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Energy Policy predictability is coming


Energy Policy predictability is coming

As part of SIMEC Energy Australia’s commitment to transparency, our CEO, Marc Barrington sat down for a wide-ranging interview with Giles Parkinson on the RenewEconomy, Energy Insiders podcast on the 28th of February 2019. During this extensive interview, Marc and Giles spoke about the history of SIMEC Energy Australia, our Cultana Solar Farm, Playford Battery and Middleback Ranges Pumped Hydro projects, how our projects will work to improve the reliability and cost of energy in Australia, Federal energy policy, and the South Australian Home Battery Scheme.

An abridged version of the podcast containing the interview with Marc Barrington can be listened to below. A full transcript of the interview is also included at the bottom of this article.

If you prefer to listen to the full podcast click the link:
https://reneweconomy.com.au/energy-insiders-podcast-simec-energy-and-scomos-big-hydro-pump-20210/

RenewEconomy is an independent website founded and owned by Giles Parkinson, a journalist of 30 years’ experience, a former Business Editor and Deputy Editor of the Australian Financial Review, a former columnist for The Bulletin magazine and The Australian, and the founder and former editor of Climate Spectator. It has emerged as one of Australia’s best-informed websites focusing on clean energy news and analysis, as well as climate policy.

Energy Insiders is RenewEconomy’s podcast, hosted by Giles Parkinson and columnist and energy markets expert David Leitch, discussing the week's main events in politics, solar and storage.

Interview Transcript

Podcast Date: 28 February 2019

Giles Parkinson:
Welcome to this latest episode of energy insiders. My name is Giles Parkinson I'm the editor of RenewEconomy. And joining me, my co-host David Leach from ITK Analysts. David, How are you?

David Leitch:
Very well Giles and I trust all our listeners are well, and we've got a special guest as usual this week.

Giles Parkinson:
This is Marc Barrington. He's the CEO of SIMEC Energy, which is the energy company, which is majority owned by Sanjeev Gupta's GFG Alliance. Sanjeev Gupta of course, being the buyer of the Whyalla steelworks and the man who wishes to solarise Australia with large scale solar and battery storage. Let's have listened to Marc Barrington from SIMEC Energy.

Marc Barrington
. Thanks for joining Energy Insiders.

Marc Barrington:
Thanks very much Giles. It's, it's great to be here.

Giles Parkinson:
You are chief executive of SIMEC Energy, but in effect that has two businesses SIMEC Energy, which we understand is the player in there, the bigger energy markets as I understand and ZEN Energy, which is a player in the household battery and solar business, I presume.

Marc Barrington:
Yeah that's right Giles, you're almost one of the first people that has picked this up. We were previously, SIMEC ZEN Energy, but what we found was a couple of things occurred. One, it was confusing to people as to who did what, but two, it meant that because of the space that we're in with large commercial industrial customers and large scale development of renewables, that's a serious kind of business. When you're engaging in a business to consumer, your brand needs to have a bit more personality and so what's separating those two businesses by brand allows us to have a bit more personality for the ZEN Energy brand and then still carry on our business as SIMEC Energy Australia supporting and working with our large commercial and industrial customers.

Giles Parkinson:
I'd love to talk to you more detail about each of those businesses, but just for the sake of the listeners, let's just row back and just sort of see where this came from. Now, SIMEC Energy is now majority owned by Sanjeev Gupta's GFG Alliance. Is that right?

Marc Barrington:
That's right. Sanjeev came and bought what was ZEN Energy at the time back in November of 2017.

Giles Parkinson:
Around about the time he bought the Whyalla Steelworks?

Marc Barrington:
Yeah, that's right and really it was a recognition that, to make manufacturing and industry work in this country, you need to develop a solution that has sustainability as its hallmark in all facets, whether it's the environment, whether it's on the cost side. It was important to the GFG business that energy player play an important part and cause it certainly does in the cost base, but to deliver it in a way that that can be cost effective valuable in a sustainability sense.

Giles Parkinson:
I'd like to go down that path very soon. But just to recap on the history now, ZEN Energy was actually founded as an Adelaide based company and at one stage, I think just before the takeover by Sanjeev Gupta, it was chaired by Ross Garnaut, that's right?

Marc Barrington:
That's right. Look, we're fortunate to still have Ross on our board. Sanjeev was chairman and Ross is president. The DNA I guess that came from ZEN is still very much there today. You know, it started very early days of solar in Australia, back in 2004, and it was one of the early adopters in battery storage technology, back in the time when it was more of the thinking that batteries would enable you to be Islanded from the grid, so that they sort of turn of the to the 2010, whereas now and I think wisely where we're getting to is that solar plus battery in a home allows you to be more integrated to the grid. I think that part's really exciting.

Giles Parkinson:
Well, I like to chase that one down as well. Just going back to the wholesale markets then. If I'm with the Australian correctly this week, basically what they're saying is that a high level of renewables is basically going to mean the end of manufacturing and refineries and steel works and what have you, I mean clearly Sanjeev Gupta has a different view about this and he's kind of underscored the fact that the Whyalla steel works was bought on the basis that he thought he could reduce costs significantly through clean energies. Is it right to say that you are implementing that strategy in Australia, that you're expanding your retail offering in each and every state? I think just about maybe not WA, plus your putting into place, the strategy to...well, I think as he described it, help solarise the economy.

Marc Barrington:
Look, in many respects we're not reinventing or inventing the wheel, as far as saying that renewables, coupled with firming and a efficient use of the wholesale or financial markets that operate within energy they can deliver at a price that's lower than the current market price. For me it's just not disputable.

Giles Parkinson:
Unfortunately it is though, isn't it?

Marc Barrington:
Well it is, but unfortunately energy is one of those things where it takes a longer than a 20 second segment on a news piece, which is why I find this podcast great because it gives the time discuss what I find anyway, just a fascinating topic. I'm very confident that SIMEC Energy can build large scale solar, coupled with battery, we're looking at pumped hydro storage. We've just completed a pre-feasibility study, on a site at Middleback Ranges in South Australia. I'm very confident because I know we're currently doing it with only using third party PPAs, that we can end up delivering a globally competitive energy price, for our customers, which happened to be GFG customers but also other customers like the South Australian government, Hillgrove Resources and AdChem and so forth and other customers that fall within our group.

Giles Parkinson:
I'll just pick you up on the pre-feasibility study for the pumped hydro. So what has that told you?

Marc Barrington:
It's told us a couple of things. One, a pumped hydro is complex. It's told us that there's five or so projects that are vying to get up in South Australia told us that it's within the mix. It's also told us how it will work in with the existing mine site. So look, as you know, pre-feasibility studies, really lead you onto the next set of questions and that's what we're going to proceed to. In terms of improving reliability and enabling that firming that's required, that comes from a portfolio of wind and solar, we're very confident that it will and can play a very positive role.

Giles Parkinson:
You've put in a big, I think, or at least I think a request for proposal, or expression of interest and registry of interest, I think it finally came down to, what I've now learned is called the FUNGI, which is the federal underwriting new generation initiative or something like that. So, um, now your proposal, as I understand it, is for $1 billion plus mixture of solar plus various forms of storage. I don't know whether it was a battery or pumped Hydro or both. Are you confident of winning that?

Marc Barrington:
I would never propose to forecast what a government will decide. But I think the most important thing for me is that the support that could come out of good government policy is going to enable us to have/provide a better service, a better offering for our customers, and again, you know, the platform that my business is on is, one of openness and transparency with our customers. We would see that those savings that we could get, if it comes to providing with a PUT, which would enable us to get a better rate of financing, certainly more competitive rate of financing, that would go and flow to our customers, which as I mentioned earlier, flow well beyond just GFG.

Giles Parkinson:
So you've got plans, I think initially for a, is it 280 megawatts solar farm at Cultana, I think, which is not very far from Whyalla, plus these hydros. Are they dependent on result of these underwriting Tender or at what stage do you just sort of plow on?

Marc Barrington:
We're aiming to get to final investment decision by June 30 of this year (2019). I think any developer of renewables in this country would recognise that no project gets up with substantial margins left on the table. So they'll always be competitive. For us, like I said before, any benefit we can get, we can then ascribe back into a low cost energy portfolio that can be delivered to our customers. It's not just about providing low price because as you know energy cost is what she is what you use as well as the price did you use it at. And so some of those examples of projects that we're working on, we've got a great, a great opportunity at that moment with a large mine, in South Australia that's looking at a new mine site. It is one of those situations where it's a win. So we're sitting down and working with them of what the energy market will require in a three plus years’ time in terms of how that mine site and their processes could interact in a demand side respons way and then where we are providing them with what our portfolio needs might be and trying to link those two to try and get sort of an optimal outcome. So again, it's about that transparency and ability to work with customers that I think that coupled with what can be achieved working with government, I think can deliver very positive outcomes for industry and manufacturing sectors in this country.

Giles Parkinson:
It certainly seems that a lot of the big energy users now have kind of moved on now. They don't simply think, okay, I'm going to credit new business and opening a new mine. I'm looking at expanding my manufacturing facilities are more refinery, they're kind of now know or do they or, or I'm assuming they're now know that, um, you know, having a coal plant who from the grid or having diesel or gas if you sort of off grid and doing itself is not the only option. There’re actually some other smarter ideas that combine as it seems that you're discussing with this client here, a mixture of renewables and mixture of backup and storage and what have you plus demand management. It sounds like a much smarter way of going forward.

Marc Barrington:
I think it is. I think that the discussion we have is just so focused on the supply side. But the ability for the demand side to play a role in both improving reliability and managing the intermittency, I think has so far only just touched the surface and that's certainly an area that we're going to play a very big role with our customers, utilising new technologies as they come to hand. Again, just the ability to transparently operate with your customer.

Giles Parkinson:
You're in the business of providing what I think you described as base load renewables to customers and I'd like to get onto how that's going with, in the different states very shortly, but presumably then with base-load renewables, what you're talking about is sort of fundamentally as supply of wind and solar energy and wrapped around that sort when various firming things, you've started looking at a battery near Whyalla and I presume you might be looking at batteries elsewhere in the grid. One is that case? And two, what needs to happen in terms of market rules and regulations and the recognition of the value stream of batteries. What needs to happen there before they become, you know, the no brainer once the specs they either need to be or should be or will be in the future?

Marc Barrington:
I think certainly that the likes of the Hornsdale Power Reserve has been fantastic for the market in terms of being able to understand the types of markets that it can play with within. We see Batteries as an addition to a portfolio that possibly will require, fuel fossil fuel generation in terms of peaking plant for, for the near term and then that would be the, again coupled with pumped hydro storage. What still needs to be played out though is how batteries can be used as a hedging tool within a retail portfolio. We think it can happen and we've got good plans for how we might use our battery, which will be called the Playford utility battery, just south of Port Augusta. Our proposal is to feed the into the existing ancillary services markets, looking to use it as an input to fast frequency response, but then also using it again for to manage the needs of what is a not insubstantial retail portfolio.

Giles Parkinson:
Tell me about this portfolio that you're growing then. I think you better clarify for me, which States you’re in, you've just announced in the last week or so that you're moving into Victoria. So presumably you've been in many other states so far. So tell us where you'd been in the house going?

Marc Barrington:
So currently our contracted load is South Australia based. We've got just over 1.2 terawatt hours of customer load and we're hoping for some good wins coming up in Victoria and north of there. As you know or might know Giles, the contracted energy market moves slowly and particularly the sorts of propositions we're working with on customers take time. Certainly we have a power purchase agreement in Queensland to power purchase agreements with Wirsol and NEOEN in Victoria and we will look to use those and then once we get Cultana over the line coupled with the Playford Battery, we'll start to have a larger spread of assets around the NEM.

Giles Parkinson:
Tell me then about the home battery and solar market. How's that looking? I'm guessing in South Australia looks pretty damn good at the moment because there's this, I'm home battery, support scheme that's going on.

Marc Barrington:
Yeah, look, I mean it's really exciting actually, we're starting to see some incredible interest from the home battery scheme. ZEN Energy in itself has nearly 30,000 installations to its name and all those customers are now reengaging. We think it's going to be a great opportunity in that later down the track, this notion of using virtual power plants which has really been championed I guess by AGL in the early days. But now just makes so much sense to be able to utilise that aggregated power. We don't yet have that capability, I don't suggest we're going into that immediately. But, but once we do what we need to do in the larger markets, certainly that ZEN Energy brand would be perfect to look to provide energy with some sort of partnership with customer, but lowering their energy costs using their battery storage and generation that they could have on their roofs.

Giles Parkinson:
It's interesting. So the virtual power plant then you're quite satisfied. It's actually a real thing and these things can be aggregated and orchestrated and deliver a useful service and both to grid, in terms of delivery of, roar electrons and also grid services then.

Marc Barrington:
Absolutely. I guess it's just part of the transition that we're going through in the energy space. Yes, there are going to be bumps on the road. You know, for me, that's what makes it all the more interesting. Certainly the technology seems to be there for the Playford Utility Battery where we're looking at various dispatching algorithms. Initially when we, when we started down that process, the dispatching algorithms will principally focused on just the operation of the battery itself. Now we're up to is we're working with some fantastic organisations where it's looking at the dispatch of the battery but in optimisation of both a retail portfolio and the ability to work on demand side with commercial and industrial customers. So I think this transition is moving quickly and I think the important thing for all participants in the Market is to be open, to be ready to try technology as it comes in and certainly to use the assets slightly differently. I think that's going to be the secret to, One, making sure that the transition occurs with the least amount of wrinkles and two, getting to an energy price that delivers fair value, reliability and most importantly a reduction on our emissions.

Giles Parkinson:
A couple of fascinating things I have to pick up on there. So the battery is just going to be really quite sophisticated and quite complicated. It's not just a matter of flicking on a switch on or off. (It will have) all sorts of algorithms about how it will play and what it will do and what particular time. Presumably taking advantage of it sort of speed and versatility as we've already seen with the Hornsdale unit.

Marc Barrington:
I mean, that's what we see is the versatility of a battery is, it can do multiple things, but only for a short period of time. Then you look at what Pumped Hydro can do, which has a slightly limited range, but it can go for longer periods.

Giles Parkinson:
Are you confident then that ultimately, cause I guess is the question that most consumers ask and whether they be big consumers or small consumers that, okay, we're going down this energy transition, we're shifting from a fossil fuel base, we're going to end up with, you know, pretty much close to 100% renewables. We're going have all have a clear real equipment and demand side response and batteries and storage and goodness knows, you know, virtual power plants and aggregated output and all this, all sort of stuff will it actually end up being cheaper?

Marc Barrington:
That is certainly the goal, just by looking at the levelised cost of energy of the different technologies, and understanding the retirement of existing thermal plants, which will transition out of all of the energy space from 2022 onwards. That replacement will be from cheaper, shorter run, marginal cost of energy from solar and from wind. We're seeing it in real time. I mean I can remember starting at a wind turbine OEM three and a half years ago and you wouldn't get kicked out of the room with the levelised cost of energy from a wind farm in Australia at $90 a megawatt hour. By the time I left, probably nine months ago, $55 was almost the norm. I find that absolutely exciting and I guess Giles, answers your question of "what's going to deliver a lower cost in the long run". It's a market that is sensibly mixed with renewables and firming assets.

Giles Parkinson:
I guess my concern is that probably for a few years now we've actually been paying for a price of electricity which is far beyond the actual cost of delivery. And I guess that's sort of, you know, problem that's the nature of the markets, the uncertainty about policy and what we pay for networks. Hopefully that when we do lock in these even cheaper sources of delivery, then we can actually lock in lower prices for consumers. Now I'm just sort of finished off, you guys are based in South Australia and South Australia has been all the headlines and all the news over the last couple of years about its high levels of renewable energy penetration, the blackout and the load shedding that followed and the political wrestle, over renewables. In South Australia where is the discussion about the energy transition?

Marc Barrington:
Well just geographically Giles. I'm actually based in Melbourne, but I am lucky enough to go often. We obviously have offices in South Australia as well and I'm lucky enough to go there quite regularly. Look, my take on South Australians is they're just getting on and I think you see that in every possible way. The support that they're giving to Riverlink, providing additional interconnection, the support the governments of both persuasions still provide to renewables in a, in a sensible application. I think the regulators are looking at the market sensibly. The addition of the OTR is, I think it was positive. In my mind, transition in anything, if you look at any technology or environment, occurs over time and is as we've found that transition gets shorter and shorter and those that win, are those that embrace it. I think, when you look at what South Australia has achieved, I think it's a positive.

Giles Parkinson:
You talk about a very quick transition care to predict where we might be in five or 10 years time.

Marc Barrington:
I certainly hope that we're in a state of greater policy predictability. I think we don't have to wait that long though. Look, I think I think it's coming, the important thing here is predictability as opposed to certainty. I'm not one of those that that cry for certainty in the energy market because, you know, if you want a free market, you've got to take the good with the bad in business. Very few businesses that I'm aware of in Australia live a life of complete certainty given the, the competition in global markets, but a state of policy predictability I think is one that will achieve such great benefits to the reason that we all exist, which is the end consumer and the customer. So that certainly feels like it's on its way and I look forward to that. That to me, is the last piece in the puzzle. Once we get that, then almost the five-year prediction doesn't matter because, we would then have a well-functioning, energy space in a country that's just got such great natural resources for energy that we can't not do well.

Giles Parkinson:
It seems to me there's general agreement and possibly the frustration at the moment is that we've got the technology. We know what we can do all that we lack actually is a political will, a vision and a plan. Once we get all that in place then it'll go. It all happened quite quickly and quite a beneficially. Marc, thank you very much for joining Energy Insiders. It's been a fascinating conversation and good luck in the future.

Marc Barrington:
Thanks very much Giles, it was a pleasure.