As we enter 2023, impending economic slowdown is front of mind for many business leaders.
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Despite this, the year holds strong opportunities to grow and prosper.
Success for organisations in 2023 can be achieved through smart investment in business transformation, innovative technology, and maintaining a laser focus on achieving net-zero emissions targets.
Globally, governments are implementing new policies which will accelerate investments in green energy and materials.
The USA Inflation Reduction Act is expected to drive hydrogen and clean energy investment, Europe's border carbon adjustments will increase the focus on green steel, metals and ammonia, and Australia's safeguard mechanism will bring a price to carbon which will see accelerated investments in abatement and opportunities in offset markets.
Net zero goals vital despite economic headwinds
Corporations should not shy away from investments in energy transformation in their efforts to cut costs.
In fact, this will become more of a pressing need throughout 2023, as organisations across the world are realising the switch to renewables and storage, often located on their site, is both cheaper and more reliable than relying on an overburdened grid - in most cases this is not only economic, but it can be green funded.
We see much focus on massive expansion and strengthening of the grid, as we move from today's 32 per cent renewables to the target of 80 per cent by 2030 - a task that will be tough in such a short timeframe.
However, there are levers Australia can pull to lessen this problem:
- Remove the assumption that hydrogen will be 'transported' through the grid as electricity - it won't. Piping hydrogen is significantly cheaper and more acceptable to communities.
- As much as possible, focus on on-site electricity production. For consumers and large users, it's cheaper and removes the cost margins of transmission/distribution or a developer, while taking burden off the grid.
- Support better management of distributed energy with suitable legislation to enable aggregators to aggregate, and trade energy in and out of the grid from dispersed sources when the grid needs it - supporting significantly reduced demand on the network.
- Incentivise controlled chargers for EVs. EVs represent a massive potential influx of storage into the system, for peak firming and stabilising the grid, but they will only be so with slightly more expensive chargers that enable shifting of charging demand outside peaks - whilst still enabling adequate urgent charging. This represents a major way to stabilise and firm the grid. Achieving this requires legislation/incentives now, to stop the rollout of cheap chargers. If cheap chargers proliferate, it will make the instabilities caused from solar spilling onto the grid look benign (think solar on steroids).
- While it's fine for remote sites, large-scale solar for supplying the grid should be discouraged. Rather, it should be recognised that the roll out of solar on roofs is unstoppable, and already large enough - instead, we should focus on major renewable projects like wind. Communities and governments should support this by making it easier to get approvals for wind - the NIMBY approach is only fun until the lights go out. We all must do our part; every time you see a wind turbine, think about how it is saving the planet and support their installation.
- Incentivise renewable generation on already disturbed land that has infrastructure (think coal power plants and old, ageing industrial sites) - the infrastructure is there, and the land already disturbed. It also assists with the cleanup of such sites.
Taking the above into account, we see the demand for grid build as significantly less than currently planned - even considering the likely doubling of demand by 2050 as we move to electrify everything.
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The network build that remains after reducing demand from points 1-6 above is still significant, and has major pressures with labour, skills, materials, supply chain and approvals challenges.
The focus to deliver this should be on changing the design and the installation to reduce the scarce (skilled) labour, and spread it further whilst making the installation faster and safer, removing supply chain problems and economically producing some elements here rather than offshore.
The sooner we get on with combining and deploying the finance, technology and smarts at our disposal, the sooner we will reach the much cheaper, green electricity world of the future.
Individuals, communities, organisations and governments all have important parts to play in moving the key levers above - and the great news is most of it is already economic, with the rest having rapidly reducing cost curves, and all of it can be green funded.
Let's get it done.
- Skipp Williamson is the founding CEO of Partners in Performance.
