The energy transition is not a David versus Goliath battle according to AEMO CEO

David versus Goliath battle

The Australian Energy Market Operator (AEMO) CEO, Daniel Westerman spoke at Australian Energy Week 2023 today (20 June 2023) on ‘Managing the tensions in the energy transition to maximise the benefits for all Australians’.

In his speech, Westerman spoke of the tensions and challenges of the transition indicating "there is a strong pipeline of potential future generation projects proposed for the National Electricity Market." Additionally, "bringing these new projects to market and connecting them into the grid urgently is critical to ensure consumers continue to have reliable power when they need it," he continued.

"For AEMO’s part, we are connecting these new projects as quickly as we can. On the east coast we have 163 projects comprising more than 27 GW of new generation going through different stages of the connection process, Westerman said."

It seems apparent the connection process is not quick enough. AEMO appears to have created a complex and unwieldy procedure for grid connection that is stalling the transition and disincentivising investment. It is obvious that investment in improving system strength and transmission transfer capacity along existing transmission corridors is desperately needed while the merits of AEMO's ISP are sorted out. This is particularly relevant when you turn to regions like Gippsland in Victoria that has the states strongest transmission network yet appears to have been artificially constrained since inception of the ISP via a 2,000MW hard build limit that cannot be explained (despite numerous requests).

With respect to further uncertainties, Westerman goes on to say, "But there are a number of uncertainties at play now - including the cost of energy – and community reactions to large scale energy projects.

What is missing from this statement is the community reaction to poor planning and engagement, lack of public participation in the decision-making process, broken regulatory framework that is delivering transmission projects, lack of trust in the cost benefit analysis, lack of holistic coordination within and between jurisdictions, lack of transparency and trust in the institutions delivering transmission projects. This is what needs to be fixed rather than bulldozing ahead via Ministerial Orders (VNI West and WRL) and expecting communities to ‘accept’ the burden and outcomes of a planning framework that is broken.

Westerman goes on to discuss tensions. “The third tension – between people and populations – is about addressing the concerns that are genuinely held in those local communities who are being asked to host the infrastructure of Australia’s energy future.”

Let me be very clear here. These local communities are not being ‘asked’ to host infrastructure. It has been made very clear to landholders and regional communities, by AEMO and TNSPs, that the only options available are to accept transmission infrastructure or face compulsory acquisition. Further to this, the term host implies a person welcomes the development and has invited the proponent as a guest on their land or in their region. For the most part, this has clearly not been the case.

Westerman goes on to say, “The market is responding to the withdrawal of coal, with investment in renewable energy, firming generation and storage to fill the gap. This is positive for consumers, because we know that firmed renewable energy is the cheapest form of new build energy.

We do not know this. We do not in fact know how much transmission will be built across the NEM or what it will cost. We do not yet know how much solar, wind, batteries, hydro, or flexible gas generation will be required and/or built or what the cost to taxpayers and consumers will be. How can this be positive for consumers when these costs are not yet known, when state driven roadmaps are not aligned with the ISP, when current transmission and pumped hydro projects have already experienced massive cost blowouts and delays. These claims simply have no merit as Australia does not yet have a holistic plan, just a piecemeal reactive approach to our future energy needs.

Westerman goes on to say, “AEMO’s Integrated System Plan provides a credible pathway forward. It’s a blueprint of the investments most needed for National Electricity Market to 2050. And these investments are needed urgently. It’s an ingredients list of the components needed to transition Australia to a reliable, low-cost electricity system underpinned by firmed renewable energy.

The problem with the ISP is that it is not a blueprint for the future. The ISP represents a potential investment guideline that should be considered by investors alongside jurisdictional roadmaps while generator and storage investors undertake their own due diligence and engagement with communities. The ISP does not always consider what is happening in each state, does not effectively consider community sentiment, does not consider state policies or objectives such as jobs creation, environment, or public policy.

The danger of misrepresenting the ISP as some form of least-cost blueprint is that it could result in investors waiting for new transmission builds rather than utilising existing networks. It can also lead to investments being made in the wrong regions, further delaying the transition. It may also lead to overbuilding transmission and increased cost to consumers if the ISP is delivered in addition to jurisdictional roadmaps.

Westerman goes on to discuss oppositional terms, “David versus Goliath”, referring to them as “false dichotomies”, suggesting “the reality is nowhere near as polarised as this framing would suggest.”

The reality is, as far as communities are concerned, this is a David and Goliath battle with a significant power imbalance between institutions and the public. This power imbalance exists due to several factors, including differences in resources, access to information, and decision-making authority. If this transition is truly ‘all of us together’ as Westerman suggests, then it is high time institutions and energy market bodies started behaving in a way that more evenly distributes the balance of power by allowing the public to be active participants in decisions that impact them.

It's important to recognise that rebalancing power between institutions and the public is a complex and ongoing process that requires systemic changes. It involves fostering a culture of collaboration, trust, and inclusivity to ensure that decision-making processes genuinely reflect and prioritise the needs and interests of the public.

Westernam goes on to say, “There are tangible benefits to be had when new infrastructure comes to town.” While this may be true in terms of creating economic opportunities in remote regional communities that have been starved of infrastructure development, it is not true for those communities that already have reliable electricity and will have transmission lines impacting their region for the benefit of the masses. Take for example the Western Renewables Link (WRL) in Victoria. There are materially populated regions along the transmission corridor where thousands of residents will suffer significantly reduced economic, property and amenity values, without consideration, all for the sake of the masses. What are the tangible benefits when the transmission will not enhance what is already there?

Further to this, Westerman states, “Landowners in these communities that host transmission towers should be fairly compensated” and that “Communities have told us that this approach is essential for them to agree to host new transmission.

Unless the narrative has changed while I was sleeping, I have not heard this sentiment from communities at all. What I have heard is that landholders will not speak of or accept compensation as they believe the planning framework that has delivered these projects is completely broken and until that is fixed, no level of compensation will pay for poor planning and lack of participation. Additionally, the energy market also needs to develop national compensation models for those living adjacent to transmission developments, as Powerlink in QLD has recently introduced. As indicated in the earlier WRL example, neighbours can be materially impacted by the development, construction, and operation phases of the project. Impacts can include dust, disruptions, road damage, blocked roads, visual amenity, noise, and economic loss. Like host landowner compensation, neighbours to transmission line projects should benefit from an agreement with payments based on a formula of distance from the neighbour (residence or functional facility) to the transmission infrastructure and the number of towers located within that distance. But only once the planning mechanisms and framework are fit-for-purpose.

Westerman closes his speech indicating AEMO's full support of the "Victorian Government’s new Transmission Investment Framework, to ensure environmental, land use, cultural and social factors are considered much earlier in new transmission projects. The framework seeks to secure community support and social licence, that are both vital for the timely delivery of transmission projects."

The VTIF framework does not seek to “secure community support and social licence”. What it seeks to ensure is that network planners “do their job properly” by considering all matters beyond the poles and wires through an instrument that is more akin to a triple bottom line assessment. Doing their job properly, treating people with respect, being open and transparent, allowing the public to participate in decisions that impact them, and being a ‘good’ corporate citizen, will do a great deal more towards acquiring and maintaining social licence than what is currently being done. Social licence is not about the infrastructure, it is about the credibility, legitimacy and trust in the organisations delivering it.

Instead of fast-tracking new transmission links, regulators, law makers, government and AEMO should be fast-tracking the reform that is necessary for a smoother, more robust, more equitable and defensible transition. Instead of talking about social licence and treating its acquisition as an economic equation, institutions should just start treating people with the respect they deserve.

We have seen a decade of inaction on all of this, and the transition is delayed as a result. The Australian public should not be blamed for the position we are now in, nor should they be paying the price while the bulldozers keep rolling forward.

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