Podcast transcript Episode 4
[0:00:00]
Music track starts
Guest (clip): If we recognise that decarbonisation is happening.
Guest (clip): You just have to start somewhere and see what’s practical and what’s feasible in terms of reductions.
Guest (clip): Directionally, we know that this is going to be a really big thing for businesses over the next ten years.
Guest (clip): It represents one of the fastest routes for us to decarbonise as a country.
Guest (clip): Potential cost benefit.
Guest (clip): It’s really powerful. It can mean we all move incrementally forward together before 2050.
[0:00:27]
Taylor: Welcome to The Net Zero Path for Business, a podcast delving into the process of transitioning to renewable energy and emissions reduction from the very beginning. It’s a show where we explore ways to not just survive but thrive as a business along the way.
I’m your host, Taylor Hawkins, and I’ll be bringing together industry advisors, experts, and businesses as we explore things like switching to EVs and the practicalities of going solar.
Join me as I ask our guests to share their stories of transition and the strategies that have helped them on their way. We’re presented by AGL, inviting you to join the change
Taylor: As we dive into talking about our future ambitions for net zero, I would first like to acknowledge the leadership, knowledge and resilience of the Aboriginal and Torres Strait Islander peoples who have safeguarded the sacred lands and waters of this country, that we know as Australia, for thousands of years. May we strive to honour, learn from, and meaningfully partner with leaders of such calibre.
[0:01:28]
Taylor: Here we are at episode four.
Today we are exploring the power of batteries. Battery storage is one of the best ways to get the most out of solar. You can store renewable energy away for your own use later, or even offer it up to the larger grid to be used by others.
It can save you on your electricity bills. If you live rurally, storing that energy can also save you the hassle from blackouts. It really is the next frontier of renewable energy, and we are excited to explore what it could mean for your business.
Our guest is Jane Butler. Jane is the Head of Decarbonisation and Customer Strategy at AGL as well as a Non-Executive Director at the Energy Efficiency Council, the peak body for Australia’s energy management sector, driving world leading policy on efficiency, electrification and supporting Australian businesses to decarbonise.
I’m particularly excited to tap into her knowledge about the technical and commercial realities of the energy transition for businesses. Together were tackling both virtual power plants and stand-alone microgrids.
We’ll discuss what on earth they are, how to figure out which one is right for your business, and how to get everybody else on board too.
If this is all sounding great, but you want to brush up on solar more generally before you dive into batteries, please go back to episode three on the how and when to go solar.
If you’re ready to go, keep listening.
[0:02:57]
Here to talk with me about the world of solar storage is Jane Butler. Hello, Jane.
Jane: Hi, Taylor, great to be here.
Taylor: Thank you so much for joining us. And I would love to start at the basics before we dive in. Can you tell us a bit about your background and how you came to be involved in the business of decarbonisation?
Jane: Thanks, yeah, so I have an engineering background, so I came at this from a technical perspective. I spent about ten years in the manufacturing sector myself, so sort of grounded in, I guess, in the operational reality of how businesses work.
But then the last ten years or so I’ve been in the energy sector. I did my master’s in sustainable energy because I’m very passionate about this space.
And in recent times, I’ve worked around mainly what we call the new energy space. So solar, batteries, demand response, virtual power plants, helping typically businesses with solutions that are going to help them decarbonise.
And that’s my job now, which is very exciting.
[0:03:49]
Taylor: Certainly an important space to be working in. And today we’re going to be exploring the storage solutions. So that’s batteries, virtual power plants, microgrids, and for those who maybe aren’t that familiar with those terms, can you explain the differences?
Jane: Sure. But before we talk about batteries and VPP in more detail , I want to just take a step back and zoom out a bit on the energy transition.
I am a board member at an organisation called the Energy Efficiency Council, and they thought a few years ago, with all these renewables coming into the system: Is energy efficiency even going to be a thing anymore?
Is this something that we have to think about as an existential threat to our organisation?
They did some really good work and produced last year a report called Clean Energy, Clean Demand, which I’d encourage anyone to look up on the Energy Efficiency Council website.
And this report was really important because it actually showed, yes, we’re going to have a lot of renewables coming into the system, and yes, the cost of energy in the middle of the day, when the sun’s shining is going to be very low, and that’s a good thing, and maybe we don’t have as much impetus anymore to save energy at that time of day.
[0:04:52]
The flip side is, once the sun goes down, that evening peak becomes critically important.
So, in a high renewables future, when we’re going to have to firm renewables in that evening peak, the cost of firming becomes very, very expensive.
So when we think about managing your energy use, it’s really about managing the time that you use your energy, and particularly at those peak periods.
For a home, that means things like home insulation become more important than ever before in the future.
[0:05:22]
But for a business, that means businesses need to be thinking about their load shape.
So, one thing businesses can do is move as much energy as they possibly can into the middle of the day where it’s going to be cheaper. That’s great.
But lots of businesses can’t move energy.
So, what’s something else you can do to manage your energy costs? This is where we lead in to start to talk about storage.
So, when energy is very expensive, if we have the ability to store energy on our site at a business, then we can actually start to arbitrage between these low and high price times that we’re going to see more and more of in a high renewables future where renewables are really variable.
Then the price of energy throughout the day is also going to be really variable.
And that’s really what’s driving this conversation around why we are talking about battery storage and virtual power plants.
For businesses, we’re going to see this start to happen more and more where it’s going to make sense for them to install storage at their premises.
So, I had a look at some stats to sort of zoom out a bit on this. Bloomberg New Energy Finance said that as of last year, there was about 0.3 gigawatt hours installed in the commercial industrial sector in Australia.
[0:06:30]
By 2035, that’s going to go to 13 gigawatts. That’s what they’re forecasting. So that’s like a 40x increase.
So, you know, historically, forecasts are always wrong, but directionally, we know that this is going to be a really big thing for businesses over the next ten years.
So that’s the storage part of the equation. And then you’ve talked about virtual power plants and microgrids. There’s a lot of buzz and hype about some of these words.
Taylor: Forgive me if I jump in on behalf of some of our listeners.
I know that I speak for myself at least, that sometimes the idea of a virtual power plant versus a micro grid can feel a little similar.
Can you explain the exact differences between the two for us?
Jane: So, the best way to think about a microgrid is that it’s a local energy supply solution.
So local being local to that business or to a precinct, or maybe say even a suburb, and energy is shared throughout that suburb and managing supply and demand in real time.
So, you might have what we call a microgrid controller controlling the sources of energy that are supplying their local area, solar, battery, maybe diesel backup, for example, and managing a 24/7 supply to whatever the demand is at the site, precinct, local area. So very much a local solution.
[0:07:48]
A virtual power plant, on the other hand, is something that virtually connects assets and it doesn’t matter where they are.
So, you could think about a virtual power plant as being a collection of, for example, if we just use the example of storage, it could be a collection of storage devices at homes and at businesses that are aggregated and operated as though they were a single power plant.
To help support the wholesale market, for example, to earn additional revenue for those customers, or potentially to support the local network.
So, there’s a range of services that virtual power plants can perform, ultimately with the aim of using that latent capacity to generate additional revenue that then can be shared with the owners of those assets.
[0:08:36]
Taylor: Fantastic. And we’re incredibly lucky to have someone with the amount of knowledge that you do to help us cut through some of these buzzwords and the many moving pieces in this space.
You’ve already touched on one or two things that definitely have me excited. But why should businesses be excited about this new frontier of options?
Jane: So I think for businesses, it ultimately comes down to managing costs, and energy storage is something that can help manage energy costs for businesses.
But increasingly, we’re seeing businesses look to storage as a way to also increase the sustainability benefits to their organisation, or potentially also to increase resiliency.
What’s the long-term energy use profile going to be? For example, are you going to electrify your fleet? And would that increase electricity consumption over time? Are you looking at electrifying processes which are currently run on gas?
So, understanding how that electricity use profile is going to change over time and potentially to increase, and then think through, well, how might storage fit into that puzzle to help supply energy to the site and help lower energy costs and help reduce emissions?
[0:09:45]
Taylor: I’d love to know, what should businesses be thinking about as they approach this opportunity?
Jane: So businesses, when they’re thinking about storage, they really need to think about, you know, what is it that they’re trying to achieve?
Are they trying to increase solar self-consumption? Perhaps they already have solar on site. They’d like to store some of it to use later.
Are they thinking about managing the demand charges, which is the network charges on their bill, and being able to smooth out those charges?
Are they thinking about resiliency? More and more businesses are needing storage to help back up all or part of their operations, to be able to ride through power outages or power blips for example.
Another big area that businesses need to be thinking about is as businesses start to decarbonise, some businesses are going to be looking to transition away from gas and onto electricity for some of their processes. Now increasing their use of electricity, there’s a lot of planning to think about.
[0:10:43]
Where is the infrastructure on site going to come from? Am I going to increase that infrastructure, getting it from the grid?
Or could I install more storage behind the meter to help manage the costs of supplying energy to that site?
So, there’s obviously a range of use cases of storage. Thinking through what are the use cases that apply to my business, and what are my business drivers?
Is it just cost? Is it sustainability? Is it resiliency? And how do those factors play into what a battery business case might look like for me?
These are, you know, can be quite large assets with a long asset life.
People need to be thinking through capital replacement cycles and how does this fit into the long-term planning for my business?
[0:11:26]
Taylor: Certainly a lot to think about that you’ve just outlined. So let’s say a business does want to invest in, in solar storage. Where do you even begin?
Jane: So if a business is thinking about buying a battery, the first thing we would do is do some desktop modelling to see if that battery is going to save money.
So to add a bit of flavour to this, it’s going to be different for every single business.
A recent example was a school, a 250-kilowatt battery that we’re now installing. The business case for that battery was made up of 60% of savings on either the network component or the retail tariff on the bill.
Another 15% of savings in solar that was stored to be consumed later on. And about 25% of that business case was made up in the additional revenue generated by that battery participating in the VPP.
Conversely, a recent business case we did for a water utility, a three-megawatt battery. 70% of the business case was in solar self-consumption or storing solar to consume later.
And only 5% of the business case was made up of those additional savings from that battery participating in a VPP.
[0:12:32]
So, as you can see just from those two examples, it’s very dependent on the specific situation of the size of the customer and the way that customer uses energy.
So particularly on the VPP side, you can see between 5 and 25% is a good rule of thumb to the indicative range in which a VPP might help get a battery business case over the line.
It’s certainly not going to be the major driver, but it can really help with battery business cases.
Another example is the shopping centre where we installed a battery two years ago, a 50-kilowatt system.
And what was really interesting was we recently went back and actually worked out the actual savings delivered on the bill and compared them to how we’d modelled those savings over two years ago before the battery was installed.
And pleasingly, the savings on the bill were within 2% of the modelled savings that modelled the first time around.
So that was really pleasing to see.
[0:13:24]
Taylor: When are virtual power pants usually the best option to consider?
Jane: So first and foremost, when thinking about a virtual power plant, I’d be thinking about what’s the ultimate impact on my energy bill. So, is participating in a virtual power plant going to help decrease my energy bill or is it going to increase the payback on the investment in an asset, for example?
So typically, we think about virtual power plants as being a value-add service that can help improve a business case.
However, it’s rarely the main reason for building an asset in the first place.
Taylor: Can you tell us a bit more about microgrids as well and when these are a suitable approach to consider?
Jane: The best way to think about microgrids is that they’re effectively going to supply 100% of the site if the site’s going to be in blackout.
So that’s either because the site’s not connected to the grid in the first place and the microgrid is the main source of power for, say, that site or that town or that precinct.
Or maybe the microgrid is connected to the grid most of the time, but if there is a blackout on the main grid, the microgrid can take over and supply 100% of that power to the site.
[0:14:37]
So in order to do that, the system needs a grid forming inverter, so effectively they can continue to operate that site even if the main grid’s in blackout.
These sorts of systems make the most sense in rural areas where you would otherwise be using diesel to supply the site. Cost of diesel is obviously a huge issue for those areas, not only cost, but also in terms of sustainability.
So microgrids can be a real win-win if we can eliminate all those, or almost eliminate all those emissions, as well as decreasing costs at the same time.
So, we’ve been involved in some projects in rural areas of Australia where, say an 80% emissions reduction has been achieved, as well as a cost saving on that site.
Now, that’s in situations where the only alternative energy source is running diesel 24/7, so that’s very cost competitive today to think about a solar and battery microgrid solution.
Where the grid is available, typically, we’re then looking at solutions. We’re saying solar and battery won’t be picking up 100% of the load, but picking up some of the load to help reduce the energy bills behind the meter, and maybe providing some resiliency to at least back up some of the services on site if there was a blackout.
[0:15:51]
Taylor: That makes sense.
And now, as we approach the end of our conversation, I know that we’re looking at how we can bring together this resilient ecosystem for businesses.
But for the people inside of these businesses influencing to have these solutions advanced, how can they help to get these ideas across the line?
Jane: Sure. So, as with anything new, having a case study of where things have worked before, to refer to is really important.
But I think in thinking through organisations large and small have a range of stakeholder's interests. You’re going to have the financial interest, sustainability, operations. Different areas of those businesses are going to have different agendas.
And before you think about going down a pathway or virtual power plant storage, microgrid it’s important to have all of those stakeholders on board.
So, understanding what are the financial drivers of the business, how is this going to help improve cost? Understanding how is this going to improve from a sustainability viewpoint?
What is often overlooked is the operational aspect.
So, we have found in some businesses that we work with that the CFO is super keen, the Chief Sustainability Officer is super keen, but no one engaged anyone from operations and that there may be hurdles to overcome in the operations side of that business to make it actually a practical outcome for that business to take up.
So, engaging with the full range of stakeholders is really important in terms of getting solutions like this over the line.
[0:17:15]
Taylor: Absolutely. It certainly sounds like bringing everyone on the journey so that you can co-create a solid roadmap feels like something that we’re hearing time and time again on this path to net zero.
So, thank you so much for your time today, Jane.
I certainly feel like I know a little bit more after our conversation, and it just seems that there are boundless opportunities in this space. So, thank you so much for sharing your insight.
Jane: Thank you.
[0:17:36]
Taylor: Today we have another bonus segment for you.
We’ve already talked a lot with Jane about what happens before installation, so I also wanted to explore what happens next.
This is CEO James Diliberto from the engineering group AZZO talking about some of the systems they’ve installed and the results.
[0:18:00]
James: My name is James Diliberto. I’m the CEO and Principal Engineer of AZZO.
I’ve been with the company since I moved to Australia.
As you can hear from my voice, I’m from New York City, but I’ve been in Australia since 2008 and have worked really in building this company from 3 people to 55 people.
And our main role in the energy transition is to bring technology together to enable these global energy transformation projects.
I’m deeply involved with Engineers Australia as a fellow Eng Exec with really the discipline side of what we do, as well as being involved with the Association of Energy Engineers as a Certified Energy Manager.
So, from a governance perspective, from an engineering and energy as well as a global body like the Association of Energy Engineers, I'm quite across that. What we're doing here in Australia is globally relevant. These are problems that are universally being experienced by everyone that's in the energy transition.
[0:19:03]
And most recently, I was appointed to the board of the Energy Efficiency Council and with the considerations that came back from COP28, looking at the commitments that countries are making to sustainability.
Our role in the energy transition is to bring technology together to both allow us to use less and need less energy, be more efficient with that energy as well as generate it in a renewable and sustainable way.
Thats the role of our company and we’re continuing to do really cool projects like our topic today, like microgrids and energy as a service projects.
So, energy management generally is about measuring for the purposes of controlling. When you think about energy management generally, a lot of people have philosophically thought using less is better.
And where we’re at now is it's not only just how much that you use, it's when you use it is as much a part of energy management as how much you use.
[0:20:04]
We’re moving from a quantitative arrangement to a qualitative arrangement on how energy is consumed.
So, looking at efficiency for how we draw as dynamic loads on the grid as well as how much that we are efficient with the energy that we draw.
So, it's been quite an interesting journey watching the commitments in energy efficiency land, shift from much more focus on volume to time being the major driver.
James: Energy management philosophically is about being able to measure and understand energy consumption and then make decisions based on it.
So, to analyse control and then repeat that process over and over again. When you think about consumers of energy, that kind of isn’t the description of people anymore.
Now most people are both a consumer and a producer. You might even call that a prosumer if anybody’s ever heard of that term.
[0:21:05]
So everybody from a industrial site like a water utility, or a manufacturing site like a food and beverage company, or even your traditional petrol station now is a hybrid conglomeration of energy resources.
And then you look at groups of facilities, like for example a university. A university is a campus with lots of buildings. It’s kind of like a mini-CBD.
So those are your kind of traditional energy management customers that are now all prosumers.
But now even your generators and retailers have come together called gentailors. Like AGL is a gentailor, both the generator and a retailer.
And then you have these other people called aggregators that basically have lots of small installations that put them together into one. These are the people that are responsible for virtual power plants.
[0:21:58]
And then you also even have utilities trying to refigure out what they do. You have your transmission utilities, your TNSPs and your distribution utilities, DNSPs.
Again, trying to figure out where they play in the energy efficiency through data good metering, a dynamic relationship with the demand side and the distribution side.
And then you have companies that exist to service this whole thing. So, this is operation and maintenance companies that exist to service this whole industry.
So, the stakeholders are broad and wide, and everybody is a stakeholder now really in the energy transition.
So one of the challenges of people becoming a prosumer is they’re not in the discipline of running generating power sources.
You see a microcosm of this when people do it on their own home and they can’t maintain their own panels or their batteries or their EVs, they always need to call someone else.
So it is something where putting the right technology in and getting a really good O&M partner to make sure that the asset doesn’t fail and then the results end up not being achieved because they don’t know how to operate and run this asset.
[0:23:07]
James: So that’s a big trip up – is people not knowing how to do the operation and maintenance of these microgrids that they’ve all of a sudden become a power station.
And they didn’t, you know, wasn’t in their job description when they started. And then the second one is cybersecurity asset management and cybersecurity.
So microgrids kind of come in three different forms. You kind of have like a standalone power station, an islandable microgrid or a grid connected microgrid.
So, for your standalone power stations, as people who are trying to get off diesel and replace with solar but need somewhere to store that and to provide grid stability, that’s going to continue to grow.
So that’s your standalone power stations, outback communities that are really already running it as a kind of a microgrid but with only one source in the diesel generator.
[0:23:55]
Now we’re going to move to a multi-source and that’s going to continue to grow.
Your islandable microgrids are going to be important for your critical power places like a hospital, a shopping centre, a data centre.
These are places that can never go black but want to participate in the grid. And because they’re grid connected, they’re grid connected but islandable.
So, they can kind of have their cake and eat it too. Again, they can be on the grid, participate, but they also have the ability to voluntarily island or isolate when they need to.
And then lastly, shopping centres that are microgrids in the sense that there are multiple sources of energy, but they’re not a standalone power station that can’t island.
So that’s like a renewable energy microgrid that’s grid connected, but it doesn’t only rely on the grid for its source, it self-generates on prem. And that’s only going to continue to grow.
[0:24:47]
Let’s take like a traditional manufacturing plant. Like a meat abattoir. These abattoirs are often out at the end of lines, where they have a limited supply of energy that they can get off the poles and wires.
And they’re either going to be paying big bucks to ask the utilities to install larger transformers and upgrade their poles and wire which cost millions and millions of dollars.
Or they can make a decision to generate as close to the place where they consume as possible, so they don’t have to go across the poles and wires.
And so, an industrial manufacturing plant becomes a prime candidate for microgrid. So, you might cover an open field, a paddock with ground mount solar.
Now you walk across the paddock closer to the manufacturing, the rendering plant, and there is where you might have a large-scale battery storage unit to soak up that excess solar.
Because they’re manufacturing around the clock when the sun is not shining. So, they can't consume everything that they can generate in this big field.
So, they store the excess in the battery storage unit. And instead of burning fossil fuel on a backup arrangement, they use that very same battery where at the end of the line, when there's a power outage due to the storms and the thing, the impacts from climate change.
They're able to use that battery for resilience as well as energy management.
[0:26:08]
James: So that battery is able to island the site, form grid, let the solar continue to provide the main energy source, while the main grid source is the battery.
And we might even be able to use those old generators that are sitting there like as a last resort. But they still don’t have to be end of life, they can be used as a last resort.
So battery storage is there to allow for the greater adoption of renewable sources, to be able to provide almost like that holding tank, and also provide a backup source.
So industrial sites, universities, commercial buildings is traditional, but this is not just for commercial buildings. This is anyone who’s what we call a critical power site.
So microgrid is a fantastic way to achieve the renewable transformation, as well as deal with the actual power needs of the site.
[0:26:59]
Another one is like a petrol station. So, one franchise company that has fleet of hundreds of petrol stations, what they’re trying to do is they’re trying to provide high-speed chargers for their patrons.
And while they’re high-speed charging, make sure that they have a bit of a cafeteria and a bit of a food court. And so, you can do a little bit of small shopping and some general activities while you’re waiting for your car to be charged.
But because of the additional power of the car chargers and the additional power needs of the food court, they don’t have enough juice on the site in order to produce the amount of energy that they need.
So, what some of this one example company that we’re working with, they tried a few pilots, and it was so successful that they’ve basically adopted that as the model for the future.
So, they’re going to be using that same model, which is battery storage, solar, EV chargers, working together with the energy management system of the petrol station shop, as it were, all working together for basically energy independence.
Also that they actually don’t have to ask for additional juice from the local utility. So, this petrol station provider is kind of a model for the future.
And shortly on their heels, other petrol station providers all around the country are following their lead and that’s really going to be the petrol station of the future for all of them.
[0:28:28]
One example of someone taking advantage of storage and microgrid technology generally is a produce market in South
Australia.
So, the South Australia produce market, the farmers market, they are a very large site, lots of cold storage, have a very reliable usage profile.
But because most of the work that they do is before we go to the shops during the day, they're getting their food delivered to this facility between 12:00 a.m. and 08:00 a.m.
So, while we’re asleep, that's when they're happening. Well, it just happens to be that there's no sun shining while they're working.
James: So if they want to have a chance of increasing their sustainability and relying on fossil fuels and power from the grid, they needed really to generate during the day, store it during the day and time, shift that whole storage profile to the evening.
But that's a really expensive way of becoming sustainable. So, the only way to make that business case actually stack up was to say, I need to be able to do more with this storage than just shift the suns energy.
[0:29:39]
So, they're partnering with AZZO and AGL to give that stored energy access to what we call value stacking. So, one piece of value that that battery does is shift the energy from the sun.
But the other thing that can happen with that battery, without even having to charge or discharge it, is just to bid its availability of backup stored energy into a capacity market like the frequency ancillary services market, the FCAS market in the national electricity grid. Bidding that availability, giving it to a retailer such as AGL to say, hey, you get paid to be available.
So AGL has a fantastic commercial relationship with a microgrid customer like this to say, “Hey, I'll buy your potential backup stored energy and I will bid that into the market that available reserve mechanism. I’ll bid that into the market. I'll pay you money to do that and you didn't even have to do anything with the energy. I was just able to take that reserve and then when it was needed it could be called on, but so long as it's not called upon, you still get paid for it.”
So, you're getting paid to be available. Not how much you use or consume, but how much you have in reserve to say if you need it, you can call upon it.
That’s a capacity mechanism and there are many of these value stacks in the market now that are enabling microgrids not only to do their resilience play for backup power. Like this is an islandable microgrid, so if there's a power outage they don't want all the food to spoil, they need it to stay on.
So, produce and food that people need was not lost.
[0:31:25]
But while it's not providing that backup function and while it's not storing the excess energy from the sun, that storage can do something else.
So, this is what we mean by value stacking, using all of these resources for their maximum value.
If you’re going to go down this path to explore DERs and microgrids, make sure you’re doing it with partners that can squeeze the most value out of that activity so you don’t really waste your business case, or worse off, never stand the business case up in the first place and then we’re back to square one.
[0:32:00]
Taylor: Storage really is such an exciting space. It’s particularly great to hear the impact the installation of something like a battery can have, not just on the business and their bottom line, but also potentially the electricity grid.
I hope my chats with both James and Jane helped shed a bit of light on how the right system can make that initial investment worthwhile in the long run.
As always, if these conversations have sparked something for you and you want to look more deeply into it, the podcast website has a recap and even more info for you.
Until next time.
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