This is a lightly edited transcript of the recent Energy Insiders podcast with Ben Bolot.
Giles Parkinson 00:29
Hello and welcome to this latest episode of the Energy Insiders podcast. My name is Giles Parkinson and I’m the editor of Renew Economy. And joining me as usual is David Leitch from ITK services. David, I trust you are well? Last time I saw you you were hurtling down the road together in an Ionic five electric car, I trust the rest of your trip went well?
David Leitch 00:50
Oh well it didn’t go any better than that particular segment, Giles, that was a very pleasant cruise on the outskirts of Canberra. And I was pleased to see that the Hyundai lives up to its promise of being able to take off of a streetlight as fast as any 18 year old, like I am not, would absolutely wish.
Giles Parkinson 01:11
Well exactly yes, and look, I quite enjoyed this…well look, it sounds like an ad for Hyundai actually, but I do like the space of it. And then when we got back to Centennial Park later on to do a video we bought a kettle with the vehicle to load things. So just some glimpse of the future and how electric vehicles may play into the energy market, even if the vehicle to load isn’t sctrictly an off grid application.
David Leitch 01:37
Well, Giles, there are two things about it. I’ve been thinking hard about this vehicle to the grid side of things, which is the new emerging thing and the first thing is, you know, it won’t work unless you can plug directly into the switchboard, right. That’s the obvious thing. And switchboards at the moment are not set up for that at all. So that’s the first part. And the second thing is, will the car manufacturers be happy having their batteries used to run a house for a week? And then you know, someone running out and trying to drive to Adelaide or somewhere?
Giles Parkinson 02:08
Um, well apparently so because they’re allowing this to happen. So I guess they are and look, I quite enjoyed boiling a kettle, even if even if it was just a show for the video, but I can just imagine what other appliances you can use it for. So power tools and things like that. I just think it’s going to be really quite a popular thing. And we’ll look to see how it pans out.
David Leitch 02:30
What’s all this boiler kettle stuff? I don’t want to waste any more time but I thought you Byron Bay folk at the absolute minimum would have been bringing out the espresso machine or something with some gourmet beans. But anyhow, let’s get on with a real world.
Giles Parkinson 02:43
Look. It’s been a week where we’ve had a world record in Australia and specifically the South Australian grid. First gigawatt scale grid to have negative demand. It happened on a couple of five minute periods on Sunday, something we’ve kind of been expecting. But once again, it just shows the transformation about the grid. And because it invites the question about where is the storage, we thought we’d actually focus this week on pumped hydro, and we would like to welcome Ben Bolot from ATCO, which is behind at least one major pumped hydro storage project in New South Wales. Ben, thanks for joining this podcast.
Ben Bolot 03:22
Thanks Giles and David for having me.
Giles Parkinson 03:24
And look apologies. I forgot to ask the correct pronunciation of your surname.Did I get it even remotely correct?
Ben Bolot 03:31
Oh, look, you’re pretty close. It’s a silent t like polo, but Bolo.
Giles Parkinson 03:35
Okay, so Bolo, or
Ben Bolot 03:37
Giles Parkinson 03:39
Okay. Then ATCO ultimately, a Canadian company I understand, has a big pumped hydro project just near Bathurst. Why don’t we just start with you explaining what it is and what you think makes it interesting?
Ben Bolot 03:56
Yeah, thanks very much for that Giles. We have invested in the Central West pumped hydro project, which is a planned 325 megawatt eight hour storage project, located about 20 kilometers out of Bathurst. It’s got about six and a half kilometers to the 330 KV Wellington to Mount Piper transmission line. One of the things we really like about it is that unlike a lot of pumped hydro, there’s not a huge amount of drilling that we need to do. So each project is obviously different. But you know, when you really think about it pumped hydro projects are probably 20 to 30% electrical, and then the rest is actually a civil construction. So we like this because it’s above ground, the pump house is actually built above ground and then it’s inundated around it. So it’s got some pretty cool features to it that make it a little bit different. And of course that also helps from a Capex perspective. You know, if you’re not drilling under national parks like at Snowy, or some of the other projects That’s kind of an expensive exercise and fraught with danger. This is a little bit easier, we think.
David Leitch 05:06
I’m just going to interrupt. Snowy is not drilling under the National Park, it’s drilling right through the middle of it. Just to be clear, but let’s go on.
Ben Bolot 05:15
I’ll let you make that statement David.
Giles Parkinson 05:19
So look, what natural features are you taking advantage of, because a pumped hydro project normally means two reservoirs. One up high, one down below, you pump water uphill, then you let it fall down again, which actually generates the power as it rushes through the turbines. So what have you got and what do you need to build?
Ben Bolot 05:34
So we have a roughly 400 meter head, there’s the undulation of the land as you head down over the back side of the the Blue Mountains, is actually quite good for this kind of thing, because you get rolling hills. At the top of one of them, we’re going to put a turkey nest construction. And at the bottom, there’s a, what you’d call a valley, I guess, which is not a particularly arable piece of land. It doesn’t have any farming use, it’s been abandoned, more or less. It kind of had an old molybdenite mine on it many, many years ago. So that will form the bottom reservoir. And we need to put a dam at the end of that. So about a 35 meter dam wall at the end of that, and so the land is quite good. One of the things we have been working on quite hard, and we’re actually we think is pretty great, is that we’re looking to put an underground transmission cable to connect the power house to the transmission line. And part of the reason for that is because we know from our experience and from others, that local communities hate iron giants, they really don’t want them across their land. So we’ve found a solution that we think really works for that too.
David Leitch 06:50
Well, look, it doesn’t go across anyone’s land if it’s in a national park. Right. Sorry, back to your Giles.
Ben Bolot 06:55
Yeah, but ours is not. Ours is not David. Fortunately, ours is on private land.
Giles Parkinson 07:01
So that is just six kilometers of underground transmission line. But is there anything to note there about the lessons for… because, look, it’s a huge debate. And we’ve talked many times on this program, almost every program I think, just about the need for more transmission lines, etc, etc. Most of those are going to go above ground with these giant towers. That’s obviously having some sort of issue with some landowners. So underground, we were told in the past that it’s actually too expensive, there are thermal heating issues, there’s access issues and things like that. What can you tell us about your six kilometer transmission line that might be applicable to say, 1000 Kilometer transmission line?
Ben Bolot 07:43
Well, look, every situation is different. But we took the view that when you think about what it is that the community really gets upset about, they don’t like the visual impact, they are very concerned, quite rightly, about fire hazard that comes from overhead lines. So when you actually look at the lifecycle of an underground cable, you need less of a corridor to put an underground cable. So typically, you’d need sort of 10 to 20 meter easement to put an overhead cable, but we don’t need quite that much to go underground, which means that the farmers lose less of their land, which they obviously prefer. We also have worked out through the environmental offsets that you require are quite expensive the more land you take. The efficiency of the underground cable is better, because, yes, there are some issues around the fact that it’s buried. So maintenance can be a bit harder, but the operating costs are lower. So the capex is a little bit higher, but we think that the offsets with bushfire risk, environmental offsets, and actually, the engagement with the community is pretty critical. Because I think one of the things that people miss often is that the energy transition looks very different for people in the country than it does for those of us in the city. You know, we see the opportunity to reduce emissions and we think it’s a great thing. And of course it is. But for the people in the country, they see more iron giants, they see a lot of development, they see disruption to their lifecycle, and their lifestyle.
David Leitch 09:25
And jobs, by the way, Ben. And investment, you know, like billions and billions of dollars going into these renewable energy zones, payments to wind farmers and to solar farmers. So you know, I mean, it’s not a one way street.
Ben Bolot 09:41
No, no. Absolutely. You’re absolutely right, David and all those things are necessary. But when you talk to people out there, you know, there is a trade off for them. They want to know that you’re listening to them, and that it’s not going to disrupt their lifestyle the way that they might think it is. So what we’re trying to do is to show them the benefits of us working with them. You know, people often in these regions, because these ones, you know, we’re not looking at long term farming communities, these are lifestyle blocks and things like that. But it requires for us to be partners, not cowboys. And by showing that we can listen and do underground, and reflect some of their concerns, and the other big one, obviously, is water, you know, that seems to be helpful. And we want to be invested for the long term, we’re a long term holder, we’re not a build and flick. That’s not our model.
David Leitch 10:36
I’ll come back to that. I’ll come back to that. Well, I was just looking quickly, I can count, you know, you’re pumped hydro, there’s Lyle, which is Energy Australia’s ,which is, I would argue, a broadly similar project in terms of its size and even location. There is Oven Mountain, which is Alintas’ project, which is further north, but which is bigger, has a steeper head and more duration. AGL has got Bells Mountain, no matter what the technology is AGL is always going to have one of them. You know, is there something that distinguishes your project from all the others in your view?
Ben Bolot 11:16
Well, in our view, we think that the civil construction is simpler. I mean, we can go through each of them individually, and each of them has their own features, and ours will have disadvantages relative to others as well. So you know, we’re pretty realistic that there isn’t the perfect project out there. We have to build two reservoirs. Lake Lyle has an existing reservoir and so they have to build an upper reservoir, which looks pretty challenging from a civil perspective. But you know, on the flip side, we have to build two reservoirs. We’ve got to build an upper and a lower reservoir. Oven Mountain is in a national park, we’re not in a national park. If you look at Bell’s Mountain, I think that’s got some issues with it as well. Shoalhaven has had some issues, too. I think the reality is that there’s space in the market for a number of projects. You know, one of the things that we like to think about is that history favors the brave. We want to get in there and we want to get moving and often first mover advantage is actually very valuable.
David Leitch 12:20
I think it’s fortune favors the brave, to be honest, Ben, history tends to favor the winners as the way I remember it.
Ben Bolot 12:28
Very good point, David.
David Leitch 12:31
Now, the next thing I wanted to point out is that a lot of these other projects have already been done by an existing gentailer, and I’m still only on pumped hydro before we get on to other technologies. You know, it’s more than just how to build, and I get that. But there’s a lot more to the electricity business than just building the asset, isn’t there?
Ben Bolot 12:53
Oh, absolutely. I mean, offtake is critical. And we all know that that’s been a major impediment to new entrants into the market. The gentailers have preferred their own portfolios, which is what you do if you’re being economically rational. But what we are seeing is a couple of things. One is, you know, as we’ve seen, even over the course of the last 24 hours, new entrants are coming into the retail space. Shell buying the PowerShot book. And I know that’s a whole debate in of itself. But we know that Ampol are looking obviously. We can also see that BP are sitting out there. Telstra is keen to be building a retail position. So I think there’s a change going on in the retail segment as well. And at the same time, the New South Wales Government has recognized the need for some government support to underwrite the longer term nature of investment like this. And the New South Wales roadmap we think as you know, we think New South Wales government’s done a really good job of trying to provide some of that certainty. We have to see the detail of the long term energy supply agreements. But it does look at first blush as though those could be very, very suitable.
David Leitch 14:06
I’ll just ask one more question and hand back, and that’s the obvious one is, you know, when you think about pumped hydro versus batteries, batteries are my favorite technology. I’ll be honest, I’ve got a bias towards them. But I’m always interested to hear where I’m wrong. What do you want to tell me about…. I am interested you know, that’s as an analyst, you know you get things wrong, you get biases, and you tend to stick with them for far too long, even when there’s evidence in the other direction. Talk a little bit to me about how you see it as a developer of pumped hydro.
Ben Bolot 14:40
I think from our point of view, we see that batteries and pumped hydro are more likely to be storage complements, rather than storage competitors. Especially over the next two decades. I think if you look, the technology curve for batteries, we’re still seeing imprudence, we’re still seeing costs come out of that. We think that they certainly are a very important part of the mix. But I can also understand from the New South Wales government’s perspective, that they don’t want to leverage themselves to that technology emerging in the timeframes that they think they need it. And if you look at the scenarios around when coal exits, you need to be building pumped hydro now, if you’re going to meet that shortage and capacity in the market, or long duration capacity. And batteries, let’s hope they get there. I mean, they’re a fantastic technology. And, David, it’s not a surprise that you’re a fan of them. I think we all know, from reading your articles and listening that you are, but we see that they can complement each other. And if the government support through long term energy supply arrangements will help us get pumped storage off the ground, then, you know, they can work together.
Giles Parkinson 15:57
I’m interested because we’ve seen a lot of pumped hydro projects being proposed over the last couple of years. And I’m thinking particularly of South Australia, where we actually began this conversation. We’ve got actually got to the point now we’ve got negative demand in that state now. You couldn’t think about a more obvious place to put storage. They actually have very few batteries. I mean, they’ve got three, it’s a grand total of about 200 megawatts or something like that, 250 megawatt hours. They’ve been talking about pumped hydro for a few years. Six projects were put forward. Five of them have for fallen by the wayside. I understand that there’s one left, the Baroota one, I think it is. It still looks difficult. When you as a pumped hydro project developer look at what’s happening in South Australia, what makes you worry about the future of yours?
Ben Bolot 16:42
Oh, it’s a fantastic question. I mean, I do think that South Australia has had an interesting experience that we can learn from. I think one of the things that is interesting about South Australia is the demand in South Australia is not growing. New South Wales, I think, is quite a fundamentally different market. And if you look at when the pumped storage was proposed for South Australia, it kind of came off the tail end of coal having already closed. We’re at a different position in the market now in New South Wales. And we’ve still got a very large amount of coal that’s coming out in the next probably 5 to 10 years, maybe slightly longer, but as you think about that, that’s a lot of firm capacity that needs to be replaced. One of the things that pumped storage can do is as we’re building out lots of solar and lots of wind, pumped storage can add synchronous condensing or synchronous inertia to the system. So you know, it’s kind of a dual benefit to the system, you get long duration storage, but you also get transmission support and system strength. So I think we do look at South Australia and say, how do we make sure we don’t end up in the same situation? I think the other thing that is, I know I keep coming back to it, but the New South Wales Government support is really focused on trying to get some of these things built. And that level of support, there was some, but the same level of support was not available in South Australia.
Giles Parkinson 18:20
How much support you need, because if you look at the two pumped hydro projects that are being built, I mean, there’s Snowy 2.0 And then there’s the Kidston one, I mean, both almost entirely funded, well in the case of Snowy 2.0 it’s entirely funded by the taxpayers and there’s big questions about economic returns, but okay, that sort of seems to be going ahead. Kidston sounds like a mighty fine project, but was relying very heavily on funding from the North Australian infrastructure facility. I hope I’ve got the name of that right. And also the Clean Energy Finance Corporation with some private equity….
David Leitch 18:50
…and the Queensland Government paying half the transmission cost.
Giles Parkinson 18:54
Yes. So how much support did pumped hydro projects in New South Wales need?
Ben Bolot 18:58
Well, I don’t think there’s the projects in New South Wales need as much support as Kingston. I’ll come back to Snowy in a second. But if you look at the level of support the government is looking to provide through the long term energy supply agreements, it’s not actually focused at the same level as Kidston. Kidston is an unusual project. I mean, it’s fantastic they’ve got it off the ground, but it is a long way away from demand. It’s, as you pointed out there, the distance is enormous, but….
David Leitch 19:33
It’s a project built by Queenslanders for Queenslanders, and it’s in Queensland, so what does it matter if it’s got issues that would face mere mortals? Sorry, Ben….
Ben Bolot 19:42
I absolutely agree with you, David. I couldn’t agree with you more. But what is interesting is, I think what we are seeing and I’m sure this is a controversial view, but I think what we are seeing is that whilst the NEM is, there’s no suggestion NEM is pulling apart, I do think that states are going to be much more focused on having their own firming capacity in their own market. I think you look at what’s happened with COVID. And do you think that our premier is going to be happy to be reliant on Queensland or Victoria, to keep the lights on? You know, I think there’s a real view now that we need to have our own firm capacity, our own capability to keep the lights on. You know, the resource sharing is important. And interconnectors will play a very important role. But you can see government saying, I don’t want to be reliant on my premier next door to deliver my energy for me.
David Leitch 20:42
No, and in fact, when you look at the futures price, you can see that the New South Wales futures prices for the next couple of years is actually higher than the other states, as it continues to be dependent, in part, on constrained transmission imports. And I think that is one of the outcomes of Matt Keens roadmap is that New South Wales, which has traditionally been a net importer from both Queensland and Victoria, is working towards that not been the case. And therefore, if you’re Victorian in Queensland, you’d have to think about what that means in terms of your own business. But then again, it’s not what we’re talking about now, is it Giles?
Giles Parkinson 21:20
No, no, no, no, no, but it’s all quite relevant. So New South Wales is actually sort of looking to have two gigawatts of pumped hydro storage. And I’m guessing, because there’s lots of people out there who tell me to write about storage and say, Well, how many hours? I’m guessing we’re looking at a mixture of six 8/10/12 hours. As a developer of one of these projects that hopes to be contracted to the New South Wales Government, is that too much, too little? Round about the right amount?
Ben Bolot 21:48
I think what we have understood from the recoverable grant program that’s been running is that the government received 26 applications, it might have been 23. There’s a huge number of applications and it was for a very large amount of storage. You know, without being silly about it, some of it is a pipe dream. Some of it is real, and some of it is very real. So I think they’re on that spectrum of where those projects can sit. It will sort of depend in a way on how much the renewable energy zones also build. So that one of the reasons we like the location of our project is that it’s right on the edge of the central west Orana REZ, which is supposed to have at least three gigawatts of generation built into it. When you talk to the government and to Energy Co they think that there could effectively be up to six gigawatts built in that location. So is there enough storage? Well, no, there’s not. You need a demand sync, which pumped hydro can provide. You know, going back to your early comment around South Australia, that’s the best thing that we could possibly hope for, so we can pump when prices are really low. I think there will need to be more built. And I think that the mix will just sort of depend on how those those REZs build out. And also on things like hydrogen, because if we do end up with a very large hydrogen industry in New South Wales, that does help from a demand shifting perspective. But it’s also electrification. And electrification is good for generators like us.
David Leitch 23:34
Ben, you know, eight hours duration, I think, is the minimum required under the New South Wales storage thing. But I just want to focus on economics for a minute. I’m not talking about the cost of the project, but how do you actually envisage this project? Let’s say you were merchant, and you had to make money? Would you be selling caps? Would you be trying to trade the daily balance in market? Would you be wanting to firm wind plants? Would you be wanting to offer ancillary services? I mean, how do you see the revenue stack?
Ben Bolot 24:13
So look, I think would probably would probably look for a mix. I don’t think the ancillary stack, the ancillary services really provide enough for it to be a significant part of the the revenue stack. We would sell caps. We would probably reserve a little bit for ourselves to to be able to play that arbitrage position. One of the things that we have been looking at as we’ve been out talking to off takers around tolling type arrangements. So we have two units, two discrete units sitting in the plant. And, you know, as we think about it, one of the options is to run a tolling type agreement or arrangement, whether the off taker brings their own pumping energy and we sell, we just run the plant for them. But I think it’s a mix, David. And I think, you know, as one of the things that’s always really hard is that the price forecasts, you know, you speak to two forecasters or economists, and you get four views of what the the forward curve looks like. So what we’re trying to do is to optimize that that doesn’t leave us with too much risk, but does actually allow us to take some of the benefit.
Giles Parkinson 25:26
You’ll have to explain the tolling arrangement to me. Is that basically like having almost like a capacity contract, as we’re starting to see at some wind and solar farms basically, and they operate that and they just pay for some of the capacity that’s available, and not the actual sort of megawatt hours pumped?
Ben Bolot 25:47
It’s more like, if you think about a tolling agreement on a gas fired plant. So the off taker provides the fuel, and then they take the offtake. And it’s dispatches entirely at their control. So our role in that is to sit and be the plant operator, we have to make sure it’s available, we get paid a fixed fee for making it available, and then we get paid a variable fee for how much energy is generated. And we’re looking at that model because we think that there’s, when you look around the market, there’s quite a few people who have variable renewable portfolios, but don’t have any firming, who want to be able to offer to their customers, a firm zero product.
David Leitch 26:32
Under the New South Wales LTESAs, they have to, in theory at the moment, unless the New South Wales government changes it which they should, offer a firmed shape. And so that has to be achieved one way or another. Let’s just talk quickly Ben about cost and capex. I mean, every pumped hydro project is different. And that’s why I think they’ll never get the economies of scale coming down the learning curve to the extent that other technologies can, but how do you think your project stacks up in in cost terms, capex versus others? You know, I see a whole range of numbers out there because so few projects have been built. And recently I was talking to guys in the US that were using US$3 million a megawatt, something like that. How are you thinking about yours?
Ben Bolot 27:23
It’s a really good point, David, because there aren’t that many reference projects that you can look at and say that’s what it looks like. And I think it would be a mistake to pick up Snowy and say “what’s Snowy costing per megawatt?” I think our project is, as I said, right at the beginning, these are electrical projects, but they’re also actually civil projects. So they’re quite heavily focused on civils. And we think we’re at the low end of the capex range. We’re currently actually going, we’ve just finished our reference design, we’re out with EPC contractors now, to get some more certainty around that. It is, in our view, it’s less than the number you’re talking about. I don’t want to give you a specific number of what it is on dollars per megawatt,
David Leitch 28:11
…..this is the analyst thing, we start with a high, you know, it’s a matter, you start with a high number, and then next I’ll talk a low number, and you’ll tell me that’s too low. And we’ll get like auctioning isn’t it really?
Ben Bolot 28:22
A little bit. But I may have been on one or two of your calls before, David, so I know where you’re going with it. I think that number feels high. But, you know, we’ve still got a lot to do to prove out where we are in the cost stack. And there’s, there’s lots of variables. I mean, it’s not helped, of course, by the current supply chain issues, inflationary pressures, you know, availability of labor, etc, is a really interesting thing at the moment, I’m sure you’re getting this from other people you talk to as well. But you know, there’s so many large scale civil projects going on, that getting EPC contractors to compete as is, is difficult. So we have to prove all of that out. And then make sure that there’s a market for the product project that is economic for us and earns us our return.
Giles Parkinson 29:13
To get back to the transmission line thing, actually, I’m kind of intrigued about this, because it does seem to be reasonably significant. If you think that can be replicated on the lab scan longer thing, then that might actually seem to be like a real alternative. I mean, you quite you talked about the offsets, and I think the I think the offsets from the Human Project and snow mountains that are close to a billion dollars or something like that. So I’m just wondering just how replicable that sort of approach could be for a longer transmission line.
Ben Bolot 29:41
Well, we’re really hoping it is and if you actually have a look at Atco, outside of Australia, we’ve we’ve got quite a significant position and transmission. Were actually rebuilding the entire Puerto Rican transmission and distribution system as we speak. So that was obviously affected very badly by cyclones and hurricanes and We’re rebuilding it. We’ve done the Fort McMurray project in Canada, which was a contestable process. And we think that we have a competitive advantage and transmission, we think we can be innovative. And we do like the idea of being able to show these capabilities, and then seeing if we can replicate it, because it’s got to be an interesting option for the for the market. And in terms of cost, it is very cost effective relative to an overhead cable of similar size.=
Giles Parkinson 30:31
So a little bit more expensive to build, but cheaper to operate.
Ben Bolot 30:37
Actually, it’s a little bit cheaper to,
Giles Parkinson 30:40
to build as well. Okay. But
Ben Bolot 30:43
particularly because the offsets, so on an ongoing basis, you’ve got onsets and then you’ve also offsets and on upfront basis in terms of land acquisition and those types of things. So we think it’s very competitive on both. That’s interesting.
Giles Parkinson 30:57
Okay. Cool. And then just maybe final question before we go into the other news of the weekend and things and how long does the project like this take to build?
Ben Bolot 31:07
Well, the actual constructions about two and a half to three years, because we’re not doing lots of underground that makes it a bit easier, because we’re putting penstocks above ground. So it’s kind of ironic, isn’t it transmissions going underground, but penstocks are above ground. So the constructions probably two to two and a half to three years. The from now until fid is probably 12 to 15 months, depending on quite a lot actually depends on the New South Wales government’s timeframes around recoverable grants. And l Tessa.
David Leitch 31:48
I can you remind me you’ve got the environmental, all the geotechnical and environmental stuffs done signed off on etc.
Ben Bolot 31:57
Now we’ve got we’ve done the geotech. So we know what land we’re dealing with. We’ve now put in the scoping study for the project. And so that will start in the stats immediately. And then we’ll move into the EIS in the next few months.
David Leitch 32:13
I think that’s still an ambitious timetable to get it but it is
Ben Bolot 32:17
an ambitious timetable. But I’ll go back to your to your comment. Fortune favors the brave doesn’t.
Giles Parkinson 32:26
All right, good. Well, actually speaking about storage, we had the Victorian big battery, which is the biggest in Australia just got registered for F Cass services. And I guess the battery storage facilities is one reason why pumped hydro might sort of struggle to compete in those sort of markets. Would that be right,
Ben Bolot 32:46
then? I’ll look at I don’t know enough to be honest about the Victorian market haven’t looked in enough detail just yet. I think pump store. Victoria has also got this other issue of the merriness link, which is kind of it’s the snowy of Victoria in a way, isn’t it? I saw the article today up on RenewEconomy about the about whether it makes sense or not. Yes. And you know, you look at Basslink one, and that’s also a fascinating story that’s unfolding the battery, my understanding of the battery and Victoria was it was there to help ensure that the interconnector would be able to operate at capacity all the time.
Giles Parkinson 33:28
Well, yeah. Well, that’s, that’s one of its attributes, that’s probably less than half or probably even a third of its actual capacity. So yes, that’s right, playing in the market doing little different things,
Ben Bolot 33:38
you would hope say, Yeah, but it won’t solve once I’ve sold for, you know, eight hour duration, it’ll sell for probably four? Well, that’s
David Leitch 33:47
that’s the question I have, you know, do you when do you need eight hours? As opposed to when you need four hours? Obviously, you don’t need eight hours overnight, every day, because, you know, you’ve got a charge for nine hours or 10 hours a discharge for eight, it doesn’t leave a lot of other hours. That’s so it’s this marginal value of the last four hours that actually interests me, but I don’t think we’re gonna get the answer to it on this on this call.
Ben Bolot 34:17
No, I don’t think we will. It’s a very, very long conversation. I think, David,
Giles Parkinson 34:22
good stuff. And David is anything else that you want to touch on before we wrap up for today?
David Leitch 34:27
No, just to note that I think the prices looking forward futures market is relatively steady. We seem to be hanging around 5051 terawatt hours annualised across the name of wind and solar. We’ve probably past the peak wind period now but and even the solar period, you know, grows, grows up until about Christmas and then starts to fall off. So I think myself, that’s what we’re looking at the main things I’m thinking about in terms of the short term action What kind of a summer it will be? Will it be like last summer that match quarter? You know where absolutely nothing happened? Or will it be like the year before, which was full of drama? So that’s about as far as I’ve got to at the moment. And
Giles Parkinson 35:15
well, I think I think when the La Nina forecast, it’s probably going to be like last summer rather than with someone beforehand, which would be very disappointed for some of the storage people depending on increased volatility in the market, but just just finally, David, shells purchase of Powershop many observations on that it’s a, they’ve already bought er M. I mean, they’ve got this little grand ambition to be a major player, if not the major player electricity market has been mentioned. You know, there’s there’s Telstra last week was unveiling its plans. You’ve got even people like BP and and Paul apparently, looking at it. What is this?
David Leitch 35:50
Well, I think myself, I’ve thought for a long time, there’s room for a major and I really mean someone at the size of AGL origin or energy Australia, to say, we’re going entirely green 60 or 70% of people want to do more about climate change, we’re going to make it really easy for them by ditching everything to do with coal and gas, and guaranteeing that as a major retailer, we’re going to sell green energy, and we’re going to promote it. Now, none of the big Gentiles actually do that. Because they’ve all got coal and or gas assets that they’ve been trying to protect for the last 10 or 15 years desperately. They now see the writing’s on the wall, but they can’t almost like Anthony Albanese, they can’t move from, you know, being critics and holding things back to putting their own position forward and leading from the front. So there’s a lot of scope for that now, power shops pissed off, if just customers are slightly pissed off, because it’s no longer going to have quite those little green credentials. But if I’m shell, I’m also worried that I’ve got to integrate something that’s been very focused on the commercial and large industrial market very successful. I’ve been by far the most successful at that in terms of dollars per megawatt hour and capturing volume to now having to integrate a small, you know, and it is a small couple 100,000 retail customers and make all that work. So there’s issues on both sides. I’m not sure it’s a perfect marriage.
Giles Parkinson 37:13
Ben, maybe one final question for you. We heard this last week as well that the Australian energy market Commission has put us on discussion about sort of various forms of capacity market, I think it was like an operating reserve, which has been proposed by the likes of EBA drawler. And there’s obviously still discussions on some form of capacity market. Hopefully, it won’t look like what was dubbed coal keeper, and they insist it won’t. What do you hope for as a developer of a pumped hydro project? Are you sort of resigned to the fact that it’s going to be basically state based policies? And how helpful would it be to have a unified and decent federal policy?
Ben Bolot 37:52
Well, I think the, you know, the economic reality is that caused leaving, so you know, coal will be out of the market, and we need to replace it with something, you know, whether it’s for whether it’s batteries, or pumped hydro, as we’ve talked about before, the the environment in New South Wales is pretty strong. We’re happy with that. But we support any regulatory reform that brings closer the mix of resources we’re going to need in the future. So if capacity if a capacity regime works to do that, great, if it doesn’t work to do that, well, let’s let’s try and make sure that we position ourselves to, to deliver our project through what the New South Wales government’s proposing, you know, our view is that waiting for the perfect economic, so the perfect regulatory environment, probably will erode returns for people like us. So we’re keen to see some certainty, but we’re also happy to keep moving based on what we’re seeing today.
Giles Parkinson 39:02
Okay, well, I think that’s a bit of a wrap for today. And thank you very much, Ben, for joining the energy insights podcast.
Ben Bolot 39:08
Thank you for having me.
Giles Parkinson 39:10
It’s a pleasure. And thank you, David. Once again, thanks to all our listeners, everyone out there listening to this podcast. We’ll be back again next week. Thanks finally to our sponsors, epogen and pylon and that’s a wrap for today and life.
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