Thinking Papers
Australia's transition to a low-carbon energy future

From fringe to mainstream: the opportunity for Australia to lead the transition to a low-cost, low-carbon energy world

Australia’s energy sector is experiencing an opportunity never seen before: consumers now have the opportunity to take control of energy costs and transition to a low-carbon future by being an active participant in Australia’s energy market.

In Aurecon’s recently released Future Energy Ready report, it’s estimated that 50 per cent of big energy consumers see themselves purely as purchasers in the market, whereas the other half aspire to be leaders and advocates of a low-cost and low-carbon energy future.

With increasing energy prices, a consumer-driven desire to lower carbon emissions and the absence of bipartisan government policy, Australia risks falling behind both developed and developing nations as technology and investor preferences transform the sector globally.

Big energy consumers begin to lead Australia towards a low-cost, low-carbon future

However, a new age is dawning where big energy consumers can choose to what degree they participate in the energy sector. There are now many ways for them to choose where their electricity comes from and at what cost:

Own and operate a renewable energy asset and be a market participant
Contract with someone else who is developing an asset
Engage with a retailer in a more proactive way to source electricity that meets their corporate goals on emission intensity and commercial objectives

Big energy consumers are realising that energy is becoming one of their top business risks. Never before has there been such an opportunity for business to actively participate in the energy market.

We are now seeing trailblazing projects across the country that are great examples of the articulation of visions, scenarios and pathways to a low-cost, low-carbon energy transition for Australia.

A case of a big energy consumer taking matters into their own hands is the University of Queensland, Aurecon designed, 64 Megawatt solar farm in Warwick, Queensland. Once finished, the project will allow University of Queensland to become the first university in the world to offset 100 per cent of its electricity requirements from its own renewable energy assets.

Interview with Professor Peta Ashworth OAM

Professor Peta Ashworth, Chair of Sustainable Energy Futures at the University of Queensland and coordinator of the Master of Sustainable Energy program, is widely recognised for her expertise in the energy field and has joined forces with Aurecon to challenge the status quo of how industry and education engage to lead change.

In this video, Professor Peta Ashworth and Paul Gleeson, Managing Director Energy, Resources and Manufacturing at Aurecon, discuss the challenges Australia faces in transitioning to a low-carbon future and provide insights into the role that key players in the industry can perform in modelling a just transition.

Watch the full interview with Professor Peta Ashworth and Paul Gleeson.

Video transcript

The University of Queensland and Aurecon discuss the challenges we face in transitioning to a low-carbon future

Paul Gleeson: I’m Paul Gleeson, Aurecon’s Managing Director for Energy, Resources and Manufacturing and I am talking to Professor Peta Ashworth from The University of Queensland about the challenges we face in transitioning to a low carbon future.

Question: What was the challenge that brought The University of Queensland and Aurecon together?

Peta Ashworth: So, the challenge that brought The University of Queensland and Aurecon together was really about a small group of people that were really positive and motivated to do something different. And within the context of a university, that’s all about education, it’s not actually that easy. There was a lot of different processes and things that were met along the way, and I think that’s where having a partnership was actually really useful and fruitful to moving it forward.

Paul Gleeson: In the Australian energy market context, it could look very much like this project that we are highlighting, The University of Queensland Warwick Solar Farm, where big consumers take action into their own hands, because they can now. I think ultimately the whole system will start to follow that, you know. But the fact that, as a big consumer, you can now choose to what level you want to participate in the energy market, that’s really the big change. That, combined with the fact that it’s now economic to do these things. So it’s no longer just reliant on someone’s sustainability drivers. It will often make sense for someone to do it commercially.

But the idea that you could choose whether you want to own and operate an asset and be a market participant, or whether you just want to contract with someone else who is developing one, or do it through a retailer in a more conventional way, but you’ve got ways now of choosing where your electricity comes from, and just how much impact it has on the environment. So, I think that’s really driving the change.

Question: What is the future vision that we are seeking and what are we doing to get there?

Peta Ashworth: The future vision I think for The University of Queensland and Aurecon going forward, is this commitment to low carbon, finding a future, you know, that is sustainable. And while the Warwick Solar Farm is one thing that we can do locally, in my role as Chair of Sustainable Energy Futures, I look after the Master’s, which has a real mix of domestic and international students. And so that changes the conversation quite a lot for me, because it’s not just about what’s happening here, but also internationally. And I guess that’s what motivates me to do the job that I do, because we all know there’s a billion people that don’t have access to electricity, and that’s the most basic form of electricity, to LED lights and some mobile phone charging.

Paul Gleeson: So, I think you’ve got a couple of things going on in the world. So you’ve got developing economies, which are trying to get electricity for the first time, and then you’ve got developed economies like ours, which are looking to how do they transition over the coming decades to a lower carbon future. And I think for the developing economies, in some instances it may be possible for them to leapfrog from no electricity to the ultimate solution, but for economies like ours, it’s possibly trickier to go from a well-established entrenched system, to what the one of the future looks like. So, Australia really can play a role in modelling that just transition and looking after everyone on the way through.

Question: How does what Australia is doing play into the broader international stage?

Peta Ashworth: I think while most of us would acknowledge, we are in a transition, and that’s the things that we have been talking about in our partnership with Aurecon and The University of Queensland. I think where I see in the world is this disagreement on the time it will take to transition, and that’s where all the tension comes. So, it also creates an opportunity. So for Australia, where we are very heavily reliant on fossil fuels, both for our energy, but also for exporting and the royalties that that returns, that’s a big ask to think about what is going to replace that.

And I think in many ways, that is sort of part of the crux of the problem as we transition, is how do we move away our reliance and come up with alternatives that we can actually bring royalties, bring new jobs and new skills. That said, I think there are some real exciting opportunities that are emerging in different technologies, and I guess that’s what we’re exploring with our partnerships.

Paul Gleeson: There’s been a bit of discussion about how big or small of an emitter we are, and whether we should bother doing anything about our own emissions. To me, there’s a couple of reasons why we need to do as much as we can. One is because we have the capability and the capacity to do so, and the other is that it’s largely economic for us now to make that transition, and I’m talking about low carbon energy sources. I think the other role that Australia should play is it can model what that transition looks like, largely from fossil to renewables over the coming decades.

And when we talk about transition, there’s a phrase that gets used a bit, a ‘just’ transition, and it’s really important to understand the impact of these changes, not just to – I guess the physical assets, but more importantly, to the communities, the regions. Will jobs be in the same places or of the same type? So, modelling a just transition and how you go from one course of energy to another over time, without creating massive disruption, both in terms of systems stability, but also in terms of the communities and the regions.

And I think Australia has already been playing a role in doing some of the modelling of that over time. If you look at programs like the Solar Flagships Program, which ran ten years ago, the role that that played in helping drive the cost of solar down globally is quite well documented. You know, and that’s something that at the time, technology wasn’t quite there, or it certainly wasn’t price competitive. If we hadn't embarked on something like that, we wouldn't have solar as affordable as it is today. So, that’s something that has impacted on the world stage.

Governments embrace game-changing energy storage technology

To ensure the lowest total cost of energy to consumers requires investment in transmission, storage and firming to be able to integrate new, variable, renewable energy.

Game-changing energy storage technology is being embraced by state, federal and territory governments as an important step in ensuring network reliability. With that support comes the need to work with the Australian Energy Market Operator’s integrated system plan to allow Australia’s transition to a low-carbon future to continue as it needs to.

Aurecon has been proud to deliver specialist and technical engineering advice for some of the country’s biggest and most exciting storage projects, including the South Australian Government’s 100MW lithium-ion battery and Territory Generation’s 5MW Battery Energy Storage System (BESS) in Alice Springs.

Recently, Aurecon was contracted by the Australian Renewable Energy Agency to gather insights and data from Australia’s early large-scale battery storage projects, including the Hornsdale Power Reserve, for which Aurecon developed the technical and functional requirements. Our insights outline the opportunities and risks for future projects in Australia, and ARENA intends to share the report and data with industry.

Hydrogen: Australia’s energy future?

Australia has world-class renewable energy resources that far outweigh our ability to utilise them for our own purposes. This is a similar story with other commodities: Australia exports around 80 per cent of its annual coal production; almost 100 per cent of its annual iron ore; 100 per cent of its uranium; and around 60 per cent of its wheat crops. The possibilities for expanding our export and balance of trade to include renewable energy with countries that do not possess Australia’s endowment of sunshine, wind and bioenergy is immensely attractive. This is particularly so for our existing trading partners in coal, iron ore and LNG; principally Japan, China and South Korea.

While these nations may have regions where solar, wind and other forms of renewable energy are bountiful, Australia’s sparse population, sizeable land area and potential supply of water (including via desalination for coastal-based export projects) provides us with a sustainable competitive advantage. This is where hydrogen comes in – hydrogen is the form in which our renewable energy can be shipped and consumed around the world. Aurecon believes its share of world energy consumption will become significant.

Hydrogen can be used in fuel cells to generate power using a chemical reaction rather than combustion, producing only water and heat as by products. It can be used in cars, trucks, trains, ships, houses, for portable power, and in many more applications.

Both Aurecon and The University of Queensland are working closely with government and industry to bring hydrogen to life as a viable part of the energy mix and as an enabler of the transition to a low-carbon future for Australia and its neighbours.

Australia behind on capitalising on ever increasing ‘green’ investments

The rapid rise in appetite for environmentally responsible or ‘green’ investing has created a considerable new pool of capital for green projects. Governments, financial institutions and companies have begun to issue green bonds in response, with the market growing rapidly.

Estimates show that the global volume of green bonds has grown from less than AUD 5 billion in 2010 to more than AUD 150 billion in 2017 and 2018. Australia has come comparatively late to the party, having only issued its first green bond in 2014. However, growth has been quick since then, with significant diversification of issuers, from banks to corporates to universities. The rapid growth and increase in liquidity of the market is being driven both by investor and issuer considerations, with products varying in terms of what projects or assets the bonds proceeds are earmarked for, and the recourse available to the bondholder.

While green bonds can come with some additional transactions costs (e.g. tracking and auditing the use of proceeds), that is balanced for most investors by the benefits of diversifying beyond income-generating investments towards making a positive difference (and the marketing opportunity that comes with it). In fact, research has shown that green investment unlocked through green bonds may actually enjoy a discount on finance, on account of the willingness of bondholders to pay for environmental sustainability and/or the reduced stakeholder risk of green investment.

Green bonds appeal to a broader, more diverse range of investors – a recent study showed that an overwhelming majority of millennials are interested in socially responsible or sustainable investment. It is expected that as the market matures, the assurance cost of green bonds (i.e. mitigating ‘greenwashing’ risk) will reduce, making financing of green initiatives increasingly competitive with more traditional finance, and potentially enjoying a pricing advantage.

In a market with low (to negative) treasury rates, debt-burdened governments will need to rely more on private capital to support the massive infrastructure investment required to address climate change. Regardless of how pressing the issue of climate change is to Australia’s government, we need to focus on promoting and strengthening our green finance market, to maintain and build an attractive case for investing in Australian infrastructure during the coming green finance boom.

Australia has the capability and capacity to model a just energy transition for all

Many discussions have taken place around how big or small Australia is as a greenhouse gas emitter. Aurecon believes there are plenty of reasons why Australia should do as much as it can.

Directly or indirectly, the world will put a price on greenhouse gas emissions, and countries that have low carbon sources of energy will ultimately have an economic advantage when it comes to producing commodities and goods for the global market.

Australia has some of the very best renewable energy resources in the world and should make the most of those the same way it does for its other resources. We need to flip this from being a threat, to an opportunity for regions.

Of course, there are challenges in how you transition from one source of energy to another without creating massive disruption both in terms of system stability and what it means for different geographic regions. But, the initial success of trial projects and systems are well documented and provide the perfect platform for lessons learned to be adopted on other larger projects.

The opportunity for Australia to be more competitive in this transitioning world and ultimately reap the long-term economic benefits for companies and communities in a low-carbon future is there for the taking, so let’s move quickly.

About the authors

Paul Gleeson, Aurecon Board Sustainability Committee advisor and Managing Director, Energy, Resources & Water – Australia and New Zealand, helps organisations to be at the forefront of the transition to a low carbon future.

Paul’s experience helping clients through the energy transition, using a combination of digital solutions and design led innovation, is being translated to unlock similar benefits in resources and water, helping to create sustainable industries. He is also leveraging these learnings to help other industries prepare for the transition risks created by climate change and therefore get to a low carbon future faster.

He has worked on some of the most significant projects in the Australian energy market; advising on the successful acquisition of TransGrid, the development, design and delivery of Australia’s largest solar farms, and the ongoing implementation of the Government of South Australia Clean Energy Transition, which led to the installation of the world’s largest lithium-ion battery.

Paul is a Fellow of the Institution of Engineers Australia and a graduate of the Australian Institute of Company Directors. He holds a Certificate in Design Led Innovation from Stanford University.

He is also a member of The University of Queensland’s Master of Sustainable Energy Advisory Board and continues to work closely in partnership with The University of Queensland to lead change for students and business.

Professor Peta Ashworth, Chair in Sustainable Energy Futures, the University of Queensland. Peta joined the University of Queensland in April, 2016. As Chair in Sustainable Energy Futures, Peta has responsibility for the Master of Sustainable Energy. She is also tasked with the role of building energy literacy more broadly and continuing her research around public perceptions of climate and energy technologies.

Peta Ashworth brings over thirty years’ experience working in a range of senior management and research roles. Peta is well known for her expertise in the energy field, communication and stakeholder engagement and technology assessment. Peta has been researching public attitudes to climate and energy technologies (wind, CCS, solar PV, geothermal) for the past fifteen years with a particular focus on CCS.

Previously, Peta conceptualised and led the Science into Society Group within CSIRO’s Division of Earth Science and Resource Engineering, which specialised in interdisciplinary research at the interface between science and society. Peta has an interest in designing a range of dialogic processes for engaging around complex issues.