AEMO chief says clinging to old energy business models is “insane”

The new head of the Australian Energy Market Operators says the notion that major energy industry players can hold on to their old business models is “insane”, and has described last year’s state-wide blackout in South Australia as a “wake-up” call for all in the industry.

In a speech to the Australian Solar Council conference in Melbourne on Wednesday, and in earlier in-depth interview with RenewEconomy, Zibelman says the pace of change in the energy industry would be rapid, would focus on consumers and their use of rooftop solar and battery storage, and on demand management.

Zibelman advocates major reforms in the market, particularly in the proposed 5-minute rule, which she says would help make wind and solar “predictable”. She says it is clear that Australia will lead the world in shifting from a grid focused on centralised generation and passive consumers to one based on distributed resources and two way system.

This, she says, will require a new approach from all involved, including incumbent utilities, network operators, regulators, and AEMO itself.

“You can’t simply say that everything is changing, but I’m going to do what I have done for the last 100 years in the same way and I’m going to be successful. In some quarters that is sort of the definition of insanity,” Zibelman says.

“It’s all changing, businesses need to change and they need to think about what their role is in this new system. And that’s true for AEMO. AEMO needs to think about how things are changing and what we need to do in the market to adapt to that change. so that the markets become the platform for that enabling that innovation as opposed to a barrier.”

Key to this change was in the 5-minute rule, a push to replace the current 30-minute settlement period to 5-minutes, to match it with dispatch periods and encourage fast-acting technologies such as battery storage, and remove the ability by big generators to game the market.

“Within a 5 minute window, wind and solar are highly predictable,” Zibela says. “Being able to forecast and manage the market within a short time frame is going to allow for greater predictability and greater value of resources like storage, and the demand for the resources that have to be fast responding. That’s how we can provide a more secure grid.”

Another of her key themes is “load shifting” and using smart technology to take advantage of the fact that “we know when the sun will do down”. In past times, this focused almost uniquely on electric hot water systems, which were switched to night time to keep coal generators occupied.

Now, with fast acting technologies,smart controls and storage – both on grid level and inside homes and businesses – this can become more dynamic. And it will be critical to managing the so-called “duck curve”, when the sheer amount of solar generated during the day hollows out grid demand.

This, says Zibelman, was already starting to occur in states such as Western Australia and South Australia. “We need to look at demand itself as a resource. Traditionally, when we think about managing the power grid, it is pretty simple. we increase generation to respond to demand. We have to be smarter than this.”

Zibelman has only been in Australia and in her role for six weeks, but already her views on the changes needed to adapt rapidly to a modern grid are being described – both within her organisation, and in the broader energy industry – as a breath of fresh air.

Never before has Australia had a senior executive in the energy industry being so up-front about the possibilities, and so enthusiastic about the change that lies ahead.

Her entry could not have come at a better time for AEMO, which has been roundly criticised, by the industry, by the South Australian government, and more recently by the regulator for its actions, or lack on action, in the major blackouts and load shedding that occurred last September and earlier this year.

“I’m not lookin back and asking why, as I wasn’t here so I don’t think it’s particularly useful. What’s more important is figuring out what we need to do to move forward, and address really what our opportunitues to work the system better.”

But Zibelman does say that the “System black” event may have been wake up call that Australia needed, in the same way that Hurricane Sandy was the wake up call for New York about the vulnerability of its own energy system, and led to the ambitious “reforming the energy vision” program she led as head of the state’s regulation authority.

That program, which looked to a decentralised system, micro-grid and a 50 per cent renewable energy target by 2030, has inspired huge change. But she says Australia can go further, because no other country had gone so far with renewables, on such a continent-wide system.

“The one thing that happened in NY was we had Cyclone Sandy. That was a huge wake up call. That’s what got the attention that there had to change.

“”I’m not sure we’re not at this point right now. – given the system black, the gas prices and the awakening that Australia has had that it can’t continue the way it has. Maybe what we need to do is put a name to this, New York City did this, we created a name (REV) that people can recognize and link into. Maybe, we need a name.”

To read the full interview with Audrey Zibelman, please click here.