In the lead up to Australian Energy Week, I spoke to James Harman, CEO of EDL to get a better understanding of how they view the energy transition in Australia.
EDL have a unique perspective, doing lots of work in the off-grid space in Australian and internationally, and currently pushing the boundaries in terms of renewable penetration in these projects. In our discussion, James shares his views on Australia's policy landscape, opportunities for new technologies to drive further increases in renewable penetration and shares his experiences in delivering projects with an extremely large share of renewables.
1. What do you see as the most critical issues for the Australian energy sector?
The most critical issue is still ensuring an orderly transition of the energy sector and delivering affordable, reliable and sustainable energy. The challenges include overshooting in any one of those areas, which could result in severe disruption in the market. We need to maintain strong elements for the market including private sector investment, while amending how the market deals with some of the things that haven’t worked as well in recent times, such as system security.
Australia has an opportunity to embrace various energy types that have been instrumental in helping other markets transition in other parts of the world—this includes providing support and a framework for biomethane and bioenergy on a much larger scale in Australia, similar to what happens in North America and Europe.
2. What do you see as the consequences of the deepening divide between federal and state energy policy?
It’s been interesting to see the way in which states and large corporations have set their own abatement targets. Given the interconnected nature of the NEM, it’s inevitable that the targets and policies that one state sets will influence markets in other states and there will be a flow-on impact.
We’d like to see a coordinated an approach as soon as possible between the states and federal governments. There is a role for the Energy Security Board, to ensure the future market design manages the potentially competing parts.
3. What strategies are you using to make the current regulatory environment work better for your organisation?
We deliver clean, reliable baseload energy in most of the NEM regions—given the distributed nature of our business, there are very few generation assets that have the attributes we have and are located as close to demand as we are. We are usually co-located with local demand sources and as far we are concerned, that is the optimal design of the energy system.
As more intermittent renewable generation enters the market, our assets and their benefits of reliability and sustainability are at risk of being pushed out and displaced. So, new state-supported renewable energy is replacing our clean, reliable baseload energy in what we believe can only be an unintended consequence.
Governments’ recognition of the services our assets provide the market—such as recognition of the abatement they provide, the localised support of the distribution networks, the reliable and baseload nature—would allow us to keep investing in these existing assets and maintain regional jobs.
4. What technologies are going to have most impact on the industry – short and long term?
There is opportunity for many technologies to play their part.
I think the off-grid space is going to become more and more relevant, and I’ll explain why. These hybrid renewable technologies we are developing off-grid, we see playing a major part in the market. EDL is the market leader in high penetration hybrid renewables and we’re working to reduce the fossil fuel fraction further and further, with the ultimate goal of 0 carbon and 0 fossil fuels.
For shorter term storage, batteries are certainly feasible, but longer term storage remains an issue still to resolve. There are a few options to resolve this. Pumped hydro seems to be the one that most people have backed, but like everything else, a broader suite of options for storage is needed.
There are a few evolutions to come on how the market integrates all the various technologies, but the kind of thing EDL does in the remote hybrid space and the research and development we do in that space will ultimately need to be transferred to the NEM.
Because what we are doing in islanded microgrids is providing more reliable generation to a customer than would be available in the NEM or in the West Australian grid—and we are doing that with renewable fraction of up to 100%. We are doing that taking into account local conditions, but also through integrating different renewable technologies to make them work together, to increase the renewable fraction and make the hybrid system even more reliable.
Eventually we see hydrogen playing a major role. Absolutely. But there are cost curve hurdles to overcome, which will happen over time.
In the meantime, we see the potential for renewable natural gas (or biomethane) to play a large part in the transition from fossil fuels to renewables. The Jemena project in Sydney is a very interesting one. It’s been supported by ARENA, for the waste water methane injection into pipelines. We think there is a synergy between energy generators and the pipeline industry to work together, to help form the market structure that’s needed for renewable natural gas in pipelines to be economic and not need ARENA support.
Taking our experience in the USA and Canada into account, we think that we can help and we’ve been talking to the regulators about that, about what’s been happening in other parts of the world. Does Australia need to reinvent the wheel in this space? Probably not. There are other systems and structures that have worked well. Renewable natural gas is technically feasible. It’s being injected in pipelines all over the world. It just needs to be incentivised through an abatement methodology that recognises the fact that it’s replacing fossil fuels in the pipeline.
Hydrogen is the endgame. We’ve got two off-grid hydrogen pilots in WA where we are testing feasibility, and indications are it won’t be economic for some time. Whereas renewable natural gas is closer to being economic and we think there can be a market setup and a structure to recognise the value of abatement that comes from renewable natural gas in the pipelines.
5. It’s not all doom and gloom. What energy developments have caught your imagination or make you excited?
Off-grid hybrid renewables make me excited. We started with Coober Pedy in South Australia where we used to run a diesel-fired power station—we converted that into a hybrid microgrid with solar and wind, which delivers up to 100% renewables and displaces millions of litres of diesel that don’t have to be transported to Coober Pedy anymore. We proved it could be done with ARENA support—about 50% of the capital was supported by ARENA. We then took the learnings from Coober Pedy and applied these to Agnew on a much higher scale, and on that project we only needed about 10% ARENA support. The one we are building at Jabiru right now has no ARENA support, as the technology cost has come down and the learnings around integration have improved. So, off-grid hybrid renewable technology is a test case for what can be done across the rest of the grid.
You'll hear from James Harman at Australian Energy Week, being held 24 - 27 May . See the full program here.