The sheer size of Queensland - at 1,852,642 square kilometres it is larger than Alaska but with six times the population – presents a big administration challenge, not least when it comes to energy provision. It is well known internationally for its tourism, surfing and the Great barrier Reef but is currently coming to the centre of global attention as its capital Brisbane prepares to host the Commonwealth Games in 2018.
It's known as the Sunshine State for its beach culture, but that name is highly apposite as the world moves, largely unpreparedly, from fossil fuel reliance to a more renewable mix. Queensland gets a great deal of sun and has the highest average maximums of any Australian state Ergon Energy, owned by the Queensland government both distributes and sell electricity to Queenslanders, at prices regulated by the State. Distribution is over a network of some 160,000 kilometres of powerlines supported by a million poles and pylons. It also owns and operates 33 standalone power stations serving some of the remote communities the grid can't reach, as well as the Barcaldine gas-fired power station which supplies power to the main grid.
The company was formed in 1999, from six regional Queensland electricity distributors and their subsidiary retailer. In some ways its legacy allies it to the entities that have grown up across the planet to address the new economic and technical landscape, but for a number of reasons it stands out from its peers. Its experience in reaching out to isolated communities, including a number of islands, is highly relevant to energy businesses in the many places that face similar problems, particularly in emerging economies but also in the great land masses of America, China and India. What it does to 'provide safe, reliable, efficient and sustainable energy solutions to support our customers and the Queensland economy' is just its daily bread. This is a company that is taking a holistic view of the future energy landscape taking into account technology, economics, business and market models that work as well as global imperatives like climate change and population growth.
Peter Nimmo has the enviable job of driving forward the future agenda. As Ergon's Director of Effective Market Reform he wants to see Ergon Energy becoming recognised not just in Australia but globally as a benchmark future network provider. Economies that adhere to old fashioned models of investment in baseload capacity, whether nuclear or fossil fuel, fail to step back and consider wider macroeconomic models for network planning, he says. “That is where I see Ergon playing a big role. We have the highest residential rooftop solar saturation on the planet climbing to 40 percent in our network, as against significantly less in the rest of Australia.” Hand in hand with this level of technical innovation goes the innovation opportunity for business model evolution, he adds. Ergon is currently merging with its long-term joint venture partner Energex, based in Townsville in the north of Queensland to create the largest network and energy operation in Australia.
The goal for the expanded company is to become what he calls an intelligent distributed network service provider (DNSP) that embraces digital solutions, big data and systems integration. In other words, while the grid will always be with us, and there are a host of ways to make it smarter, but there has to be a way to make it work as part of a growing ecosystem of alternative and independent energy sources, microgrids, renewable projects and the like, all united under a business model that puts sustainability, the consumer, energy security, the climate and the national interest at the forefront. This concept of a resilient 'transactive energy' network is being considered at Ergon by Peter Nimmo and his team with an eye on the wider implications. “Ergon is a diverse business under a single shareholder: our consumers range from domestic to small business to major industries like mining, agriculture and of course tourism. And we have plenty of experience facing the challenge such as our remote communities.” Many of these are on the mainland, like the Birdsville geothermal power station 1,600 kilometres west of Brisbane, which powers the town's mini grid, but the Torres Straits islands are also part of Queensland and require isolated generation, increasingly with renewable in the mix. For example the 4,000 inhabitants of Thursday Island used to have to rely entirely on diesel generation but now has a $25 million wind generation plant that saves up to 600,000 litres of diesel and 1,700 tonnes of greenhouse gases each year.
Innovation is only useful if it is developed in line with future demand. Everyone gets excited about electric vehicles (EVs), and Nimmo has spent a lot of time travelling to countries like the USA, Taiwan and the UK helping develop EV models. As we spoke he had just returned from Ergon partner Mitsubishi in Japan for discussions about the second generation Outlander 4x4 hybrid. “We were talking about range extension, battery recycling and battery life. In Australia we have growing numbers of EVs and PHEV’s on the road: in five years' time we can expect a multiple of those battery packs coming back and we can make use of these. They have potential use in the grid, people's homes or in industry if we ask the questions about how they can be repurposed.”
The current regulatory framework in most countries is not keeping up with technology, he warns. The real challenge is business model innovation around the technology so as to unlock its full potential and value. We are trying to unite our collective strengths and our people and our markets in a transition that allows us to continue to bring products to the customer that they actually value.” The old models are being disrupted not by being directly challenged (they still have their place in the mix) so much as by a process of 'regulatory arbitrage' which involves reform processes from the bottom up. “MicroGrids are a case in point,” he says. “They are an important part of the energy system but not fully connected: the existing system can't fully cater to them because there's no mechanism for the regulator to interact with them for the entire value they offer. Hence the need and desire to look at transactive and dynamic energy components.” He points to the UK, where optimizing renewable energy or bringing in products to the market that are clearly beneficial perhaps because of customer uptake, then these innovations are rewarded more favorably by the regulators.
We can do no more here than point out a few of the ways that Ergon Energy may transform the market, its consumers and the industries that connect to it. The idea though, according to Peter Nimmo, is to deliberately position the company as one that is moving from an enhanced to an intelligent energy business model. “We aim to not only deliver better product to our customers but also a better solution to cater to the challenges technology innovation that lie ahead.” To take that forward Australia's Energy Networks Association (ENA) and the national science body, the Commonwealth Scientific and Industrial Research Organisation (CSIRO) producing a network transformation roadmap (NTR). This acknowledges that the way consumer’s use and value energy will evolve over the long term. In 2013 CSIRO completed its Future Grid Forum which considered the decade 2015 to 2025. Both this and the roadmap are collaborative ventures in which all stakeholders can get involved, and collaborative is a word Peter Nimmo uses frequently when describing his vision for growth: “It is a progressive story about innovation and using local resources and underlying capability, both physical and human but also relying on and collaborating with global partners with innovation. We can start in local towns in Australia, by trying to work out new models here we can solve the problems locally, then scale up to address the national debate on energy security and energy transition, enabled by renewable technology and the greater transition to a low carbon economy.”
This is how he hopes to realize the vision he has for a sustainable energy model in Queensland that can lead Australia to attract international attention for energy providers – and regulators – looking for better ways to partner and to collaborate to help transition into what is a new energy market whilst supporting the broader social implications and scale facing other emerging economies.