Victoria Mollard

5th Annual Australian Renewable Energy Zones Conference

Swissotel, Sydney

Hello and thank you for the welcome. I’ve been looking forward to this conference for many reasons, and it’s great to finally arrive at the day! 

Like others before me, I acknowledge the traditional custodians of the land we’re meeting on today, the Gadigal people, who would also meet and share stories on these grounds. 

As we transition to a cleaner energy future, we recognise that First Nations peoples have cared for and safeguarded the lands we now call home. I pay respect to the enduring relationship that Aboriginal and Torres Strait Islander peoples have to Country. 

Interesting times 

We live, as they say, in interesting times, and very few sections of human activity are currently as ‘interesting’ as the work we are all doing for the energy sector. 

And that’s my context for today: the complex, fascinating, and very changeable environment in which we all do our work. 

For us at the Australian Energy Market Commission, that work is making the rules and reviewing market arrangements that will enable the best possible outcomes for consumers.  

Whether you work in consumer-facing roles, in a market body or government jurisdiction, or with one of the many market participants, we’re all in the same position right now.  

We’re all navigating a complex and rapidly changing world with sometimes contradictory demands. We’re all looking for practical ways to make progress during what our Commission Chair Anna Collyer often calls the ‘messy middle’ of the energy transition.  

We need fast technological innovation and new ways to think about generating and sharing energy, and we also need the security of backup power and the traditions of sharing our resources across the NEM. 

With so many equally valid demands and so many unavoidably unknown factors of change, it can be hard to commit to the next steps, especially at the pace we know is needed to meet our decarbonisation goals. So, what do we do?  

At the AEMC, that means we're trying to proactively address uncertainties and engage with stakeholders to help shape the future of the energy sector.  

We are balancing the need for immediate fixes with the flexibility required for an evolving market, recognising that both technologies and understandings are constantly sprouting off into new directions.  

One of the concepts we've started to embrace is recognising that we have left the older, easier Land of Either/Or behind. We’re now living in a more rapid and pragmatic decision-making space, which, for the purposes of this speech, I will call the Universe of ‘And/Also’.  

A key characteristic of the Universe of And/Also is to navigate complexity and still make progress by being able to hold multiple and potentially conflicting positions simultaneously. 

It's not as confusing as that might sound!  

Let’s do a quick thought experiment to demonstrate my point:  I’m a big fan of coffee (aren’t we all?) and I greatly look forward to my first coffee in the morning. 

So imagine – there’s a coffee cup and it's only a quarter full. Now, would you say that’s ‘too much’ coffee OR ‘not enough’ coffee? 

Well if it's first thing in the morning and I’m drinking it, I would absolutely say it’s not enough coffee. I need my full coffee hit! 

However, if I’m dressed for work and about to leave and I spill that quarter-cup down my outfit – it’s now both definitely not enough coffee, and it’s also ‘too much’! 

Both things are true.  

This isn’t some wild notion of mine: there are many versions of this concept in literature – you may have heard of managing through ‘paradoxes’ or ‘polarities’.   

Psychologists might call it cognitive dissonance… 

You and I probably just call it another Tuesday…  

But the base concept is this: in times of great flux and complexity, we have to be able to hold multiple contradictory concepts together at the same time rather than holding back on decisions until we see just a single, simple way forward. 

This is the and/also – not either/or. 

As I said at the start, we need all these things: new and traditional, rapid and well-considered, locally sensitive and nationally crucial. 

Well, today I’m going to talk about how the AEMC is approaching these complicated decisions as practically as we can. 

First, I’ll talk to you about the Strategic Narrative we recently published that describes how we navigate our way through the uncertainties and complexities of this messy middle stage. 

Second, I’ll share a snapshot from a new report comparing the REZ frameworks being developed in NSW, Queensland, South Australia and Tasmania – whose architects we heard from this morning. 

Finally, I’ll talk to you about our system security work program, where we very much manage the twin contradictions of security and uncertainty. I will include an example of a recent rule change we’ve made. 

This is a rule about improving security frameworks, and it fully accepts that we’re living with unknowns all around us. But it also accepts that we still need to get on with the job of making the best decisions we can and remaining open to change, and enabling all of you to keep moving forward as everything changes around us.  

AEMC Strategic Narrative 

To start, late last year we launched a report we call our Strategic Narrative, which you can Google to find on our website, and I know many people have already downloaded it from the link in our newsletter.  

In this And/Also world, full of uncertainties, it’s even more important to be clear about what our ultimate future destination is, no matter the changing paths we face along the way.  

So, this narrative maps the longer-term work the AEMC must complete to successfully navigate a clear path to our vision, which is a consumer-focused net zero Australia.  

Initially, this was an internal document. It helps our annual prioritisation process where we assess what we’re going to spend our time on, and also helps us keep our eyes on the future during our rule changes or reviews 

As we developed this report, it became even clearer that we need to prioritise multiple, and sometimes contradictory issues, simultaneously.  

This is why we framed it as a narrative, separate to our more conventional strategic plan. The narrative approach freed us to consider potentially conflicting outcomes against the long-term gains that we all need to achieve.  

We set out the eight significant opportunities and challenges that we think are important for achieving a consumer-focused net zero energy system, even if in the immediate term they appear to have very different characteristics. 

For instance, to achieve energy transition benefits for everyone across Australia, we need both customer-facing goals (like giving consumers clear and actionable information) and grid-scale features (such as innovations that drive low-cost energy). 

So what, you might be asking yourselves? It sets out our view of the future state of the transition and we also incorporated the thinking from every other major player in the energy market – your plans, your road maps, your frameworks. That means we are confident this narrative isn’t just helpful for us, it can be helpful for you, too. I’m very happy to discuss it further with any of you who would like to see more. 

REZ framework review 

Moving on to one of the more upbeat acronyms of the energy sector: REZs.  

We recently published a report that captures the approaches that REZ jurisdictions in the NEM are undertaking. If you want to read more, you can also find it on our website later.  

As we’ve heard this morning – and you, of course, know – over the past four years the states and territories have introduced regulations to enable the development of REZs. These include components relating to network planning and investment, economic regulation, access schemes and connection process. 

These frameworks have progressed well, so we felt it was a good time to compare and contrast them, and then to share that information. 

We wanted to better understand the different schemes:  their alignment and their differences. Part of this was considering whether there were any ‘lessons learnt’ or ‘best practice’ from these frameworks that would be useful to consider bringing into the NEM.  

And yes, not surprisingly for Australia, where we have a national curriculum but every state leaving certificate has a different name, the developing REZ frameworks do vary between states, but all have similar purposes and similar intent.  

Essential System Services 

Finally, let’s turn to system security now, and the work the AEMC is doing relating to essential system services (ESS). These are critical to maintaining overall power system security and keeping the network within its technical operating envelope. 

We devote a considerable amount of our effort to ESS, as you can see from this snapshot that provides a summary of our work to date in this area – and again I apologise for the busyness of this slide! Please take a photo of it to read later or use the link at the top of the slide to find our full report. 

As we move through this transition, in the many messy middle stages it will have, it’s really challenging to define and manage security services.  

The generation mix is changing at pace and, as you know, where once we relied on a small number of very large bits of machinery, now we have a vast proliferation of power sources. 

That includes millions of household rooftops, and a growing number of utility solar, wind and battery connected to REZs around the states. 

Australia is at the global forefront of these challenges, adding to the complexity because there are very few other systems in the world that can inform the changes we need to see in ours. 

Thermal synchronous generators are continuing to retire and more and more inverter-based resources are connecting to the grid – and as I have just described, there are different frameworks being rolled out for investment across the NEM. 

We can’t definitively know the NEM’s final post-transition composition yet, and system operators have to develop their understanding of security amid many rapid technological advancements.  

Our understanding of the system's needs is changing in parallel to the evolving capabilities of new technologies to provide security. Not all security services are yet defined or able to be managed in real-time.  

But – and here’s the real kicker… 

We don’t believe we can wait for a time when we might be completely sure of the operating environment in order to make progress. The technology is moving ahead, regardless, and so is the demand for lower-carbon energy that will ultimately be cheaper, too.  

Instead, our position amid the uncertainty is that we have to design system security tools that are practical, flexible, innovative, and proactive.  

I’ll give you an example. In March last year, we published the Improving Security Frameworks for the Energy Transition rule (the highlighted bit in blue on this slide). The project aimed to better value and incentivise investment in security services in the NEM. 

This is an intermediate measure, tailored to the transition phase. It will evolve as we advance our understanding of system needs and the capabilities of emerging technologies.  

We deliberately put in place arrangements that will help us progress to the longer term, without knowing for certain what the longer term looks like  

We hope our pragmatic step of accepting that we know there are unknowns, and designing for them, will mitigate the impacts of change.