Why the ISP Puts Batteries at the Heart of the NEM with Alex Wonhas (AMPYR)

Hello, and welcome back to Transmission.

In this episode, I sit down with Alex Wonhas, CEO of Ampere Australia and one of the country's leading energy market experts. We explore Ampere's latest battery energy storage project and the role that these systems and the wider battery fleet have in supporting system reliability and enabling more renewable capacity in Australia. We also dive into Alex's experience at AMO, where he helped in the formation of the Integrated System Plan. We explore the ISP further in this episode. Want the latest news, analysis, and price indices from power markets around the globe delivered straight to your inbox every week?

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Now, let's jump into the conversation.

Hello, Alex. Welcome to the Transmission Podcast.

How are you doing?

I'm doing really well, Wendell, and it's an absolute pleasure and privilege to be here.

Great to have you on. I guess, to begin with, it would just be great to just hear a quick introduction to yourself. You know, what is your past experience and, what you're doing now at Ampere?

Yes. I'm currently the CEO of Ampere in Australia, which is a new, renewable energy company. And prior to that, I have lived the life of an energy geek. I led system design at AIMO, and prior to that, I led the energy and resources work at Aurecon, which is a global engineering firm.

Awesome. We always love having energy geeks on this podcast.

I think that's kind of what we're Geeks rule.

Yeah. What we what we target. And so, yeah, there's been some really exciting news, I guess, for Ampere recently. So firstly, you previously announced the kind of financial close on the Bulleball, battery, at least stage one of it. Could you tell me a bit more about what that system means for Ampere and how it kinda sets you up for the next phase of the company?

We are really excited about the Bulleable one project. That's a three hundred megawatt, six hundred megawatt hour battery in Wellington. It was for us in Australia, the first large scale battery project that we have done. Ampere globally, has done battery projects before, but it's really marking the start of our business here.

It's going to be the first of many projects. We are a very ambitious company, and we would like to, you know, capture maybe ten to twenty percent of the market by by twenty thirty.

What I am also really excited and thrilled, in fact, about is some of the novel things we have done with this project. So for example, we have created a First Nations equity sharing scheme, which we hope is going to be really transformational for the local indigenous community.

Awesome. Yeah. I mean, that was kind of incredible to see, and I think it's, like, so important for, like, social license, I guess, if you think about expanding out, like, the transition here.

Look. I couldn't agree more. I think we we often talk about cost of renewable energy and the challenges and how to keep the lights on and, you know, these are all very important topics.

But I suspect the speed of the energy transition, because I don't think there's a question whether it's gonna happen. It's just how fast it's gonna happen, and that I think will all depend on how we work with local communities and, you know, get their acceptance and ideally support for the projects that we need to power the future of our country.

Awesome. And so thinking about Buildable, you know, it's coming in as a big system, three hundred megawatts, two hours. Like, things in, NEM don't start small. What's the role you envisage it playing in the in the NEM?

I mean, the role, it's, a traditional battery role, helps to obviously firm supply. It will also uplift the capacity of the local local network to ultimately host more, in particular, solar generation. And I think that is very, very important because when we look at deployment rates, of different generation technologies, at the moment, we probably see wind lagging a bit because it is in on many dimensions, more challenging. But I think with batteries and combined with solar, we can actually keep up the pace of the energy transition, and I think that's that's really critical because we will need the power in place to ultimately replace the existing, in particular, coal generation fleet, which will exit.

Yeah. I mean, I guess if you think about, yeah, New South Wales, which is where the system is, Ararang is still scheduled to retire in twenty twenty seven. There's a lot that needs to happen to help replace that. Right?

Oh, yes. I mean, each each coal generator is is a massive plant, and we will need a lot of investment in the right replacement technologies ahead of time to allow the replacement of that.

Awesome.

So in getting bidable to the stage, what would you say is the biggest hurdle that you faced?

Well, developing any project is really the ability to bring lots of different pieces together, and, you know, it's it is quite normal that not all of the pieces always fit. With this project in particular, it, it has actually been on the books for a while. It it started off as a joint venture, between Ampere and Shell, but what held it back for a long time is a dependency in its planning approval with other projects in the area. And what I'm really proud of, what our team has done is is actually problem solved those interdependencies, removed those interdependencies, and then very quickly finish the project, got it to financial close, and it's now in construction. I was actually just out there last week, and it's amazing to see the speed with which battery projects can be delivered. It's a real game changer for the energy transition.

Yeah. It's something we've been monitoring, and it's incredible to see, just how quickly you can go from essentially the start construction to something that's energized out there. I mean, yeah, when do you expect the system to be to be trading in them?

So, energization, September next year, and, we are aiming COD in April, twenty seven.

Amazing.

So, yeah, I guess there's, like, the planning, yeah, connection process, and actually needing to actually get the system past FID. What else is kind of required to achieve that?

Look. There's there's lots of pieces required. One of the things that we're doing with this project is, which is probably also pretty novel. We are actually taking full advantage of the new offtake structures that are, being used in the market, in particular around, virtual tolls, capacity swaps, fixed for floating swaps, And we're actually layering them on top of each other. And, we, you know, have thought very deeply about how we are going to do that because it allows us to take a really big at scale battery and tailor offerings to, different customers, which I think is really important. But that involves at the back end being really, really clear on how to deliver the the integrated operation of that battery.

Yeah. I guess it kind of makes, like, the operational side of it more complex for yourselves, right, layering those contracts?

Yes. I I think it's complexity that can be managed if you think very carefully about it. But if you don't, it can get you in all sorts of challenges. So I think I think it's exciting, but at times also daunting what you can do nowadays with batteries.

I mean, really excited to see it go live. I think the in terms of, like, the value or kind of what's the advantage that that kind of contract stacking helps to give you?

It really helps you to serve the needs of your customers because there are frankly not that many people out there who, you know, can buy three hundred megawatts of battery capacity.

And by using these novel offtake structures, you can create a now fully contracted battery, which is really good for investors.

But you can give each customer what exactly the size, the shape, the duration of what they need. And I think that's, that's very exciting, and that will be yet another thing that can help to accelerate the energy transition.

Yeah. I think it's something that in Australia, it's for us, what we see, it definitely seems to be something that the, you know, the market is leading in globally, when we compare it to kind of the other markets we're in. Like, kind of the development of the offtake industry here is kind of pretty exciting to see. I of maybe don't realize it being sat here.

Well, that's that's good to hear. We it it it certainly feels we are at the leading edge, but it's great to have that confirmed from you. Yes.

I guess more widely, how Ampere are thinking about that offtake structure and the the kind of new products which are available in the market when you're thinking about your wider portfolio?

So I think it comes back to really careful analysis. It actually starts at the front end of the development process, making sure you select the right projects. So being relatively new to the Australian market, we actually started to look at other existing developments to basically buy developments to accelerate the growth of our company. But we were, in some sense, quite surprised about the relatively low quality of, you know, the average project out there, and and that certainly didn't meet the requirements that we had that will ultimately allow us to do some of the things that we are now doing doing with off takes because, for instance, projects were exposed to constraints, which is, I think, a very big issue for batteries going forward.

And so we, you know, we are still looking for the right projects, but we're probably focusing more on development of our own, projects now to overcome that and and and really combine the the front end understanding of the market with with therefore what do we need in the in the in the front end of the development business?

Yeah. I think the like, how do you manage that potential kind of grid risk, when you're thinking about contracts?

Get as close to your customer as you can. And there's a trade off, because the closer you get to your customer, you know, that increases, for instance, factors like land cost, exposure of or proximity to to noise recipients, which is an issue for batteries. So it it's a very careful calibration act, that we're trying to balance there through our development process.

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Enjoy the conversation.

Within the kind of, contracting space, are there any innovations that you're kind of really excited about?

So, Wendell, what I would really love to do is write twenty four seven renewable energy time matched contracts. I think that would be really exciting. We we have certainly started to think that through, on a conceptual level and and and modeled it through. We haven't yet found the right customers who are also prepared for that.

But I think that will be a real game changer for for those customers who want a genuine firm renewable energy solution and not just, you know, buy racks and say we are a hundred percent green. That will drive a lot of innovation in the market. It's it's actually very hard. So our our view is, you know, you get to maybe depending on what input sources you need, or you use in form of wind and solar, maybe seventy, eighty percent, maybe ninety percent.

The last, you know, ten to twenty percent will be really hard, at least for the time being until we have sort of alternative sources like long duration storage in our portfolio and other things. But I think that will be something really exciting to do.

Yeah. It kinda feels like, I mean, similar around the world, kind of that time match BPA is something which is talked about a lot, but kinda need to see the next step of that actually being turned into something.

That's right. Well, we are we are we are hopeful, with, maybe working with the right, data center businesses who have, you know, very high aspirations in that regard. And we acquired, fortunate, our main investor, AGP, which is a Singapore based investment fund. They are also investing into a data center business, and we are actually having a a collaboration with them. And that's really fascinating learnings to see what you can do at the interface between an energy business and a data center business.

I mean, yeah, I think even just potential data center growth, here, I guess, is gonna be a huge driver of change in the future. I mean, do you kinda interest just to quickly on that on that time actually pay fund. Within the Australian market, you know, are there this kind of the systems in place to support that? Are there the right kind of, I don't know, is there anything which would need to change in the market to support that sort of time matched PPA structure?

Having having the right regulatory framework that that allows you to have it on a certified level, I think that that would be good, but I think you could do it even even without that in place, but it certainly would make it easier. I think the the biggest challenge is customer demand and and ultimately customer willingness to pay for that product because it it will be more expensive than a traditional, energy product.

Yeah. I mean, I think it's incredibly exciting space. So hopefully We'll get there. There are good developments in there.

I mean, quickly, yeah, I mean, we had some kind of exciting news today. So the kind of next stage of billable battery, was announced as, winning a CIS contract. I mean, quickly, like, how do you see the CIS playing in terms of how you're thinking about developing project? What does it enable you to do?

So we are very grateful for the support from the capacity investment scheme. The capacity investment scheme really helps us to accelerate and derisk our projects. In the end, that leads to a faster energy transition. It allows us to move faster. That means we have our projects in faster, which means the risk also for consumers from, for example, an unscheduled exit of coal is is greatly reduced. When in the end, the capacity investment scheme allows you to structure a contract with much more, in particular, longer term revenue certainty that allows us to find different investors for those projects, which helps us to bring down the cost of those projects, which helps us which in the end helps us to bring down the cost for consumers, which is, I think, another big challenge that we need to manage in the energy transition.

And so, I mean, I think that kind of, I guess, takes us to say looking further forwards. And I guess what the CIS is trying to help achieve is is that transition.

So, yeah, your previous role at AMO, you were very involved in the ISP.

I mean, could you briefly just explain what is the ISP? You know, what's it meant to achieve?

That's a really interesting question. So I'm I'm very fond of the ISP, been, really involved for sort of the twenty twenty and twenty twenty two, ISP, And, very fond of the team and what they have done since. I think originally, the ISP started off as the tool to help us identify what transmission investments we need to enable the energy transition, and that's actually designed in that way.

It has I should just say as well.

So ISP for the for those who who don't know the acronym, ISP is integrated system plan. I'm bringing myself up on that because, I should have said that earlier. But, anyway, sorry, Alex. Carry on. Continue.

It has become such a such an integral part of the vernacular. You're right. But you're right to point it out. So initially designed to inform which transmission investment should and shouldn't be made, but it has really evolved to almost the bible of the energy transition.

And and I think that needs to be treated with caution because that was never the intent. So what the ISP is doing is it's it's assuming a optimal development pathway if all of the policies that have been announced get implemented, and it optimizes predominantly on minimizing total system cost, which I think is actually a really good good way of looking at it. But you have to be careful that in reality, the system might not evolve as it's mapped out in the optimal development path. So when you look at the deployment rate of, you know, wind and solar and compare it to the actual deployment rate, we have actually significantly less wind deployed and probably transmission slower deployed than anticipated in the plan.

And that has some profound implications, so you you have to fill the gap in some way. So if you have an energy mix that has, for instance, more solar in it, it means you need more batteries to firm it up.

And it was really interesting to see the announcement of the step up of the capacity investment scheme in terms of battery capacity that actually increased by fifty percent. And, obviously, I haven't been involved in that, but I can only assume that that is a reflection of the reality of we'll probably have more solar in the mix, so we need more batteries in the mix as well. Actually, our estimate is is we probably need two to three times the amount of batteries in the mix by two thousand and thirty to achieve the eighty two percent target.

Yeah. Well, I guess that target is what a lot of it is aimed towards. Right? But like you said, the ISP, I guess, sets like a a path, but then as we've seen with things like wind, wind deployment, it that doesn't necessarily match up to what happens.

So, like, I guess now when you roll outside, of Aimo in the industry, like, how well do you see the ISP, you know is it setting up the energy transition for success here?

I think it's a really important building block of the energy transition. I think what we did when we set up the whole process, we actually really focused on a great level of transparency. So the amount of information about projects, costs, you name it, I think is quite phenomenal, and everyone in the industry is using it. It's actually an important feedback loop process as well for people to provide feedback and and refine it, and AMO and and CSRO who work on some of those assumptions actually take that very seriously.

So that gives that gives actually a shared knowledge base. I think then and the scenarios and the and the optimal pathway, they are all really important tools. But I think as we've just touched upon, I think it's then really important to also do a reality check inside sort of how are we tracking against that and what adjustments do we maybe need to make to some of the outputs as a result of reality. And I think what we also need to do, and I I know Amos thinking about this, is sort of taking nonfinancial and economic factors into account, like, you know, impact on communities, development lead times, risk exposure for developers, which then result into maybe longer development processes, the impact of the planning process.

So there there's a lot of variables that by its very nature and initial design, it doesn't capture and but that's okay. I think that's why we have brains as humans, and and we as a collective industry, we need to debate and discuss it and then try to find the right interventions for the energy system to help us navigate, the transition in the best possible way.

Yeah. I think just picking up on something you just mentioned, I would just recommend if anyone is kinda interested in the space and understanding how different technologies work in them, the resources that are published as part of the ISP process are incredible. Yeah. Even just the gender cost work, which is done. So, yeah, I'd really recommend going and checking out all of that. So I guess a lot of stuff is being published now in anticipation of the next ISP release next year. I mean, with what you're just saying, like, do you anticipate essentially quite big changes happening in the next ISP?

When you look at the in going assumptions, so there have been changes to assumptions. So changes to the cost of transmission, changes to the cost of, you know, different generation technologies, wind. I think that will that will suggest probably some changes in generation mix would be my would be my guess. But in the end, these are quite sensible adjustments of that overall plan, and that's frankly the reason why it's done every two years is to take account of those adjustments, to take account of the learnings, and sort of course correct the path as we're going along.

But fundamentally, I don't think it it will, you know, dramatically change the nature of the transition. It will, you know, refine it at the edges, but I think where we're heading is crystal clear and frankly hasn't changed for a very, very long time. We are heading over the next, you know, ten to twenty years to a system that is almost exclusively powered by renewable energy. There will be just, you know, some periods where maybe we have other technologies such as gas coming in and and providing residual firming. And, you know, that's the future of the energy system.

Absolutely. And, you kind of yeah. You touched on it a bit. I mean, within that transition, do you think that the ISP is ambitious?

Well, ambitious enough in how it views the role storage can play.

You know, do you think storage can actually play an even bigger role within that whole transition than is currently, you know, planned out?

I think the ISP is ambitious. It just depends on which scenario you pick. And, you know, people people sometimes it says it's too ambitious. Some people say it's not ambitious enough, so it's probably probably just right.

In in terms of the role of storage, I think there are additional applications for storage technologies that we are just starting to understand and unpack, which are probably not covered in the ISP. One thing that will be really interesting to see is how, in particular, grid forming inverters can help with, providing system strength. That's gonna be a huge issue, and I haven't yet found anyone, who really knows the exact answer of how many sync cons we need and how many grid forming inverters we need to provide system strengths in the future. I think sort of the rule of thumb seems to be, you know, as much grid forming capacity as you can that will deliver the bulk of the system strength work, and then you might need a few more synchons to provide, sufficient fault current.

And, you know, I think that's probably how the system will work. The other thing that I'm also really excited about is the role that batteries can play to uplift, transmission capacity, to increase hosting capacity. I've been involved in the, Victorian big battery. And when I was at AMOL, we procured that from the UN, and, that was really the first, system integrity protection scheme battery that uplifted transfer capacity from New South Wales into Victoria, which was exciting.

Now EnergyCo, and I'm also on the board of of that organization, has adopted that, same principle to uplift transmission capacity in New South Wales, which is very exciting. I think there is much more work we can do over time, say, over the next five to ten years to push the envelope of what we can do to unlock and really maximize utilization of our transmission and distribution system.

Yes. I guess, obviously, in that, I mean, we've had, Waratah going live now, which is huge system, which much of it is dedicated to this sort of transmission support service.

I guess, yeah, you you've mentioned maybe some of those transmission delays. So do you see that batteries can help essentially navigate that transition if those projects are delayed?

Yes. Batteries, I think, can play a big role, and you mentioned Acacia's Waratah Super Battery, another great example of a project, that does that. I don't think batteries are a silver bullet in that regard. I think we do need to build more transmission infrastructure.

That is really challenging. It has high impact on the local communities. As we are, you know, learning, it is a very costly process, but in the end, some of it is needed. But I think what we need to what we can do with batteries is we can really maximize the utilization of that transmission infrastructure through the use of batteries so we get the biggest bang for our buck.

So, yeah, you also mentioned grid forming. And, you know, we just published a piece on grid forming last week. And then there's been other stuff being put out recently by Tesla, by and, I mean, you see the big, TNSPs all publishing their their views. I mean, it's kind of amazing how it seems from the outside looking in, like, that technology has advanced so quickly to the point where it's, you know, it it's almost now cost comparative with just an a regular grid following system. Is that what you're seeing?

Is that reflective, I guess, of how you're seeing Of course.

Possibility of grid forming?

For us, it's not even a choice.

Every new project in our portfolio is going to be a grid forming project. We see a lot of potential for that technology. Some applications we already understand. I suspect with like with many new technologies, there will be new applications identify as we come along. So I think it's an exciting future. I think it will be really interesting to see how big a role grid forming technology can ultimately play in the system of the future.

Yeah. I was gonna say and then from, kind of an investment perspective, do you see, yeah, those kind of systems strength services or these sort of transmission support services, you know, playing a substantial part of, like, the revenue stack if you think about it for best?

That is a really interesting question. I would hope so, but I haven't actually seen it yet. So we haven't signed a contract for system strength, for example.

But I I know, for instance, TransGrid's, just starting its process in in New South Wales, and, I think this is another great opportunity for us as an industry to get that right and and to put the right mechanisms in place so we can integrate and stack all of these different revenues on top of each other to build, you know, viable, efficient projects, similar to what we've done with, you know, battery started off on, you know, mainly providing FCAS. Now transitioning increasingly to arbitrage, and we're sort of optimizing between arbitrage and FCAS. And I wouldn't be surprised if there are, you know, more services we can stack on top of each other, like grid support services, grid forming services, and probably many more things in the future.

So would you say that, I guess, within the current market framework, it's not quite there yet for supporting batteries to provide these services?

I think the current market framework is a challenging one because it's very difficult to get an investment up in an energy only market because the risks you are you are asking an investor to take are really incredible. And even for many off takers, it's difficult to ride a, you know, even ten year PPA. That's that's a real stretch, and I understand why it is a stretch. So I think we need to and and this is obviously what the Nelson Review is is trying to do. We we need to find a framework that gives investors more long term certainty, for their investments, which will be really beneficial because it will lower the cost of capital, and with lower cost of capital, we'll reduce the cost to consumers of those projects, and it will drive the investment into the market that we need. So, yeah, I look I look forward what's coming out of, ultimately, the implementation of of the outcome of the Nelson review.

Yeah. I think with, what's come out so far, it's still early days, but, like, with what's been published around the ESEM, like, do you see what's been proposed as helping you achieve your, well, AMPES goals?

I think you said it before. I think it is it is early days. I think it's it's definitely heading in the right direction, and I think the members of the panel who are, very, very smart and dedicated people, know that themselves. The devil's in the detail, and the implementation will really matter.

And I think that's what they are spending their time on. So I think we, as an industry, we need to really engage in this process. We need to really try to, get this right. Because to be honest, we had a number of goals at this, and so far, we haven't cracked it.

And we're still stuck with an energy only market with, you know, some outside intervention, and we'll sort of cobble it together. But it would be wonderful to have a nice, predictable, investable market framework. So I think we collectively should take the attitude, how do we make that work? How do we help that team and government and AIMO and everyone else really implement that and make it work?

Awesome. Well, I think, we can kinda move on to the last few questions we have. So I think firstly, Alex, is there anything you would like to plug?

One thing that we are really passionate about at Ampere is is really that that first nations equity scaring sharing scheme that we have invent, implemented for our battery.

I think it's a novel concept. We we are actually planning to publish all of the underlying mechanics and documents of that, and I would really encourage people to, copy it if they want to, build on it if they can. And I think coming back to the beginning of this discussion really help us as an industry drive the energy transition forward that in a way that actually works for local communities and indigenous communities. I we would we would love to see that because that will ultimately determine the speed of the transition.

That's fantastic to hear. I think, yeah, we'd we'd love to see that. And so finally, what is your contrarian view?

Well, there are so many contrarians in the energy market. It's probably impossible to hold a unique contrarian view. But, one thing that I think is an area that is maybe underdone in the energy transition today is really using distributed PV on commercial and industrial rooftops. And so, you know, as we all know, residential PV deployment has been massive, pun intended, has gone through the roof.

Australia's world leading, but, deployment across in commercial and industrial roof spaces is pretty anemic or low.

And especially as we're maybe not getting the deployment right on the large scale solar and wind, I think putting the right incentives in place to to drive that, I think that would be making a big difference. It will require some incentives because at the moment, they are not there.

But it can be, again, creating the energy and and accelerating the energy transition.

I guess just on that, what would you, like, what do you see as the primary blocker?

It's the it's the commercial attractiveness.

So I think that probably needs needs some support. There is also a a split incentive problem that that many people, you know, rent those places where but they are actually owned, by someone else. There's also generally not enough intrinsic energy demand for a consumer for to use the system behind the meter, so you then have to export and that's generally not attractive. But if you combine that with, for example, some battery deployments, then you basically get dispatchable generation within the demand center. You don't need to build more network, and that's exactly what we need. And when you look at it on a whole of system cost basis and compare that to building, you know, transmission, large scale wind, you know, it actually starts to be starts to be comparable, and it can be deployed, much much faster than some of those those larger scale projects. So I think at least in the interim, I think that's that's probably an an area where we can put more focus on.

Awesome. I mean, I like that. It's, like, exciting to hear that that could be this big, untapped sort of resource out there still.

It definitely is. Well, you just have to next time you're you're sitting on an airplane, just just look out there. There's there's still a lot of roof space where you can put PV on.

Amazing. Awesome. Well, Alex, thanks so much for joining us.

Wendell, it's been a great pleasure. Thank you.

Thanks a lot, and thanks everyone for listening.