The International Electricity Summit (IES) is held every 12 – 18 months and brings together electricity industry leaders from around the globe to examine the major issues and headwinds facing the sector. It is an invaluable opportunity to meet colleagues from other developed economies and talk together to understand the challenges occurring in electricity markets globally. The unique situation faced by the Australian markets are always of great interest to other delegations.
This year’s summit was held in Washington D.C. from 1 – 3 October and marked the 30th anniversary of the IES. It was attended by more than 30 representatives from Europe, the USA, Japan, Canada and Australia, each of whom were CEOs of either an electricity company or its representative associations.
This year’s Australian delegation comprised Sarah McNamara (CEO AEC), Dominique van den Berg (CEO, ENA) and John Cleland (CEO, Essential Energy and Chair of ENA).
The agenda for the conference kicked off with a country overview from each attending delegation, then moved on to discussions on topics including:
A key feature of the conference was commonality of experience, and a shared desire to ensure that customers are actively engaged and well informed on the benefits a decarbonized electricity sector brings to them and the broader economy. Delegates agreed that the customer is the most important stakeholder relationship and that maintaining reliability and affordability for them is the highest priority.
Recent global events such as the COVID pandemic and Russia’s invasion of the Ukraine, which have further destabilized markets, were also discussed, with a general expectation that there are future shocks to come which will require vigilance and flexibility.
Changing government policy and regulatory settings are a common experience, with each delegation citing concerns with the fluidity of the policy and regulatory environment. In addition, the sheer volume of reform initiatives is presenting challenges in an industry already under transformational pressures and striving to explain to its customers what is happening, and why.
The Australian delegation’s key observations were as follows:
Customers: All delegations agreed that it is critical to maintain a political and social licence and it cannot be assumed that customers support for climate change mitigation and emissions reduction will be able to be sustained through future price and reliability shocks. Each delegation is grappling with how best to communicate the drivers of upward pressure on prices and how to ensure that they can access the benefits of distributed VRE and CER. There is a common view that customers experiencing vulnerability will require additional and bespoke support to realise the benefits of the transition.
Both the US and Australian delegations noted that the visible impacts of climate change (fires, floods, storms & drought) were impacting customer perceptions about the pace of change.
One of the many challenges ahead will be guiding customers’ digitisation within the home. Artificial Intelligence is also likely to be a profound accelerant of digitisation into the future.
Gas: All delegations assumed that gas would have an ongoing role in generation, particularly in peaking capacity to support VRE, household (Canada stated that dual fuel heat pumps are ideal in extreme climates) and hard to abate industrial processes. One US electricity company CEO indicated that they are assuming a future electricity mix of 50 per cent VRE, 20 per cent Nuclear, 20 per cent Gas, and around 10 per cent Hydrogen (or similar new technology). The EU delegation indicated some issues raising capital for gas peaker investments in the current environment.
Nuclear: All jurisdictions (apart from Australia) continue to see nuclear as part of the future supply mix with some delegations also reporting some optimism around the future of SMR technology. Meanwhile, the Japanese delegation expressed concern that its nuclear economics are being impacted by VRE (even with its relatively low penetration)
Electrification: Electricity share of current end use energy consumption is assumed by all delegates to increase materially (currently ~18 per cent in Australia and Canada) on account of domestic heat pumps, EVs, industrial processes etc. It will also result in a material decrease in overall energy consumption, which in turn impacts the industry narrative around rising electricity bills being more than offset by reductions in gas & petroleum, but not in the short term as requisite network investment impacts bills.
Network Infrastructure Investment: All jurisdictions are following a similar trajectory in line with electrification (27 per cent investment increase in Europe by 2030). Germany assumes 70 per cent of VRE will be connected at the distribution level (partially a consequence of much smaller projects than in Australia – less than 50MW). Criticality of bi-directional capability and digital functionality at all levels.
Siting & Permitting: This is a massive challenge for all jurisdictions and a key risk to developing generation and transmission/distribution infrastructure required for effective transition. Delegations also noted global supply chain pressures and the necessity of maintaining a social licence in those communities that are identified to host this infrastructure. These issues can result in delayed delivery of new infrastructure to effect the transition.
Hydrogen: Very mixed messages and views were shared on this subject, with seemingly little certainty on the role it will play. Japan views hydrogen as a key energy future import source (noting currently 70 per cent fossil, 100 per cent of which is imported, only 12 of 36 reactors recommissioned following 2011 earthquakes).
The Australian delegation will continue to engage with the IES network of international colleagues and looks forward to next year’s conference, which will be hosted by Japan.
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