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The 2019 Financial Review Energy Summit certainly wasn’t short of views, news, policy positions or agendas.
There was unity - captains of industry all agreed affordability, reliability and sustainability are central to our energy future.
There were also differing views but it is clear from all the sector, there is a need to embrace change and get on with investing in the technology and infrastructure that will deliver affordable and increasingly clean energy to their customers.
Demand management is front and centre for industry players responding to customer signals and intelligent demand management. Making energy tangible is key through the likes of electric vehicles and storage, and earning the right to trust has never been more important. The energy transition is underway and time is not on our side but there is a need for balance and speed.
Federal Energy Minister Angus Taylor touched on the importance of the need for the sector to balance flexible intermittent generation with firm despatchable generation.
Origin Energy CEO Frank Calabria highlighted industry’s difficulties committing to investment in new generation and technology in the absence of any firm government policy.
But he also rightly said industry has not stood still and doesn’t stand still every single day, working tirelessly to keep despatchables running and respond to the demands of customers for reliable power.
Frank said customers also want affordability and sustainability. This was a common thread throughout the summit.
Deloitte’s own lead energy advisory and regulation partner Sandra James, in presenting our latest report – Beyond the energy transition – when the demand side is demanding change – highlighted the pull from customers on the future direction of the market.
Customers and future customers in the form of millennial and Gen Z activists, want affordable, environmentally friendly power from companies who are demonstrating a strong social licence to operate.
The need for engagement with customers and action is a constant.
Users are now in the driver’s seat and are likely to put their feet on the accelerator as the advent of Open Energy Data Platforms through the Consumer Data Right (CDR) looms closer, placing a further imperative on industry to respond to customers’ needs and demand.
Australian Energy Market Operator CEO Audrey Zibelman spoke of the challenges of the industry’s three Ds – decarbonisation, decentralisation and digitisation – and of hard decisions needed in the next five years given the pace of change. Audrey told the summit if we don’t get it right people will be judging us in 2025. Consumers are at the heart of this, she said.
Energy Australia MD Catherine Tanna said renewables will underpin the system of the future, but cleaner energy needs to work for everyone. Catherine said “energy is stuck” and everyone, including consumers, are shouting – like being in a bar just before closing. And that is wrong she said because the frustrating thing about energy is we agree on more than we realise and the path has already been bumpier than it needs to be. Most agree electricity and emissions should come down and that power system reliability is non-negotiable. As for the future, Catherine said it was not if we reach net zero it is when and how.
ENGIE Australia & New Zealand boss Augustin Honorat said from his perspective customers want lower prices and cleaner energy. He said ENGIE no longer faces the market, it faces the customer and cautioned some of the ad hoc subsidies by various governments would be locked into customers’ bills, with private investment giving customers the choice for the best solutions and value for money. Augustin said in essence when you ask customers you always get the right answers.
We heard from ACCC chief Rod Sims the most significant cost for customers was past over investment in network capacity and reliability standards, which was being passed on. The cost of feed-in tariffs was previously set way too high and paid for by non-solar customers. He told the summit despite the lessons of the past government schemes to subsidise continue to proliferate. We risk hunting for a silver bullet that doesn’t exist to meet the important objectives of affordability, reliability and sustainability. You don’t need to trade objectives off each other, Rod said. Without a clear focus on affordability Australia will continue to suffer high prices, he warned.
BP Group Chief Economist Spencer Dale forecast global energy demand will grow as much as 30% in the next 20 years, with the emerging middle class in China, India and emerging Asia driving growth.
Spencer said while renewables and gas will account for much of the response to this growth emissions will continue to rise. While wind and solar are leading growth in renewables energy, transitions take a long time and indeed are measured in decades. Spencer said it takes time for resources and finances to shift, within highly capital intensive energy systems. It took oil 45 years to grow from one to ten per cent of the mix and renewables have grown from four to 15 per cent since 2006, suggesting renewables will grow faster than any fuel in history. But even if renewables grow off the charts it won’t be enough to achieve the Paris climate goals and will account for only a third of the world’s energy needs by 2040, leaving oil and gas as an important part of the mix.
The summit confirmed Australia’s energy future is disruptive and challenging, but with challenge comes opportunity. The right policy frameworks and responses will allow a positive and lasting impact - for business, consumers, communities and the environment.
There are signals and signposts that can provide guidance on the direction that the market is moving and how to leverage opportunities to meet your individual needs. Download our latest energy report which provides multiple insights beyond the energy transition.
Michael is Deloitte’s Asia Pacific Power and Utilities Sector Leader and lead partner of the Power and Utilities team, Consulting Australia. Michael has over 18 years consulting experience serving energy, water and infrastructure clients across the Asia Pacific Region. Michael has extensive industry knowledge having worked for over 18 years in the Power and Utility sectors in line management and executive roles in the areas of asset management, engineering design, and regulatory management. Michael has provided a range of consulting services on business and market strategy, asset and operational optimisation, technology strategy, sourcing and implementation.