Time to ditch the “dumb” grid and embrace a smart energy future

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Australia’s National Energy Market is hamstrung by an out-dated, ‘dumb’ grid, and must be updated to face the realities of low carbon, low marginal cost energy generation.

smart grid

Greater inter-connectivity is the first critical step needed to ensure sufficient competition in the market to drive down prices, and allow the continuity of supply in periods of low renewable generation.

A diversified energy mix is required to ensure continuity of low carbon energy supply and growth of investment opportunities. Continual and increasing investment in increasing efficiency of wind and solar photovoltaic power, as well as in alternative methods of generation such as bioenergy, geothermal, concentrated solar power, and tidal power is required.

Sufficient advances in smart grid and energy storage technologies must accompany advances in generation capacity. Cost reflective price signals should also be implemented to ensure efficient use of energy and assets.


The price spikes in the South Australian electricity market, claims of market manipulation and challenges of better integrating distributed generation into grid has placed the spotlight on Australia’s National Energy Market. A proactive, future focussed response at COAG is needed to ensure the grid is fit for purpose in the 21st century and enables Australia to capitalise on the investment and job creation opportunities of the growing share of renewable generation in the energy mix.

The grid needs urgent work to transform it from the current ‘dumb grid’ based on last century’s centralised generation model, to an adaptive smart grid the enables the nation to meet the energy needs of this century and supports Australian business and residents to benefit from the billions being invested in the shift to a low carbon economy.

The following challenges need to be addressed by COAG when considering the national energy system and the future shape of the grid:

Declining aggregate peak demand and consumption;

– Widespread uptake of rooftop solar panels Smart grid future: the business case for urgent energy upgrades Future Business Council 12 August 2016;

– An increasing focus on greenhouse gas abatement;

– Decreasing costs of low carbon generation and energy storage technologies;

– Outdated grid designed on centralised generation principles;

– Anti-competitive behaviour by existing generators.

Uncertainty over future energy prices and the capacity of the national energy market to adequately integrate the increasing penetration of renewable power generation is limiting Australian businesses ability to prosper in a low carbon world.

A transition from the current ‘Dumb Grid’ based on an increasingly outdated centralised distribution model, to a 21st century ‘Smart Grid’ is required to overcome the challenges the Australian energy system is facing.

The following principles must be incorporated into COAG’s considerations on the future shape of a smart grid that is fit for purpose this century.

Distributed generation

A diversified energy mix is required to ensure continuity of low carbon energy supply.
Continual and increasing investment in improving efficiency of wind and solar photovoltaic power, as well as in alternative generation methods such as bioenergy, geothermal, concentrated solar power, and tidal power will be required.

UNSW research [Centre for Energy and Environmental Markets, 2016] suggests that a significant increase in synchronous generation capacity will be required to transition to 100% renewable energy at least cost, involving significant increases in generation capacity of hydro, concentrated solar thermal with storage, and biogas turbines. Energy Storage Advances in smart grid and energy storage technologies must accompany advances in generation capacity.

New technologies are increasing the capacity for storage technologies to be economically deployed at utility-scale and network locations. Decreasing lithium-ion battery cost and an uptake of electric vehicles allow further energy storage to occur at the on-site consumer scale. The network, as currently designed, is ill equipped to effectively integrate these developments.

Demand management

The electricity market system primarily relies upon volume-based pricing, rather than cost-based pricing, where consumers pay for the volume of electricity used at a set price, rather than at a price that adequately reflects the differing costs of generation across peak and non-peak periods.

The current system provides little incentive for consumers to reduce consumption in peak periods, resulting in higher prices, excessive levels of network infrastructure and reliance on non-renewable sources of electricity.

Cost reflective price signals in a smart grid would allow consumers to adjust behaviour according to price signals and smooth demand across the network, and make electricity prices fairer and cheaper for consumers in the long run. Smart grid future: the business case for urgent energy upgrades Future Business Council 12 August 2016

Expansion and management of grid assets

Significant increases in transmission capacity both inter and intra-region will be required in the new smart grid. Some of the best solar and wind sites in Australia are located far away from places of demand, necessitating a certain level of transmission investment.

More importantly is the necessity of increasing interconnectors between states to facilitate sufficient competition in the market to drive down prices, and to allow spatially diverse renewable generation loads to be linked across the national electricity market, overcoming some of the problems associated with wind and solar generation variability.

Historically, investment in grid assets has been non-optimal. Energy prices have increased across Australia due to perverse incentives that have resulted in over investment in surplus infrastructure based on exaggerated demand forecasts.

The costs of the unnecessary infrastructure are passed on to customers. All new investment should be based upon up-to-date scientific and economic information, with clear accountability for costs of non-optimal investments established.

Recommendations for COAG

A smart grid is needed to meet Australia’s 21st energy needs and provide certainty for the local business community. Appropriate policy frameworks need to be implemented by COAG that take into account the changes outlined and that will enable the transition towards a low carbon energy system at least cost. Importantly, bipartisan support for transforming the grid to ensure it meets the needs of energy producers and consumers this century.

The Future Business Council recommends COAG prioritise the following actions to address the changing energy market, Australia’s global commitments and the needs of the business community:

– Build a second interconnector between South Australia and Victoria, and a direct connection between South Australia and New South Wales to enable competition, facilitate interstate trading and better access to inland renewable energy resources;

– Incentivise investment in a complementary mix of renewable energy and battery storage. Investment must be increased in large scale solar farms, solar thermal towers, and tidal energy to better levelise generation, alongside work to accelerate the uptake of energy storage including battery’s, electric vehicles and pumped hydro projects;

– Restart the national rollout of electricity smart meters informed by the lessons from the Victorian experiment.

The Future Business Council strongly supports a commitment from COAG to prioritise investment in a smart grid that meets the needs of business and the community.

Tom Quinn is executive director of the Future Business Council.


  • News Views

    You can have all the connectivity you want and have a “smart grid” but without a regulator with teeth, generators and retailers will still game the system for a quick profit at the expensise of customers – as has been the case on occassions over the last few years with minor fines.

  • Analitik

    “clear accountability for costs of non-optimal investments established”
    That should keep the courts busy!

  • Daniel

    This overview appears objective enough. Many strategies are listed, including micro and macro. Where do you live Tom? What have you done at your place? There is a here and now and you can only act in that reality – not a theoretically cooperative reality of your imagining. Which strategies of the above would you say can move forward within an uncooperative context lacking vision or environmental sensitivity??? Any ideas upon where you can get some traction now???

  • Daniel

    Tom what if the truth is, until you’ve made something work on your own property, you don’t really understand solar/storage, and are not really placed to evaluate larger systems? I know people who have implemented individual properties and all levels of larger community infrastructure. I personally would trust them rather than myself or you.

  • Daniel

    Your a part of a group of people who wish to challenge mainstream assumptions and so I’m challenging yours. There’s really no baseline support for the strategies for which you “advocate” a mere voice in a sea of resistance, inertia and hegemony. To write an ethical and useful article, it’s necessary to think what kind of strategy could be applied at this time in history. Build your collegiate teamwork around that. Any ideas? The above article is more of a dreamers wish list than a grounded path of action. Or is there a grounded path of realisable action within the above and I missed it???

  • Daniel

    Well I personally think your logic hasn’t adequately taken into account transmission losses and how abundant solar energy is on every property. If we can be optimistic around energy harvest, passive solar architecture and energy efficient appliances, there’s less and less need for complex and historically problematic transmission infrastructure. Let’s try imagining the trajectory of a Distributed Paradigm given the optimism the sun shines many places. Maybe your version of a Distributed Paradigm and a smart grid is most applicable to cities where transmission losses are low compared to population density. Right now, you don’t have a smart meter though do you? How long do you suppose it will be until you get a smart meter? It would probably be better to now aim for load management equipment, to make your property responsive to energy harvest to more effectively deploy what you have instead of focusing on a grids cooperation which you probably do not have.

  • Daniel

    The property here has three buildings and only the smallest currently has solar/storage however it already supplies all property power except heating in winter. Once the buildings have the connectivity of a microgrid forming a kind of miniature urban ecovillage, there will be an abundance of power. If my larger community has some community level solar/wind/storage too, that would be fantastic for powering our town. Perhaps there could be thin links between towns however we don’t yet know the current carrying capacity needed.

  • Daniel

    The bottom line is you haven’t indicated your part of a responsible acting family or business premise. You want others to change first. Therefore I don’t want you writing articles and acting as a community leader. You appear caught in intellectual abstraction and this appears primarily what your comfortable with. Leaders actually implementing projects are what is needed – moving from theory in an ideal world to what can be done now.