Energy policy
Governments should be readying for the energy grid of the future, but most are still caught in the politics of today.
2020 could go down as the year the National Electricity Market was fractured beyond repair.
Frustrated by the snail’s pace of federal energy policy, Victoria and New South Wales broke away from the national approach, forging their own path to drive the transition to renewables. Queensland had already established a third state-owned generator.
It’s “a fundamental reshaping of the grid that hasn’t occurred in close to a century,” says Simon Corbell, energy advisor and former ACT Minister for the Environment.
And experts believe it’s just the beginning on the path to a completely digitalised energy grid.
How will governments design policy and regulation for this new grid?
One where you as a consumer of energy can also sell your excess energy, where every energy consuming device in your home from your car to your heating and cooling is connected to the grid, and a new energy economy has emerged for the peer-to-peer trading of electricity.
“We could do it well or badly,” says Tony Wood, Energy Program Director at think tank the Grattan Institute.
“We will muddle through doing what we're doing now and the best consequence will be it will just cost more, worst case something serious goes wrong and we have to rethink where we’ve got to.”
The last decade has delivered many tough lessons to state governments muddling through.
Early incentives for solar, for example, delivered a boom in uptake even the most ambitious governments underestimated.
“Some elements of trading created a monster and now were desperately trying to fix it,” says Wood. “We don't want to see the same thing happen with EVs - there needs to be tariff reform.”
Energy users with spare energy to deliver back to the grid, or prosumers as they’re now being called, are often seen by regulators and governments as “more as a problem than part of the solution,” says Corbell, something that fundamentally needs to shift for the future grid to work efficiently.
“There needs to be a much stronger focus on the role the consumer can play in providing broader services to the grid and how the grid can accommodate that.”
And voters are putting pressure on governments to “get on with it,” says Wood.
“But the thing we want them to get on with is ensuring we continue to have affordable, reliable and low-emission energy.”
To deliver on the promise of a fundamentally changed grid, governments and regulators are making changes, some knee-jerk, some for the longer-term.
Here are five they could speed up to bring forward helpful change.
1. Price energy based on time
Right now, energy pricing isn’t structured in a way that reflects it has different value at different times of the day. Tariffs that reflect this would help.
“There's no incentive for people to store their low value middle of the day energy for use later in the day,” says Wood.
“We are all used to paying different prices for things at different times of the year, like airline tickets at christmas, stone fruit before peak season.
“No-one complains about that and yet we’re still not comfortable buying electricity that way.”
By 2050, says Wood, new businesses will manage every aspect of this for us in a seamless way.
“So they’ll come to you and say ‘we will manage your power use, we’ll put in a control system with fixed price electricity and we’ll make sure you don’t run out by controlling usage in your house’.
“If you plug your car in, the system will decide the lowest price way to do that, but if you know you’ll need the car to pick up your child at a certain time, you can choose to pay more, tell the system and make the tradeoff.”
2. Move to ‘open energy’ akin to open banking
The grid of 2050 will require large volumes of data being shared en masse.
Moves are already afoot by the Energy Security Board to work out how to enhance the availability of data and information and address any barriers to effectively accessing it.
As with banking, the large incumbent players won’t be too keen to see data sharing erode their competitive advantage.
Government regulators could play a serious role in forcing open energy, in the same way they are forcing open banking, paving the way for data to be shared with third parties.
In the open environment, third parties wishing to gain access to the data must be accredited and ensure customers opt-in. At the heart of the regime is a requirement to safeguard privacy and ensure trust is protected in the entire system.
3. Incentivise peer-to-peer sharing of energy over feed-in to the grid
The rapid addition of renewables is already forcing a rethink on how the grid is designed. It’s clear not every consumer can be a ‘prosumer’ - if everyone tried to push excess energy to the grid for a profit the grid would simply fail.
Greenfields communities like Western Australia’s White Gum Valley, are already enabling residents to share excess energy, but there are regulatory and policy hurdles standing in the way for this to occur more widely.
Energy innovators like Powerledger’s Jemma Green ask policymakers to imagine a future where long distance delivery of power is less likely to be needed. Where production and consumption of energy exist within the same household or factory or campus unit, but at any one time they’re either producing, consuming or storing (or some combination of the three). And that this type of grid actually strengthens rather than threatens grid reliability.
4. Require buildings to produce more energy than they use
By 2050 it will be unusual for anyone to build a house without solar panels and some form of storage, says Grattan’s Tony Wood. For larger buildings, energy efficiency requirements can push owners to rethink power use.
Fleet cars plugged into building carparks can help redistribute energy, but energy efficiency within buildings will help reduce overall energy use.
Smart cities of the future may see fewer people working in large buildings - leaving them free to share excess energy no longer needed.
5. Enable redundant gas pipelines to store hydrogen
The decarbonised world of 2050 runs the very real risk of stranded assets - including government assets not yet at the end of their life with large maintenance or removal costs.
Energy adviser Corbell says governments need to look at their contractual arrangements for public-private owned assets. “There needs to be mechanisms that incentivise the owners of that infrastructure to be innovative about new revenue streams.”
Why not, for example, think about potentially redundant natural gas pipelines as hydrogen storage facilities?
“You can think of the gas network as a great big tank that can store huge amounts of hydrogen fuel, which can extend for hundreds of kilometers and can be drawn upon either for direct power generation or distributed for use in the existing gas network for heating and cooking.”