The energy transition is gridlocked, regulators have no answers

Investment in renewable generation last year, for example, was only about half what’s needed to keep Australia on track with its ambitious targets. And that steep climb only seems to be encountering more obstacles.

Just four renewable energy projects reached financial close in the June quarter. Westerman is urging companies to consider all existing and coming government schemes that should make questionable commercial returns look less risky.

“We are anticipating that we will see, hopefully, a flood of investment decisions coming up soon,” he says.

Hopefully. What is sharply clearer is that talking targets is no longer enough. It’s delivery that counts. Add in surging cost inflation and labour shortages compounded by global competition for resources required.

It’s why the The Australian Financial Review’s Energy & Climate Summit this week is titled “Crunch Time for the Transition”. And for much of Australian industry.

Boral chief executive Vik Bansal, for example, says the large cement-making and construction materials business has to temporarily idle thousands of employees across its 300 sites every day because it’s cheaper than paying the energy costs at certain times.

“Energy is a big component for us,” he says. “At the end of the day somebody’s paying for it. Boral’s shareholders or Boral’s customers or Boral’s employees.

“Give me certainty of policy, give me certainty of price – and I can do something with it.”

‘Massive transmission task’

Westerman argues that firmed renewables are still the cheapest form of replacement energy but because wind, solar and hydro resources are being built in geographically dispersed locations, new transmission is essential.

It adds up to 10,000 kilometres of new transmission lines to connect these assets to demand centres in towns and cities.

Yet quite apart from the costs and delays in obtaining various approvals, that prospect is being fiercely resisted by many regional and farming communities along potential routes.

“In light of the massive transmission task ahead, it is beyond the scope of a single market operator or even a single transmission company to fully build the necessary social licence,” Westerman says, calling for a “whole of government and whole of industry effort reliant on community involvement”.

That’s going to be a tortuous process that probably won’t end up as regulators, governments or companies optimistically suggest.

Even with “fair” compensation and better consultation, there’s little likelihood of persuading many landholders of the benefits of accepting either wind turbines or solar farms or high voltage transmission lines on or near their properties. Compulsory acquisition is not on the political agenda.

That helps explain why Westerman and his fellow energy regulators are also emphasising the need to more efficiently utilise the power produced by Australians’ enthusiasm for rooftop solar and battery storage to supplement the grid as coal-fired power disappears.

At the moment, the east coast of Australia still depends on coal-fired power for 62 per cent of its electricity generation, but this will fall dramatically this decade.

That’s even though the NSW government is following Victoria’s example and negotiating with Origin Energy to keep its Eraring coal-fired power station open beyond its scheduled retirement date of 2025.

“Australia has three-and-a-half-million solar systems installed and that represents around 20 gigawatts of potential output,” Westerman says.

“That’s more than seven Eraring power stations at full output and capable of meeting almost half the energy demand in the day when the sun is shining at its brightest.”

20pc of the solution isn’t being managed

But while that popularity undercuts coal-fired power, it doesn’t help when the sun isn’t shining unless stored supply is also available.

At the same time, oversupply of solar at certain periods can also unbalance the grid. Solutions for both require greater use of technology to manage “consumer energy resources” – including smart meters and virtual power plants.

“The uptake of these virtual power plants is disappointingly low, but virtual power plants are an area of development and opportunity, and we hope will be a significant area of growth in the years ahead,” Westerman says.

“Properly harnessing the value of those consumer energy resources does require focus and attention, but it will help to lower the cost of the energy transition for everyone.”

Anna Collyer, chair of yet another regulator, the Australian Energy Market Commission, says bluntly that consumer energy resources (creating yet another energy acronym – CER) doesn’t get the attention it deserves, especially from governments. She calls it the “secret source” with the potential to provide 20 per cent or more of the energy solution.

“The stronger we are in the way we use CER, the more confident we can be about the supply we have and the less utility scale back-up infrastructure we will need to build,” she says. “Consumers will be the hero on the way to net zero.”

Right now, too many of them feel like the patsy.