Behind-the-meter battery adoption in Australia with Jess Padman (Director of Energy Products @ National Renewable Network)

Hey, everyone, and welcome back to the Transmission Podcast. I'm Wendell. In this episode, I'm joined by Jess Padman, director of energy products at NRN or the National Renewable Network. Australia is a global leader in the deployment of rooftop solar. And in this episode, we're diving into both this and the growing app appetite for household batteries.

The NRN are helping this shift by providing new ways to make domestic solar and storage more affordable for more households. In this episode, we chatted about why household batteries are suddenly in vogue, what's slowing down progress, and ultimately why it's good for Australia to get more batteries into more people's homes. Jess has tons of experience in this sector, and I really enjoyed my conversation with her, and I'm sure you will too. As always, if you like the episode, please like, subscribe. It really helps to grow our audience. Let's dive in.

Jess, welcome to the Transmission Podcast.

Thank you for having me, Wendell.

Yeah. We've had a fun week in Sydney, so Energy Storage Summit.

And, yeah, we thought we'd get you on the podcast. So to start off with, I guess, can you just tell me a little bit about your background, and then yeah. And then ultimately, tell me a bit about the NRN.

Sure. Yes. So I'm a lifetime energy tragic, energy nerd.

My dad was in the oil industry. I grew up overseas, traveling around as an ex pat brat, kinda seeing that lifestyle. And I guess as a result, I went into oil I studied oil and gas engineering at uni, and then I got into actually working as an oil and gas engineer. I did that for a few years, and it wasn't really giving me the level of satisfaction I wanted. And I remember that I was doing this course back at uni called, history and geopolitics of oil and gas. And I was like, that's what I want. That's actually what I like about the industry is that it's kind of world changing in really horrible, terrible ways, but also in really important positive ways.

So I went and did my MBA and end up did some strategy consulting and, lived in a few different countries and ultimately moved more into the strategy and commercial side and, decided, actually, I wanna be I don't wanna be a bad guy anymore. I wanna be a goodie. I moved into the more sustainable side of energy in the electricity industry. So I've been specifically working on kind of behind the meter solar and battery, demand response type products for about ten years.

Oh, wow.

Yeah. Which is, I guess, in that space a really long time, starting when I was with at Energy Australia, and it's, like, twenty fifteen, I guess. And it was really just when this demand side management concept was just emerging. And I was in the strategy I was doing strategy for them then, and and I wrote, I guess, the first strategy for Energy Australia about, well, what does it mean for us?

What are we gonna do with it? Because they basically missed all the energy retailers in Australia had basically missed the wave of solar coming in. So at this time, they were like, okay. We think batteries are gonna be a thing.

How are we gonna be involved? So yeah. And I've kind of been really passionate about that ever since.

Yeah. Like, what was the conclusion from that at the time, that kind of strategy around the future of this, like, distributed flexibility?

Yeah. I I guess not much has changed, I think, in the strategies of all the big energy players in Australia since then. We we looked at the different roles we could play. And, obviously, one was, well, we could be installers and kind of get be part of that value chain because we know when customers put in solar and battery, our gross margin drops by, like, seventy percent. We're just not selling as much energy to these customers, and that's a really big problem. We need to make that up somewhere else. Could we be installing?

A lot a lot of retailers went into solar installations.

I know, you know, Origin became the biggest solar installer in the country until twenty twenty four, I think it was, and they got out of it. So, obviously, even being the biggest solar installer in the country, when you're a retailer, clearly, you can't make make good money from it. It's just not part of your business model. When at Energy Australia, during the eight years I was there, we got into solar installation three times and got out of it twice.

And I think they're still kind of working out what to do with that side of the business. So that's something that retailers don't do very well.

Okay.

And they were like, okay. Great. Well, what we are really good at is working with customers, like communicating with customers, like, question mark about whether that's true or or not. But we're definitely really good at energy management, so trading.

And batteries are going to really help us. There's heaps and heaps of batteries behind the meter that can help us manage our wholesale position, and we can treat that as part of our overall energy portfolio. And that's when everyone went in pretty wholesale on VPP, virtual power plants, and demand side response programs. So we did a really big behavioral demand side response program for for residential customers, more successful probably as an engagement tool than, you know, moneymaker.

But certainly VPPs, there are big teams, a lot of investment at the big energy retailers looking into how to make money from them, and I don't think that question's really been answered.

Not quite yet. But, yeah, it's definitely something we see. I mean, across all, I guess, yeah, like, all the big retailers here, which is probably a slightly different to, like, the UK Yeah. We're used to. And so I guess if you now think about, yeah, the NRN, National Renewal Network, specifically, yeah, like, kinda, I guess, like, when did you make the move across? And then can you tell me a bit about the company?

Yes. So NRN, we do we invest in solar and battery behind the meter on customers' homes. So primarily residential customers and and soon small business customers as well. No cost to the customer. We're just putting these assets on their home. And what that gives them is access to retail energy plans that will be lower than what retailers can traditionally offer. Because what NRN are doing are licensing the assets in the background to energy retailers who can then optimize those assets in a way that, you know, creates more value, and then they can pass through some of that value via low energy prices to the customer.

So it solves a couple of problems. It solves a customer problem of having to buy assets upfront, trying to understand what the right assets are gonna be, what you know, how how much money am I gonna make from buying these things. And it also solves the retailer problem, you know, that seventy percent reduction in GM that I mentioned. Because the retailer's actually still selling a hundred percent of the energy to the customer. It just happens that seventy percent of the energy is coming now from behind the meter, and that means they can give them a better price.

Interesting. Okay. Yeah. So you essentially work with both sides of that equation to make it.

We do. And we also work with solar installers. So we've got a lot of stakeholders, and that's kind of the complexity of the model, but also kind of what what creates value. Yeah. So and Alan, CEO and founder, kind of he'd pitched to me, actually, when I was in Energy Australia, and I was leading the kind of behind the meter team at that retailer.

And he pitched this idea to me, and I just absolutely loved it. And I kinda couldn't get it across the line at the time. But when I decided to leave EA, he tapped me on the shoulder and said, hey. You gotta come over and and and work with us.

And I thought, look. I'd I'd never thought about working for a start up. I was very happy in my corporate life, you know, getting along well, but I thought this is such a great idea. I can see how the benefit this benefits all the stakeholders.

And if I don't jump into it and help it happen, someone else is gonna do it, and I'm gonna be kicking myself for the rest of my life.

Yeah. I mean, if you go back to, like, I guess, yeah, the founding of the company and, like, the mission behind it, like, what is that?

Yeah. So Alan's really inspired by, I guess, equity of access to renewable energy and to lower energy prices because there's kind of the one of the barriers for greater uptake of batteries is clearly the upfront cost. This is we've been used to the solar market where, basically, you can put put solar on your credit card. You need five grand.

You can get solar installed. Batteries are a lot more complex and a lot more expensive. Not everyone can afford the upfront cost. And then there's also the the issue of the rental market where you kinda got this split incentive dilemma where the landlord doesn't wanna pay to put something in that benefits the tenant if they're not gonna get anything out of it, and the tenant obviously can't can't make that decision themselves.

Whereas when you've got a company like NRN coming in and installing and owning the assets and not charging anything to the landlord for doing that, the renter can then just access lower energy cost and greener energy by joining one of the one of the plans with our energy retailers.

Okay. Awesome. And, I mean, yeah, like, we quite like, like, startup stories here at Madeira. I guess, yeah, we we are one or, I guess, yeah, transitioning into, like, maybe a scale up. But, yeah, what's the size of NRN now?

And, I guess, yeah, where along that, sort of journey are you?

So Alan, as I think would say, the company started about three and a half years ago, but it really started as a solar PPA type vision.

Where we started with this actual business model that we're currently using was about fifteen months ago. I joined a bit over twelve months ago, and there were ten of us, and we were installing, about ten assets a month. Fast forward to today, there are, I think, twenty of us in the office.

We're about to do a little bit more hiring, and our peak install rate has been about ninety Oh, right.

Per month. So, yeah, it's been pretty fast, and, you know, it's time to, I think, start considering ourselves a a scale up rather than a start up pretty soon.

So I guess if you zoom out a little bit and then kind of discuss, I guess, yeah, like rooftop solar in Australia, I guess, what does uptake of it look like today? Because it seems to be in a lot of places.

Yeah. I think I think uptake of solar, so many people have over the years said that it's peaked, and it's still not peaked. It's kind of well, for a number of reasons, because energy prices are going up, the cost of the solar obviously is going down, and system efficiency is increasing. So the size of the the solar getting installed is just physically bigger. So I think we're we're about twenty five gigawatts installed solar now. Rooftop solar in twenty twenty four, that contributed three gigawatts of that.

So they still got a long way to go. You know, we do have high levels of penetration, but as I said, you know, there's the whole rental market, which is, like, thirty percent of housing that still pretty much none of that has solar on it. So we've we've still got a long way to go.

So when you're seeing it in the news, like, things like kind of removing feeding tariffs, like, how do you see that affecting the take up of rooftop soda, or do you think it's gonna keep growing?

Yeah. I don't think there's much risk to rooftop solar. What is it it is really gonna change is is batteries. We had when solar first came in, you know, it was all kind of greenies or retired engineers that took it up.

And then there was introduced a sixty cents feed in tariff. In some states, sixty cents or forty four cents in other states, like, enormous. And you see there's a real inflection in uptake. The next inflection in uptake happened around twenty eighteen when because wholesale energy prices increased by, like, eighteen percent.

And then it they'd been going up, and then suddenly, you know, in one year, customers being told, oh, your energy price has gone up by by eighteen percent. And just there was a huge rush on solar.

Now feed and tariffs are much lower, so they're not driving solar uptake, but energy prices going up again. We just heard, you know, there was an update on the DMO, which is the kind of mandated maximum price that you can charge customers in different states, has gone up by almost nine percent in some areas. That's a big jump, and people are looking at, well, solar's getting cheap. I'm gonna produce my own energy. And then, obviously, at the same time, feed in tariffs have gone down. I think the new feed in tariff in Victoria is zero point zero four cents.

And there's these are still people that, like, remember getting sixty cents. So there's a bit of uproar about that, but they're going bugger that. Let's I'm gonna use all my own energy. I need to get a battery. Yeah. Battery's just gonna drive batteries.

Yeah. So the feed and tariff is kind of what you're getting paid for exporting to the grid.

That's right.

So so back in the day, you can install soda and you just yeah.

You just make your money.

At home. You can export that and get paid. Whereas now your personal electricity bill is going up. Yeah. That's what you're getting paid for any exports is has basically gone to zero or essentially zero in some way.

Exactly. Yeah. Yeah. Yeah.

So And, yeah, like you said, then that is an incentive for for energy storage.

That's right. Yeah.

And people also you know, everyone loves to hate the retailers as well. So they see that it's really the retailer's fault that they're what they're getting paid for their excess solar has gone down to nothing. So also there's there is quite a strong driver in Australia of, like, screw the retailers. I wanna be more energy independent.

So, And have you seen, like, much take up in, like, domestic battery energy storage here, or are there kind of particular blockers that are really stopping it accelerating?

Yeah. So batteries are still really expensive, so they don't they're not creating value in a lot of cases still. There are there are some cases, but not in all cases.

So we're seeing that when they're installed together with solar, there's a better overall business case for that. And so about twenty five percent is what we're hearing of of solar installations that are happening right now are having batteries put in at the same time. That's gonna keep growing. What we're not seeing is huge installation of batteries retrofitting to existing solar yet. It's about one in ten is what we're hearing from from our installers.

I think that's just right on the cusp of changing with the announcements of the those feed in tariffs going down, with energy prices going up. I think it's gonna be a real drive towards that. We're also seeing different governments putting incentives out there. The WA government was the the most recent one to do that. It's good politics.

I don't I don't think it's necessarily gonna be required because I think battery prices are gonna come down anyway, and the business case is gonna be there for customers. But I think there will be more of it. My concern is that it's a bit random at the moment. Like, every state has their own different little battery subsidy, which makes it more difficult for companies like us to build business cases around.

The solar small energy certificates that are created by when you install solar, that's a national scheme. So everyone knows you put in solar, this is how much of a subsidy, basically, you're gonna get from the government for that. It's very different with batteries. It depends on your household income in some states. In New South Wales, you have to provide some different information and and make sure that you're part of a VPP.

I'd like to see a national nationally coordinated I guess for the NRN, I mean, how much, like, say, for example, yeah, like, of those ninety installations you're doing a month now, how many of those are you seeing energy storage as even option or actually coming into that, like, installation itself?

Yep. We're doing a hundred percent with storage.

Oh, wow.

That's that's really important. That's because our primary customer is the energy retailer, and they're really excited about using those assets as part of their VPP.

So that makes sense. Even though, you know, perhaps it's more valuable to be created by just solar. In some of those cases at the moment, we're putting storage on everything.

Exception being, we're doing a trial in the Northern Territory working with Jecana Energy, which is a state energy company, to put some solar on community housing.

So we're doing a trial of thirty. We're installing solar on on thirty homes, and that's gonna reduce their cost of energy by twenty five percent.

As a demonstration of how this proposition will be used for for government community housing is fantastic because, basically, the state is not putting any money into this.

NRN are investing in these systems, and the, you know, customers are winning because they're just getting lower energy cost really for for no cost upfront.

Like you mentioned, obviously, the AirN then kind of, yeah, relies on these relationships with retailers. Are all kind of utilities sort of supportive, or do some sort of see it as competition?

Yeah. We have a huge amount of support. So we've currently got three residential energy retailers that we're working with, Diamond Energy, Alinta Energy, and IO Energy. I'm working with well, I'm talking to all the retailers, but I've got probably four four new retailers coming on over the next six months.

So we have had really positive feedback on that. You know, I think the the larger retailers have to do something about this. Some of the smaller retailers, you know, there are some really quite creative, innovative retailers out there that will do this. Some of the smaller retailers, I don't know, either either it's worth it for them to be a fast follower, or maybe they're just gonna focus their retail businesses on the other portion of the population who are not going to have access to to solar and and batteries.

But And so, obviously, you've got kind of another stakeholder in here, which we've not discussed yet, which is, I guess, the the owners of the network, distribution network operators.

So are they supportive of this?

Not yet, I'm gonna say.

The difficulty and we talked about this at at this is a big topic at at the conference on Tuesday, is that networks are kinda incentivized to spend money building networks. They have a regulated rate of return on everything they invest in. So, you know, on the face of it, it's it's good for network costs to for to have behind the meter technology optimized to kind of reduce peak loads and and reduce peak export because that means there's less money needs to be invested into the pipes, the poles and wires. But that's kind of counter to how networks earn their money.

So there's a bit of a not conflict, but a misalignment, I think, there at the moment. There are some great people in innovation teams within the networks that are trying to get some things done. But I think, fundamentally, there needs to be some regulatory change to make sure that we are taking as much advantage of as possible of the pie in the meter assets. Because frankly, they're gonna be there anyway. So they're either gonna be there just reacting to wholesale market movements or maybe even just, you know, optimizing behind the meter usage on for customers, or they can be doing that and supporting networks by reducing load at really peak times or by making sure that we network deferral, essentially, making sure we don't have to spend more money just to meet these kind of super peaks. But right now, there's not a lot happening in that space.

With the amount of take up of rooftop solar that you you mentioned, I guess, are we at the stage where some of these networks are, like, starting to see the impacts on the grid? Because, I guess, there's only so much energy that can be, like, exported to that local network.

Totally. And there's so they are same impacts, and different networks have got flexible export limits, which is basically saying, okay. We'll let you have an inverter that can export ten kilowatts.

But when things are really bad in the network, you have to give us the right to reduce it down to five kilowatts or maybe even nothing to to we'll just totally curtail your solar because we can't handle it in the in the network.

So that is one way of doing it. It kinda pisses customers off because all they're saying is, I'm exporting. I'm maybe I'm in a VPP. I'm making a lot of money, and the network's just gone and turned down, how much I'm allowed to export. So it's not a great customer experience, and it's not it's not incentivizing anything more interesting, but that's a way to deal with solar. Now batteries are in the picture as well.

There's not just the opportunity to turn down how much is being exported to support the networks, but also those batteries can absorb energy. They can, you know, do much more interesting things if we can get clear messages from the network to the battery to do something, and that just takes kind of market signals.

I strongly believe that those market signals should be sent from the distributor to the retailer, then the retailer can kind of package all that up and work with the end consumer on on how to make it actually happen.

But there's so much opportunity there for value to be extracted from these batteries.

Yeah. Okay. So there is, I guess, a lot of appetite from the network perspective at least at, like, a high level Yeah. To use some of these systems to help manage the problems they are saying.

Yeah. They just don't know how to make money out of it.

So And so, I mean, on that, like, do you see yeah.

You just mentioned kind of ideally, you would see the networks and the retailers working together on this. Is that happening? And I don't know. Is there something which anything any well, let's say for government or policy to to enable that more?

Certainly, I think there needs to be changes in regulation. Right now, so networks have to for any investment, they're gonna make over six million dollars. They have to look at non network solutions. So batteries and, you know, whether it's distribution level batteries or behind the meter batteries. They have to make that public and look for alternatives.

Six million dollars is, like, a pretty high threshold, so I think that needs to come down.

There are examples I know, it might be a bit controversial because actually what I'm promoting is, like, is is, public ownership of of energy retail distribution, but it does kinda work really well in WA because there's alignment between the energy distributor and the energy retailer because they're both government owned. And, like, everyone's just aiming to reduce the overall cost to supply to customers.

We need to find a way of getting alignment between the energy retailers and the distributors to see them really working together. I haven't got the answer for that, but we obviously need to align incentives in a way to make it happen.

Yeah. I guess that's the thing because there's sort of this patchwork of different network operators. And at the same time, you have this open retail market. So, you know, that's a big combination of potential Yeah. Like, partnerships going on there to manage and to try to work this out.

Yeah. And it's really hard. And we heard we heard that at the conference on Tuesday as well from the network side and the and the retailer side saying just putting together a commercial contract around how who gets use of this battery at different times for how much and how much risk tolerance each party has, just putting together one contract for one community level battery takes so, so, so, so long. So it's it is really hard even when people, you know, have the best intentions in the world.

I guess finally, from the the consumer side of it, the customer side, how much do they want to still retain kind of control of these systems?

Because, yeah, I mean, I guess something like you mentioned with, like, the tearing down the solar. You know? Is that something you get pushed back on? Or, I guess, at the same time, pop by by using, you know, NRN, they are getting access to this when otherwise maybe they wouldn't be able to.

A hundred percent. I was speaking to a social scientist recently who looked at kind of VPP participation, and she was saying that, actually, participating in a VPP is kind of a hundred percent against the motivation that caused people to buy a battery in the first place, because that was all about having more control over their energy bills, you know, maybe saying kind of piss off to the energy retailer because they're they're sick of them. And so they've just invested in this shiny new they're probably quite proud of this shiny new battery that they've invested in. And then an energy retailer comes up to them and says, here, I'll give you twenty bucks a month to kind of fiddle around with your battery. And number one, kind of that I don't think that value's high enough. Yeah. It will go up because there'll be more value to the the flexibility.

But also, yeah, that's they don't wanna give away control. They've just bought this asset to maintain a feeling of control over their costs. That's a huge driver. So that's where the NRN model kind of works because we're not making anyone pay upfront.

We're saying, actually, the upfront cost to this, like investing in a gas plant or a pumped hydro plant, the upfront cost should be the industry's cost, and we will compensate you for for hosting this thing on your property by offering you lower energy rates. And then retailer can fiddle around with the battery to their heart's content, and customer doesn't care. Totally agnostic. Am I getting can I look at my bill now and look at my bill before and see that I'm saving?

Yep. That's it. It's fine. And if something goes wrong with the battery, you'll just fix it?

Great. Not worried about it. That's all customers want.

I guess just to finish off with our last two questions we have. So firstly, is there anything you'd like to plug?

What are we plugging? I mean, just the business in general, I guess. I guess, if you're a solar installer, particularly in, South Australia or New South Wales, when you wanna be part of of this project, I guess, and and part of this product for customers, then there's a call. If you're an investor, give us a call. We're we've got no shortage of potential investors, but it's always good good to talk to new folks, and we certainly intend to to take this model international at some point. So, we'll definitely be looking into that.

That's awesome to hear. And so finally, Jess, what is your contrarian view?

My contrarian view is that we should not bother educating customers about energy.

Okay. That is quite contrarian. Okay.

I think every conference you go to, when you see, like, you know, retailers come up with some new plan and we're gonna get them engaged in VPP and demand response and things, like, it's just doomed to failure. No one cares. Actually, I was just we were speaking this morning to my colleague, Ian, about about it. I don't remember. Twenty eight.

Eight twenty eighteen, twenty nineteen when blockchain was the new thing. Right? Blockchain, what are we gonna do with blockchain in the energy industry? We're all gonna get into peer to peer trading because, you know, it'll be really exciting. People have a chance to be able to give their granny energy and all this sort of thing. So he was involved in this project to set it up. They had a friendly community.

It was a school community who were really engaged in getting it set up. So they they got a program set up, and they just sent out these links and said, okay. You just need to register to the program. And then kinda time went by.

No one had even registered to the program. They said, okay. Don't worry. We'll pre we'll register you and just send you the link how to use it.

And then no no one went in and used it. And I said, okay. We'll get in there. We'll kind of, like, facilitate the trading for you, and we'll just tell you what the results were.

And then no one no one looked at results. Like, no. There was no engagement. And these are people who upfront were like, yeah.

This sounds like a really good idea, and there's nothing. They don't wanna do it.

It's it's not interesting. Stop trying to make it a thing. I was speaking I was speaking to someone recently who had worked in superannuation. Apparently, superannuation went through exactly this thing.

They're like, they're like, oh, we'll create all these dashboards. Everyone will be really engaged. We'll, like, make a fun game out of it. No.

People don't know what to think about it. Just, like, make it really easy for the customer to not think about. Make the customer feel confident that they're getting a good energy rate, and they don't have to worry about the cost of energy. That that is it.

Don't it's like like Ian said, like, it's not as fun as Facebook. It's just not. Like, let it go. Yeah.

Let it go. Yeah.

I think that's a great great place to place to end it. So, Jess, thanks a lot for coming in the podcast.

Thanks for having me, Wendell. It's been fun. Alright.

And thanks a lot for listening.