It’s now been more than three months since we started to seriously feel the effects of the coronavirus here in Australia. We’ve moved through the various stages of lockdown; and are now slowly starting to chart the course to recover. The economic impacts of the crisis have been immense, and the energy industry has not been immune. Here, we take a look at how the crisis has unfolded and impacted the energy sector, and look ahead to some of the opportunities this unprecedented event will provide us with moving forward.
In the first weeks of the unfolding COVID-19 crisis, federal and state governments moved quickly to establish a coordinated national approach to managing the impacts of the pandemic, fully supported by industry associations and energy utilities.
Federal government initiatives were announced, a number of the state governments announced payment freezes or subsidies for household and business energy bills, and energy retailers moved quickly to provide support to customers experiencing hardship.
The Federal Government, through the Australian Energy Regulator (AER), also quickly set reasonable expectations of energy companies to protect householders and small business customers during the COVID-19 pandemic.
The Australian Energy Council (AEC) confirmed that energy retailers were ready to provide scalable, accessible and tailored assistance to all affected customers. AEC Chief Executive, Sarah McNamara, also welcomed the AER’s recognition that the viability of energy businesses must be protected.
“For that reason, over the coming months, a whole-of-sector response is vital to achieve the best outcomes for customers. We look forward to working with the AER and other market bodies, governments and stakeholders on the best ways to share the risks and costs across the sector and work through these expectations,” Ms McNamara said.
Energy Networks Australia CEO, Andrew Dillon, backed up these comments and said networks were working to assist customers.
“Networks continue to discuss with governments, regulators and retailers about the best ways to support customers through this difficult period,” Mr Dillon said.
“Energy networks understand many households are also facing challenging circumstances. With many customers now working from home, networks are doing what they can to minimise the impact of planned outages for critical work and to keep them as short as possible.
“Safely keeping the lights on and the gas flowing for the months to come is critically important, and networks are continuing to undertake critical works to keep energy supplies safe and reliable.”
Together with ENA, the AEC devoted significant effort in the immediate aftermath of the pandemic on maintaining the safety of energy industry people, ensuring the security of the energy system, and supporting customers who were experiencing difficult circumstances.
“Safety is always our top priority. Energy companies have undertaken a range of measures in response to this pandemic to ensure its workforce, assets and energy supply are protected,” Ms McNamara said.
“There continues to be industry-wide consultation on pandemic preparations and necessary responses with AEMO in regular discussions with generators, network and transmission companies and gas companies.”
Pandemic response measures underway include:
- Ensuring essential supplies, including the stockpiling of fuel supplies
- Reviewing any scheduled plant or network outages for maintenance and assessing the need and potential for rescheduling
- Further restricting access to control rooms and limiting access to areas required by critical staff
- Splitting of teams and establishment of multiple, separate teams
- Rostering changes
- Non-contact and social distancing for shift changes
- Implementing new working arrangements, including having staff work remotely when feasible
- Monitoring of essential service providers
- Maintenance of personal protective equipment stocks
The ENA also moved to remind customers that part of keeping the lights on and gas flowing during these uncertain times is continuing to carry out scheduled maintenance works across our networks. Many utilities have reported frustration from customers having their services shut down during this challenging period; however Mr Dillon reminded customers that “there is a need to continue critical maintenance to protect lives, prevent damage to properties and keep the power on for the future”.
Ensuring a steady stream of supply
In the upstream energy sector, the Australian Petroleum Production & Exploration Association (APPEA) and Australian Pipelines and Gas Association (APGA) are both working with members, governments and energy users to ensure the delivery of essential gas supply to local customers.
APPEA Chief Executive, Andrew McConville, and AGPA Chief Executive Officer, Steve Davies, confirmed members were taking all steps necessary to ensure the production and delivery of gas supplies continued.
Mr Davies said the upstream and pipeline industries had robust operational integrity measures in place at all times, but were vigilant to the additional challenges posed by COVID-19.
“We are ensuring good information flows and open channels of communication as they are absolutely essential elements of the response in this rapidly changing situation,” Mr Davies said.
“We are continuously monitoring the situation and are taking appropriate precautions to ensure the energy we need in our homes, commerce and industry is delivered.”
A word from the frontline
The country’s energy utilities have been quick to reassure customers that they have the necessary precautions in place to maintain supply while protecting the safety of employees and the community.
Common themes in the response from energy utilities have been strict isolation protocols; limits on face-to-face interactions where possible; additional cleaning of sites and workplaces; additional personal protective equipment for staff; telephone contact with customers before crews arrive; and phone notification of future outages, rather than face to face.
Other measures include increased infection control measures, ceased business-related international travel, and teleconferences rather than face-to-face meetings where possible.
Most companies have also established separate locations, backups and staffing in critical service areas like control rooms; and have limited access to, and contact between, those teams to sustain customer operations in the event a case is confirmed.
Another element of the changing pandemic operating environment is the shifts in demand that have occurred as a result of the pandemic.
The Australian Energy Market Operator (AEMO) has advised that they expect that reductions in demand may continue to increase incrementally over time at current levels of restrictions, with some states likely to exhibit changes in demand.
Some potential COVID-19 demand impacts have now been recognised in Victoria , where average demand reduction during morning peaks reached eight per cent (approximately 400MW) for the first time over a working week in the state.
The midday trough fell five per cent (approximately 200MW) from pre-COVID-19 levels on weekdays, and three per cent on weekends (approximately 100MW), and rooftop solar variability makes it uncertain if the demand reductions are from COVID-19.
Elsewhere across Australia, COVID-19 demand reductions continue to be observed in Queensland and New South Wales, which has seen further falls in demand over the weekday morning and night-time, while reductions continue to be lower on weekends.
As restrictions are progressively lifted, demand is expected to increase, as has been demonstrated in overseas cases, including, most prominently, Italy.
In addition, AEMO expects that as cooler weather prevails, Australians might see an increase in load volatility, reflective of a greater proportion of residential (weather sensitive) load on the grid. All regions except Queensland are expected to see a lift in maximum and minimum demands during the cold weather.
It’s important to note that Australia, overall, has seen only moderate reductions in demand as a result of the pandemic.
An evolving industry
Despite the challenges the industry has been facing, many industry bodies and commentators are also viewing the pandemic, and the changes it has brought with it, as a chance to implement the changes we have been needing as an industry for a while now.
According to Matt Rennie, EY’s Power & Utilities Leader, the energy transition will not stop because of COVID19; it will stall, and then accelerate.
“There is no doubt that one of the big winners from the current COVID-19 crisis will be battery/solar companies and virtual power plants,” said Mr Rennie.
“Our research shows that batteries and solar energy on households will reach cost parity with the grid next year.
“As the economy re-opens, we expect to see a boom in home electrification. This will place more pressure on AEMO, and network companies, to get the necessary frameworks and regulation in place to deal with bi-directional flows on the network.”
The Clean Energy Council meanwhile is arguing that the clean energy industry should be a key part of the economic recovery from the crisis.
It has released a report, A Clean Recovery, which highlights the fact that an enormous pipeline of wind and solar projects across Australia should be brought forward to:
- Create over 50,000 new direct jobs – and many more indirect jobs – in the construction of these projects, and an additional 4000 ongoing jobs in operations and maintenance
- Triple the amount of large-scale renewable energy installed in Australia. Over 30,000MW of new capacity would be built, on top of the existing 16,000MW of renewable energy generation in the National Electricity Market, accelerating Australia’s shift to a grid dominated by clean energy
- Drive down power prices and empower energy consumers with rooftop solar and household batteries
- Inject $50 billion worth of investment into the Australian economy, particularly in rural and regional areas where these projects are located. This investment would be delivered by investors and allow government to direct scarce taxpayer funding to other essential services and areas
For its part, the Australian Energy Market Commission (AEMC) has stated that the COVID-19 crisis should serve as a reminder of the importance of reform – including striving for a more secure, reliable and cheaper energy system.
According to AEMC Chair John Pierce AO, right now, the Commission is doing its bit by helping to ensure the power system is resilient enough to deal with what the crisis brings.
Along with energy market body colleagues Clare Savage and Audrey Zibelman, Mr Pierce has been consulting exhaustively on plans to both protect consumers and to ease the regulatory pressure on industry during the pandemic.
“At the same time, we are deeply committed to ensuring that important energy market reforms are progressed in a way that accommodates and responds to the conditions that we all now find ourselves in,” said Mr Pierce.
“As well as keeping the lights on during the crisis, it is crucial that we continue working on reforms that will help position Australia for a successful recovery when the crisis recedes.
“The three market bodies, with our distinct roles and shared objectives, are working together to ease the path of transition.”
According to Mr Pierce, it’s important that all three bodies remain focused on what we want our energy systems to look like post-crisis. He also noted that work to unlock innovation made possible by new technologies and digitalisation is going ahead, albeit with considerable flexibility.
In particular, Mr Pierce signalled a continued commitment to the implementation of five-minute settlements, as well as the ongoing reform of the frequency control frameworks.
Key focus areas for the AEMC in the weeks and months to come include the security of the grid system, as we move away from baseload power to intermittent resources; and security of supply, particularly on peak demand days.
The path forward
As the industry, and indeed the world, moves past the initial phases of the crisis, which involved deep shock, significant challenges and considerable change, the next step will be adjusting and adapting to the “new normal” we find ourselves in.
The most important priorities of keeping the lights on, and protecting our most vulnerable customers, have been achieved remarkably well, given the circumstances we have been dealing with.
Pleasingly, and as outlined in this article, the industry’s governing bodies seem intent on focusing on the opportunities that present themselves as a result of the enormous change we’re going through.
Like any industry, and like any individual, the path ahead won’t be easy. But there are signs of hope, and exciting new projects and objectives to focus on and work towards as we begin the path of recovery from COVID-19.