Ep.19 Can investing in renewables boost economies?

Maria Rampa: Hi I’m Maria Rampa – welcome to the latest episode of Engineering Reimagined.

While cities play a significant role in contributing to a nation’s economy, the COVID-19 crisis has demonstrated they can also be the Achilles heel in a pandemic. You only have to look at the loss of lives and illness that COVID-19 has caused in densely populated cities such as London, New York and Mumbai compared to regional areas, to understand the impact of a city’s size and population on economic prosperity.

Given their smaller size, regional areas sometimes fly under the radar for funding and attention compared to their bigger city neighbours, even in a time – be it a bushfire or post-pandemic recovery – when they need it desperately. Today’s episode focuses on renewable energy and the benefits it can bring to both regional and larger communities. Can it in fact be one of the ways to kick-start economic recovery?

The Clean Energy Council released a report recently which showcased how renewable energy could create jobs and jumpstart the economy post COVID-19 – creating, for example, an estimated 50,000 new construction jobs and injecting around 50 billion dollars’ worth of investment into the Australian economy, particularly in regional areas where projects would be located.

But just how could renewable energy help to kickstart economic recovery? And what can we learn from regions that have already started transitioning towards a low carbon future?

Harriet Floyd from Aurecon’s future energy team talks with Lillian Patterson, the Director of Energy Transformation at the Clean Energy Council about the potential for economic recovery through investment in renewable energy.

Later, Harriet speaks to Lachlan McLeod from Ekistica about the challenges of delivering renewable energy projects in regional areas.

When ARENA is mentioned our speakers are referring to the Australian Renewable Energy Agency.

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Harriet Floyd: Lillian, thank you so much for joining us today. How are you doing in the current new normal?

Lillian Patterson: It feels like we've been home for a while now and steadily getting used to it. It'll be actually really strange when we all go back to the office.

Harriet Floyd: Yeah, I couldn't agree with you more. So, the engineering and construction industry has had to adapt pretty quickly to the new ways of working as a result of the COVID-19 pandemic. I've experienced firsthand projects that have seen delivery delays and a reduced number of work crews able to be on site at any one time. What impact are you seeing COVID-19 having on renewable energy developments?

Lillian Patterson: So when COVID-19 hit, there were 26 wind farms and 41 solar farms under construction across Australia. All these projects had to quickly adapt to a new working environment in order to protect their workers but also the regional communities in which they are located. They all had to make modifications in order to allow for physical distancing and to promote good personal hygiene practices. COVID-19 has also meant getting people to regional sites has been made more complex because of domestic travel restrictions. In the short term, what we've seen is that the large scale renewable sector has been fairly resilient to the impact of COVID. But what it means for the longer term is something that we are a bit concerned about and is still really uncertain. So before COVID-19, large scale investment had really kind of dropped off, we'd seen a reduction of around 50% in investment levels between 2018 and 2019. Reduced investor confidence was largely due to things like growing grid connection issues, increasing constraints and curtailments to existing plants, and the lack of a long term, combined energy and climate policy. So COVID-19 led to a fall in the Australian dollar, which drove up equipment costs for projects. But the Australian dollar has rallied a bit since then. At the same time, we've seen a minor reduction in energy demand, lower wholesale power prices and the tightening of financial markets. These factors are all combined to make, I guess, capital intensive investment in long term generation assets more complex and more difficult. We're really hopeful that COVID-19 will not have a lot of long lasting impact on the large scale renewable sector. And we're really hopeful that the resilience we've seen so far means that the sector can continue to bounce back fairly quickly. We really think there's a huge potential for the renewable sector to assist the national economic recovery efforts.

Harriet Floyd: Yeah, I have to say that word resilience is something that really underpins our renewable energy industry. The International Monetary Fund has projected global growth to fall by minus 3% in 2020 due to COVID. Asia is expected to fare better than other regions around the world, but New Zealand's economy is predicted to contract by 8% this year. In Australia there are almost 1 million people out of work and the reserve bank says the economy could shrink by 10%. I know the Clean Energy Council recently issued a report named A Clean Recovery that describes how the renewable energy industry will kickstart the Australian economy recovery. Can you talk me through some of the key initiatives that underpin this clean recovery?

Lillian Patterson: A Clean Recovery really describes how the renewable sector can assist the national economic recovery effort. There are four broad categories. The first one is around creating jobs, supporting local communities and empowering consumers and some of the initiatives are developing a national battery scheme and supporting small businesses and new homes to get solar on their rooftops. The second category of initiatives is around building 21st century energy infrastructure. So, this is looking at building more transmission, supporting investment in large scale energy storage, and building an EV charging network. The third category is around accelerating large scale clean energy investment, so facilitating continued investment in large scale solar and wind projects, and developing a offshore wind industry. And the final category is about making Australia a clean energy superpower and this is really focused around establishing Australia's renewable hydrogen capacity. So, it has initiatives that are really in that kind of go hard and go early idea of stimulus initiatives that can be kicked off, you know, fairly quickly, and can generate outcomes really quickly. So that's things like home batteries programmes and solar on new homes. They're also initiatives that are in the big infrastructure space, so a lot of jobs, big investment dollars, but aren't necessarily quick to get off the ground. So that's things like transmission build, which is realistically, you know, three to five years away. We see that there's so much potential for economic recovery through renewable energy. We've estimated that on the large scale side alone, a clean recovery could create over 50,000 new construction jobs and inject around $50 billion worth of investment into the Australian economy, particularly in regional areas where projects would be located.

Harriet Floyd: Regional communities in particular have been hit hard by COVID-19 with the lockdowns restricting business and travel. What are the benefits of investment in renewable energy for regional communities?

Lillian Patterson: So, in the next 15 years, the renewable energy sector could employ as many as 44,000 people under the right policy settings. This is really significant for regional communities, as many of these jobs are located in regional Australia. By 2035 around 75% of renewable energy jobs could be in regional Australia. Currently construction and installation jobs dominate the renewable energy labour market. Within 15 years, as many as half of renewable energy jobs could be ongoing jobs in operation and maintenance, especially in the wind sector. Those are just the figures looking at direct renewable energy jobs. Regional areas can benefit from the presence of the renewable energy industry through increased economic activity through things like local hardware stores, accommodation, restaurants, catering businesses, and tailored kind of regional training programmes. One of the really great things about the renewable sector is that benefits sharing concepts are a growing feature of many renewable energy developers. This goes beyond landholders receiving payments to host renewable projects on their land. It really goes to sharing the rewards of renewable energy with the broader community. So, benefits sharing options include things like providing funding, through grants, and sponsorships and scholarships, prioritising local jobs, local training and local procurement and employee community volunteer work.

Harriet Floyd: Clean energy and renewable projects really will buoy the regional communities that have been hit by COVID and potentially really benefit their economic recovery. That's such a good news story. Hydrogen is the form in which our renewable energy can be shipped and consumed around the world. The opportunities for developing a hydrogen industry are pretty exciting. We've got a number of government grants available such as ARENA's renewable hydrogen deployment funding round. What opportunities do you see for regions to reap the long term economic benefits of this technology?

Lillian Patterson: So, at the Clean Energy Council, we absolutely agree that Australia has enormous potential to become a leading global power in the hydrogen market, driven primarily by enormous demand from Asia, so we're seeing countries such as Japan and South Korea really committing to hydrogen future. We see significant value in the creation of renewable hydrogen zones. So, these zones could co-locate renewable energy generation with the electrolysis facilities to convert water into hydrogen. These zones could accelerate development approval processes and facilitate connections to the electricity and gas network. If we are to export hydrogen, we require export facilities. So, there is a potential for export facilities to be located regionally, such as Gladstone, where we have existing LNG export terminals and a strong base of skilled energy workers. But at the CEC, we don't see hydrogen potential just in the export of hydrogen itself, but also in the creation of new domestic sectors, such as green ammonia and green steel. So, we think that renewable hydrogen could even revitalise manufacturing in regional areas throughout Australia.

Harriet Floyd: We've talked about how Australia will recover from COVID-19. Have you seen any insights or lessons that we can learn from other countries or regions? Or even have other lessons that other countries can learn from our recovery.

Lillian Patterson: I think what we're seeing throughout the world is that renewable energy and emerging technologies such as energy storage and hydrogen, are playing a central role in the economic recovery plans of different countries. So countries within the EU, the UK, South Korea, Chile, Canada, UAE, Indonesia, Philippines, New Zealand, so a real diversity of different countries. As an example, the European Union has unveiled a 750 billion euro economic recovery plan, of which a significant amount of the contribution is to climate action investments so focused on renewable energy, clean transport, energy efficiency and emissions reduction. Under this plan, on the renewable energy front, the EU would tender for 15 gigawatts of new solar and wind capacity over the coming two years representing 25 billion euros of investment, so huge dollars in investment in renewables. Renewable projects would also have access to a 10 billion euro loan pool administered by the European Investment Bank. What I think this really shows and the lesson we can learn from this is that there is wide support for clean initiatives across governments and political parties. Here in Australia, what we can really learn is that we should really embrace this global concept that clean energy investment is not just about supporting the economic recovery, but also about investing in our future. I guess in terms of what other countries can learn from Australia's own recovery, it's clear that the COVID-19 impact has not been as great here as overseas. So we really have the opportunity to lead the pack and show what a clean recovery can look like, with physical distancing in place and without putting workers and communities at risk of contracting and spreading COVID-19.

Harriet Floyd: I hail from the UK originally. So, it's been a really interesting journey for me watching the recovery in the UK and how it's so different to here in Australia. I have no concept as to why we've done so much better. It probably is the geographical distancing that we've managed to put in place and perhaps our quick response. But I have to say I count my blessings that I'm in Australia currently and I really feel for my family and friends back in the UK. And I think there are certainly going to be some really interesting retrospective reports that come out after COVID and how different regions and countries have responded to the effects of COVID. Moving on to Asia Pacific, it's one of the most vulnerable regions in the world to the consequences of climate change. Regarding renewable energy, where can we get the most bang for our buck in terms of investment there?

Lillian Patterson: So, in the Asia Pacific region, around 85% of energy consumption comes from fossil fuels. And those fossil fuels are often imported, which means these countries are really exposed to highly volatile international commodity markets. What is so exciting about renewable energy in the Asia Pacific region is the region is really highly diverse. We have a highly sophisticated, highly industrialised, high energy demand nations through to small island economies amongst the most vulnerable to the impact of climate change. And there are different renewable energy opportunities for the diversity of these different countries. We all know now that large scale renewable energy costs have come down significantly, so that renewable energy is now the least cost form of new generation. So, for Asia Pacific countries with growing energy demand, it provides the cheapest form of new generation to meet that new demand. It can also be built really quickly. And importantly, it allows for energy independence for countries. For other parts of the Asia Pacific, we need to remember that energy poverty is still an issue in some countries. So, there are large numbers of people that do not have access to electricity. And there are many more that rely on traditional biomass use for cooking and heating, which leads to household air pollution, which is continuing to worsen the impacts of climate change. For these communities, renewable energy micro grids are a great option to bring electricity into a community and address climate change concerns. Studies show that when reliable electricity enters the community, it drives socio economic development as well for that community.

Harriet Floyd: Yeah, I think that point on scalability and diversity of renewable energy is so fundamental. We've got so many options in the renewable energy market, micro grids, large scale, small scale, there's almost a solution for every problem. On a completely different topic and reflecting back on pre-COVID. It feels like such a long time ago now. We were devastated by bushfires here in Australia. Are there any learnings from the recent bushfires that can help us improve the resilience of energy as we transition to a low carbon future?

Lillian Patterson: Yeah, I really think there are three key learnings that we can take away from the really catastrophic bushfires that we had over the summer. So firstly, Audrey Siegelman who heads up the Australian energy market operator has said that the bushfire is really exposed the frailty of the grid, and must be a wake up call for urgent investment in transmission. Throughout the bushfire season, we had major outages across a number of the electricity links and as a result, the energy market operator really had to work extra hard to ensure blackouts were largely avoided. Loss of transmission lines has highlighted the need to better integrate the East Coast grid through transmission upgrade projects. Secondly, the impacts of the bushfires to the distribution network shows we shouldn't be considering just standard poles and wires as part of the rebuild effort. Standalone power systems, including micro grids can supply electricity more cheaply, more reliably, and safer than traditional poles and wires in certain situations. It's great the distribution networks in the national electricity market may be allowed to use standalone power systems for regulated supply of electricity as soon as next year following the release of a package of rules from the Australian energy market commission recently. And finally, the bushfires really highlighted that people want action on climate change. So, the bushfires have provided the government with an opportunity to rethink its response to climate change and introduce strong policy measures to mitigate the effects of climate change. In terms of the energy sector, the energy sector is really willing and able to deliver a greater contribution to Australia's overall abatement. Given the availability of low cost abatement technologies in this sector, particularly compared with other industries, such as agriculture, as a nation, we should really be looking at the policy settings to accelerate the transition to a low emissions electricity sector to address climate change, and lessen the risk of catastrophic bushfires going forward.

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Maria Rampa: While regional areas can benefit from investment in renewable energy as a means of kickstarting economic recovery, remote locations can also benefit from the connectivity it provides.

We have seen how essential infrastructure in remote communities can be decimated, particularly in times of natural disasters such as bushfires in Australia and volcanic eruptions and floods in Asia. Whether in the Australian Outback or rural south-east Asia, the people who work in these communities are often the lifeblood of their country’s economy. Just like those who live in cities, people in remote areas deserve affordable and reliable connectivity to survive and thrive and it’s important that remote places aren’t left behind in the renewable energy transition.

Next, Harriet Floyd talks to Lachlan McLeod from Ekistica about the incredible opportunities for renewable energy in remote areas.

This discussion was recorded at the World Engineers Convention, held in Melbourne, Australia, in November 2019.

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Harriet Floyd: Lachlan, it's great to have you here today.

Lachlan McLeod: Hi, Harriet. Thanks for having me.

Harriet Floyd: So, the work you spoke about at the World Engineers Convention covers the usage and optimisation of renewable energy in remote areas. I wanted to firstly begin by asking what sparked your interest in this area? You live in Alice Springs, the beating heart of Australia, situated in the middle of the Outback and an incredible 16 hours’ drive from a nearby capital city. Now that's pretty remote. What inspired your focus in regional areas?

Lachlan McLeod: So, I've lived in cities pretty much my whole life. I'm from Perth and I was living in New York City for a year, about four years ago. And I had some experience in renewable energy and I wanted to continue working in that field, and heard about this company called Ekistica based out in Alice Springs. And it's a relatively medium sized company, there were only 12 people at that time based in Alice Springs. And because I'd lived in cities and because I wanted to work in renewable energy, I thought it was a great opportunity to sort of move out to Alice Springs and see what remote Australia is all about and continue working in renewables.

People living in remote areas of the world I guess it's more difficult to have access to something like electricity. And if you do have access to it in a remote area, it's likely to be either more expensive or reliability might not be as good. So, there's a lot of really good work to be done in these areas and we need to encourage a lot more people to actually move out to remote areas and do some good work. And then also I've never lived in a remote part of the world before, other than the last three years. And sort of to understand challenges of living and working remotely, I think the best thing to do is to actually live remotely and talk to people and engage with the community and hear their stories as well.

Harriet Floyd: Wow. Certainly a big change from New York City to Alice Springs I can imagine.

Lachlan McLeod: Very big change.

Harriet Floyd: Now can you tell me about your work around renewable energy in remote Asia Pacific and what the Bush Light programme is all about?

Lachlan McLeod: So, Ekistica's got over a decade of experience working in the region, in Australia and the Asia Pacific region. We've done a lot of work with the Asian Development Bank in places like the Philippines, Indonesia, the Cook Islands. We've done work in Papua New Guinea and Nepal. We're doing a project at the moment in Palau, which is a 40 megawatt solar farm and a battery integrating into that grid. And we've done work in Kenya, in Africa, as well. And then right through Australia and then down on the West Coast of Tasmania as well. The Bush Light programme, that started in 2003, it was run through the Centre for Appropriate Technology. So, they are our parent company. They are an Indigenous owned and managed NGO based in Alice Springs. And they have been working in remote parts of Australia for over 30 years.

So, the Bush Light programme looked at reducing reliance on diesel generation in remote communities, and stemmed from a survey that was done looking at how remote pumping stations and remote power systems were operating in remote communities. And the survey found from the 350 systems it looked at, it found that on any given day two thirds of systems were not working effectively.

And this was due to three reasons. It was a lack of good effective operations and maintenance processes in place. It was poor quality installations were done and probably the most important one was that there was little to no engagement with the people living in these communities. So, Bush Light sort of had a big focus on people and engagement with people and tried to address some of those challenges through engaging with people. So, it set out to talk to people early on, make sure that you understand how a community engages with an essential service, what they can afford, how they use energy. What is their understanding of renewable energy, do they know what it is, is there local technical capacity in the community? There's a whole range of things that you need to cover. You can't just sort of go in and install these systems and walk away. And so the programme installed 130 systems and they're still, a lot of them are working really great today, and that programme ran for 10 years.

Harriet Floyd: Wow. That's pretty impactful in these remote communities. I would have thought a remote energy programme though should be able to survive without people giving the nature of what it was created for. Why does the need exist?

Lachlan McLeod: So, there are levels of automation and you can have remote monitoring and you can have resiliency and redundancy sort of built into these things. And that's really important and it definitely reduces the engagement that people need to have with a system. But that's the technological sort of standpoint, and getting the technology aspect of one of these standalone remote power systems is only half the story. If you only focus on technology, it will, in the long-term result in a bad outcome, and we see that constantly in the work we do.

And as I touched on before, the other aspect of things like engagement with people, looking at structural barriers, governance, finance, supply chains. Looking at the challenges of working remotely, looking at distance and geography and climate. And you get all of that knowledge by talking to people. I think when you take the time and you have the patience to form these relationships with the members of the community, they actually really appreciate what you're trying to achieve. And it's a common goal. Unfortunately, it's not done a lot because it's often not a profitable thing to do and it's a labour intensive thing to do.

Harriet Floyd: So, based on your work, what is required to make an off-grid renewable energy system successful?

Lachlan McLeod: The Off-grid Guide is something that we've just published and it's gone live online. Anyone is free to go online and download that. It's a really thorough sort of framework for how to deliver an off-grid system in a remote area. And we've worked on this report with the Intyalheme Centre for Future Energy, which is a group based in Alice Springs.

We see a common set of challenges arise when deploying infrastructure in remote areas. Those challenges can be categorised into physical challenges, technological challenges, and structural challenges. And the physical challenges, they're quite obvious, things like distance, travelling 12 hours to get to a community. Things like access to site, many roads in the Northern Territory can be flooded for months of the year and you can't actually access the community you're trying to get to. The climate can be incredibly harsh, bugs, dust, humidity, temperature. In some of the Pacific Island nations, accessing the mainland from a boat and shipping materials to mainland can be hard. They might not have the docking facilities in place.

So, you've got to take those physical barriers into account. The structural challenges are really important, the structural governance frameworks might not be in place and you might need to actually support that and try and strengthen those. The supply chains might not exist in that region. And then finance can be really hard to come by because it's considered more risky to work in these areas. And then the technological we like to think that location should never be a barrier to good technical outcomes. But that only happens when you do that at full engagement with people.

Harriet Floyd: Renewable projects are being built where there is an abundance of natural resources in remote communities and these new areas were never built to support electricity. Would it be safe to say that there is arguably an advantage for remote communities here?

Lachlan McLeod: Yeah I would say that there definitely is. What happens typically is electricity is transported out towards these regions and along the way, travelling thousands of kilometres, electricity is lost in the process. The reliability of supply can be poorer and also consuming electricity in these regions can be more expensive. And so you can overcome a lot of those challenges by locating the generation closer to the source, you can improve reliability, you can make it cheaper and reduce losses on the system. There's some clear benefits and we've written about this in our knowledge sharing piece with ARENA, which is in their knowledge bank online. So, everyone should feel free to go and download that and have a read.

Harriet Floyd: I see that the Bush Light programme has inspired other remote community projects based on a similar model, which is absolutely fantastic. Are there plans for other international adaptations?

Lachlan McLeod: The spinoff from Bush Light did actually go to an international context. It went to Bush Light India. So, they applied that same process of a strong focus on people, engagement and then took that to a very different context in rural Indian villages. And they are different because the technology over there is different, the way people consume energy is different, the climate's different. And so that's one adaptation that went to an international context and that project actually won the Sir William Hudson award.

Harriet Floyd: Congratulations.

Lachlan McLeod: Thank you. It's a really high accolade to win in the engineering world, so we're quite proud of that. However, a lot of the funding for programmes like this has sort of dried up a lot, and it is hard to do another Bush Light these days. And so I guess what we're seeing are sort of much smaller solutions being, really innovative and really great solutions. But a lot of companies are looking at say solar lamps or solar heaters for small household uses.

And I think the reason the scale has come down so much is because they're trying to fit a model where the consumer can actually afford to pay for these things. Because you're talking about some of the poorest people in the world. And unfortunately there is a view out there that remote communities should have to pay for the capital expenditure of larger power systems. But I guess no urban user connected to the national electricity market has to do that, those costs are spread over millions of people. So, it's a bit unreasonable and you're going to need at some level of public support and hopefully private support as well.

Harriet Floyd: Awesome. Well, thank you so much for your time today. Really enjoyed having a chat with you and learning some more about the projects that you're rolling out in remote Australia and globally.

Lachlan McLeod: Thanks, Harriet. It was lovely to be included.

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Maria Rampa: Thanks for listening. It’s exciting to hear about the potential impact of renewable energy transformation in our communities. If you found this episode of Engineering Reimaged useful, tell your friends about it or leave a review in Apple Podcasts. You can subscribe to Engineering Reimagined wherever you listen to podcasts and join the discussion on Aurecon’s socials. Until next time.