Our democratic grid
Our democratic grid
Ergon Energy's Manager Emerging Markets Glenn Walden was interviewed recently by the ABC's 7.30 Report about changes in the electricity industry, new technologies and what that could mean for electricity utilities, the business of networked electricity and customers.
While there was only room for a small amount of Glenn's insights in the story that aired in May, we wanted to share the full interview which provides a fascinating view of where things may be going with electricity and the new products that are the talk of the electricity industry of late.
We often hear about how the electricity industry is slow to change, but lately there seems to be a lot going on – what's happening?
GW: Yes, there is quite a bit of change happening in the industry. For the last hundred years electricity has been about transporting power from large generators to customers over powerlines. As solar PV has become more affordable and batteries are now starting to drop in price, we're really seeing a 'democratisation' of electricity and people having a lot more choice about where and how they access their electricity. Democratisation of power is really about customers having more choice. The cost of these technologies will give more choice for people to consider and instead of just buying electricity in one way, there will be different ways and product offerings. It's about choice, peace of mind and getting electricity at the most affordable cost.
So what sort of change does that represent historically – is it a big one?
GW: Yes, it has the potential and the feel to be quite a significant change. There is a lot of technical change that is going to happen, but that's not the only factor. There are business model changes and probably critically there's real demand from customers – residential customers in particular – for the type of service offerings that these products will enable.
I think you described it earlier as a 'quiet revolution'. What do you mean by that?
GW: Well there's been a bit of a quiet revolution in battery storage. PV's clearly been very high profile in the community, but until the Tesla announcement recently, which has gotten quite a lot of attention, there has been a lot of solid and progressive development over the last few years towards more economic battery storage.
What was so significant about that (Tesla) announcement? What does it represent in terms of a step change?
GW: Well it has raised profile in the community for one. And it is a step – the pricing that Tesla is talking about, based on the headline pricing at least is quite a step change and really does start to make some of the products that some businesses will be offering affordable and attractive to customers.
So how would batteries be applied in an average household?
GW: Well typically there are a whole lot of value propositions that smaller-scale storage can offer. For customers it could be as simple as storing their solar during the day and using it in the evening. If you are on variable price tariffs you might want to charge the battery at low cost times and use it when the price of electricity is high – typically in the evening again. For networks, we can use it – and we are using it here at Ergon – to manage peak demands so that we can avoid network augmentation projects; we're doing that at the moment on our regional networks. For electricity retailers, they can manage market exposure on the national electricity market, they can offer new product offerings and new product mixes to customers and combine those value streams and deliver value for Ergon overall.
What potential would this technology have for customers who have solar, because lately there have been a lot of incentives for getting solar taken away or watered down – so what change would this represent for them?
GW: The ability to store the solar that typically people don't use during the day – you're away from home and the sun is shining, the load on the house is lighter, but then be able to take that energy and use it in the evening when the sun is not shining, when you're at home and doing your cooking, watching your television, playing on the internet and so on – that's a lot of what people are focussed on.
What changes will come about from a retailer's point of view, because we are used to having a poles and wires system, but that's going to be the only service on offer anymore is it?
GW: From a retailer's point of view there'll be much more service offerings, much more package offerings start to become available. So instead of just buying kilowatt hours, you'll be getting different product wraps and product mixes. So capped price options, somewhat like telco offerings for mobile phone plans, would be the typical thing you'll start to see.
Australians obviously love solar. Will they be buying batteries – those who don't already have solar technology in their homes?
GW: Yes, that's a great question. Australians do have a history of being early adopters. That's one of the reasons why many companies around the world focus attention on Australia. I think it is pretty clear that customers will be interested in the battery option. But again it will come down to the ingenuity and innovation from retailers to be able to package those up into something that is attractive.
Is that happening?
GW: Yes, definitely. There are a number of companies announcing product offerings in that space.
What's the uptake been from customers and the level of interest?
GW: It's very early days. It's a time when people are starting to talk about what we are going to do. In the network side, people are starting to do work to understand what the customer want and how they will use these products so there's a bit of work to go. But there are companies that are seeking expressions of interest from customers to take these products on board. So early days, but very definite signs of where things will head.
Are there any countries that are leading the way?
GW: Yes, for different reasons there are different drivers around the world. Germany – who have for a long time had quite significant uptake of renewables – a couple years back put a centre in for batteries purely to stabilise their network a bit more because of the intermittency of renewables. In Japan, where they've had some issues with their nuclear industry and some reliability issues there's quite a big uptake of batteries and renewables. In the US there are quite large incentives in some states. Here we have a much more pure market playing. In Australia we've got different drivers so part of making it happen here is being able to combine those value propositions and then package it up into something that is affordable.
So take us through some of the initiatives that Ergon is introducing in this space.
GW: As a business we've made a decision to embrace these changes, and in addition to being efficient and effective, become a market enabler to enable the multi-directional flow of electricity and information. We certainly have looked carefully at battery storage and have a project where we will deploy batteries into remote feeders to avoid augmentation costs on those feeders and improve quality of supply. We're also trying to understand this space around residential storage better, so we're running a trial in Townsville with customers to see how customers use and interact with batteries. We've done quite a bit of testing in a laboratory to see how these batteries work and make sure they're safe and understand how they 'tick'. So quite a bit of work in understanding this space.
It used to be quite expensive technology. What's brought it down, and why is it more affordable?
GW: One of the biggest drivers at the smaller end of the scale is electric vehicles and the huge amount of investment from global companies like Toyota and GM and German companies, as well as governments in developing storage for electric transport. Electric transport around the world is taking a little longer than people anticipated to pick up so there is quite a latent capacity there in production which people are turning more attention to stationary applications like battery storage for residences.
Describe your customers and some innovative solutions they've taken on board or embraced.
GW: Well, whenever we speak about customers the first question we need to ask is 'which customers?' There are large industrial customers, there's small to medium businesses and of course residential. There's been innovation and uptake across the board, but a lot of this is focussing on the residential end of the market and there are companies in the residential space who are pioneers. There is quite a bit of pioneering work going on here in Queensland. There is world-leading technology being developed here in Brisbane. There are companies here that are helping foreign companies build battery factories. All those things are starting to develop a big possibility of providing those technologies to customers.
What kind of services can you envisage coming online soon that aren't already there?
GW: More options and how you take electricity is the real opportunity. As I mentioned before, instead of buying power by the kilowatt hour, some companies may come along and offer a package of buying technology where you may be able to take a capped plan similar to a mobile phone plan where you get some certainty around affordability and costs. There might be a range of options from things like lease packages. The lingo in the industry is about 'power purchase agreements' which is a concept taken from quite large renewables production transferred down to the residential end. You'll see quite a range of offerings.
Traditionally there's been tension between electricity companies and renewables, but now it seems you're moving more towards a partnership. Is that new?
GW: Certainly at Ergon Energy we're about forming partnerships to enable new markets. It's quite challenging and we're up to that challenge. We want to create dialogue with those companies, understand each other's drivers and then work together to create benefits and opportunities.
Is it also a partnership that's come about through necessity though? There has been declining use of electricity – people are really trying to reduce their reliance on the poles and wires network and people are trying to have a more autonomous arrangement at home. Has this come about because the survival of the electricity industry depends on it?
GW: Survival is the mother of all invention they say. It's reality is another way of putting it. We can face the reality of the way things are happening in the world and technology and customer's desires and business model innovation. If we want to resist that it will happen anyway and I think there will be more people that would be worse off. If we embrace it and allow it to happen in a much more structured way there will be many more winners and many more happy customers.
Is this a solution to what's been described as the 'death spiral' in the electricity industry?
GW: The 'death spiral' is a bit of a spectre. There are serious issues we need to deal with, but there are opportunities that come out of change and we're embracing those opportunities.
Do you think many people will go as far are to move off the grid completely? If so, why and when?
GW: Definitely some people will. There's a range of reasons – some people prefer that independence, for some people it's by necessity because the cost to connect to the grid is prohibitive. So these changes are making life better for those people as well. But as a general choice and certainly by general consensus, mass defection from the grid is unlikely – certainly in the short to medium term at least. The point is that if we don't deal with these opportunities well, and we resist those changes, we're likely to create more pain than if we embrace them and share the benefits.
Why would a mass move away from the grid be unlikely at this stage?
GW: Well as a community we've got a huge investment in this network, and there are still going to be people who are still going to need the use of that network. So the costs for those people are going to go up.
So it's not something you would encourage?
GW: We're encouraging the productive use of energy and the productive use of these assets so that it benefits all.
How much will the industry have to change to get to a point that you're imagining where all these different sectors work in partnership in a way that is sustainable and affordable?
GW: Quite a bit of change is required. There is technical change. The industry has been built around large-scale production (generation) being transported to customers in one direction, so the networks have been designed for that one-directional flow. We need to change those networks into multi-directional flow of information and energy. There's a mindset change that we need to embrace. There's a mindset that we need to partner more closely with other businesses and we need to be innovative in the way that we approach business in terms of business models, product offerings etcetera – quite a bit of change.
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