Transcript: Energy Insiders Podcast interview with Isshu Kikuma

Giles Parkinson  00:29

Hello, and welcome to this latest episode of the Energy Insiders podcast. My name is Giles Parkinson, I’m the editor of Renew Economy, and broadcasting from a Ionic 5 in deepest and darkest Canberra, and joining me as usual, not in Canberra but about to arrive I think pretty soon, David Leitch from ITK services, David, how are you?

David Leitch  00:50

I’m well and I trust all our listeners are well, as we head into the end of the year, and this incredible flurry of announcements that we’re expecting from just about everyone before we get to Christmas.

Giles Parkinson  01:00

Oh, look, you know, I’ve been doing this for about 10 years now, David, and it doesn’t slow down before Christmas, it actually speeds up and it’s quite exhausting.

David Leitch  01:08

Yes, well, that’s right. But it’s fun for us and fun for our listeners. It’s great to be exhausted isn’t it? I’ve been that way for about 30 or 40 years. But let’s talk about something that our listeners are actually interested in.

Giles Parkinson  01:19

Well, I’m sure they’re interested in our state of health, David. But anyway, look, Glasgow is over. Look, progress of sorts, still light at the end of a very long tunnel. But nothing seems to have changed in Australia, at least as far as the federal government goes. David, what did you make of it?

David Leitch  01:38

Well, that’s exactly right. But you know, as we discussed on last week’s episode, I feel it’s the federal government, current government that is getting wedged this time. Labor has been, as far as labor versus the coalition goes, and I want to point out that we still had Zali Steggalls’ climate bill been sitting there and rejected by the current government when a lot of people would support that if it was to come up. But Labor has sort of been sitting there holding its fire, and as much as we all want them to announce lots and lots of stuff, at the meantime,  if you just talk politics, and politics has got nothing to do with climate change, it’s got nothing to do with electricity, it’s got nothing to do with anything. It’s about politics, and everything is seen entirely through a political lens. And  I don’t want to talk about it too much, but if you do look at it that way, it’s just that the government is sort of having to go back on what it said before and the messages are not  good. No, they’re not good. And we don’t like talking about the politics of it all, because it’s very frustrating. But the trouble is, for the last eight years politics has gotten in the way of policy.  Well, it hasn’t though Giles. That’s the point. It hasn’t. We haven’t had politics. And  despite the politics, despite the policy, in fact, Australia, the underlying message is that at least in electricity, which is the first place we start, we’re making terrific progress. We have a national electricity market, which now is about 20 to 23% on a whole year basis of wind and solar, one of the highest in the world for large grid, or a respectable grid. And it’s growing quite quickly. And so  we are actually making a lot of progress, under very old policies.

Giles Parkinson  03:24

Well no that’s true. But as Simon Corbell said in the podcast last week, we could actually be going much quicker. And there just seems to be a bit of a hiatus at the moment. It’s true that we’re seeing record amounts of renewables. Just this week, we saw 60% wind and solar on the main grid for the first time. A 62% share for total renewables. You go back a year ago, and it was in the mid 50s. So that’s advancing forward. We’re seeing record low demand in South Australia, we’re seeing negative demand in the grids there. Extraordinary progress on the technology front and the transition front. But there’s still this fear that we just don’t have the investment. And you’ve been talking about the lack of network investment. And where are we going to see that? I don’t know. You have been tuning in to observations about the New South Wales renewable energy roadmap, I don’t know whether now’s the time to talk about that, or after hearing from our guests,….

David Leitch  04:17

We should talk about it after our guests. I just want to say before we move to our fantastic guests that we’ve got this week, Isshu Kikuma from Bloomberg NEF in Japan, just before we get to Isshu is the two things are transmission, and we will talk after this interview about transmission and what’s going on in Queensland and New South Wales. And the other thing that’s been holding back the rate of progress is what we’re going to do about inertia and stuff. And that’s where this year I think we’ve seen grid forming inverters go from a concept that might be some years in the future to something that’s been very aggressively pursued all over the market right now. But let’s talk about that after we hear from Isshu Kikuma, who as I said is the lead Japan analyst for Bloomberg NEF. Bloomberg NEF is just a wonderful resource and we would like you to get this interview.  Isshu Kikuma, lead Japan market analyst for Bloomberg NEF, it’s a pleasure to welcome you to the podcast today.

Isshu Kikuma  05:19

Hi. Hi, David. Thank you for having me here.

David Leitch  05:25

Japan has quite an ambitious climatenchange reduction program, I think aiming for about a 46% reduction from 2013 levels by 2030. Do you feel confident that Japan will be able to achieve that?

Isshu Kikuma  05:47

Yeah, I think that’s a good question. And I think one thing I can definitely say is Japan has committed to the higher decarbonization target this year, such as net zero, registration, updated NDC and higher renewable energy target into the mid 30s in electricity supply mix. So with these target, I think Japan is definitely there for decarbonization. But I think whether Japan can achieve this target or not is probably a different question. But I think Japan has been doing well to implement new policies and trying to, I guess, work on more for decarbonization. And yeah, we’ve seen a lot of movement within the government side, so I think that’s a good step. But I think in that sense it’s good, I guess, movement towards Japan decarbonization. But I think at the same time, there’s some disconnect between what the government wants to do, and also what’s the most economic or feasible way of decarbonizing Japan. For example, I think Japan tends to bet on some future technologies such as CCS or CCUS, the carbon capture technology, plus cofiring of ammonia, hydrogen, thermal power plants. And I think these are important, and especially these will be important pieces to complete Japan’s 2050 or 2030 decarbonisation target picture, but I think the government needs to kind of acknowledge that the most economic or the feasible way of decarbonizing, especially in the near term, a renewable energy deployment. And to do so I think Japanese government needs to kind of remove some of the regulatory hurdles, including some of the, I guess, better management around the land use since the land is one of the most biggest hurdles that developers have seen these days.

David Leitch  07:45

Yes, that’s, that’s great. So I was going to ask you exactly what you would do if you were Japan’s Prime Minister or the senior person at MITI and you know, you really cared about achieving this target? What steps would you actually take yourself?

Isshu Kikuma  08:07

I think the first important step would be setting a long term target that gives some clarity on what  Japan is going to do. So I think one of the example that Japan did last year was setting the high offshore wind target with kind of concrete number of like what Japanese government is going to do. So in the offshore wind target, the government announced that Japan is going to allocate 10 gigawatts of offshore wind capacity by 2030 and 30 to 45 gigawatts of offshore wind capacity by 2040. And what worked out well in this offshore wind target, it gave  a long term commitment, I guess, yeah, it gave some confidence to the private sector, because they now know that Japanese government is serious about offshore wind, and they know that the private sector can come in and make a commitment in Japan in the long term. So I think I’d like to see the Japanese government set  a long term target with some kind of a concrete plan, so that the private sector can come in.

David Leitch  09:25

I think, when we talk about offshore wind, because it seems, notwithstanding that the water is deep in Japan and it may have to be floating offshore water, floating offshore wind, there are issues that I have read about like the grid capacities, port capacity, you know, four or five year environmental approval process, and collaborating with the fishery industry, which are all things that  is partly the responsibility, I suppose, of the wind developers but also things that the government could assist with. Do you feel confident that Japan is heading in the right direction on those things?

Isshu Kikuma  10:09

Yeah, definitely right now. And current offshore wind auction mechanism, developers are more responsible for a lot of things from like site selection to environmental assessment to get a grid capacity, securing the grid capacity. But at the same time, we have seen some movement within the government that basically Japan is trying to lead these activities in a way that the government will manage those beforehand, before  developers will work on those projects. So it’s called the Japan centralized auction scheme. And the government has announced, I think, three sites as kind of potential sites that could be used for Japans centralized auction , and still the government is leading a lot of discussion, or how are those sites can be used for actual auction, but I think the movement along Japan centralized auction for the offshore wind have been, I think it’s a great step.

David Leitch  11:15

Yeah, yes. Sometimes people like me who don’t understand Japan very well think that the solar industry may only have limited prospects and onshore wind because there isn’t enough land area, or land is expensive, which is the same thing. How much of an issue do you think that is?

Isshu Kikuma  11:39

So I think, as you said, I think solar and offshore wind, land constraint has been a huge problem. And I think this is part of the problem why Japan’s renewable energy is expensive, because they were like, now Japan’s renewable energy market has reached a point where it’s getting very difficult to cut down the cost for land development. But I think the potential for offshore wind is that they don’t have to be constrained about that, like land with restriction. And I think that the potential about offshore wind, especially around that scaling up the project.

David Leitch  12:18

And I think that in the offshore wind, the target that Japan has set for the price or feed in tariff or cost, however you want to think about it, is around about nine yen per kilowatt hour by 2030, or 2035. For our Australian audience, that’s about AU$110 a megawatt hour. Do you think that this price target is achievable?

Isshu Kikuma  12:48

Yeah, I think that’s a great question. But I think that target, the cost target of the Japanese government for offshore wind is very ambitious. And there are a few reasons for that. I think the first reason is the wind speed in Japan is not as strong as, let’s say, European countries where we see a lot of offshore wind project at this moment. I think that means the capacity factor for Japanese project will be lower, which means the cost will be higher on  levelized spaces. I think that’s one problem. And I think the other thing is, how much Japan or Japanese project will source equipment, domestically or from overseas. And according to some of the research we have done, we have found that sourcing equipment domestically will cost more than sourcing equipment from  developed market overseas. So if Japan wants to balance out the cost, as well as the local content, I guess, balance, I think that will be the tough part that Japanese government and also Japanese developer will struggle.

David Leitch  14:02

Yes, I am surprised about the wind speed because some fairly amateur data I looked at suggested there was quite a lot of resource available at wind speeds of nine meters per second and even 10 meters per second. Which seems to me to be, you might get a capacity factor of 40 to 50% with modern technology.

Isshu Kikuma  14:31

Yeah, I think that in terms of resource potential, yes, but we haven’t seen like, latest technology installed in Japan. And I think Japan’s project may be still using like smaller carbine compared to European projects, and that could explain the capacity factor.

David Leitch  14:48

I think that when Japan puts its mind to it, and develops its own local industry, and you know, if Japan was to decide that it could do what it wanted to do it, then perhaps it would end up in a very competitive cost. Japan has demonstrated that in lots of other industries in the past. Would you agree?

Isshu Kikuma  15:13

Yeah, I think, definitely. In terms of the market expansion, the Japanese market has been growing and supported by the offshoring target, which that I mentioned earlier, I think that a lot of companies are actually trying to develop domestic supply chain, which helps market expansion for the future. So I think if those company can build good sides of the supply chain, Japan, I think it will help reduce the cost in Japan, because I think sometimes if you have already developed supply chain for the OM, Operation and Maintenance work, I think, during the downtime, the project will be able to reduce the downtime, because Japan cancels those equipment needed for the maintenance locally, which will reduce the downtime. So yeah, that could be, yeah, one reason how Japan can reduce the cost.

David Leitch  16:17

And just to be clear, I think that even if it was, I don’t know, 10 or 11 yen a kilowatt hour that would still actually be quite competitive in the Japanese power market. Am I correct to say that?

Isshu Kikuma  16:32

I think like, What do you mean about the competitive?

David Leitch  16:37

Well, I mean, compared with the cost of, I don’t know, coal or gas fueled electricity. You know, I think the final price in Japan is quite expensive for electricity compared to some other countries. And so, you know,  even 10 Yen is not a bad number.

Isshu Kikuma  17:00

I think so. Yes. But I think the problem is Japan’s current feed in tariff is 36 yen per kilowatt hour. And auction price cap at the first offshore wind auction will be 29 yen per kilowatt hour. So I don’t think Japan can reduce the cost, like to nine or 10 yen per kilowatt hour level overnight. So it will still take some time. And I think that will be the biggest part, especially around the how Japan will develop the supply chain and reduce product cost at the same time.

David Leitch  17:36

Hmm. Is there anything else you wanted to say about the wind industry before I would move on to talking maybe about hydrogen and ammonia?

Isshu Kikuma  17:46

Yeah, maybe I can talk about some of the technology market from the technology perspective. Sorry, yeah. So I think, as you said, I think Japan had a lot of resource potential for floating because Japan ocean gets very deep right off the coast. But we don’t expect the floating will, like become the big thing in Japan in the near term, because I think what the Japanese government is trying to do is trying to locate some site for  bottom fixed technologies for now. And I think to make the floating market bigger, I think the Japanese government would need to allocate some site specific for the floating. But we haven’t seen that movement much. And I think Japanese government will start allocating some sites for floating once a lot of sites, a lot of suitable sites for bottom fix  will be taken in future auctions. And at some point, they will run up the space suitable for the floating technologies. And that would be probably the time  when we start seeing a lot of site allocation for the floating.

David Leitch  19:06

I see. And but but if I was to ask for the 10 gigawatts that will be developed over the next 10 years, you would expect most of that to be fixed offshore?

Isshu Kikuma  19:19

Yeah. I believe so

David Leitch  19:21

That’s clear. So if we just move on, the other I think big thing that Japan is perhaps one of the world leaders at promoting is using hydrogen and ammonia maybe, in the in the in the generation industry. What do you think about that? I mean, I think the target is to have 1% of power generation in 2030 coming from hydrogen and or ammonia. That doesn’t seem too hard.

Isshu Kikuma  19:55

So I think Yeah, I think the government’s ambition’s too small. But I think that’s because the government hasn’t figured out what they need to do to kind of develop their market, or develop the supply chain. And I think what Japan is lacking right now is like, the government expectation of what they want to do for the supply chain, or I guess, in general, like what they want to do for hydrogen, or let’s say ammonia, and also what the government can do to support the uptake of hydrogen. I think those two, are missing in Japan.

David Leitch  20:39

And I guess, if I was Japan, just speaking as a financial analyst, I might worry that if I went too much for hydrogen and ammonia, that my power would cost even more in a relative sense to the rest of the world than it does today. Because not many countries in the world will be able to have a lot of renewable energy, you know, straight from wind and solar. And that is clearly going to be lower cost than hydrogen or ammonia  whichever way you cut it. What do you think about that?

Isshu Kikuma  21:21

Yeah, I think it’s fair. But at the same time with, definitely, we’ve seen a lot of interest. And I guess, clean energy sourcing from corperation side, and some companies definitely struggle to source clean energy because of the high cost. But at the same time, we’ve been hearing some of the interesting stories, for example,  for the on site, PPA, the power purchase agreement, using the rooftop solar, according to some of the discussion that I had with the market players, the tarriff for onsite PPA can be actually lower than what the corporations are currently paying, depending on how long they can find the contract. So I think, yes, I think having clean energy can be more expensive. But at the same time, they can reduce the cost of what they’re paying at the same time. And it’s just on a case by case.

David Leitch  22:25

Yes. No, I have no doubt that clean energy, at least in Australia, is  lower cost. A system built on wind and solar will be lower cost than a system built on coal and gas. I have no doubt about that at all. But if I had to build a system on hydrogen and /or ammonia, then I would worry that it wouldn’t be lower cost. It would still be a higher cost. That would be my concern, if I was thinking about it.

Isshu Kikuma  22:53

Yeah, I think that’s where the policy support is needed. For example, as you said, coal firing hydrogen ammonia at the power plant will be more expensive than regular, I guess, power generation, let’s say like coal and gas. And to make it work, I think the higher carbon prices needed in Japan, but carbon pricing Japan is currently $3 per metric tonne of co2, which is I think, to introduce low carbon or zero carbon solutions. So I think that yeah, this is where the policy support is definitely needed. And also, if Japan wants to kind of increase the domestic production of, let’s say, hydrogen, I think Japan needs some mechanism, incentivizing the production. And I think some good example can be something like a feed in tariff used for clean energy project. But as you know, there’s no such mechanism in Japan. And I think these are something that I was kind of talking about, about the policies earlier.

David Leitch  24:01

Yes. And so if we just talk about policy and support, and I feel embarrassed as an Australian to be asking about this, but you know, Japan didn’t sign the phase out coal pledge, you know, at the beginning. And sometimes you get a feeling that like Australia, Japan is not really rushing into decarbonisation, no matter what the official target is. What is your sense about the underlying reality of it?

Isshu Kikuma  24:35

Yeah, I think that’s a great question. And I think that’s what we fell at the Cop26 where Japan didn’t sign the pledge about the phasing out or the shifting away from coal. And I think in general, Japan is a bit cautious of moving away from coal too quickly. So if you look at the2030 electricity or the 2030 generational mix target, which was approved by the Japan cabinet last month, in October. In the target the coal still accounts for  1/5 of the total generation int 2030. So by just looking at this, you can understand that Japan if not trying to fade out coal overnight. And I think energy security is one of the biggest reasoning behind this move. So to look at generation target mix target in 2030, again, the share of each technology is actually like evenly spread. And this is because of the some of the past devastating economic impact that Japan had seen before. For example, in the 70s, when the oil shock hit Japan, or the global market, Japan was impacted quite a lot, because at the time,  Japan was relying on oil quite a lot. And again, in 2011 when the Fukushima nuclear power plant accident happened,  Japans’ electricity supply was hit quite hard, because at the time nuclear was supplying about 1/3 of the electricity, and I think the Japanese government was a bit traumatized by the expenses and trying to diversify resources and energy supply portfolio, if that makes sense.

David Leitch  26:32

No, it does make a lot of sense. And is that the reason perhaps why we see the share of gas going down in the new plan more than the share of coal, it’s to have this balance in the portfolio?

Isshu Kikuma  26:45

Yeah, I think one reason, but I think ingeneral, I think the role of gas will be to support renewables, especially in the long term. So I think that could be  reflected in the revised target for 2030.

David Leitch  27:06

I think that for every country, energy security is a big thing. And because Japan has had to import a lot of its energy, other than when nuclear  was a big deal, things like offshore wind and solar and that seemed to offer to me, from the outside, a promise or a vision of more energy independence  for Japan and not less.

Isshu Kikuma  27:34

Yeah, I think I completely agree with your argument. And also, as you know, we have seen a lot of events around power plants or the global energy plants these days, because of the increase in commodity prices. And in Japan, natural gas usually is, or the gas power plants usually set the wholesale power prices. And we have seen that increase in wholesale power prices, because we have seen increase in gas prices as well. And I think having more renewables in Japan’s power market will help Japan to kind of mitigate some of the impacts that we have seen during the current period.

David Leitch  28:19

Yes, we forget now, but in Europe, one of the reasons for introducing the wind and solar in the first place was because the cost of it is certain and fixed. And once you have it, then you don’t run the risk of these gas and coal and oil price increases. And the same must be true for every country. I think it’s not something you want to be exposed to more than you have to.

Isshu Kikuma  28:45


David Leitch  28:47

If I was to just move on a little bit then, the other side of things that I guess from Australia’s perspective is always interesting. And from the world’s perspective, is the auto industry, the car industry, and I know it’s not your area of expertise necessarily, but a sort of feeling is growing when I read the newspapers that Japan, particularly Toyota, I suppose,  seems to be very slow becoming enthusiastic about electric vehicles and really  would like to push hydrogen and stuff. Could you just talk a little bit about why that is and whether you think they’ll be able to keep doing that? You know, or will I have to make a decision one day or another?

Isshu Kikuma  29:36

Yeah,so I think you’re right, Japan’s market EV penetration is very low. And that’s because of limited EV models in the past or against the huge market presence of the hybrid vehicles. But at the same time, I think Japanese automaker have been keen to   shift to EVs since early days. For example, Mitsubishi and Nissan have been one of the first EV manufacturers, among all incumbents globally. And also we have seen Honda’s move around its shift to EVs by 2040. I think these are good movement that we have seen among the automakers. And I think it is also notable to mention that Panasonic’s contribution around energy storage to Tesla. I think one thing a lot of automakers, let’s say, Yeah, Toyota, as you said, struggled to think about how the auto market or the auto industry can shift their supply chains to EVs completely. So I think Toyota and its suppliers are creating quite a lot of employment in certain areas for certain groups of people. And I think certain change, like complete shift from, complete shift to EVs would basically take up a lot of jobs for those people or those sectors. And since Toyota has a huge market presence in Japan and some areas, I think, the company cannot easily commit to such a such a change. So I think what could work if maybe the government can help that transition from what they have to what they want to do in terms of  electrification of the vehicle sector, the transport sector, to smooth out the transition. This is very like, for the car workers in Japan, I think, like the coal workers in Australia, and like we all have often seen industry transitions. And if I was to ask what opportunities, again, this is not a question I was thinking of asking before, but when I look at Japan, what do you see as the opportunities for the country in decarbonisation generally? You know, is it in battery or in inverter manufacture, electronics? What do you think Japan can do well? Are you asking about the auto sector or just….

David Leitch  32:26

General, you know, auto sector or just generally, you know, what you? Yeah,

Isshu Kikuma  32:31

Yeah. So I think what Japan can do for decarbonization is basically prioritizing the power sector first, because Japan, the power sector admits the highest emission among all the sectors. And the good thing is, we know what we can do to decarbonize the power sector, which is basically deploying more renewables. And in the sense, offshore wind is definitely have the huge market potential, because of some of the reasons I already mentioned. So I think offshore wind can be in Japan, only installed 20 megawatts of the installation also. So it’s tiny, but we expect the market to grow to about four gigawatts by 2040. And about 10 Giga by 2035. So I think the offshore wind market is quite promising in our views. And the other thing I’m looking forward to seeing Japan is the basically materializing the high demand of clean energy from corporations side. So many companies are interested in sourcing clean energy in Japan. And if you look at the number of where we are, we are 100 initiative, which is basically the group of companies which tried to use 100%, clean, electric cheap electricity. The number of arguing 100 initiative in Japan, or the number of companies in the initiative is 59, which is the second largest after the US. So we have seen like growing momentum in that movement. And yeah, the demand for clean electricity among the private sector is like really high. And yeah, I’m looking forward to see how that will be translated into like actual installation and clean up the power sector as well.

David Leitch  34:28

One last question. I think Japan has quite a big steel industry. And do you think that maybe if Japan was to get right on board with decarbonizing steel by introducing, I don’t know, hydrogen or electric arc with hydrogen, that this this can be an advantage for Japan? I mean, I was on a conference with some people in Sweden, that the Swedish Chamber of Commerce organized, and the guy there was he had some carbon, zero carbon steel, and  no one cared about the price. They just wanted to buy it anyway, because it was a good advertising and marketing potential.

Isshu Kikuma  35:13

Yeah, so I think in the steel making sector, especially the heart of the sector, I think there are a few things that sector can practice. I think the first thing will be increasing the efficiency of the steel making process. And I think that will contribute to the reduction in greenhouse gas emission. And I think the other thing they can do is switch to electric furnace, when they basically create the steel, because yeah, electric furnace can be more efficient. And also, if Japan’s power sector has more renewable energy or their carbon sources, that means their steel making process will be cleaner. And I think in the long term Japan can think about the use of the hydrogen, because hydrogen has a lot of potential in the sector. And I think to make it work, as I said before, I think the higher carbon prices will be needed to  make hydrogen more economic in that use case.

David Leitch  36:21

But I don’t get any sense, just finishing off, that there is any push or move to have a higher carbon price in Japan.

Isshu Kikuma  36:29

Yeah. So for now we haven’t seen any move. And what the government wants to do for now is to spur the carbon pricing market using the brown free carbon offset market or the certificate among the private sectors. And I think the government  is having a hard time to implement the higher carbon tax because higher carbon tax, obviously means higher electricity tariffs for some people. And they’ve been getting a lot of strong pushback from industry groups. So yeah, I don’t expect the carbon pricing or the higher carbon tax will be introduced immediately.

David Leitch  37:17

No, I would be a bit grumpy, to use an Australian word, if I was paying much higher coal and gas prices and also having to pay a higher carbon tax. It’s not so much fun, when you’re trying to make a profit. Isshu Kikuma, I thank you very much for talking to Energy Insiders. It’s been been an absolute pleasure. And I’ve learned a lot.

Isshu Kikuma  37:36

Yeah, thank you so much.

David Leitch  37:38

That was me talking to Isshu Kikuma, Giles. I’m wondering, when we  think about Japan,  it’s got a long way to go. It’s our major trading partner. But it’s clear, there is a certain degree of commitment even though Japan was one of the countries not to sign up to the end coal agreement, just before the G20.

Giles Parkinson  37:59

That was actually quite disappointing. But look, it’s just fascinating to hear from Japan, because it is going to be the decisions made in Japan, and South Korea, and in other Southeast Asian countries, which are really going to decide the future of Australia’s fossil fuel industry, and also the progress in the green hydrogen industry. So we saw  various Japanese companies have been signing deals, I think with Woodside in Tasmania, with Marubeni in South Australia with the South Australian government and offtake agreement. They’ve been doing deals in Queensland, talking about things in Western Australia. So it’s those customers and that capital, which is going to influence a lot of the bragawatts we’ve heard about green hydrogen to date.

David Leitch  38:44

That’s  right. And if we get back to what we were talking about before that interview, the two roadblocks to going faster, no matter what policy settings are in place, are transmission and inertia. I don’t want to talk about inertia today. But I do want to talk a little bit about transmission. Because  Simon Corbell was saying it’s a big issue. Everyone we talked to says it’s a big issue. And it’s an issue that even if we all agreed on what was to be done, even if there was a war on, it would still take time to build new transmission. So it’s why it has to be front and center of people’s minds frequently. And this week, we had the Queensland transmission statement Powerlink, talking about what they’re doing, and in my opinion, relatively modest amount of progress and you know, with the usual, Queensland centric focus. If it’s not built in Queensland, by Queenslanders, then it’s probably no good and doesn’t work. And you know, I heard Minister de Brenni there saying he’s charged with developing a 10 year plan for how Queensland is going to get to 50% renewables by 2030. But you know, guess what, it’s 2022 Next year, and they’ve got a long way to go. Don’t you think Giles?

Giles Parkinson  39:58

They have got a long way to go. And if the transmission plan that you’re talking about with Powerlink is the same as what they talked about this week with the rollout or the initial stages of the renewable energy zones, then certainly the scale of what they’re proposing is nowhere near what they need to be getting to for that 50% renewables. And quite a contrast, really, when you think about it, with the way that Matt Keen has gone about it. He’s gone, Okay, we need this at the end of it, and we’re going to pile in and do this as we go to make sure that we actually get to that target by 2030. It just seems to be an upside down approach that Queensland has adopted, but maybe I’ve got them wrong.

David Leitch  40:36

Look, I was just on an Australian Institute of Energy, young energy professionals webinar, where one of the presenters was a representative, a very competent representative, of the New South Wales Government talking about the New South Wales roadmap. And as I’ve said several times on this podcast, that they are really doing a very thorough and comprehensive job. Not one without its questions, because it’s path breaking. And for instance, I still don’t know how you have an L tester with a firm wind contract, but I’m going to be thinking about that. But what they’ve announced is that there’s a whole lot of new entities. And what I heard today is that we’re going to see this year, the first report of the 20 year development pathway. That’s due apparently before Christmas. And that’s going to be followed up by a 10 year tender plan which, if I heard correctly, is going to announce the New South Wales government’s target for how much of this 12 gigawatts of renewable energy they’re going to procure every year. And that’s going to obviously be over one gigawatt per year, but maybe not in a straight line. So, you know, this has been a year of getting ready and preparation in New South Wales. But I think as we move into 2022, and 2023, we’re going to see the sort of exciting news about which projects are getting up and when they’re going to start and that’ll be something to look forward to.

Giles Parkinson  41:55

That will be something to look forward to.  David, anything else to cover as we sort of wrap up today’s podcast? I think we that’s about it. I guess we’re going to have to wait for Labor to pop their heads above the parapet in early December on their climate policy, their choice between politics over policy. I expect to see a few more records broken in the coming, another couple of weeks left in Spring, in terms of renewable share, and then we’ll go into the Summer period.

David Leitch  42:25

Yes. And the summer period will of course, be the one where it’s very unpredictable as to what happens. There’s a slight reduction in renewable energy output because wind is past its peak. And we also get the very hot days where wind doesn’t work so well as we know. There’s still not enough storage in the NEM, even now. We need more storage of short, long and medium durations. So we look forward to that. But that’s all in front of us Giles.

Giles Parkinson  42:53

Just on that, I just want to ask one more question, David, before we sign off. South Australia, levels of  curtailment are quite high. This week, we actually saw a day when they actually had to curtail as much as they actually used. Now it was a low demand day, but still, surely this has got to be a signal for storage or demand shifts or something. I mean, that can’t continue. I mean, I guess we shouldn’t be scared of curtailment. But surely that’s a lot of free energy, if you like, going to waste?

David Leitch  43:23

Yes, most optimized systems historically show that some curtailment is the lowest cost solution. But those models never really think about the equity of it, like whose energy gets curtailed. And that’s really one of the fights that you have in between the rooftop, the guys don’t even know they’re in that fight, and the utility solar and wind and thermal generation people. And this is where all these rules about minimum generation that’s required for system strength, once we take that requirement away by putting grid forming inverters in place, and that will happen much quicker than people realize, then  there’s no real reason why the coal generators can’t go away all together if there’s enough other  firming around. Look, it’s a fantastic topic. It’s something that can fill papers and papers and papers and lots more podcast, but I think we’re done for the day Giles, except for thanking our sponsors to whom we as usual, are eternally grateful

Giles Parkinson  44:25

Absolutely. And those sponsors of course are Pylon and Evergen, and we would like to thank them. We’d like to thank everyone listening out there and we’ll be back again next week with another Energy Insiders podcast. Thanks for listening, and bye for now.


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