Australia’s ‘energy future’ is suddenly upon us: Origin, AGL
Australia’s two largest power suppliers, AGL and Origin Energy, are being forced to confront accelerating changes sweeping the market as the nation’s transition to renewables is declared the fastest in the world and new technologies reshape customer demands.
“The predicted ‘energy future’ we have been preparing for ... is no longer in the future,” said Jon Briskin, head of retail at power giant Origin. “It’s here and now.”
n Australia, coal and gas are still the dominant sources of the power mix, with renewables accounting for less than 30 per cent. However, after 3.3 gigawatts of new wind and solar power capacity were plugged into the nation’s main grid during 2020, the Australian Energy Market Operator (AEMO) has described the pace of change as “staggering” and believes it is feasible for renewables to make up more than 90 per cent as early as the mid-2030s if the trajectory continues.
“When you look at the numbers, this is nothing but absolutely staggering,” AEMO chief system design officer Alex Wonhas said. “Australia is undergoing the fastest transition of any energy system in the world.”
The influx of cheap renewable energy has been piling pressure on the nation’s traditional power generators by driving daytime wholesale electricity prices down to levels where many coal-fired operations are expected to be cash-negative. This year, EnergyAustralia brought forward the closure of Victoria’s Yallourn coal plant to 2028, four years ahead of schedule. There are predictions across the industry that further coal closures may follow.
“I wouldn’t be surprised if we see more of that,” Dr Wonhas said.
In response, companies including ASX-listed AGL and Origin have been increasingly seeking to expand into new technologies and digital offerings in order to be able to offer a range of energy solutions to attract customers and find new revenue streams. Home batteries, solar panels and demand-management technology continue to grow in popularity, while “virtual power plants” – groups of hundreds or thousands of homes with solar and batteries linked up to manage demand and energy flows – are being trialled across the country.
“We are currently witnessing the evolution of an exciting new energy world, one that is cleaner and smarter and that is good news for everyone,” said Mr Briskin, adding that Origin decided to put its “foot to the floor” on digital transformation five years ago. “The role of data to inform decisions and solutions is key, and the role of digital to enable these solutions critical.”
Energy Consumers Australia, a residential and small-business advocacy group, said retailers needed to move from being complacent, with a business model that hasn’t changed in a century, to adopting a “21st century mindset”. Australians previously had limited choice when it came to power, chief executive Lynne Gallagher said, but greater access to data and technology such as batteries and solar had provided customers with more choice. “Retailers need to get serious about innovation around their offering to consumers,” she said. “There needs to be a shift from the mentality of owning their customers to earning their customers.”
AGL chief customer officer Christine Corbett said the industry was already being disrupted by “digitisation, decarbonisation and decentralisation” when she joined the company two years ago.
“What no one could have anticipated was, despite the incredible amount of change in the industry itself that was already underway, things were going to accelerate so much faster and the headwinds we saw on the horizon would be here much faster,” she said. “Indeed, we are all living those today.” Ms Corbett said AGL had always believed the pace of the energy transition would be guided by customer demand, community expectations and technological advances. “Over the past 12 months, the rate of change in each of these areas has accelerated,” she said. “What was once a pipe dream into the future of how dynamic the market may be and what operating conditions we may be experiencing in the industry is now today’s reality.”
As electricity production is a dominant source of Australia’s emissions, the impending closures of more coal plants will help sharply reduce the national carbon footprint. However, some in the energy industry and the Morrison government are ramping up warnings this year that unexpectedly early shutdowns of coal-fired plants could raise the danger of blackouts or price spikes in the future unless there was more investment in “dispatchable” assets. These include facilities such as big storage batteries or gas generators, which are able to supply on-demand electricity in times when weather conditions for wind and solar power are unfavourable.