Designing a National Clean Energy Master Plan

Every development professional knows the ‘Universal Development Matrix’. This is true whether you are working in the field of integrated ‘E-WASH-E P’ (Energy, Water, Sanitation, Health, Education & Poverty reduction) or advising governments on ‘FAC & LGD’ (Forestry, Agri-business, Aquaculture, Coastal & Land remediation and Demographic sustainability solutions). The application of the ‘Universal Development Matrix’ always conforms to the desired government, community and business project outcomes relevant to the socio-cultural, ethnic and economic context of the project analysis. As a methodological framework this is true, irrespective of whether you are empowering women, addressing child trafficking, designing green liveable cities or fighting corruption. I am certain that the world would be a better place if the ‘Universal Development Matrix’ became a pre-requisite knowledge tool for politicians, bureaucrats and business leaders. ( See Figure 1)

Development-Map

The ‘Universal Development Matrix is relevant to developing and developed nation. It can be readily deployed to address a range of local community, national and business project development targets and issues. It is highly relevant in the design, development and deployment of Australia’s National Clean Energy Master Plan.

 

Finkel’s Time of Future Past

The ‘Finkel Review’ published in 2017 advocated a technology neutral CET (Clean Energy Target) mechanism. On balance, this statement is nonsense! It is nonsense because any renewable energy target requires the setting of basic industry and market rules. These rules must describe the following in some detail:

  • The CET must be cheaper than any none renewable generation option.
  • The CET generation option mix must be acceptable to the electorate, e.g. not nuclear if the electorate does not agree to a nuclear option.
  • The CET is always a 100% renewable energy target achievable in a defined and agreed time frame.
  • The CET is always a 100% renewable energy generation protocol under an agreed fixed price energy transmission and distribution capacity supply reliability guarantee.
  • The CET is always a 100% renewable energy generation protocol that will not increase a nation’s international emission obligations during the transition phase.
  • The CET is always a 100% renewable energy generation protocol that will not cause hardship to any citizen irrespective of the mix of energy generation chosen.
  • The CET does not favour any stakeholder or allow the manipulation of energy market mechanisms to promote anti-competitive behaviour and entrench cartel control of the market in part or its entirety.
  • The CET has a strong and independent regulatory framework that includes an Electricity Pricing Commission that save guards the market from arbitrary price increase, ambit claims, hidden fees and pass through charges.

The responsible design of any CEC (Clean Energy Credit) mechanism within a time specific CET ( Clean Energy Target) framework requires the articulation of a defined set of policy priorities. These policy priorities are defined in a ‘National Energy Master Plan Development Framework’. The ‘National Energy Master Plan’ clearly describes energy supply and demand constraints. The inclusion of governance matters relevant to market regulatory, compliance, standards and enforcement are always a necessary precursor to the development of a workable ‘National Energy Master Plan’. The job of the ‘Finkel Review’ was always to educate Australia’s politicians, its public servants and the media. It was in political terms, an attempt to reset a hysterical national political debate going nowhere and running out of time and options. Avoiding the prospect of political irrelevance is no longer an option for a federal government afraid of demonstrating its commitment to political leadership. This boat left the harbour a long time ago! With 49 out of 50 ‘Finkel Review’ recommendations adopted, pushing the CET and CEC $ value debate to the year 2020 is not doing Australia’s international climate credentials any favours.

What the ‘Finkel Review’ neglected to tell us is that the current wholesale energy price including the fossil fuel subsidy program puts an effective price on carbon above $55 per ton. The Chief Scientist failed to point out that Australia is paying a very high price for allowing the gas market to set the electricity spot price. The emergency use of gas fired power stations in the NEM (National Electricity Market) is less than 30 days per year. So the claim that Australia needs to drill new wells for conventional and unconventional gas is at best misleading. A survey of national gas reserves earmarked for energy generation predict an average shortage of 1 day per year. This is significantly less than the crisis scenario presented by the industry to hysterical politicians and paranoid punters. In terms of the national clean energy roadmap 2050, the consensus is that the domestic gas sector has effectively priced itself out of the market. The industry should really focus on consolidating its export markets. North African competition and the emergence of the Indian gas market by 2030 will put significant pressure on international gas prices and Australian market influence.

The argument that the CET must be technology neutral is one of those dumb political statements that really should be shoved where it belongs. At best we could justify the political dumbness as an olive branch to the LNP right wing extremists. At worst it is a confused utterance that ignores price realities with a warped idea of risk management and the dreams of another time and place. A good design uses the most price competitive and best technology of the time. A great design adjusts to future technologies without any changes to the original design. All Australians are well aware of the NBN farce. It is not what I call a great design or indeed a rational project management outcome. Knowing how incompetent government is in the area of managing large scale complex technology based projects we have to ask ourselves a simple question. Should anyone trust our politicians to design, manage and build a ’21st Century Clean Energy System’ without reference to the best practice universal development methodology, engineering and governance standards? In my opinion, no!

Filling the Leadership Vacuum

If you run the numbers on the CET the LNP is prepared to accept under the Paris accord and the target the state and federal labour party are promising there is very little difference. Whether we are talking about a RET or a CET makes no difference. In both cases the target is 100%. There has always been only one 100% target. The difference is whether we get there by 2050, 2065 or 2070. Assuming we start in 2020 the effective target is 20% every five to seven years. This is irrespective of whether you believe the LNP, Labour or the Greens . Australia has to reduce its emissions by 20% every five to seven years from 2020 to meet its international obligations and raise its national productivity. Doing both of these things at the same time is clearly not in the political innovation vocabulary of the Turnbull government. Reducing emissions by 20% every five to seven years was clearly beyond the ‘Finkel Review’. It doesn’t seem to fit into the jobs and growth agenda because in order to achieve both, the government has to involve itself in a very messy wealth distribution and wide ranging inequality debate. Detailed forensics and inclusive public debate are definitely not something a modern politician wants to engage the electorate in. Mimicry, party tricks and cheap one liners are all the go these days! Someone told me that politicians don’t want us to panic. Oh yeah! Is that why the Turnbull government places no necessary urgency on defining a credible CET and CEC mechanism? After all, the mad monk and his jack boot extremists would have us believe that this is a socialist conspiracy hatched by crazy heathens and homeless LGBTI nut bags intent on bringing back the carbon tax. Since our current energy policy has created an effective carbon price above $55 per ton, any return to a fixed price carbon mechanism will only be as a compliance and enforcement tool. Do we need to worry about any of the old school right wing political hacks testing our patience with their drivel? In a future NZE energy market operating in a NZB consumer driven environment the actual question is, how do we transitioning the Utilities?

NZE-Model-Fig2

Australia is an island of dispersed demographic centres. The majority of us live on or near the coast. The location and distribution of our regional towns and major cities make the entire country absolutely perfect for the implementation of a ‘Just in Time’ DER ( Distributed Energy Resource ) management model. As the energy market moves beyond the dumb shunting of electrons from A to B we are appreciating the integration of a ‘Just in Time’ demand management model within a delayed capacity supply market. This allows us to consider an entirely new energy market that will force existing stakeholders to adapt to new competition conditions. The CET and CEC $ value model suited to Australian conditions incorporates both a NZE (Net Zero Emission) design and a NZB (Net Zero Billing) consumer outcome. This is demonstrated in figure 2. A critical design element is the decision for a CET or similar clean energy transition mechanism. I have already said that irrespective of which party is in government at either state or federal level, the interim target is a combined 20% clean energy generation, energy efficiency and energy storage gain every five to seven years from 2017 – 2020 onwards. This CET is set by Australia’s international obligations and by the commitments both major parties have expressed. These commitments leave very little time for sorting out the design and project management details of ‘How’ this is to be achieved.

As you can see in the NZE model (figure 2), the most effective manner of achieving this mandatory 20% target every five to seven years is the deployment of a closed loop energy management platform. Each urban and rural clean energy development zone is both a net zero emissions zone as well as a net zero billing precinct. Grid embedded energy storage is supplemented by additional storage options for each renewable energy generation zone with localized storage in the closed urban and rural renewable precinct. This maximizes the grid management impact of the FCM (Frequency Control Market) and VCM (Voltage Control Market) in a net zero consumer billing environment, whilst distributing CEC’s throughout the model at the lowest cost. If we add additional storage and localized self-generation into the industry segment identified as the Clean Energy Credit Zone at a 20% level every five to seven years, the entire model would require minimum reliance on gas or coal generation over the projected CET time frame. Thus, allowing the orderly retirement of aging coal plants without the construction of new gas power stations during the transition phase. The progressive quarantining of gas fired power stations in this model will put further downward pressure on the wholesale spot market with no impact on grid stability and energy supply reliability. A key risk management function of the model is the achievement of critical self-generation and storage reliability and the progressive phase out of all fossil fuel subsidies.

A comprehensive national building efficiency, self-generation and storage requirement in addition to the model will impact positively on the capacity demand side of the energy market. Incremental efficiency targets for new and existing buildings of 20% every five to seven years can easily be legislated for all government, commercial and domestic buildings. A similar regime for public transport and all commercial and government fleet vehicles can merry with the plans of car manufacturers to progressively switch to the manufacture of clean emission vehicles. A simple 240 volt white goods and appliances phase out by 2030 and a switch to high efficiency 12 volt devices would side step the current aggregate demand management debate. The impact of behind the meter technology has the Utilities petrified. The only reason Utilities are pushing their right to access behind the meter peer to peer data management technology is because their entire business model is predicated on the privilege of owning consumer energy data. It is this same privilege that underpins the Utility right of charging consumers hidden fees and passing on unspecified charges without having to justify price gauging to a strong and independent Energy Pricing Commission. All these privileges are eliminated as peer to peer data management, customer self-generation, storage and consumer data ownership provide greater competition and market transparency.

NZB

Figure 3 clearly show the inequality in the current energy market. Rooftop solar customers in Australia must generate an additional four daily units ( 4 UFC) of energy to achieve a net zero energy bill without storage.

The Utility proposed aggregated demand management model would provide the Utility with unprecedented access to any smart appliance, including any home automation and energy storage devices. It would also allow the Utility to profit from this activity without any guarantee of a fair return to the consumer. Utility ownership of consumer energy consumption data as well as all self-generation and stored energy data and any functions associated with this data belong to the consumer / prosumer. Without legislation that provides binding protection to consumer/ prosumer energy data from Utilities any CET design will fail. Without national consumer energy data validation and verification requirements that are binding and enforceable on Utilities any CET will fail. Figure 3 shows that consumers are already struggling to gain transparency of existing Utility fees and charges because of Australia’s weak regulatory, consumer protection and privacy laws. There is simply no guarantee that this will change under the Turnbull government. The resolution of this matter is essential before Australia implements a national CET and CEC mechanism.

Whether consumers / prosumers agree to a NET Zero Energy Billing contract in return for 3rd party access to their rooftop solar and battery is an entirely different matter. Most Australians would see little fault with an agreed trade off under a zero privacy intrusion provision with a 100% behind the meter energy data transparency and data ownership guarantee. This is however not the Utility aggregate demand management model recently tabled in Brisbane. A simple piece of legislation that phases out all 240 white goods and appliances and mandates high efficiency 12 volt devices would eliminate the Utilities demand for behind the meter access. It would also sharpen the focus of discussion on consumer rights and privacy. This is the legitimate debate we must have. No one is interested in wasting time on closed door lobbying and dodgy car park dealings designed to hobble outcomes in favour of existing market participants. It is time Minister Frydenberg rolls up his sleeves and draws a line in the sand.  No more claim fencing and pissing on consumer rights. We all want an affordable, reliable and clean 21st century energy system. Here is your model, drawn and illustrated in plain text Mr. Turnbull. There are no more excuses.

How do we transition Australia’s Energy Utilities?

For many years a quiet revolution has been sweeping across the globe. Individualized and personalized participatory democracy is a powerful driver of institutional and market change. Adding principles of personal motivation and inclusion makes this driver of social and economic change even more potent. With many people affiliating themselves to broad cause and effect issues the voices calling for reform are quietly seeking alternatives. Climate Change solutions that do not include appropriate risk assessment of ‘NATURAL’ and ‘SOCIAL’ capital are increasingly viewed as pandering to entrenched interest groups. This trend is the primary cause of the political, institutional and industrial crisis sweeping entrenched liberalism. Some have attempted to quantify and qualify this trend as a disruption to the business as usual model. Others have used this trend as a rallying cry for reform. In both cases the rhetoric stalls at the questions that ask simply. Where do we begin? How do we proceed and for whom? In all cases this is precisely where these simplistic debates cease to be of relevance. The real question is how do we change our institutions and our global market structures to include demands for individualized goods and services in a world where everyone wants personalized services and participation in decision making processes? These underlying motivations are visible at all levels of contemporary society regardless of race, ethnicity, sex, religion, sect, caste, class, as well as social and economic status. It is also a trend that identifies the basic contradiction in the social contract. How do we value and respect the wishes of the individual in a society organized on ‘Weberian’ principles supporting centralized monopolistic market behavior and principles of governance as the most rational and cost effective way of managing essential services. The issues of wealth distribution and market inclusiveness make the principles of liberalism a questionable precondition for the ethical values that underpin the notion of governance for the ‘Common Good’. The contradictions that all liberals and conservatives of any persuasion have to content with are the principles of fairness that underpin the modern ideals of participatory democracy and inclusive market participation for the benefit of all. There appears to be no obvious contradiction within the ideology of liberalism that some are more equal than others. Just as much as it is acceptable to pontificate the virtues of superior moral and ethical values in the name of and for the exclusive benefit of the good burgher.

The pathetic notions of team contributory ‘value add’ are simply stupid when individuals ask themselves, ‘for the benefit of whom’? Does the value I contribute to society and the   workplace align with my own understanding of the common good and the personal         expectations that reflect my estimation of my own individual worth? Is the economic return for my contribution enough to satisfy my wants, desires and needs, or do I feel alienated from the feast of benefits that are available for the few? These questions may be dismissed as the sociological pessimism of the time. A leftover aberration of the 60’s and 70’s that has come to haunt us in the form of a twisted world view serving the confused. These sad individuals may also be viewed as the new wave of mass psychosis sweeping the globe in ever growing spirals of radical political and social movements articulating extremist intolerance. However these conflicts are represented by established interest groups is beyond the question of mere tolerance of difference and exclusion. They strike at the heart of legitimacy by questioning the ethical and moral obligations of the ruling elite to the people they claim to represent and serve. In Australia this crisis of legitimacy is nowhere better represented then the hiatus that remains over the country’s national energy plan. Crowing about achieving a COAG consensus for the 49 of the 50 ‘Finkel Review’ recommendations can hardly be seen as a moral and political victory by the Turnbull government. Far from it! At best the ‘Finkel Review’ stated in simplistic terms the status quo that has existed for more than two decades as the consequence of a failure in governance. This failure to engage with the core issues has plagued the national energy sector. The subsequent flow on effects throughout the Australian economy continues to stifle national growth and remains a significant drag on national productivity. The responsibility for this national disgrace has to be laid squarely at the feet of all state and federal politicians and political parties both past and present.

The failure by our politicians to accept collective responsibility is perhaps best articulated in the Turnbull government view, that the adoption of the 50th recommendation is best achieved with due consideration for proper planning, mathematics, engineering and economics by 2020. No Mr. Turnbull! The adoption of the 50th recommendation is best achieved by the implementation of governance, planning, and engineering standards in conjunction with market regulatory, compliance and enforcement standards that meet community and industry expectations now. If it is the intention of the Turnbull government to drag out the core design requirements of the CET (Clean Energy Target) and the definition of a CEC (Clean Energy Credit) dollar value, the Turnbull government will stare into the abyss of its own relevance. Some of us would probably welcome this prospect. Others would argue that the nation can ill afford another stalling tactic by a federal government suffering from indecision and internal division.

Since the ‘Finkel Review’ has for now achieved some sense of broad census and perhaps, a limited spirit of collaboration among political parties, we should assume that the proper design of a CET mechanism is within reach sooner rather than later. The Chief Scientist made the point that the design of a CET should not be difficult since it can easily be modelled on the existing RET scheme. This simplistic analogy may be convenient for the consumption of the ignorant masses. It hardly satisfies the savvy Australian punter who has long regarded the RET as a means to preserve and service the bottom line of Energy and Utility cartels. Constructing a CET subsidy scheme along similar lines to the existing RET is clearly not an option for a responsible 21st century energy market system designed to underpin the future growth and productivity objectives of the Australian economy. What is at issue is whether the existing energy market bodies are able to serve the needs of Australia’s 21st century energy market. Since COAG has accepted that Australia’s energy market bodies must be reformed in order to be more responsive to Australia’s future energy market needs, we have to ask ourselves what is the nature of this reform in detail? Is it acceptable that Australia’s future prosperity is held to ransom by the gas cartels? Is it the view of the Turnbull government that gas is no longer a viable transition fuel? What is the future of Australia’s Energy Utility companies and will they continue to exist in their present form? To what extend will the design of the CET incorporate fundamental reforms to the Energy Utility market by encouraging the transition of Energy Utility companies to become responsible service corporations that place the consumer at the heart of the energy equation? Already we are witnessing dramatic changes in the European and US markets. New entrants to the Australian market are offering rooftop solar plus storage installation deals in return for a zero energy bill to consumers under specific usage guidelines calculated over a 10 to 15 period. At least one of the Utility companies is experimenting with a ‘SolarCoin’ crypto currency model. The growing acceptance of both financial models in the domestic and commercial energy space is likely to fundamentally change both the relevance of the existing energy market institutions and the manner in which Utilities relate to their customers.

 What is abundantly clear to anyone familiar with the energy market in Australia and around the world is that renewable energy technologies as well as the financial models that drive the industry are increasingly focused on servicing the customized energy needs of individual consumers. Smart grid / micro-grid equations that used to read rooftop solar plus storage connected block chains managed by Tag-e (Transactional grid elements) between ‘Prosumer’ groups now include ‘SolarCoin’ crypto currency payment systems. Do we need Utilities to manage our energy bills if community groups organized in local renewable energy zones can manage their own billing whilst owning their own billing data? If we add to this equation the desire by individual renewable energy clusters to achieve a closed renewable supply loop ( Net Zero Emissions ) by supplementing their own supply capacity with a direct power purchase agreement from large scale wind/ solar, hydro, wave, geothermal and tidal facilities via grid integrated battery or thermal storage or waste to energy conversion facilities we have to ask:

  • What is the role of gas as a transition fuel in the economy?
  • Has gas already priced itself out of the equation?
  • What is the role of the Energy Utility in this equation?
  • What is the relevance of the existing market institutions (AEMO, AEMC, AER, NEMO, etc) in this DER 21st century national energy market model?
  • How do we facilitate unrestricted market and grid access for 3rd parties to sharpen competition and provide real consumer value?
  • What is the role of state and local government?
  • How do we effectively manage and reform our institutions to facilitate a positive transition of our energy market to reflect the desire of the individual consumer to be the beneficiary of this new reality?
  • How will Australia’s federal and state governments address the need to transition our Energy and Utility cartels so that they act in the service of the national interest, whilst delivering real value to individual consumer?
  • How hard is it to calculate a Clean Energy Credit dollar value when the effective cost of doing nothing for the next two years is the equivalent of a carbon price above $55 per ton?

 These are the core questions at the heart of the CET design. These are the core questions the Turnbull government and all state and federal politicians have to address in a comprehensive and inclusive national debate if Australia wishes to have an affordable and reliable 21st century national energy system. It is a debate that goes to the very heart of liberal values that Mr. Turnbull’s pragmatic centrist vision of liberalism wishes us to believe in. Yet we see no evidence of his commitment to address the values that underpin our earnest desire for the respect we deserve. What we see is the Energy and Utility cartels ring fencing their existing market shares and manipulating market access in collusion with state governments and existing stakeholders. We see no evidence any comprehensive reform agenda because it would require a fundamental intervention in the market. The level and type of market intervention required is contrary to liberal economic dogma. This is the contradiction in Mr. Turnbull’s liberal party that will play out for the remainder of his tenancy. It is also the real reason why there is no urgency for the design of the CET or setting a realistic CEC dollar value. Planning to release the CET as an election manifesto is not proactive politics that places the issues of electricity price affordability, consumer hardship and the state of the national economy front and center. It is a political game to stall for time and perhaps fool the Australian voter into believing that Mr. Turnbull is not quite the ‘Tin Man’ but instead, a gambler playing the Australian people for mugs.

Decoding the Finkel Review for the ‘Common Man’

Following the ‘Finkel Review’ into Australia’s electricity market we are witnessing reviews of a ‘Review’, unsolicited and uninformed opinions, as well as party political and industry motivated brain farts. Let us debunk these first. The ‘Finkel Review’ of the Australian electricity market is a ‘Review’. It was not an Inquiry. The ‘Finkel Review’ is essentially a report card on the current state of the electricity sector. The ‘Finkel Review’ ‘Recommendations’ are a list of market failures that Alan Finkel advises should be addressed if Australia wishes to have:

  • A secure, reliable and affordable energy system for the 21st century
  • A properly functioning and responsive ‘Energy only Market’

The Finkel ‘Review’ documented a variety of governance, regulatory and market mechanism failures. These issues have been long standing; are a function of both state and federal government failures, market body infighting, overlapping responsibilities, incompetence, poor planning and the lack of a national strategic vision. There is simply nothing new about this. For most of us who are even vaguely familiar with the issues, the call for a ‘National Strategic Policy Vision’ followed by a ‘National Energy Framework’ that clearly articulates energy supply priorities for a ‘National Energy Policy’ has been a long standing battle. Despite stating that a ‘Business as usual approach’ is no longer acceptable, the Finkel Review contains several contradictions without offering any real solutions. To be fair, the purpose of a ‘Review’ is to review the current state of play. By definition a review is not a document aimed at delivering solutions beyond the provision of a list of recommendations under the defined terms of reference.

This is precisely what the ‘Finkel Review’ is. The shortcomings of the ‘Finkel Review’ are the assumptions that underpin it and a failure to detail the CET / EIS modelling methodology used. Let’s consider the first of these failures. Finkel clearly worked under very specific political constraints. Even though I consider the notification of a generator closure period to be a reasonable recommendation under a German targeted capacity market model, Finkel rejects the German model in favour of the current ‘Energy only Market’ model operating in Australia. In the same vain the chapter on Australia’s gas market recommends a limited regulatory intervention response with a preferred option of securing new conventional and unconventional gas supplies as critical. With the Howard government ignoring the need for regulating a domestic gas supply, despite Labour calling for it at the time, the subsequent neglect by the Rudd / Gillard years to secure a national gas reserve remains a missed opportunity.

This policy vacuum was identified by overseas and domestic bankers as a risk management strategy against the closure of existing coal fired power stations. As far back as 2012 I discussed this issue with two Bankers who attended one of the conferences I was hosting. Both maintained that their current risk exposure into coal is best served by a transition into gas fired power stations. ( Either new or as a coal to gas conversion) The reasoning was surprisingly simple. The projected domestic gas price increase can be leveraged against international forward contract risk under current state and federal regulatory arrangements. For this reason I must question the Chief Scientist’s reasoning that any future expansion of gas generation in order to meet supply shortages, black start, frequency and voltage system stability with some type of ‘Target Capacity’ supply reserve under an ‘Energy only Market’ model is actually possible? You just can’t have it both ways. You cannot categorically rule out the need for an energy reserve to meet supply shortages, black start, frequency and voltage system stability needs under an ‘Energy only Market’ system whilst advocating it as an urgent recommendation for consideration. This fundamental confusion in the ‘Finkel Review’ may have a lot to do with the terms of reference, the political imperatives and the position the Chief Scientist took on reforming the energy market bodies controlling the NEM. Others factors that might have contributed to the Chief Scientist’s thinking on this matter might have been the Western Australian Review into its capacity market model as well as the ‘Vertigan and Harper Reviews’. Alan Finkel does acknowledge that both the ‘Vertigan and Harper Reviews’ are gathering dust in Canberra. Pretty much like my own ‘Energy Efficiency’ recommendations to the Rudd government that eventually and perhaps bizarrely informed India’s ‘Renewable Energy Policy’ (MNRE). On the flip side, the Western Australian capacity market model has been roundly criticized as the most shambolic and incompetent energy market model anywhere in the world.

Perhaps the other key consideration was the need to balance ‘Transmission and Distribution Network’ costs with the need for an affordable energy price going forward. Even though the Chief Scientist makes some very good points here, the fundamental contradictions remain. If Australia’s future energy system will contain substantial gas fired power stations in order to meet energy demand, supply security, network stability standards and emissions reductions targets, then pegging the future on gas will not reduce the consumer energy price. Alan Finkel acknowledges that current market spot prices as well as future prices in the FCM and VCM markets going forward; are determined by the gas generators. This simply makes a mockery of the idea that we can contain electricity price increases within a reasonable margin when only days after the release of the ‘Finkel Review’ various Utilities in three state jurisdictions announced price increases in multiples higher than the Chief Scientists CET model projects by 2030. The key failure of the ‘Finkel Review’ in this respect is that he did not recommend an Electricity Pricing Commission with the authority to restrain price increases to the CPI and the means to hold proper evidence based market inquires. Australia has a Wage Commission system. Why not an Electricity Price Commission? Is this a function of the AEMC, AEMO, AEMR, or who? Perhaps neglecting the very concept of an Energy Price Commission is partly due to a reluctance to tinker with a failed market model and an ideologically abhorrence to acknowledge government responsibility for this failure. No doubt the omission of such a key recommendation was calculated not to offend the far right of the LNP. It didn’t really make any difference because we were still bombarded by the ‘No Energy Future without Coal’ and the ‘Over my Dead Body’ simpleton positions splashed across the media.

To Alan Finkel’s cedit, he did at least imply in his report that Australia’s energy future could be achieved without excessive reliance on gas and coal. He discussed storage at some length but without any real rigor. We all agree that hydro storage is a good long term opportunity after 2025 when the various options proposed by the Turnbull government are likely to be commissioned. Hydro doesn’t solve the issues facing various state jurisdictions in 2018. Very few options will! Biogas generated from sewage sludge could be implemented relatively quickly and at a relatively low cost. This generation option is not enough to replace a coal fired power station. The best solutions mentioned in passing by the Finkel Review are ‘Renewable Energy Zones’, embedded Mini/Micro/ Smart-grids, Grid embedded storage ( other than hydro) and adding storage to new and existing wind and solar farms. By now you are wondering why you need to read the Finkel Review because it is beginning to sound like my Blog without the acid lampooning of our political elite. Well! Alan Finkel did not go into any details about what he meant by a ‘Renewable Energy Zone’ so let me assume this privilege.

Let’s assume that Victoria’s Regional Towns along the NSW boarder all agree that they wish to become independent grid connected renewable energy zones. In accordance with the local council objective to reach a zero carbon target by 2050, each will implement a strategy of rooftop solar with either an on-premises installed or a zone collective storage hub. These regional renewable zones will be an autonomous DER using TAG-e technology in a block chain connecting each household and small industry customer into the embedded mini/micro/ smart-grid zone. The management authority of each mini/micro/smart-grid will in turn enter a clean energy supply agreement with any of the wind and solar farm operators in the region. There are a few of them. Since all energy markets are ‘Capacity Markets’ this localized supply agreement would form a target capacity market system under the existing ‘Energy only Market’. In essence, a decentralized time base energy dispatch model, to be more accurate. If the wind/solar farm operators agree to install their own storage and the Victorian government approves a third party grid embedded storage solution between the wind/ solar farms and the regional smart-grid ( renewable zones ) we solve:

  • energy supply security,
  • price affordability,
  • black start,
  • FFR under an internationally compliant FCM, VC stability standards model,
  • spot market volatility and market gaming,
  • transmission and distribution grid investment,
  • bushfire and storm risk
  • Future investment in renewable energy capacity as the localized clean energy supply guarantee acts as a default PPA with a known capacity

We can solve all issues identified by the ‘Finkel Review’ and acknowledged as the lowest long term cost solution in the review without bothering to invest excessively in new gas or CCS compliant coal technology. This would solve the problem of over investment and misdirected investment in transmission and distribution lines. It would solve all data collection and forecasting issues. It would even create NZE ( NET Zero Emission ) zones that can earn multiple credits under the ‘Finkel Review’ CET system. It would do all that at the lowest cost to the government and prosumers long term whilst it would send a serious spot price and FCM signal to the Utilities. Unfortunately Alan Finkel did not even bother to model this solution. Offering a sensible solution was clearly outside the terms of reference of a review.

In Conclusion

What new information or great insight did the Finkel Review deliver to the ‘Common Man’s’ understanding of the Australian Energy Market? Not much, really! None of the recommendations can be described as visionary, radical, exceptional or outstanding. On hind sight though! I will reconsider my call to get rid of the Energy Market Quangos and start from scratch. I agree with the Chief Scientist’s view that it would be too expensive and at the cost of lost institutional knowledge would be too great. To be honest! My gut tells me different. Let’s see if the politicians in Canberra actually read the ‘Finkel, Vertigan and Harper Review’ and stop talking nonsense.

Contemplating the role of the Australian Wind Industry in a 21st century energy system

As the sun sets on the Pacific Education and Development Forum at Hawaii’s Pacific University I am heartened by the stoic determination of my peers from America’s leading Universities. I suppose it is always the same. When leadership fails the rest step up to fill the void! It was not surprising to hear the measured criticism of the Trump decision to step away from the Paris accord. More interesting was the determination by America’s leading institutions to invest into Asia Pacific development programs. Specific targeted programs aimed at expanding Climate solutions with identified research, student and teacher exchange projects linked directly to industry investment opportunities where high on the agenda. This positive agenda was marred by the now ubiquitous reports of marginal projects that failed to integrate with individual country visions, or lacked integration and compliance with overall development goals. Once again the role of Australian DFAT associated NGO’s and agencies warranted mention. None compliant TAFE programs, substandard education programs and research support services mixed with reports of wasting up to 38% of funds on internal administration. The prevalence of employing local education / ex-pat staff who did not have the necessary qualifications to undertake duties described in the original funding brief was noted in a raft of related practices by several organizations. This included:

  • Poorly drafted briefing notes designed to employ specific individuals
  • Employing locals to do the task of specialist advisers at lower pay rates then specified by funding proposals approved by the ADB and related funding bodies
  • Using funds for entirely unrelated activities
  • Supplementing the income of influential locals for the purpose of retaining exclusive contracts

These ongoing issues where frequently mentioned as part of a wider discussion on how to improve the effectiveness of the money spent in remote island communities.

It was not long before the conversation moved to the regional influence of China. As we discussed how best to engage China, news of Australia’s first offshore wind farm proposal filtered through the meeting. Many of my peers from CalTec, Harvard, Berkley, MIT and others asked whether I would once again waste four years of my life on lobbying Australian governments and Universities to support a $300 million Asia Pacific certified wind training and research industry. My response to this question was guarded. After wasting four years from 2008–2012, I am reluctant to spend another quarter of a million dollars without a glimmer of hope. I don’t relish the thought of wearing out another set of shoes travelling the government corridors of South Australia, Victoria, New South Wales and Canberra in an attempt to convince the various department heads that Australia needs an internationally compliant wind industry training program because there are 15000 islands stretching from Papua New Guinea through Indonesia and across the Pacific to Manila that could benefit from it. There is little point when the Australian Skills Councils specifically undermined negotiations with UK City& Guilds in 2012. It is one of the reasons Australia still does not have a internationally compliant wind energy training certificate with the provision for the training of TAFE and University staff who could run such a program. There is even less hope for such a valuable education industry training package when the Australian wind sector maintains the position that internal industry training is simply too valuable to allow someone else to run it. It doesn’t matter that current industry training programs are not certified under Australian or international training standards. After all, the industry position is very simple. Even if the first Australian offshore wind farm should get federal and state approval we have more than enough trained people in India, China and Europe to build and support the Victorian offshore array. So why would anyone train or employ local people when the North Sea super array is nearing completion and the workers can simply be brought into Australia under a 457 visa arrangement? Besides, we have no intention of handing a multi-million dollar value add education business to any institution here in Australia.

Here is the nub of the question. Does the Turnbull government actually want a viable onshore and offshore wind industry, or does the Turnbull government want an industry dependent on fly in and fly out workers? This was the questions several US and European Blade and wind turbine component manufacturers asked me nearly 10 years ago. We like the idea of using Australia as a spearhead into the Asia Pacific region. We like the idea that Australia offers a relatively robust basic education system. We like the idea that Australia is politically stable. However, if we have to spend money on training technicians and PHD graduates to meet our industry needs then we might as well relocate directly into Asia and bring our people from the US or Europe. Why? Because we have the training courses and the PHD programs as well as the expert academic staff in place. So why train up Australian workers and the staff in Australian Universities.

My friend from CalTec made his point eloquently over dinner. You know that we have all been through the same experience in dealing with Australia. You know that the Universities will argue that we should pay them so they can submit a funding proposal to Canberra before considering any positive industry engagement. It just doesn’t work that way in the US or Europe. Leading institutions are leading institutions because they invest in training and applied research. They work with industry because there is a tangible benefit to both. In Australia we have to put money on the table so the Universities can employ the staff to write a grant application before they start the courses and train the teaching and research staff. This is a three to four year commitment before we see any return for our dollar. You saw that yourself when you tried getting traction for both the ICS (Industrial Control System ) training program as well as the large Wind Turbine training courses from 2008-2012. Even India decided to source the ICS courses directly from the US, Canada and Europe when you tried again in 2013-2015. So why do you want to go through another four years of pain in a country that simply lacks the vision to invest in supporting a renewable industry from the ground up? We might be suffering a Trump hiccup, but we have not stopped out investment in renewable education. We have not stopped in supporting world leading climate research at institutional level.

The problem I see in Australia is that the entire country and all its institutions are suffering from a colonial hangover. You basically need a warder to give you permission to take a piss. Mind you! We in the US like the idea that we can simply buy your best and brightest ideas because as a country you lack the guts to develop anything useful on your own. You like to sell anything and everything because you long for our approval. Even China has worked it out! Look at the Indian coal miner running you guys ragged in the full knowledge he doesn’t have two coppers to rub together. As an American I can see the irony in that! Hell! Your industry advisers still haven’t work out that the world has a shortage of HVDC cables and if the Victorian offshore wind project actually does go ahead, Australia will need to import those cables because they ignored your advice to build a HVDC manufacturing facility years ago.

So why don’t we just build an Asia Pacific wind training program through the US. After all, we already have everything in place. We know how to build local smart-grids. We know how to build virtual power stations and we know how to integrate those with large solar and wind arrays. Take a drive around Hawaii and you will see that a state 90% dependent on fossil fuel and with the highest electricity prices anywhere in the US, is transforming it’s grid to peer to peer rooftop and grid embedded storage. In Australia you don’t even have a rational national electricity policy framework and your government is trying to sell the idea of clean coal and fund it from money earmarked for renewables. Why do you want to go back to Australia and chew stones for another four years? It just doesn’t’ make sense! At this stage my friend from CalTec had certainly made his point. Beer and a seafood platter looked a lot better on a warm Hawaiian evening. Certainly better than ruminating over another one of Australia’s many lost opportunities!

Closing Hazelwood is good for the Victorian Latrobe Valley

In my previous article I returned to a now familiar theme. Australian politicians need to allow ‘The Standards’ to define policy. Nothing demonstrates this further then the ‘Energy Efficiency Policy’ outlined last week. The current IEEE standards for high efficiency domestic and commercial white goods and appliances can easily reduce international carbon emissions by half. In Australia’s case, a policy shift towards a 12 volt / low energy and high efficiency white goods and appliance phase out by 2030, can spawn an entirely new manufacturing sector.

Let us now look at why the closure of Hazelwood is good for Victoria and the Latrobe Valley. Once again I will not stray far from the basic theme of ‘Standards’. I will assume that policy makers and experts reading my ‘Saturday Night Brain Dumps’ are sufficiently familiar with IEEE, EU US and UN standards and procedures as well as industry trends to follow the conversation.

Some basic facts:

The previous owner of the Hazelwood coal fired power station was a company called Engie. Prior to closing Hazelwood, Engie announced its intention to concentrate on solar energy. Engie also purchased a controlling stake in a Californian company called Green Charge. Green Charge is a major manufacturer of DER technologies, Controllers, Battery storage and TAG-e technologies for community owned micro-grids / smart-grids. Tag- e devices record transactions in a ‘Blockchain’. Prosumers in a micro-grid are connected to each other.  This is what a block chain connection is. The software controllers negotiate demand and supply between all block chain customers in real time. The software also allows Prosumers to interactively participate in the energy market outside the micro-grid in real time. This is typically done through a mobile app. Transactional behaviour can also be pre-programmed ( set to automatic) using user defined rules based engagement principles.

There are several advantages to DER and Tag-e integrated technology deployment and community micro-grid / smart-grid integration.

  • Both DER and Tag-e technologies minimize the risk of load shedding whilst optimizing renewable integration both at the local as well as the transmission grid level.
  • As Utilities revise their business model they are looking closely at hybrid technologies that lower their own costs and business risks whilst offering scalability in the form of community micro-grid clusters. Recent announcements by AGL, Origin, AusNet and others stand in evidence of this. In fact, AusNet has indicated a $400 million grid upgrade and expansion program for Victoria. (Make a mental note of this!)
  • Unfortunately Australia has a political policy and regulatory framework that fails everyone in the value chain. It particularly fails consumers and prosumers, workers and business owners as they are treated like dumb cash cows. (How about some recognition and some respect for the common man, please!)

I am not certain whether the Victorian government has put these dots together. However, as Engie is grappling with the money it needs to spend on the Hazelwood closure, there is a very clear and present opportunity for the Andrews government to turn the Latrobe Valley into an international energy technology ‘Hot Zone’. What do I mean?

Well! Has anyone wondered what the impact of a series of community owned micro-grids / smart-grids stretching from Moe to Sale will do for the economic, jobs and growth potential of Gippsland? We know the Victorian government is trying to revitalize the region. We also know that we have a lot of manpower with electrical and technical training and experience in Gippsland. In addition, we have 2 energy companies indicating a future business direction and articulating strategic future business plans for their industry.

I am not sure whether anyone at the La Trobe Valley Authority recently sat down and had a good chat with Engie, AusNet and Lily de Ambrosio? However, it seems to me that the stars are aligning in a symphony of opportunities for the La Trobe Valley that we should not ignore. So let’s get Engie, AusNet and the Victorian government to the same table. A series of autonomous community owned smart-grids / micro-grids from Moe to Sale can do a lot for the Victorian manufacturing sector. They can also unlock lucrative export, research and training markets in the Asia Pacific. But hell, why am I telling you guys this? You already know this! Right! That’s why the Victorian government has its ‘Energy policy framework’ and the ‘Future of the La Trobe Valley’ glossy brochures printed and ready for distribution. 🙂

Australia’s Energy Efficiency Policy

The other day I was asked three questions I thought I had answered several times in previous posts. These questions are:

  • What is the role of technological disruptors in the creation of a coherent national energy policy?
  • What is the role of energy efficiency in the creation of a coherent national energy policy?

And

  • What is the role of gas as a transition fuel in the national energy policy Roadmap 2030 / 2050?

Let’s consider these questions.

During a wind conference in 2016 I shocked some of the delegates by telling them that technology is a facilitator for change. It is not a business disruptor. It may only be seen as a disruptor by businesses operating under a government sanctioned preferred trading status. In all developed and emerging nations the business disruptors are inconsistent and contradictory government policy, regulatory failure and an inability to articulate national business and industrial priorities that align with a national energy policy framework. Australia has no coherent national energy policy framework. It has no national energy policy. It does not even have a national industry policy that articulates industry priorities. Australia has operated on a set of assumptions for over 100 years. These assumptions simply state:

  • Australia’s mineral wealth will provide sufficient export income and generate real economic growth indefinitely.
  • Australia’s land mass and low population density will generate enough agricultural export opportunity and real economic growth indefinitely.
  • Australia’s position in the Asia Pacific will ensure relative competitive advantages compared to the EU and US economies for ever.

All three assumptions are wrong. Nothing demonstrates this more vividly than the Queensland’s government dealings with Adani coal. If the mine becomes operational the jobs it will bring to Queensland will be the most heavily subsidized job creation scheme in Australian mining history. Even if the mine goes ahead there is no guarantee that the mine will ever be profitable without ongoing Australian and India government support. This is true if the international coal price remains relatively stable. If international coal prices remain at current levels the question is whether the Indian government is prepared to subsidize Australian coal imports. Why is this so? Notwithstanding the approval of several super massive coal plants by several Indian states in the last 12 month, not one of these coal plants can be built without the Modi government digging deep into the national budget. Apart from the cost of the new coal plants the Modi government will have to spend somewhere between 10 -25 billion USD in national transmission grid infrastructure. It will have to maintain its state based energy subsidy program for poor and marginal households, agriculture and small business. It will have to address the massive problem of energy theft and look at reforming all state based energy markets into one national market. India’s unwieldly post-colonial bureaucratic structure, unpredictable electoral system and endemic corruption, make these reforms unlikely in the next 2 years. Now that several Indian states are offering 100% rooftop solar rebates, the economic viability of Australian coal is put further into question. At current Indian state solar rebate rates, Adani coal would have to be priced at less than $30 USD per tonne in India. Even at this price Australian coal would not be competitive with Indian rooftop solar rebates, or local Indian coal. This market reality has not escaped the international bankers. So why is the Queensland and to some extend the Turnbull Federal Government flogging a dead horse?

In conjunction with Scott Morrison’s federal budget several confusing announcements were recently made by the Turnbull government. The expansion of the Snowy Hydro and the Tasmanian Hydro projects are welcome by the electorate. In reality, neither of these projects addresses Australia’s energy security or price affordability problem. Australia’s current energy price needs to be between $36-$40 per MWH if we are going to tackle the jobs, growth and national productivity crisis. The current energy price hovers around $155 per MWH. The most conservative futures analysts have no alternative but to conclude that current commodity exports, including mining revenues, would have to be somewhere in the miracle range, if the projected budget surplus is going to eventuate. We can reach no alternative conclusions under the current federal government ‘National Energy Plan’. We cannot even reach a conclusion under the current federal government ‘National Industry Plan’, or the much talked about ‘Jobs, Growth and National Productivity Agenda’. The federal government subsidized gas pipelines from the Northern Territory and Western Australia to South Australia will have no impact on future energy prices and energy security. The assertion that the Northern Territory has enough gas to supply Australia’s needs for the next 200 years is an irrelevant side show. It is just as irrelevant as the Gillard Labour government announcement that Australia has enough gas in the ground to last the country for a thousand years. The reality is that Australia has enough solar, wind, tidal, wave and geothermal potential to power Australia for ever. So why does any government minister spruik our gas and coal potential? It is clear that the two gas pipelines announced in the Turnbull budget will assist Arium and the South Australian navy defence contracts. The announcement will reassure international gas industry investors that their long term profits in Australian gas exports are guaranteed by high domestic gas prices. This guarantee comes at a high cost to Australia. High domestic energy prices have a negative impact on all other industries relying on low cost energy inputs in order to remain internationally competitive.

So here we have the triple threat. Australia has no national energy policy framework. It has no national energy plan and it has no industry policy that is fully integrated with a national energy policy. I predict that sometime between now and 2030 Australian voters will be shocked by the election of truly intelligent governments at both state and federal level. They will be shocked by intelligent energy policies that will be integrated with a targeted national industry program, backed by state and regional development priorities. Such a program might focus on energy efficiency including storage and heat exchange technologies. Such a program might begin with a simple ‘ Zero’ budget impact policy statement that states:

‘In accordance with Australia’s international obligations and under its 2030 and 2050 Energy Roadmap, Australia will phase out the sale and importation of all 240 volt white goods and appliances by 2030. Australian manufacturing and research into 12 volt white goods and appliances will receive state and federal government support under a new export guarantee. The reason for this policy is that the government recognizes that the domestic manufacture of 12 volt and all related high efficiency low energy consumer and commercial products for the Asia Pacific, African and South American markets is potentially unlimited’.

Let me give you a simple example. Australia’s domestic refrigerators and freezers consume approximately 10 million KWH of energy every day. There are more than 1 billion people living in the Asia Pacific region. Many of them will be purchasing domestic refrigerators in the next 30 years. With most Asia Pacific countries struggling with an unmet energy demand averaging 20% per year under persistent brown out and black out conditions, both the potential for low energy products as well as their commercial application, can only be described as staggering. Despite this Australia has no industry policy that targets this market. Australia has no energy efficiency policy that addresses either the domestic, or the export market opportunities such a simple energy efficiency plan promotes. We have a government in Queensland promising to give away our coal to India. We have a federal government trying to buy back its stake in the Snowy Hydro while it shores up the profits of the gas companies who are busy exporting Australian gas overseas. We have a federal government waiting for the outcome of various enquiries into the Australian Electricity market, whilst it refuses to deliver a National Energy Plan that authorizes the creation of autonomous regional smart-grids. So what do you think about ‘Smartgov.au’ now? Are you depressed yet or simply disappointed in our politicians? After all, they have refused to get themselves up to speed with Australian Energy market policies for the last 30 years. Perhaps you are wondering what Mr. Turnbull means when he talks about smart manufacturing, innovation and high technology industry becoming the corner stone for the smart economy of the future? I know what you are thinking! Mr Turnbull is actually the Prime Minister for some other mythical nation that we are all waiting discover one day!

Inquiry into modernizing Australia’s electricity grid

The Turnbull government has decided to hold a public Inquiry into ‘modernizing Australia’s electricity grid’. The ICE-group has decided to make a formal submission to the inquiry. Our submission will focus on a 100% renewable energy future. It will cover market regulatory and competition reform. Our submission will address grid standards, network upgrade choices, energy security and price affordability.

We know that we can achieve a better electricity system with distributed wind, solar, bio-mass/ gas and hydro power with grid embedded storage. We also know that breaking up state distribution networks into manageable self-generating smart-grids that include energy storage is cheaper then all other Turnbull government options. Building new gas, coal or nuclear power stations is too expensive for Australia’s diverse population and vast distances. The idea that we require base load power in the 21st century, when we can self-generate 70% of our own electricity within self-managed community and industrial smart-grids is simply not the vision of a fully employed Australia we share.

If you believe that Australia deserves a 21st century energy system that treats consumers as equal partners instead of powerless pawns, please send your details or your company logo to; icegroup.info@gmail.com. We would love to add your name, company logo or association to our submission.

If you like to make your own submission please find the details at  http://www.aph.gov.au/moderngrid

The submission has to be logged with the federal government by April 28, 2017. I look forward to your support.