It has been described at times as a ‘fork in the road’ moment. Has Ergon Energy (and other utilities for that matter) reached a point where they have to make a decision or see mass defection from the grid?

Prior to having an interconnected network throughout Queensland, we had a very much decentralised or local model of electricity generation and consumption, where local communities each had their own separate generation facility and isolated distribution systems supplying small numbers of local customers.

As people’s electricity needs grew, a more centralised generation model was implemented through the development of large-scale steam turbine driven synchronous machines and extensive transmission and distribution networks. This was largely driven by efficiencies and increasing energy needs, in terms of volume, reliability and quality of industry.

Over that period, large and small customers saw much improved levels of reliability, quality and value, which we all now expect. The reducing cost of distributed generation and the looming availability of lower cost energy storage systems are now changing the value equation for small users.

There is probably not a point in time where the value to customer will be at a level where there is suddenly a mass defection from the grid. Some may have made that decision now, some may decide it is viable at some future point and some may never be able to invest the capital required to move from the grid. We need to ensure the value of the grid to the customer remains at a level that does not warrant their defection by ensuring we remain relevant to their needs and provide the value they require.

All parties connected to the grid benefit to some extent from that connection. Generators, of all types and sizes, get a delivery mechanism. Industry gets an important input to production with high levels of reliability. Small businesses and customers get access to reliable, controllable and comparatively inexpensive energy. Customers that have distributed generation and/or storage get access to a sink or source that can increase the value of their investment and cap their exposure to resource or equipment failure. These technologies can also benefit or impact the grid depending on their location and implementation.

So while we have not reached a point to decide one way or another, we are subject to a rapidly changing environment of technology, cost and customer expectations that we need to continually respond to in order to maintain the value of the assets we have in place and utilise them effectively and efficiently to meet the needs of our stakeholders.

Do you think such a ‘fork in the road’ moment is likely to happen?

I don’t think there will be an actual point in time where we make the choice to choose one path or another. There will be a series of changes which will influence choices or make other choices feasible where they may not have been previously.

For example, large increases in customer connected renewable energy systems, the falling price of storage, increasing use of electric vehicles, better and more accessible communications networks, tools to support customers in managing their electricity bills, regulatory environment, power delivery efficiency, reliability and security all impact on the network and choices need to be made continually to provide the best outcomes.

So there will be an evolution, some of which will happen quite rapidly, which we need to be able respond to in a manner which best leverages the assets we already have in place.

Can you give any examples of where we have had to change the way we think?

Certainly, one of the most recent examples has been the rapid uptake of solar PV generation connected to the network. Up to that time, customers had little interest in connecting small scale generation to the network and, while we had guidelines and processes in place for connection of small scale generation prior to the solar boom, they were not designed to handle the volume of applications that ensued after the rush of solar applications commenced.

We have had to very much streamline this process to meet customer demand in that area. In addition, this revolution in small customer connections has resulted in a number of technical challenges with power now flowing in both directions on some distribution feeders. We have worked with Standards Australia to revise inverter standards which will deliver inverters that work better with the distribution network in these cases to ensure we can maintain acceptable voltage levels for customers.

Likewise, are there any examples of the network reflecting our change in construction thinking?

With the increase in small scale distributed generation, the focus in our network has moved from the larger, centralised end of the network (transmission connection points and zone substations) to the edges of the network. This is reflected in our most recent regulatory submission where expenditure on augmentation of the subtransmission elements of the network have now reduced to historically low levels, and expenditure on activities to cope with bi-directional power flows at the edges of the network have increased.

The energy being delivered by centralised generation systems to customers has stagnated, while energy delivered from distributed renewable generation systems has markedly increased.

Can we rest on our laurels and assume things as they stand at present will stay the same?

Absolutely not. We will need to be continually focussed on the customer to ensure we remain relevant to their needs. Things have been changing rapidly in the cost and availability of distributed generation and storage systems and other relevant technologies. This will continue. We will need to continue to innovate, respond to changes and deliver value so our past, present and future investments provide for the needs of all of our stakeholders.

The topic of ‘going off-grid’ seems to generate a fair bit of discussion online. Is it happening on Ergon’s network?

I don't think the risk of large numbers of people disconnecting from the network is that big at present as there are additional costs beyond the base cost of the unit - especially if people seek similar levels of reliability.

For most network outages I can remember, I make a phone call (or not!) and a short while later Ergon Energy comes and the power is restored within a few hours at most, then life at home continues as normal.

If I was ‘off grid’ and my inverter or battery failed, I make a call to my local retailer and they dispatch someone to have a look, that may be tomorrow or next week, but certainly not on the weekend. They diagnose the problem, order the parts (in regional Queensland that means at least a two week wait!) and then come back and repair the failure and leave a bill behind when they leave.

In the meantime, I have to go without power or arrange my own standby generation with the inherent noise, cost and inconvenience.

So the upfront cost of establishing a system which allows one to go ‘off grid’ is not the only consideration.

From a community perspective, each time a person goes off the grid there is a smaller pool of remaining customers who have to pay to maintain the assets in place to provide their supply, so it is not an ideal outcome from many perspectives.

If we can improve the perceived value of the network to customers, they will remain connected and, if we can leverage the value of their energy generation and storage to benefit all, then the network will remain relevant to the needs of the wider community.

Ergon Energy is using the availability of new technology in developing devices such as our GUSS (Grid Utility Support System) which, by storing energy during periods of low demand and releasing energy during periods of high demand, can reduce supply costs at the edges of the network and consequently improve value to our customers.

This area is where our effective market reform initiatives are so very valuable to meet the needs of our customers and for the future of the network.

You mention ‘risk’. Is this a risk to the network or to the electricity user?

Risk can arise in either area. There is a risk to network viability if customers cease to see value in what it provides to them. Should customers see no value in connecting to the network, the remaining customers will see their value shrink as their costs rise.

There is a risk to the user that if the network is not available to them because it does not offer enough value to others, they will need to pay the full capital cost of establishing their own generation and supply system and will not be able to share expenses and risks with others in doing that. Some of the value in the grid to customers is in the way it shares expenses and risks across a very large community to minimise the cost of these to the individual.

If someone was looking to go off grid at this moment, what would they be setting themselves up for when it comes to maintaining current reliability?

As indicated above, to maintain present levels of reliability (without any other considerations) one would need the following services:

  • Access to 24/7/365 local service representatives for the equipment you have installed
  • The capital to replace any part of your equipment that fails
  • Realisation that some components like batteries have a limited life and will need to be replaced
  • Possibly you would need to duplicate some of the major components of your supply system to ensure failure doesn’t mean complete loss of supply
  • Invest in an alternative standby generation system – to both protect from failure of equipment or failure of resource (i.e. a week of cloudy days).

Are customer interests and grid interests at odds with each other in regional Queensland?

No, they never have been and we certainly should not get to a position where they ever are.

The grid effectively supplies a shared resource for all connected customers. Different customers have different interests in being connected to the grid, but in general it is providing a shared resource that delivers some form of value to each and every connected customer. We need to ensure that value remains high enough to prevent customers turning elsewhere and to do that we need to continually ensure the interests of the grid are aligned with the interests of the customers.

Of recent times, we have seen a significant increase in interest in connecting large scale renewable energy generation to the network. The grid then becomes an essential requirement to deliver this renewable energy to customers and given that large scale facilities can generate energy more efficiently and at lower cost compared to smaller scale installations, it is then very much in the interest of the generators and customers to have this conduit available to deliver their energy.

As we evolve our thinking, what are the challenges we’re likely to face (both internally and externally)?

Some of the challenges relate to the speed at which we are able respond to our rapidly changing operating environment.

We are a regulated industry, so need to ensure we continue to operate within the rules established by our regulators.

We need to provide supply to a wide range of appliances and maintain acceptable levels of community and workplace safety, so must operate within very well defined standards. The equipment we install (the poles, wires and transformers) is expensive and long-lived, so cannot be removed and changed in short order without a very large scale of investment.

Not all of these areas lend themselves well to rapid rates of change, but we have demonstrated we can work within those constraints to provide innovative outcomes, which can help set the direction for future rules, standards and equipment.

There seems to be a belief utilities are so wedded to their business models and operational processes they are incapable of evolving. What should Ergon do to demonstrate this isn’t the case?

The New York Public Service Commission addressed this very issue in their Reforming the Energy Vision Regulatory Policy Framework and Implementation plan which stated:

"Utilities could respond [to the challenges facing the industry] by clinging to the traditional business model for as long as possible, relying on protective tariffs, regulatory delay, and other defences against innovation.  Alternatively, we can identify and build regulatory, utility, and market models that create new value for consumers and support market entrants and this new form of intermodal competition. In other words, embrace the changes that are shaking the traditional system and turn them to New York’s economic and environmental advantage.  We decisively take the latter approach."

Ergon Energy also will adopt the latter approach as well to embrace the changes we are experiencing and, through continuing innovation, provide economic and environmental advantages for the people of regional Queensland.

The electric utility model has existed for a century. It seems to some the model’s longevity - its ability to prevail - is the crusty proof that it is incapable of changing. Be interested to hear your thoughts on how one counters assumptions like this?

I think we all realise change is always inevitable and at the present time we are going through a period of great change in the electricity distribution model.

I think the best way to counter assumptions it is incapable of change is to observe our history. Initial observation may indicate the same model has been in place for a century, but nothing is further from the truth and nowhere more so than in regional Queensland.

We have come from a past which had a very much isolated and distributed energy generation arrangement. Every small town had its own generator and rural properties made their own arrangements. The safety, reliability, capacity and quality of many of these systems were limited at best.

We then moved to smaller interconnected networks with some larger power stations which provided some opportunity for larger scale industrial loads to be supplied and, during my working life, the network was interconnected across the entire state and extended to many smaller rural communities and farms.

We then progressed to separating the generation, transmission and distribution network service providers and retail activities out of the previously vertically integrated industry structure. We now have a national set of electricity rules and a national regulator for the network businesses.

None of these changes have been small and each has required detailed vision and execution of strategy to get to our present level of maturity. To say the industry is incapable of change is to ignore the overwhelming evidence of our ability to change that has been clearly demonstrated over a long period of time. There should be ample ability to implement the necessary changes required to respond the continually moving operating environment.

Tony Loveday, Ergon Energy Distributed System Platform Architect
About Tony Loveday

Tony has been employed in the Electricity Supply Industry for more than 30 years, having commenced as an apprentice in the Transmission and Generation areas before graduating as an engineer and moving into Distribution as part of the Network Planning and Development team.

His current role as Distributed System Platform Architect has responsibilities including:

  • Transformation of the electrical distribution network to provide a sustainable platform to meet the future needs of customers and stakeholders
  • Maintaining a robust and resilient electricity delivery system by optimising the operating capabilities of the distribution network, lowering cost and ensuring high reliability, as well as deferring and reducing infrastructure investments
  • Managing the realisation of smart-grid benefits – specifically enhancing the ability to facilitate the penetration of widespread renewable energy systems, energy storage systems and other relevant new technology
  • Enabling the deployment of electric transportation infrastructure across the distribution network and ensuring optimal utilisation of supply-side and demand-side assets
  • Influencing the development of appropriate methodologies to drive appropriate customer behaviour and improve asset utilisation
  • Undertaking a lead and advisory role in distribution network analysis for the connection of large scale renewable energy generation systems.