investments in other sectors, such as clean energy technologies, which offer lower but more stable returns, might be worth a bigger think.

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