a more connected energy transition written by Christopher Malins

Australian Energy Week 2019

io oil & gas consulting (io) attended this year’s Australian Energy Week in Melbourne and found a clear example of the importance of needing an integrated commerical, technical and strategic approach to projects. While the latest technical wares are brightly displayed amongst the exhibits, it was the risks and problems associated with market inefficiency and political inaction which dominated discussions on and off stage. This was good to hear and substantiates io’s integrated approach as fundamental to ensuring a balanced approach between competing priorities backed by practices founded on Decision Quality principles.

Commercial and strategic risks come in the form of missing long term emissions reduction targets, and a lack of market reforms to adapt to a low cost renewables’ reality. While technical challenges are also present in the form of a lack of transmission infrastructure for renewables, the Energy Transition in the Australian Power market is taking place – fast. The Clean Energy Council highlighted the Australian National University’s [1] finding that last year Australia installed far more renewables per capita than any other country (over 200W per capita). From a very low base, the country’s electricity generation is forecast to reach 30% by 2020, and 50% by 2030. Rooftop photovoltaic (PV) alone is set to surpass the combined output of baseload and gas peaking power early next decade. As Brett Redman, AGL Energy’s CEO stated, “the debate around cheap versus clean electricity is over: it is now about balancing cheap versus reliable.”

With renewable electricity now lower cost than gas and coal in Australia, everyone, including governments, consumers, funding organisations and utilities are turning their attention to energy storage. Market structures to value storage adequately are absent, making the economics of many projects with today’s energy mix tenuous and efficient outcomes unlikely. A combination of government funding and recognition that the energy mix is changing, is giving some impetus to pumped hydro and utility scale batteries. Frustrated by high power prices, consumers are investing in PV and batteries. Indeed, utilities are now competing with each other to offer better deals to consumers to add home owners’ batteries to the utilities’ virtual power plants. With the rise of renewables, it is storage that is set to grow to take advantage of the increased volatility and prospects for energy arbitrage, and in doing so enable yet more renewables.

Hydrogen was a frequent topic for the first time this year, particularly in the “NextGen Generation” stream on day three: as a storage medium, a means of monetising curtailed renewables, a domestic gas replacement, and as a potential new export. The Energy Transition has been led to date by the power sector and the rise of electrification, however there was broad recognition of the need for other “harder to reach” sectors, including heavy industry and transportation. With the potential synergies of hydrogen production by a variable power sector, it was no surprise to find enthusiasm for hydrogen as “almost a silver bullet” for decarbonisation. While the growth in demand for hydrogen in Japan, Korea and China was frequently discussed, it was far from clear when or how Australia would supply these markets with “green” hydrogen.

Gas will have a key role to play in energy supplies in Australia for years to come, but even here the focus is changing. Baseload gas is in relative decline, while gas peaking plants are rolled out to provide grid firming. This also sees an increasing role for reciprocating gas engines, and with both turbines and engines being discussed as potentially running with varying hydrogen blends in the near term.

Interesting times lay ahead for the energy sector as the Energy Transition gathers pace. We are quickly heading towards a world where different energy networks such as natural gas, hydrogen and electricity are even more interconnected, where the relationship between consumers and utilities is radically changed, and where companies have more energy options available to them than ever before. It is up to energy producers and large consumers alike to ensure they seize the new opportunities that the Energy Transition presents.

[1] http://re100.eng.anu.edu.au/publications/assets/100renewables.pdf