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Transcript: Energy Insiders Podcast interview with Alex Wonhas

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Kerry Schott Alex Wonhas Clean Energy Summit 2019 - optimised

You’re listening to Energy Insiders, a weekly update on clean energy and climate policy with Renew Economys’ editor Giles Parkinson and leading energy analyst David Leitch. Energy Insiders is brought to you by Evergen, providing cutting edge energy management software for battery optimization, virtual power plants and distributed energy resources; and Pylon, helping solar installers and retailers design high resolution solar proposals in minutes.

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Giles Parkinson  00:29

Hello, and welcome to this latest episode of the Energy Insiders podcast. And a very special one it is because we’re talking today about the Australian Energy Market Operators’ latest integrated system plan, at least the draft version, for 2022 and quite a game changer it is. My name is Giles Parkinson, I’m the editor for Renew Economy, and joining me as usual is David Leitch from ITK services. David, how are you?

David Leitch  00:56

I’m well, thanks. Oh, excellent.

Giles Parkinson  00:59

And also joining us from AEMO is Alex Wonhas. Alex, you’ve been shepherding through the ISP as …you’ve changed titles a couple of times, Alex, I think you’re the Head of Engineering Systems or Head of System Design. What exactly is it?

Alex Wonhas  01:18

Firstly, hi, Giles. And I’m glad I’m being a moving target. I’m currently the EGM for system design at AEMO.

Giles Parkinson  01:26

I was very close. Thanks for joining us once again. Alex, good to have you back on the podcast. And also joining us is the head of forecasting, Nicola Falcon, thanks for joining the Energy Insiders podcast for the first time.

Nicola Falcon  01:36

Thank you for inviting me, it’s great to be here.

Giles Parkinson  01:39

So the draft ISP has been released, it’s quite a significant document. It focuses mostly on the Step Change scenario. Now if we go back to two years ago, the 2020 ISP had a central scenario and various other ones including step change, which is a bit of an outlier, talking about a decarbonized grid by the early 2040s. That is now considered the most likely scenario or the core scenario. And quite a radical change in Australia’s grid it forecasts. A bunch of assumptions here, which we’ll go into in detail in the forecast, particularly that the accelerated departure of many coal plants, possibly three times as many coal closures by 2030 as had originally been forecast, and going with that is the need to plan transmission to get enough variable renewables into the mix and also significant amounts of storage and dispatchable capacity. Alex, I thought I was going to do a really good summary. I don’t think it’s been quite as good as I expected. I’ll just ask you both just to sort of outline for each of you what are the most significant parts of the ISP? And then I think we’ll just go over to questions. Alex, you first.

Alex Wonhas  02:56

That sounds like a great approach, Giles. And thank you again for having us around to talk about the ISP which we are so passionate about. But before talking about all of the technical things that we’re doing in the ISP, can I actually also say a huge thank you to all of the people from across the industry who have participated in this process to date. So we had over 200 people already actively participating. We received 120 submissions, we held 25 webinars. And as you said, this is the draft ISP. So what we’re really keen to hear is, what is the feedback that people have? How can we make this better so that in the middle of next year, we’ll publish an even better document in form of the final ISP. The second point I wanted to make is, as you have said, one of the, pun intended, big changes of this ISP compared to the last ISP is actually that the step change scenario is now our new central scenario. And again, this has been influenced by the feedback that we have received from our stakeholders who said, basically, half of them said, that step change is, they consider, is the most likely scenario. And there’s still 17% who consider that the hydrogen superpower scenario is the most likely and then we “only” in quotes had 29% saying that the progressive change scenario and only 4%, which is really one in 20 people saying that the slow change scenario is the most likely. So we are seeing a real shift towards this acceleration that we have experienced over the years. And I think what that means for us in the energy market, we need to really put our skates on and we need to build the system that Australia needs in the future. And that’s an enormous task. So in this step change scenario, we are by 2050, we are expecting to see a doubling of the electricity consumed from the grid. And that is because we are seeing a huge electrification of our economy. So not only the traditional electricity is being used, but we are also seeing electrification of transport, of heating of cooking of industrial processes. Now, to achieve that, we need a enormous investment into new utility scale wind and solar generation, about nine times what we currently have, sort of from 15 gigawatts to about 140 gigawatts. And we need about four times the currently installed distributed PV capacity. And most importantly, we need to ensure that power is available if and when consumers want it. So we also need to treble firming capacity. That is a huge task. And to enable all of that, we’ll need more transmission, because there will be no transition without transmission. But I’m sure we’ll talk about this later.

David Leitch  06:07

Nicola. What was the most interesting thing to you in this forecasting process?

Nicola Falcon  06:14

Yeah, well, Alex has just outlined some numbers. But I think it’s really bringing those numbers home to say, what does that actually mean for us as an industry, but also for, you know, the mums and dads and communities and  everyone that we need to engage with. So now Alex rattled off some numbers, renewable generation, for example, from 15 gigawatts today to over 140 gigawatts by 2050. But let’s just stop and think about what that actually means for a minute. By 2030, we would need to triple the amount of renewable generation that we’ve got on the system today. And that means that the record rates of connection of renewable generation that we’ve seen in the last year or so is going to have to continue and increase almost immediately to be able to achieve that. And then we’re going to need to start ramping up our supply chain to be able to deal with not only that, but then a doubling the decade later and a doubling the decade later. So when you actually start putting it into perspective like that, I think it’s really does bring home just how much we need to move, and to Alex’s point, put our skates on. And it’s not just about what we need to do in terms of connecting up that renewable generation, but really thinking about what that means for communities? How are we going to engage on all of that? How do we get this the social licence to do that? And how do we bring the opportunities that they might be able to realise to light?

David Leitch  07:44

I think our social licence is going to be an incredibly important topic. And I will certainly talk some more about that. But I know that in the mainstream media and you talked about the person in the street, and the one thing everyone’s want to know when they hear all these big investment sums, is what does it mean for their electricity bills? There’s a lot of avoided fuel costs. But if we go with the step change scenario, what would you say about the likely course of electricity prices for both big and small business and people?

Nicola Falcon  08:16

We haven’t done, and it’s not really the role of the ISP to project forecast of prices, but what I can say is that we know that there is an efficient way to deliver all of this and an inefficient way to deliver all of this. And if we can get the transmission, the storage, the renewable generation in place to enable this development, then it’s certainly going to be the lowest cost way for consumers to achieve emission reduction in the NEM.

Alex Wonhas  08:49

And just just to build on that Nicola, so as part of the regulatory prescribed analysis that we need to do in this, is we actually looked at: what are the net market benefits with the optimal transmission build and with the optimal generation and storage build, and then we compare it to a case where we’re not building any transmission, and the difference is quite staggering. So the difference between those two scenarios is $29 billion. And effectively, that means for every dollar invested into transmission infrastructure, we are getting about 3.5 times that value back to all of the participants in the electricity market. I think as we care about the cost of electricity going forward, I think that sounds to me like a real no brainer investment.

Giles Parkinson  09:47

And is that the significance of actually having the step scenario, step change scenario as the core of the central scenario? Because it now means that when the regulators are making decisions on these transmission investments and governments and other people making decisions they’ve got this in mind, and that is the basis of their calculations? Because I know that there’s been some discussion. I mean, some projects have looked like they’ve been delayed, because the net market benefit is not necessarily very visible under the old central scenario. And is it true to say that under the step change scenario, that’s actually important, because it kind of shifts the economic calculations?

Nicola Falcon  10:21

I mean, it definitely shifts that economic calculations. But I think the other thing that becomes really, really clear when you start looking at a realistic scenario where the future might go is that all of this transmission investment is needed, and it’s just a matter of timing and when. So there’s very, very little difference between one transmission plan and another really, in terms of those 29 billion of net market benefits for consumers. We need all of that transmission, and we need it pretty quickly. So I think that’s the other thing that it really draws out, is it removes the discussion about whether this transmission is good or bad for consumers, whether it’s needed at all. And it really just puts the focus on getting things done.

David Leitch  11:10

The other thing I’d like to talk about a little bit is the integration of behind the meter, which gets a fantastic boost in the step change scenario. But just staying with social licence for a minute, which is an incredibly important topic. I mean, I just saw in the Hume link, one of the transmission projects today that there’s up to a billion dollars of biodiversity costs. And there’s even within the renewable energy industry, a lot of debate about the merits of transmission and social licence. I guess it’s difficult, not something engineers, market forecasters generally worry about so much. But I guess my question to you is, do you have any ideas about how to build social licence, how to get the community and the nation to agree that this is the way forward if even if 60 or 70% of people think it’s the most likely outcome?

Alex Wonhas  12:01

David, I think that’s a really, really important topic. When I think about what are the potentially biggest barriers to the transition of our energy system, I don’t actually think it’s, you know, the technology or the cost of renewables, or whatever people are talking about, it is actually the social licence of building the system of the future. And transmission is one of the key elements. But let’s also remember not the only element that requires social licence, and so big, you know, pumped storage projects require social license, and we even need social license to run distributed PV effectively. But let’s take transmission as an example. Without good engagement with the community, it will be very, very difficult and potentially impossible to actually build the 10,000 kilometres of new transmission infrastructure that we need. That engagement needs to start early. And that engagement needs to be very sensitive. And we need to carefully design in detail how we do this transmission infrastructure. And there are actually some lessons learned here from also the current framework that we have. The current framework focuses a lot on, you know, the economic benefits test, and actually quite explicitly  exclude some of the sort of community impact as factors, but I think, is, in particular, with the early works declarations that we’re making for some of the projects, we actually hope that this allows the respective network service providers to start working with the communities early and to get to have sufficient time to explain what these projects are doing to design them sensitively. So that, you know, in the end, we can find a workable compromise, for delivering this nation critical infrastructure.

Giles Parkinson  13:58

I’m fascinated by the fact that the AEMO forecast under the step change scenario is for 79% renewables by 2030. Now, that’s well beyond what the coalition modelling assumptions for their  climate plan. I think that’s about 69%. But it’s actually lower than say, Labour’s, which is assuming an 82% share. But look, it’s not that much different. Given some of the delays that we’ve seen in the last 18 months to two years,  I think connection and financing approval for new projects and things like that, I guess a lot of it’s  been caused by the lack of transmission infrastructure, how confident are you that we can actually roll out the significant amounts of, Nichola’s talked before about, you know, we need a three fold increase in wind and solar over the next decade, well less than that actually, to get to the 2030 target?

Alex Wonhas  14:48

Look, it’s going to be a stretch, but there is no debate about it. But I think the only way we can achieve this is by working together across the whole of the industry to address all of the challenges that are in our way and solve the problems. I mean, you mentioned connections as one example, I just wanted to make a big shout out to the industry and also the Clean Energy Council, who over the course of the last year or so actually worked on developing the connections reform initiative that looks at what are the different things that we need to change in the way we are currently connecting generators to make this process simpler, and most importantly, more predictable, because we need that streamlined process to connect the amount  of renewables to it. So there are many, many different, different things that we need to do. We just need to get on and, frankly, do them and work through that problem by problem.

Giles Parkinson  15:49

It’s interesting…

Nicola Falcon  15:52

I was just gonna add that, you know, that’s also one of the roles that the ISP can play is to be able to actually step out what might be needed in the next, you know, 10 years or so, so that industry can start planning for it. And you know, in the absence of  a plan or a vision, it’s very, very difficult to know, what is the target we’re trying to achieve? And just how quickly we need to get there?

Alex Wonhas  16:15

Yeah, can I  just build on what Nicola said, Sorry, to jump in there, Giles. But I think we need to build the capacity also of the industry to deliver all of this infrastructure. We actually at the moment, right,….

David Leitch  16:28

Thats right, there’s not many transmission experts out there are there?

Alex Wonhas  16:31

Yeah.

David Leitch  16:32

I mean, not enough engineers to build the transmission, there are just  so many skills needed.

Alex Wonhas  16:38

That’s exactly right, David. And I think this is, by the way, not just transmission, it actually applies to all of people working in infrastructure, actually, Infrastructure Australia has done a report recently that looked at the whole plethora of infrastructure that we need to deliver across the country and identified unsurprisingly, we actually don’t have the capacity across the industry to do that. So as Nicola said, what we are trying to do is we’re trying to provide a vision for the future. And hopefully, that gives people the confidence to actually build the capacity so we can deliver it.

Giles Parkinson  17:10

One of headline conclusions or assumptions in the step change scenario is the three fold acceleration in coal closures. So rather than the five gigawatts of coal closures by 2030, previously assumed, you’re suggesting that could actually be 14 gigawatts. And you’re also suggesting by 2032, all the brown coal generators could be closed in Victoria. Now. I know that Lloy Yang A,  think that they’re going to be open until 2048, or something, or at least that’s their official view, they probably don’t actually believe that. What’s causing you to update to make those assumptions?

Nicola Falcon  17:46

Well, it’s a couple of things. And I would like to first just emphasize that this is just a model to outcome. And we acknowledge that there are a lot of decisions and considerations that come into play when deciding as to closing a plant or not. So, you know, we’re not pretending to have a crystal ball on some of the operations and everything. But we’re just seeing that with the amount of renewable generation that will need to come into the system, there’s going to be continued pressure on electricity prices, particularly during the day and requiring more, I guess, variability in operation across the day and coal plants find that difficult to operate very, very flexibly. So they have to make decisions. Do their stay on and deal with quite low electricity prices at certain times, to make sure that they’re available when they need to at higher price times. Do they’re shut down and then potentially miss it, it’s going to become a far more challenging environment for them to operate in. And so our modelling is identifying that there is potential definitely for a lot more closures, given all of those challenges that the coal fired generation is going to face in the next decade. But I do just want to stress, it’s a modelled outcome. And each company is obviously going to be making a decision based on a number of factors.

David Leitch  19:08

It is just a modelled outcome. But I mean, I think it’s got a fair claim to be the most authoritative model in the NEM and likely to remain so. So it’s, I wouldn’t resign from the fact that your model is going to be taken very seriously. And that’s a wonderful thing. I mean, this is the most exciting vision that I’ve ever seen laid out in an official government document, you know, with detailed modelling to support it. It’s incredibly exciting and wonderful. At the moment, though, if you went out and talked about coal generation, or even six months ago, I would have heard all that stuff about ningen levels, and systems security and inertia and stuff like that. I mean, do those sorts of things…. I suppose we should get out of the way that the step chain scenario meets the reliability standard, despite all the coal generation closing, but how do you think about you know, system services I call them. Virtual inertia and stuff like that, in the context of the coal generation rotating masses going away?

Alex Wonhas  20:07

David, that’s another great question. And that’s building on what we discussed earlier. There’s a lot of real technical challenges that we need to solve, because the reality is at the moment these coal plants or gas fired generators provide important services, and we see that, for example, in South Australia, where we need to actually keep some of them on to keep the system stable. I think what we need to work through very, very quickly is finding ways to provide these essential system services in a different way. And I think we’re making some really good progress. So for example, we already can provide system strength by using synchronous condensers. But that’s a fairly old technology. As we have done as part of the engineering framework, we have actually put out a white paper that looks at what is the potential for using grid forming inverters to provide the same system services. And we are very, very excited about the prospect of this technology and ARENA is now putting together a funding round to demonstrate how this technology can operate in the wild. We in AEMO really look forward to working closely with industry and ARENA to demonstrate the true and full potential of this technology. And dare I also say, what we have seen through the recent tender process that we’ve run in Victoria, we are actually seeing those technologies being very, very competitive from a cost point of view, which is also important for consumers.

David Leitch  21:45

Can I be clear, though, that the amount of storage that you look to in the ISP doesn’t explicitly consider the amount of grid forming inverters or virtual synchronous machines which don’t actually require a lot of energy, but perhaps a certain amount of power? But that’s, that’s not actually explicitly modelled as a component of the ISP, is it?

Alex Wonhas  22:06

That’s correct, David. So at this level, the modelling actually assumes over the next five to 10 years we will actually solve those challenges. We are working very closely with industry again, on identifying what are all of the technical issues that need to be solved. That’s actually recently been published through the engineering framework roadmap that maps out in a large amount of detail all of the essential things that we need to work through on a technical side.

Giles Parkinson  22:40

Can I ask about gas generation, that we hear a lot of talk about gas fire recovery and the importance of gas in the grid in the future. The ISP, in even a step change scenario makes it very clear, is talking about nine gigawatts of gas, it’s making it very clear that the mid merit,  what we might call intermediate gas fired generation, the closest thing to what we used to call base load, probably doesn’t have much of a role there because we need gas generation, which is very quick response ,fast dispatchable, etc, etc. Does that already exist in the grid? Why are we actually going to see maybe not more gas generation in the grid, but really just like a realignment of the portfolio? Some of those sort of mid merit ones going out and replaced by  these quicker dispatchable generators?

Nicola Falcon  23:28

Yeah, it’s a lot of the latter. I mean, I gas fired generation, some of it is also expected to close in the period as it gets aged. And a lot of the mid merit stuff as it does close we’re seeing is likely to be replaced by peeking gas. And that could be re configured from the CCDT’s. And we’re not looking at it in that sort of detail. But the point is that there continues to be a need for peaking generation of some sort to really be able to fill in the dark stall periods that we might experience if we’ve got a lot of renewable generation and the winds just not blowing. Or even when we have very, very high demand periods. And it’s just not, from a modelling perspective anyway, it’s not economically efficient for us to build that much more storage capacity just to better cover, you know, one or two periods in the year that it might be very, very high demand. So peaking generation of some sort, whether it’s fuelled by natural gas in the future, whether it’s fuelled by green hydrogen, or some other sort of zero carbon fuel, we seeit still playing a really crucial role in helping to balance the system.

David Leitch  24:40

Nicola, Can I ask, while we’re talking about the fuel mix, and I guess that always does depend on cost a lot, but I mean, there’s a fivefold expansion in rooftop PV, which is, you know, in rooftops already on 30% of houses. So you know, I know it doesn’t work like this but is it going to be on 150% of houses by the time we finished? That’s a joke. And then it’s also the mix between wind and utility solar. I saw a report in New South Wales that indicated just recently they were looking for a 75%, wind, 25% utility solar mix. But when I look further out in the forecast that you have here, it’s more like a 50/50 mix or something like that.  Could you just talk a little bit about that, too?

Nicola Falcon  25:27

Yeah, sure. So the rooftop PV that we’re forecasting ends up being more like 65% of detached dwellings having PV systems by 2050. Now, that might not sound like that much more than what we had today, the 30% that you spoke about. But remembering also that over that period of time, we’re going to get a lot more homes connecting to the grid as population growth and so forth. So that’s where we get the fivefold increase from today with 65% of homes forecast to have PV. And I might add that many of them in the step change scenario that we’re looking at are also assumed to have their systems coupled with an energy storage. Now, one of the key features of the ISP is the diversity of resources that can be embraced by having transmission, sort of connecting geographic diversity. But obviously, solar doesn’t have that sort of diversity. So if you end up seeing a lot more solar on homes, and mums and dads are wanting to have PV on their systems, and so forth, you’re gonna find that there’s less value in having as much large scale solar in the system. And so what we’re seeing with our ISP modelling is that at least in the near term, as you continue to see so much growth in the household PV,  what the transmission system needs to be developed to complement that and create that diversity  is more wind generation, and tapping into wind generation, right across different regions in the NEM as well, so that we can really get that diversity. What we’ve been finding, though, is towards the end of the horizon, when we are really getting into very high levels of renewable generation, it’s then sort of switches, again to being a focus more on solar. Because really, at that point, what we’re looking for is low cost energy. And you know, solar is a very, very low cost energy source. We need to be able to have enough to better meet our winter demand. But then we’re probably going to start finding that there is what we call curtailment or some renewable generation that we just you know, is excess to need or requirement. And if we’ve got a lot of solar in the system, it’s probably going to be some of the solar during our summer months that we just have more than we need, can’t store at all, because there’s not really any need to move it to any other period in the year. But I think thats going to be a key feature of this future that we probably haven’t talked a lot about in the past. And when we think about how to make sure that’s incentivised from a market perspective, but, you know, curtailment of renewable generation is probably going to be part of an efficient future. And we need to start thinking about how that works. I’ll hand back to Giles but I’ve always wondered, you know, I don’t want to be the solar producer being curtailed and getting zero, my banks not going to like that. But over to you Giles.

Giles Parkinson  28:28

I’d like to ask about the hydrogen superpower scenario. It’s the one scenario that is sort of calibrated to a 1.5 degree outcome, which is, of course, the Paris Climate goal, and is what many people think that we should be aiming for. It’s also the assumption, at least in the hydrogen superpower, of many people coming in talking about hydrogen electrolyzers, and what have you, and there’s many billions ,not so much being bet but certainly being talked about, investing in renewable hydrogen plants across the grid. That scenario talks about an extraordinarily quick transition. I mean, I think the AEMO document describes it as monumental. So what you’re talking about is all coal generation leaving the grid by within 10 years. You’re talking about pretty close to 100% renewables from about the early 2030s going on. Maybe never quite 100% because presumably, you’ve got some of that dispatchable gas generation sitting there just in case what the Germans call a “dunkelflaute”. But Alex, I’d like you to tell us, how should we think about the hydrogen superpower scenario? What does it mean for investors? And I guess the big question is, if we are moving at that speed, do we get to keep the lights on?

Alex Wonhas  29:39

Well, firstly, we will ensure we’ll keep the lights on and I think if we work together as an industry and we frankly implement the things outlined in, for example, the hydrogen superpower scenario, we can keep the lights on. Well, what does it mean for investors? It is going to be a massive investment opportunity, dare I say, for investors. And when you look at the last couple of months in Australia, I think almost every single state has put together a very ambitious hydrogen strategy. And some of the wealthiest people in Australia have made huge commitments to invest their funds towards the establishment of this new industry, which, if it all goes to their expectations, could rival our very successful existing resource and energy export industry. So I think it is a huge opportunity for us as a country and coming back to sort of debating of our scenarios, actually, not an insignificant number of our stakeholders think that this might actually going to be happening. But I mean, we have already said the step change scenario is very challenging. So you know, doing all of this in a very short amount of time will be a true, nationally coordinated effort that is required.

Giles Parkinson  31:10

The ttep change scenario, going back to the last ISP, was considered the out there one. I mean it’s an entirely possible thing, given the state of the pace of technology change, and maybe the lower cost of electrolyzers. And maybe some of these billions actually being produced and invested. I mean, it could be the next time you do an ISP in 2024. Or it might not be you personally, Alex, that could be the central scenario?

Alex Wonhas  31:30

It may very well be. And I mean, it is a really, really good exercise to actually reflect back. What did we think about the energy sector just 10 years ago? I mean, we were thinking aah, you know, renewables are currently quite expensive. But yes, we hope they’re gonna be cheap. But can we build all of these things, and boom, today, they are the cheapest form of electricity. We are building renewables at rates we have never anticipated. And we were, you know, frankly, surprised by the speed with which the industry has developed. So yeah, that gives me a lot of confidence that, you know, we’ll probably be surprised again in the future by how quickly we can evolve and adapt.

David Leitch  32:16

I’m just going to come back to the demand side of things in the step change. You know, one of the exciting things that you’re forecasting is that electricity demand  would double under that scenario, when, of course, it’s been absolutely flat or even down over the last 10 years, cumulatively. Could you just talk a little bit about the things that, the sectors that will drive this potential doubling of demand?

Nicola Falcon  32:44

Yeah, there’s obvious ones that we’re all starting to talk about now in the transport sector, so your electric vehicles will be part of the demand, we’re thinking about how we heat homes, how we heat businesses, and so forth. So a lot of the gas demand will also be electrified, as well as a lot of the heavy industry that currently relies on gas to run their businesses. You know, a lot of that will also be electrified in the future. Not all of it, some things just don’t work to be electrified. But a large proportion of those industrial processes will.

David Leitch  33:26

And if we were to leave some of them out, like the industrial, you know, like, I think we all agree that electrification of industry, of heat, is a harder sector than electric vehicles. Would that change the demand forecast very much?

Nicola Falcon  33:44

Well, a lot of a lot of the increase in demand is from electrification, not only of the electric vehicles, but of those other processes. So yes, it would change the demand a fair amount. And I think the question needs to be how? How do we look at this from a whole of system perspective, for Australia? We need to be thinking not only of the electricity sector, but all of those other sectors and how they couple together now, whether it be transport, whether it be gas, or or something else, I think that’s one of the challenges.

David Leitch  34:14

Would I be right in saying ,just before I head back, again, that even within the household sector, despite all the residential behind the meter stuff, and the fact that it goes on batteries, despite that, and despite because of electrification within the house, that actually the operational supply to the residential sector would still eventually increase?

Nicola Falcon  34:42

I’m not actually entirely sure about that one. David, I might pass on that and need to have a look at it further.

Giles Parkinson  34:51

I think we’re probably coming to the end of this podcast. Thank you very much, both of you. Before we go and it look, notwithstanding maybe another couple of questions which David has thought of, Alex, I was just wondering, you’ve announced your departure from AEMO, it seems to be a surprising one. I mean, I know you’ve helped deliver this, you’ve been key instrumental in delivering this draft of the 2022 ISP, you won’t be around for the final version. It’s such an exciting transition, as you say, why hop off the train right now?

Alex Wonhas  35:20

Well, as you have already heard in this discussion, Nicola, who will be stepping into my shoes, she is going to be doing an amazing job. And in fact, she has been one of the driving forces of this ISP already. So I think it’s actually a great opportunity to create space for new talent. And rest assured, I remain extremely passionate about the energy sector and its transformation. So after having had a bit of a break and a breather, I will be back as, to quote a very famous Austrian actor, with large muscle mass.

Giles Parkinson  36:03

Nicola, what does this mean for you? Congratulations, then on your future role. I guess the answer to what’s gonna be your priority is actually putting together the final version of the 2022. ISP? In what ways might you be having a different approach?

Nicola Falcon  36:25

Well, first of all, thank you very much. And, you know, I have to say, I’m still very sad to be farewelling Alex from from our organization, and AEMO. I very much enjoyed working with him on a lot of the ISP things. But really, my vision and his are pretty well aligned. So I’m not intending to do a lot of things differently, certainly. And the role is, as I should clarify, will be an acting position. But really, I hope to be able to just, you know, take what Alex has already delivered for us and keep on moving forward with it.

David Leitch  37:06

I only have one final question. I mean, I could go on forever. But, you know, what’s the single number one thing , if on the critical path,  what is the biggest priority now?

Alex Wonhas  37:19

Let’s make it happen. I think we have been talking about this energy transition for such a long time, and we have been analyzing it to death. And we’ve probably contributed to this. We actually need to make it happen. It’s coming at us, as we’ve seen with this one, faster and faster. So we need to get on with it.

David Leitch  37:39

And but I’d be right in saying, wouldn’t I,  it seems to me, the three things you talk about are that transmission, which always takes longer,  has to be accelerated further. We need a plan to close the coal plants that would make everything a lot easier. And perhaps then long duration storage would also be on the critical path.

Alex Wonhas  37:58

Well, that sounds like a great plan to me. Three point plan. David, maybe you want to do the next ISP?

David Leitch  38:05

Yeah, I want the lights to stay on so I won’t be doing that.

Giles Parkinson  38:07

It’s interesting, though. I mean, I sort of I spoke over David, when he’s asked the question, and you said, we need to make this happen. But who was we? I mean, it’s not just AEMO, who else do you need to get on board with this?

Alex Wonhas  38:22

That’s a really, really good point. It’s actually everyone in the industry, everyone has a part to play in this. You know, AEMO has a role in doing the plan and keeping the lights on. Investors are really important. This is a north of $100 billion investment. So you know, capital markets need to come to the fore, all of the market bodies and governments need to put the right rules and regulations in place to enable us to do these things. You know, people around the kitchen table need to make the right decisions. And there’s probably a long, long list of people. It’s not a single silver bullet, but we as a nation need to come together. And we as a nation need to deliver this.

Nicola Falcon  39:05

Yeah, and I might just emphasize that at the end of the day, it really is about the consumers. So one of the things that we’re going to need to work on very hard is to.. how can we provide consumers with confidence in this plan? Because I think really, that’s going to be a critical part of it is to help them understand that this is in their best interest.

David Leitch  39:30

Speaking as an energy minister, speaking as an energy minister, Nicola, I can tell you the way you do that is by telling them lots of jobs and electricity prices will be no higher in real terms than they are today. That’s how you do that. And the lights will stay on.

Nicola Falcon  39:45

Sounds pretty good.

Giles Parkinson  39:48

Well look, Alex Wonhas and Nikola Falcon, fromAEMO, thank you very much for joining the Energy Insiders podcast for discussing the ISP, the draft ISP for 2022, which I’m sure you can find on AEMO website, and also a couple of stories on the Renew Economy website as well. So thank you very much and best luck for the future, Alex, and we look forward to talking with you more in the future. Nicola.

Nicola Falcon  40:12

Thanks very much. Both of you, enjoyed it.

Alex Wonhas  40:14

Thank you. That’s been great.

Giles Parkinson  40:17

So once again, thank you very much to Alex Wonhas and Nicola Falcon, for joining us, David. Look the ISP, I’ve got to say is, as we’ve kind of alluded to in the chat with those two, is a pretty impressive document, I think the step change is really quite significant because it’s going to cause government regulators and developers and investors to think, or to rethink the game. And we could go even further. I mean, in the  last ISP step change was the outlier. And this time they got hydrogen superpower the outlier. You never know, in a couple of ISPs time?

David Leitch  40:56

Well, it’s like a bomb going off, and before the election to with 14 gigawatts of coal slated for closure in their modelling. However, it’s only a plan as Nicola said, and, you know, the question is what actual, there’s no mandate to action it as a plan other than for the transmission.

Giles Parkinson  41:16

Yes, but I guess what it does is that, yes, but it does sort of set the scenario. And it’s just a reminder of the pace of the transition that is actually happening here, and a reminder that we just can’t blindly just go along and just sort of say, oh will, things will happen, we actually do have to put a plan in place.

David Leitch  41:32

It’s a fantastic plan Giles. I think it’s an absolute a bomb, you know, like it’s a fantastic plan and wonderful, wonderful thing, but look, we should let our readers all digest it and we’ll talk about it some more. There’s a few other things  in the minute or two we’ve got left to to ourselves, what else are we talking about?

Giles Parkinson  41:50

Well, look, as you forecast last week, there was the New South Wales infrastructure plan. More information on that AEMO. …I can’t remember the subsidiary it’s called, but it’s basically sort of managing the rollout of this and it gave the timetable for all the auctions that will happen over the next nine years to replace the coal fired power stations that will close in New South Wales, and roughly operating between about 500 megawatts and one and a half gigawatts a year. David, do you make any or have any observations to make about that plan?

David Leitch  42:21

Just the steady pace of it and the organized rollout, off to a slow start, but I mean, in the end, that may produce a good outcome. Bit like the old 50 over cricket style, isn’t it Giles? But we won’t really talk about that.

Giles Parkinson  42:34

And look, things happening elsewhere. We’ve got the formal opening of the Victorian big battery in…

David Leitch  42:43

….twelve months from contract to opening.

Giles Parkinson  42:45

Absolutely.

David Leitch  42:46

You can say what you like…

Giles Parkinson  42:48

…well, quite impressive. I mean considering they’re the sort of set back with the fire as well. So they still got it out on time. So that’s quite impressive.

David Leitch  42:56

It’s not just Tesla, you’ve got to give NIO a tick. They’re great operators and getting things up and done.

Giles Parkinson  43:01

Absolutely. Yeah, absolutely. And look, there’s a few other things happening. One of the things not mentioned in the ISP is offshore wind, but there’s some people getting really serious about that. Alinta as revealed in this very podcast a couple of months ago by Jeff Dimery, planning a one gigawatt wind farm and they’ve now told us, or announced to the world, that it will be located near Portland and ostensibly to supply the Portland smelter with 100% electricity by say 2028 or 2030. So let’s remember that the Boyne Island smelter and the Tamago smelter, both owned by Rio Tinto, or is majority owned, are also going 100% renewables, so they are the biggest consumers of electricity in Australia individually, and possibly collectively, and they’re all buying renewables by the end of the decade. David.

David Leitch  43:50

Yes, the ISP explicitly says it doesn’t model any offshore wind because the costs aren’t there and the benefit to cost ratio isn’t right. So it’s interesting that these projects are proceeding nevertheless,

Giles Parkinson  44:01

It was very much at the concept stage, aren’t they but it’s still interesting attention. A bit like some of the hydrogen electrolyzer announcements. I mean, we’ve got some more rolling out every day. One that’s struck me was Nearstar and Trafigura, majority shareholder Swiss based trading house in Port Pirie, which sounds interesting, and there’s also a, well not a PPA, it is more of an MOU, signed the 600 megawatt solar farm, by the project that you consider to be the most serious at this stage, which is the Stanwell project up in Gladstone.

David Leitch  44:39

Yes, I like the Stanwell project because it’s close to Japan. It’s clearly got lots of resources, although maybe not so much water, that’s an issue for them. But it’s really that they’ve got customers. Iwatani, which is the biggest hydrogen user in Japan. Plus Kawasaki, plus Konzai Electric Power Company and Marabini and they’ve got in the consortium the people building the first hydrogen ship. So it’s the strength of that consortium. And the fact that you can see where the off takes going if the cost things are met. That makes me feel really good about that hydrogen project relative to all the others, including the many millions of projects that Twiggy Forrest is so busy actually announcing, one project after another one. I wonder if he’ll ever have any time to build any of them?

Giles Parkinson  45:26

Well, we’ll certainly find out. You’re right, a string of announcements. But let’s see what happens there. David, look, I think that’s a bit of a wrap. I think our focus should be on the ISP and I think we should let that speak for itself and the AEMO people without any further ado, so thanks to you. Thanks, once again to Alex and Nicola for joining us today, thanks to of course to our sponsors, Evergen and Pylon. Thanks, everyone listening out there. We’ve got a couple more episodes to go before the end of this rather extraordinary, in some ways, exhausting, but exciting year, at least in the electricity industry. And I think that’s a better wrap for now. Thank you very much.



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