Marc England is leading AGL Energy’s push into solar, battery storage, electric vehicles, and home energy management systems. He has already built up a team of more than 200 people and been tasked with generating $400 million in revenue from his new division by 2020, and reach break even two years before that.
England (pictured) says AGL does not see a mass market for battery storage until the 2020s, but it is keen to get in early to understand the technology. It intends a roll-out of its first product in Queensland this month, and in NSW a month or two later.
AGL also sees opportunities in the fact that nearly one-quarter of existing solar installations are under performing. And it is also looking at new technologies that will allow the aggregating of household solar output for trading on the National Electricity Market.
You can see our report on the interview here. Following is a lightly edited transcript of the interview.
RenewEconomy: Marc, thanks for joining us. You have reportedly been invited by managing director Andrew Vesey to challenge and compete with the company’s existing business. What does that mean?
Marc England: The new energy business has been established to embrace all the changes that are happening in the distributed energy world. I don’t actually see it as competing with the core energy business, I see it as underpinning the value in that business. Some commentators say that some of the technologies such as solar reduce demand on the grid, which is true. But it’s not just about solar, it’s about integrating various technologies, from solar, to storage, to meters, and bringing in home energy management and other control systems as well.
So we are looking at it in a residential sense, we are also looking at it across the business and the commercial space. And it is a broad set of technologies, not all of which will reduce demand from the grid. Some of them will. We see that will underpin the value in our core business we have today. It is also a recognition that consumers are changing. We see consumers are now moving from being passive, to being engaged participants. It is a recognition that as that happens, we need to act too. We are reacting by establishing this new division that has the wherewithal to meet those needs from consumers.
RenewEconomy: Some analysts say they are not sure who will win out, because they are not too sure what those business models of the future are. One said at least it is better to cannibalise (the existing business) than to be consumed.
England: I don’t teally see it that way. It’s a very binary way some people look at this, one or the other. I see it as both. We are heading for a very different future where the grid is still important, and distributed sources of energy are very important. I use the analogy of the computing industry. We went from a world where we had one desk top in the corner of the room to multiple sources of computing. Desk tops have not disappeared completely, and I think that is the closest analogy to industries which have undergone a similar transformation.
Despite 1.4 million homes having solar panels on their roof, that only equates to just 2 per cent of demand on the grid. Even if you triple solar installations it will account for just 6 per cent of demand. So the grid is not going away; the need for low-cost generation is not going away for AGL. What we need to do is to make sure can can offer customers choice. And that is an important part of strategy here. They can get it from the grid, they can get it from their roof, they can get it from their generators … We’ll have lots of different ways to help them get their energy, and we’ll help them manage that I. Don’t buy into this grid vs distributed. I think it is both and that is where we are heading with AGL.
RenewEconomy: I guess, though, that you have started behind the eight ball on this and trying to catch up.
England: No. AGL has a low market share in solar. But the market here in Australia is on the verge of a transition, from being all about solar to being all about many more things than solar. We see our role as integrating various technologies in the home. So solar itself, yes we have had low market shares, and we are accelerating efforts around that. But it is just one component. When I think about the market we are playing in I am thinking about a variety of different technologies.
RenewEconomy:: You said in our presentation that you are aiming for 600GWh of solar by 2020, and that translates to around 400MW of capacity, is that what you are looking to install on people’s roofs in general, or through power purchase agreements?
England: That’s what we looking to install on people’s roofs in general. A portion of that will be on PPA structure. That is not the only way people will buy their solar systems, and that number relates to both residential and commercial.
RenewEconomy:: You also talk about one millions smart connected homes by 2020, what do you mean by that?
England: It’s a variety of technologies. We’ve given it as a key metric, and it relates to connections in homes and businesses. It could be meters, solar panels, electric vehicles, batteries, charging connections and potentially others in the future. As regards to the earlier questions, the volume of installations will come from residential, but the capacity from commercial and business.
RenewEconomy:: According to analysts, you have been reported as saying that about 25% of panels are underperforming, and you see that as an opportunity for AGL. In what way?
England: We are looking at a product to give consumers who have solar panels today better insight on performance of the panels, on their inverter and on the whole system.
I feel there is a potential there to add value to existing solar households. Some may not have had a high quality install, or their system may be ageing. One of things about the last five years and large uptake of solar has very much been what I call a dumb distributed world. There’s no connectivity between panels, the homeowner, and the utility or whatever. There is no information coming in about how well it working. Apart from the feed in tariff they see a quarterly bill and it has halved and they wonder what is happening.
We have partnered with an Australian start-up, which is working on algorithms and building up a model which can add value back to consumers. We will be selling back that product in July with all new installs, and also hope to approach other customers.
RenewEconomy: What about battery storage: you are rolling out in Queensland first in June. Why Queensland?
England: For two reasons. The economics make most sense in Queensland. We have good data on existing consumption patterns of our customers. We can pin it down to the exact area and type of customer and whether we can assist or not. We know that in Queensland, there are customers who will benefit more than other parts of the countries. The other reason is that Energex (which runs the network in the south-east corner) has been quite helpful in working with us in understanding how the batteries work in connecting with the distributed networks. We are working with others, and we will move south as we go.
RenewEconomy: How quickly are you moving south into NSW and Victoria?
England: I don’t want to give a firm date, but I hope that by the end of July and August we will be talking to customer in NSW. We will have product arriving by then. There is product in Queensland now, and as the product comes in and demand comes with customer, we will talk about solutions we can offer.
We have pretty exciting interest level. We created the battery club, and we have had 1300 people sign up for interest. Through that we can work with consumers. This is early adopter set we believe, and early adopters will work with us in perfecting the product. We not expecting to have perfect solution at this stage
But you will know better than many it is not a simple thing to do to connect battery into home and into grid. When you don’t have visibility in solar system that already there, it can be very complex.
RenewEconomy: You selected AU Optronics for your roll out in Queensland, will you be selecting other battery storage partners?
England: Yes, it is not our game to tie ourselves to one particular manufacturer. We are talking to several and one in particular where we might have solution later in the year as well. But it is surprising to see how few battery companies actually have supply chains ready to come to Australia, despite lots saying that they do. When you sit down and talk to them, even though a lot has been said in the last few weeks, we can tell you that right now that is not the case. We will work with anyone as long as they have the right products. And we will be going to manufacturers and asking them to develop batteries for Australian conditions
RenewEconomy: You are predicting about 30% penetration of Australian homes by 2030?
RenewEconomy: How many of those homes might have battery storage?
England: We haven’t made a call on that. We have an assessment internally but we not sharing that externally. I will say that our view is that the that the payback period for storage is still going to be fairly high. It will take time before it gets under 10 years. So it will remain an early adopter product for next couple of years. That is our view. Some people like to be more excited about it. We want to be in early and learning early. We are working with Australian consumers to make sure that we are doing the right thing. But we don’t see mass market uptake happening until the 2020s.
There are lots of dynamics that can change that, such as costs coming down. Several people have got carried away thinking that batteries will be exactly like solar market, but there were three things that drove the solar market – solar enjoyed huge growth in retail prices, fast reduction in costs of solar reduction, and high government incentives. Only one of those ingredients exist for batteries, and that is the costs are forecast to come down. There are no sign of government incentives to drive it. Most predictions are that electricity prices won’t increase. We need to temper our excitement. We are excited at AGL too, but we temper that with some of the fundamentals.
RenewEconomy: What impact did Tesla have on market or the conversation about battery storage?
England: Tesla have had an impact on this market. Tesla are good for this market. They are a very strong visible consumer brand. Other manufacturers are less so. All activity that drives volume will help to drive costs down. It remains to be seen if Tesla is right for the consumer markets in Australia, but there is no doubt that big players will have an effect on the market.
RenewEconomy: What is your view on electric vehicles and other technologies.
England: On EVs we don’t have a prediction. Our role is to support the consumer in charging their vehicle. There are a number of innovative ways to do that. We working on some of them as we speak. It is important we play a role in that. The uptake has been slow. We still have to wait and see if that happens. The key is bringing more cars into the market. The more EV and plug-in hybrid vehicles there are in Australian market, the more likely consumers will recognise the benefits,
RE: You also talked about the possibility of aggregating household solar output and trading that output on the National Electricity Market.
England: Again, that is the future Giles, that is where we are heading. That is one of the components of what we see as the new energy market. So when you open up the conversation by saying we behind the eight ball, you are thinking of solar, which is one technology. When you are thinking about the suite of things that can be done, with lowest cost sensors, increased connectivity, increased bandwidth, and technologies coming into homes and businesses, the ability to create virtual networks and link them together perhaps with demand response technologies, virtual power plants, batteries, so allowing consumers to share power. That is the future we are heading towards. It is probably a way away but you will see AGL moving in that direction because we have capabilities that work well in that space.
It comes back to consumers wanting choice, they want to engage in energy. Some will want to have comfort, some will want convenience, some will want more control.