Rethinking energy distribution in the NEM with Steve Lewis (Ausgrid)

Australia's energy system is transforming at remarkable speed. Renewables are surging, demand is growing, and the transition is accelerating in ways we've never seen before. But between all of this new generation and the communities who rely on it sits one of the toughest challenges in the transition, building a network that connects everything together. And in a country as vast and varied as Australia, moving energy across long distances is a different kind of challenge altogether. So what if the answer wasn't always about transporting power hundreds of kilometers?

What if more of our energy could be generated and shared within the communities that use it?

Well, that's the idea behind Ausgrid's new community power networks initiative.

It asks a simple question.

Can we unlock the enormous solar potential sitting across Australia's urban rooftops and share it with households who can't install panels of their own? In this episode, Steve Lewis, project director for community power networks at Ozgrid, takes us to a vision of how this could be achieved, what it could mean for the future of the grid, and why distribution networks such as Ozgrid could be best placed to implement it. If you're not familiar with the Australian Energy System, we mentioned a few acronyms throughout the episode.

DNSP, which stands for distribution network service provider, the AER, which is the Australian Energy Regulator, and AEMO or the Australian Energy Market Operator.

If you want a comprehensive introduction to how the name operates, we'll link to our series, The Energy Academy Australia, in the show notes. Let's get into the conversation.

Hi, Steve. Welcome to the, transmission podcast.

Thanks a lot, Wendell. Glad to be here.

Could you start off by explaining, I guess, who you are? Yep. And also, I guess, what is the role of Ausgrid, who you work for?

Excellent. So who I am is, my name is Steve Lewis, and I'm looking after a project called Community Power Networks for Ausgrid. My background is about sort of last fifteen or so years in the renewable space working across utilities, both here in Australia, New Zealand, and the UK. And then also, I have done some jobs on the other side of the fence. I was doing, large scale solar installations for a number of years, and then also, I have worked in the EV transition world as well. So that's kind of a bit of my background.

And then Ausgrid, the company who I work for, we are the distribution business for a large part of New South Wales, which encapsulates Newcastle down to sort of the southern half of Sydney and out to about Parramatta and then up into the Hunter Valley. So at one point eight million customers, I think we have for somewhere around that number. And, yeah, so our job is to get power to people in the most reliable, cheapest, and the safest way.

And, yeah, so you mentioned there the community power network trial, which is what you're leading. Could you just give an overview of what that is?

Yeah. So it's a it's a trial still still to be approved yet. So we're working through with the Australian Energy Regulator around that. But it basically came from a call from the regulator a year or so ago to say, they've got this sandbox mechanism, which is, you know, as it says on the tin, it's a sandbox to trial new new ideas.

And so they said it hasn't really been used well, and they wanted some big ideas that really sort of said, you know, we've had the distribution network and the electricity network for, you know, many, many years now. Distributed energy resources really change the way things can work. And so, you know, how how should the distribution business of the future looks? So how could we help to really, you know, start with a blank sheet of paper and change things to really support this world in the best way possible?

And so that's what the call came out to.

And so the Community Power Network is Ausgrid's response to that. Basically, looking at what are some of the problems that aren't being solved in the market today, and they're mostly around, equity. So equity for all customers, you know, solar and storage are excellent if you have your own house and so can put in solar and you can put in your own batteries. But if you live in an apartment or you rent or just don't have the free capital to be able to invest in those assets, then you're missing out on a big chunk of the benefits at the moment.

So if this is gonna be our go forward mechanism for providing a whole bunch of our energy, we've gotta make sure that that's equitable. So that's number one thing. Number two is cost. We wanna make sure that we're helping to put enough orchestration around it so that you are minimizing your spend a on those resources, but also on the network too.

We'll make sure that we've got things in the right places so that we aren't having to unnecessarily spend on network. And then the last thing is speed. You know, we have a a really tight time frame to get to a decarbonized energy network. And so we are pushing ahead well, not Ausgrid, but others are pushing ahead heavily with, large scale renewables.

But there's this whole other market, which is all of the rooftops in our local communities. And so we are looking how can we unlock the full potential of that. And then these two things can happen in parallel, and that's going to significantly increase our speed of getting to a fully renewable energy network.

What would a community power network look like in practice?

So a community power network is basically a network that allows you to maximize the amount of solar generation in the local community. And then it has batteries in inside the network that then will absorb that solar. So we can by absorbing that solar, we can then offer a feed in tariff for all of that solar, which makes it sensible to put it on the roof in the first place. So anyone who owns a property, who has potential on their roof can put that onto their roof, they can make money off that and prosper, so that's awesome.

That's the first win. And then secondly, by absorbing all that power, putting it into the batteries, then we can redistribute it back to all of the customers in the area in the evening so that everybody benefits. And effectively, that means that the solar on the roof of a big industrial commercial entity and the battery sitting at the end of the street, the solar and storage assets for those who can't put them into their own houses themselves, and it means that, you know, we will operate them on their behalf and then pass all of the benefits back to those customers. And effectively, it means they have their own version of their storage and solar, which solves that equity problem.

Yeah. And so I guess, yeah, so within the proposal, you have rooftop solar as of today. But then the key component of it is batteries, which would be owned and operated by Ausgrid. Is that right?

Yeah. And so the really important thing there is the the operate. So it's the orchestration that we think is really different. So what we have at the moment is a situation where, you know, feed in tariffs even on residential electrical contracts aren't high enough to warrant just putting solar on your roof literally to feed it into the grid.

You know, the sort of the typical cost of solar is about six cents per kilowatt hour to to build. If I'm a feed in tariffs only four cents, that means it's there's no incentive there. And for commercial industrial, it's even worse. Typically, a commercial contract, doesn't have any feed in tariffs, so there's no incentive to fill the roof up.

So we need to change that as the first port of call. So we will use our batteries to be able to absorb all power from the local energy, and we'll make a make an arrangement with the locals to say, we'll buy that power off you at a rate which makes sense, so which is above six cents. We then bring that in, then we will hold the energy, use that to push it back into the network when the network starts to get busy in the afternoon, thereby reducing peak demand, which gives us network savings and benefits that we can pass on to customers.

And then all the profits made on the arbitrage of the energy, that creates a dividend pool, which we will then distribute back to all customers on an annual basis. And that's how everybody gets their sort of fair share of the benefits that solar and storage can create.

I guess Ausgrid as a DNSP have typically been focused on the network infrastructure part of that network. Yeah. Well, what benefits do you see from Ausgrid actually providing that then operation orchestration element as opposed to having some sort of market based solution.

Yeah. Yeah. We see, we see, there's still definitely even in our solution. There are parts of that which are played by the market.

So we don't we don't want to sort of, you know, completely own the entirety of the network. We're seeing we're seeing gaps, though, that we think we can help to fill. And so the first is if you want to really orchestrate where you need storage, so work out in your network, you know, where are the constraints, where's voltages are starting to go a bit askew, where do I need to put batteries, where the only entity that actually has visibility across the entirety of the network and what all customers are doing. Even the three large retailers still only see, you know, roughly a third of the network each.

So we're in that unique position where we have the ability to access everything. We also have the ability therefore to get good scale of what we're doing and to use the batteries to really solve those network problems, which helps us to tap into some extra value streams that we can pass back on to customers in. And lastly, if you're going to put batteries in on behalf of the community and therefore then run those batteries and want to pass the benefits back, Well, you're kind of putting those batteries into monopoly position, and so you need to have a structure in place that then means that only a minimal amount of the profits that that battery makes get taken by the entity that's controlling them.

And so you need that regulation layer in place to do that. And so Ausgrid is, you know, that's literally what we've been set up for, you know, the the whole poles and wires. It makes sense to only have one of them. And then there's regulation which limits our returns to the sort of roughly six percent regulated return.

And so the batteries that we'll operate, Ausgrid will only make six percent return on those batteries, whereas any other commercial entity is, you know, gonna be looking for returns well into the double digits. And so that's just less money that gets passed back to customers.

And so, yeah, I think we'll come back to this and the exact details, I guess, of the Community Powered Network trial. I guess just more generally, so this is kind of like a step in the evolution of the DNSP in Australia.

How else do you see the role of DNSPs changing?

Yeah. I think it's I think it's this orchestration. I think, you know, the world's really changing. If you sort of said, you know, where were we thirty, fifty years ago?

Generation was best done in large scale entities like, you know, coal coal plants, and they were best to be done you have to have those remote, and then your consumption was over here. And so the distribution business, the job was to get the power from a to b. Now what we're seeing is that rooftop solar changes that, and now generation can actually be in the same spot as consumption. Any problem is that the generation is in the middle of the day and consumption is largely in the evening.

So the distribution business's job is not to bring the electrons from a to b, but it's to distribute the electrons from midday to, you know, six PM. So we see that our job is becoming less about distribution over distance and more about distribution over time. And so we see our assets therefore that we need to have changing to do that. And so batteries are the the new asset that we should be having to help us to do this time based distribution.

So I see I see that being one of the key things that we do, and I think the other thing that we have to do as networks is in our role as the orchestrator of the network and making sure the network remains stable. We need to make sure that we're building a network that's robust enough to let customers do all the things they wanna do with new distributed energy resources. You know, you don't wanna go and put a solar system in, say, and then have to curtail it a couple of times a year because the network can't deal with the level of solar coming in. You really if you can, you want the network to have the robustness to be able to absorb the extra electrons and then hold them and then, you know, push them back into the network when it's needed in the afternoon.

So we see that is a fundamental way we're trying to change it in this community power network is make the network be able to do what customers want them to do want the network to do rather than trying to force customers to do what the network can live with.

Yeah. On that robustness point, if you call this, we're talking about yesterday, there was like a power cut down in Bondi. Could these batteries play a role in actually supporting the local grid during those during similar events?

Yeah. They could do. So it is something we're we're thinking about. And so we're looking at the potential to use grid forming inverters on on the batteries that we have. So therefore, you do have a bit more inertia and a bit more stability in the grid. Whether they can run as islanded units, so if the actual grid drops out and then these take over and run the community for a couple of hours while the grid gets back there. There are a few other technical things that need to get sorted through, but we're definitely looking at that to see whether that's something that we can we can add into the trial as we as we progress.

I guess you kind of mentioned a few of the points around why you're paying for the trial. We talked about the evolution of DSPs. So how do things is it all about, yeah, reliability and getting know, ensuring consumers can use to have access to electricity? Or how do things like, I don't know, emissions, for example, the, know, climate change feed into what Osgood are doing?

Yeah. Osgood's doing a number of things to, support decarbonization, and so we see that as one hundred percent the right way to go. So and in particular in the community power network, you know, the really key thing that we're seeing that's the missing the missing piece, which we can really enable, is having maximizing the amount of jet rooftop solar you can get into your local community. So we're thinking that a local community could provide thirty to fifty percent of its entire twenty four hour power needs locally if you maximize the amount of solar you can have in the area. And so that's really the thing we're trying to drive, you know, as well as some other larger scale things like our renewable energy zones where we are repurposing our existing corridors to to build higher voltage, higher capacity transmission that heads out into the areas where the large scale solar and wind farms are being built as well, helping to try and keep the cost down to connect those things to the grid.

Okay. Yeah. Because I was about to ask kind of what other initiatives are Ausgrid taking to base, I guess, elsewhere in the network to kind of pursue those goals?

Yes. We've a we've got a bunch of things going on. So we've got there's three sort of major buckets of of battery sizes. So there's the project I'm looking at, which is the community power network, is smaller batteries, about half a megawatt in size distributed right at the very grid edge.

There's batteries that are a little bit further up upstream from that at about five megawatt scale called community batteries. And then we have large, you know, hundred plus megawatt hour batteries right up at the very top end of our network that are looking to much more support the supply coming in and flatten out supply coming in. So that's sort of on the battery front. We've got some some dynamic tariffs, some trials around that in a project called project Edith, which is looking at how can we send out signals to market that helps to them to respond and to help manage grid constraints?

We've got some the the renewable res, energy zones that we're looking at. So the Hunter Connection is one that's been approved that's just sort of making its way into production now. That will help us to connect up some large scale renewables at a much cheaper rate. And then maybe one of the things that we are doing is the, the EV charging as well.

So trying to help to get our pole tops to put EV chargers on that effectively say that the poles and wire assets come down to the physical charging unit, and then all of the charging retailers sit on top of that. So you can go to any particular pole and doesn't matter which operator you're with. You can just you can use that you can use that charger, and it doesn't it's not owned by any individual charging operator.

Are you aware of anything like the CPN projects you're working on that other DSPs in Australia are looking at?

Yeah. We've had a good look around and, even globally to see, you know, what other projects are going on and what we could learn. And the the key thing that we're seeing which is different is this how we orchestrate in the batteries and to achieve what end. So we found lots of cases where DNSPs are helping to put batteries in and the funding batteries or, you know, building batteries. But they all still are operated largely to that commercial principle by a by a commercial entity, which is buy energy as low as you possibly can and then sell it as high as you possibly can.

Take the most money out of the battery, and then, you know, there's some mechanism that feeds a percentage of those profits back to customers. Whereas what we're doing is saying, even if wholesale market pricing in the middle of the day is gone negative or very, very low, you know, below the cost of a solar system, we are still gonna support the local solar, providers who have put panels on their roof by giving them the rate we pre agreed. And so that's fundamentally changing the way that you are offering or creating value for rooftop solar in the local community. So that's a big difference, and it means that we need to then run the whole rest of the trading arrangements around the batteries differently after that, but that's a fundamental that we haven't seen anywhere else around the world.

And we're really hoping it works because as I said, there's thirty percent to fifty percent potential generation we can do locally, which will be much, much cheaper if we can get a world where where that's where that's occurred.

I think it's the thing. Like, yeah, I can I really agree? I can you can kinda see tangibly how there could be benefits from that. I guess what there has been, there has been kind of some arguments against it from, I guess, because it isn't active in that market, could have a sort of market distortion sort of impact. Yeah. How do you see that? And is there anything being put in place, I guess, to limit that?

Yeah. So, I mean, in terms of, you know, what we're doing to try to make sure that there is still competitive argument competitive arrangements in place here and that, you know, we're not unnecessarily overstepping what it would be good for us to do is, so we will have a commercial trading partner working with Ausgrid inside the Community Power Network, so that will be something which is we go to tender for. And so that partner, that's that's a will be a competitive competitive element there to say who can who can help to get the best value out of these batteries. So that will mean that all of the innovation, all of the smart algorithms that many different commercial entities have created, we can help to tap into that to get best value out of these batteries, which ultimately will mean more value going back to customers.

We will obviously do tenders on all of the suppliers for the batteries and, you know, everything else. The commercial market for solar, We are enabling that by creating the higher feed in tariff, but we're not we're not looking to try to to build and own the solar. We're looking to for the to the commercial markets and the property owners to find solutions that can tap into this new value stream we're creating and build and build that solar app. So there's many many elements which are still gonna be operated by the by commercial entities inside inside, the community power network.

And then, yeah, look, we think it will it will change the world for, the large retailers to some degree, you know, because all of that energy which we're now going to enable locals to generate in the in the community, well, that would have once upon a time been generated by, you know, traditional generator. And so the profits on that and the arbitrage on that would have been in their court. This mechanism is going to pass a large part of that profits back to customers. So there is some change in that, but I think if you sort of say, well, who's the winner out of out of that change?

It is customers. And so I think we've got a sort of or an up to it. Yeah. There's a change there and, you know, in any change, there's winners and losers, but the customers are the winner out of this, so it's the right thing to do.

Yeah. And so you mentioned earlier as a regulated entity, you ultimately you know, what Ausgo can do is ultimately limited by the regulations that are placed.

So this is sort of being done through, I guess, this particular sandbox kind of environment. I mean, looking at longer term, what do you think could change? Or, I mean, would you like to change with the regulation that sits behind DNSPs in Australia?

Yeah. I I don't think a lot needs to change, to be honest. I think the main thing that we're sort of seeing here that a lot of the waivers that, you know, that we and other DNSPs are putting in place is all around just really the ability to own and operate batteries. I think the problem is is that when ring fencing rules were made, you know, thirty odd years ago, batteries weren't weren't a thing at all.

Right? They weren't they weren't a tool anyone to use as part of their part of their typical job. And they're also you know, they're not a generation asset. They're they're a thing which will take energy at some points of the day and then push it back out at other points of the day.

So under the current ring fencing rules, they get classified though as a generation asset, and so therefore, they are not something that a DNSP is allowed to own and operate without a waiver. But we're saying, as I said before, that if you sort of say how is a distribution business is all gonna change, we need to do a bit of this distribution over time. We're saying, you know, we don't wanna we don't really wanna be playing in the retail markets, but we want to be able to have access to this really new tech great new technology, which will help us to lower our network costs and get better network utilization, which ultimately is going to end up in lower cost electricity for for customers.

So that's really the only the only regulatory change that I think is really important to make. There's a couple of other things like maybe totex and moving, so that's whereas at the moment, all the the regulation is set up with a certain amount of capital spend and a certain amount of OpEx spend. And so it means that sometimes if you move to a different, more smarter service, it might move from one of those buckets to the other. And if your your budgets are set though, you can't you can't flex in that way.

Whereas, totex means that we just get a total amount of money to spend and we can decide whether it's best to do that as a capital expense and own something, or is it best to do it as a service and buy it under operational expenditure? So that's another thing we're talking to regulators with, and we think that will also help to, enable Ausgrid to to bring in and utilize some of the really smart commercial operations that are going around by procuring the service to to do whatever it is that we're trying to do.

Okay. Yeah. If we dive into a bit of the detail behind the proposed trial, yeah, what networks are the first ones which are being proposed?

Yeah. So we've tried to pick areas that have, a lot of a lot of rentals, a lot of people in apartments, a lot of potential for more solar, and also, you know, maybe a lot of people that don't just have enough free cash to not free cash to be able to invest in their own battery installer. So we looked around and, at all the different areas on our network, and Botany mascot stood out as just a an excellent opportunity. Like, literally, you'd as you fly into Sydney, you can see that half of the suburb is large white roofs and the other half is apartment blocks.

So it's like sixty eight percent of people live in an apartment. I think fifty percent are tenants. And, you know, there's there's only very minimal uptake of solar across all of the big industrial sheds. So we've been talking to some of the owners of those sheds, they're really interested to get involved.

And a lot of the community are really interested in this too and really love the concept of being able to share power. There's a a great photo we've got in in our proposal, and it's like this massive roof that would be the size of, like, two or three football fields with couple of panels in one corner and that's all that's got on it. And then literally across the road, there's a whole bunch of apartment blocks. And that is in a page, the concept we're trying to solve is to get the power on that roof and then share it across to the people on the other side.

So Botany Mascot is one of the trial areas and there's about seventeen thousand customers in that area. We're looking to put about sixty five megawatt hours worth of battery capacity in there and we think that we will enable about fifty megawatts of additional solar to go in there over a five year period. Then we said, okay. We also wanna test that, you know, Botany Mascot is a bit of a unique area across the whole of the NEM.

So whereas another area that's a bit more representative of, you know, probably eighty percent of of our country. And so we looked around and found an area on the Central Coast called Charmhaven. And so it's it's got enough solar now that it's actually starting to get reverse power flow, so there is starting to be, you know, a problem for how do I deal with all the solar we're creating now. And so we thought that's a good one.

It doesn't have a lot of apartment blocks, but it also does still have about thirty two percent of people rent, which is quite high for, you know, a typical residential area.

So we thought there's gonna be plenty of opportunity out there to help out, help our customers as well. So we've picked we've picked that and that's about another fifteen thousand customers. And into that area, we'll put again about sixty five megawatt hours of storage, and we think it will enable about a further twenty megawatts of solar to go in.

Okay. And, yeah, I mean, I guess when you look at kind of maybe more of those household based communities, so obviously a big thing that's happened this year is with the the new labor government being reelected. They've introduced this household battery subsidy scheme, which has had extraordinary take up. Kind of do you see those household batteries kind of competing with what the community power network chart is trying to achieve?

Yeah. No. I think I think they're completely complementary. So as I was saying before is, if you have your own home, you know, home batteries and solar, that's awesome.

It's like it's a fantastic solution and, you know, all power to everyone to do that. What we're looking to do with the community power network is create that equity. So, you know, there is a bunch of people in apartments and a bunch of people, you know, and when I say a bunch, a significant, you know, like sort of thirty to fifty percent of our population that just can't access and can't do that detached home, you know, perfect solution. So we're looking to solve the problem for those people.

So that's a different set. And we also are only looking to put enough storage in place for to be able to absorb that local solar and then to deal with the network constraints. The storage that people put into their own homes or properties that is in orchestrated by retailers and via all sort of the normal mechanisms in the market, that will definitely push the grid in the right direction. So we will use that momentum.

And then our batteries will be the the tweaking on top, nuancing to make sure that we can flatten out all the peaks and troughs in what comes through the grid.

And so in terms of the status of the trial, so yeah. So it's been kind of proposed and it's gone through a consultation. This is a time recording in mid November.

How are you working with the AER and any other market bodies to kind of address some of the concerns that have been raised?

Yeah. So we've been working closely with a number of people. So AER, obviously, we have a fortnightly catch up with the AER.

And so we think that the way we're hoping that we will hear back from the AER formally quite soon, so that's sort of an imminent decision. Other parties that are involved in that conversation is AIMO, about what we can do. We've been talking to Arena, to both federal and New South Wales d d q, Department of Climate Energy Water, and, also, some ministers as well. So Chris Bowen's office, Anthony Albanese's office, a bunch of, other parliamentarians around the affected areas.

People like solar citizens, a number of the big retailers, we're having regular meetings with, say, AGL, Origin, Energy Australia, all of those all of those organizations regularly catching up with, plus a bunch of, smaller innovative aggregators and, software providers as to how they how their software could work and how it could help to open up some of the, opportunities to other people in the market. So all of those things, are continually being addressed. And, you know, this the solution has evolved, particularly if I think we're on to about whiteboard whiteboard version number one million by now in terms of, you know, how the whole thing hangs together and how the financial flows work.

And we think we've we think we've got a pretty good solution now. So we think we're getting that right balance of, you know, working out what does it make sense to just have one of as an asset that we run as a community and we feel that, you know, then Ausgrid's good best place to run that. And then how do you then wrap a whole bunch of commercial entities and the smarts and the intelligence that they can bring to the solution to help make sure we get the most out of that battery. And then by you know, if it's our mechanism is going to then provide all of the benefits that it creates back to customers, which is really what we're Yeah.

Endpoint. And, yeah, I mean, from from those areas, you mentioned the trial, like, what are the benefits that are expected to kinda end up flowing back to consumers?

Yes. That's a good question. And one I probably should have put into my opening statement is to say the the main benefit is about a hundred and fifty to two hundred dollars on average per customer in the areas. So that's what everyone will get back without needing to do any behavior change, anything differently in their life.

The grid just is gonna be a better, more efficient grid, and that will generate these benefits. And so, yeah, you will just, see once a year on your energy bill. Here's your energy. Here's your rebate from being inside the community power network.

And, you know, if if our modeling is correct, it will be somewhere in that sort of vicinity number that you just get off your electricity every year. And that's regardless if you're in an apartment, in a house, small business, large business, you know, everyone gets access to that benefit.

And so that's basically representative of the anticipated savings of running the network Yeah. In yeah. That was weird.

Yeah. So it builds up it builds up as a network saving, arbitration on the energy that that we buy off the local community and then sell back into the grid later in the day, plus a little bit of commercial trading. Those revenue streams are all the things that the the batteries are doing. They then pay a bunch of their money. So they they all those revenue streams over the five years of the trial, that adds up to about seventy six million dollars. We will give back about thirty three million dollars to local customers via the solar PPAs.

Ausgrid gets about nineteen million dollars, which is paying back the eighty eight million of, we spent on batteries plus the operations of the of the whole the whole trial. And that's our regulated return only, so that's that six percent that we talked about before. So that's the only money that Osprey would make out of this. And then everything else, which is about twenty three million falls into a dividend pot at the end of the at the end of that tree. And that dividend pot is annually just what goes back to customers and that that twenty three million, if you do your math, that's the hundred and fifty to two hundred dollars per customer per year.

Yeah. And I was reading that. So, yeah, in the pilot trial, Ausgrid is essentially guaranteeing that payment to customers. Is that right?

Yeah. So we're we're underwriting it is is probably the better word on that. So so we're basically saying so what's ours we're committing to? So we're committing to if we enter a PPA with someone for their solar system, we're committing to that for the life of the system.

So even if the trial isn't successful and wraps up in five years time, we'll make sure that things stay in place so that the person can be confident that the investment in their solar system is still gonna be good. So that's the first thing they're committing to. Second thing we're committing to is that that dividend pot, that twenty three million dollars cannot go negative. So the very worst case scenario for a customer inside the pilot zones is they will get the higher feed in tariffs.

That's almost guaranteed.

Apart from that, the worst case is that the dividend has gone to zero, and so customers won't get anything. Okay. But they don't lose anything here. So there's no downside and only upside. And so if the dividend does actually go negative, that's Ausbridge's problem. We will wear that, and that won't be passed back to customers.

Yeah. Got it. Okay.

And if the pilots go well, what do you see as the next steps? Like, where would you wanna take it?

What we really wanna try and work out from the pilot is, you know, this is there's there's two things there. There's the orchestration that we're gonna do of the batteries. Actually, probably the other thing which I haven't mentioned yet is the spatial energy plan that we're gonna do. So that's a that's like a sort of the first thing that we'll do as part of the pilot, which is to work out, and map out at the low voltage network exactly what is happening, like, literally meter by meter going around the suburb and saying, this is what currently exists in terms of EVs, storage, solar, etcetera.

And then looking at the roof size at each of those meters and saying what's the potential for more solar, what's the potential for more electric vehicles and other loads, etcetera. And then really start to be able to forecast over time what's gonna happen to the the the current flow, the power flows, and the voltages along every single individual feeder inside the pilot areas. And that's what we will use to work out how much battery capacity is required to balance that all out and where should those batteries be placed in the network. So that'll be a thing which as part of that consultation was almost unanimously endorsed.

So that's a really exciting thing. And that's like a whole level of granularity that just just doesn't exist at the moment. We don't have that data. It's not like we have it and we're holding it back.

It just it's not collected. It's not analyzed at that level at this point in time. So that'll be really awesome and will help not only Ausgrid but other entities to be able to work out where's the best place to put to put assets. So that that'll be stage one, and I think if that's successful, you'd wanna see that rolled out and go for larger than just the trial areas.

Second thing is the orchestration, and that's the really key thing that we're trying to test. We're trying to test that does orchestrating the batteries in the way that we want to do for this trial. Does that create more value for customers than just orchestrating them through normal commercial means?

And so if the answer to that question is yes, then we will want to see how can we expand this into other areas where that orchestration can then be done there too. It doesn't necessarily mean we need to own the batteries. We've said we'll own the batteries for the trial, this has been a bit contentious. But we have basically said, you know, this is a pilot.

It's supposed to be done in the cheapest, fastest, you know, less lowest risk way to do it. And so if you're gonna have, you know, three hundred odd batteries, which is what we will do for this trial, and if they're all different makes and models, all owned by different people, all running different software, just the interoperability problem that you're gonna have to solve to be able to do your orchestration across all those will just be it'll be a monstrous thing, and we'll spend the first three years just trying to get the system working as opposed to actually testing anything with it. So

he said, simplicity, for the trial, let us just own the batteries. We will do one or two makes and models. That means they don't need to they can be directly interfaced into our into our systems because there's no cybersecurity around different entities owning batteries on our network. So it can be much simpler.

And then we can just get straight down to the to the task of testing. Does the orchestration work? If it does, before you started to then just roll out carte blanche, you would then say, okay, what's the value that this level of orchestration's costing? What would what would I be able to procure that service from the commercial market be?

And then we can actually start to see is it is actually sensible to then go to the effort of working out how could commercial entities also provide that service with their batteries, and we just do the orchestration. Or is it still makes sense for Osgre to own a part of those batteries going forward, but that's something to answer at the end of the trial, not now. Then the ownership in the trial is just purely for simplicity and, you know, try and make the thing as low risk as possible for customers.

So, essentially, a successful outcome of the trial would be essentially proof that, yeah, operating a sort of fleet of batteries in this way could deliver savings over and above how they would normally be commercially operated.

Yep. That's right. And and I think as well that point of making, like, maximizing the amount of solar that gets created in the local area. So I think that's a really important thing.

Right? That's I think that's that's where, you know, the current wholesale market is just not driving in that direction. You know, like, you look at it and you, you know, you only have to fly into any capital city and you see all of these big white roofs that just aren't full of solar, and they should be. You know, that should be our our number one source of creating power.

And so we should be maximizing that before we start looking at building a whole lot of stuff out in the regions and then having to build a whole lot of new transmission and distribution to connect it back into the grid. So that's not being it's not it's not happening at the moment, and that's because the wholesale market is not really driving that. And that's the fundamental thing that we're trying to fix here. So if our orchestration fixes that problem, that will be that'll be fantastic, and that will mean that we have end up with a solution in thirty years time, which has maximized this lowest cost, best sort of solution for customers before we've moved to the next the next sort of best thing, which is renewables at large scale, you know, remote.

Yeah. Okay. Completely completely got that. No. Yeah. And then so the idea is then when you if you look ten, twenty years in the future, it might be the same kind of fundamental idea, but it might necessarily be Ausgrid owning, operating those assets. It might be essentially, yeah, a third party is a market solution which is doing that.

Absolutely. And then Ausgrid would sort of fall back into that orchestrator role where we basically would be saying, yep, that battery needs to be discharging, that one needs to be charging, and that could be a service that somehow is worked out, you know, with they'd have to be, you know, quite sophisticated to make it work dynamically and every single battery is potentially gonna get a different instruction. But that's the kind of stuff you could work you could work towards. So in twenty years, that's where the orchestrator and the manager of the grid, which is really our role. And then ownership of the batteries is not necessarily required to make that happen.

Interesting. Yeah. I mean, I'm really interested to see how it develops. I think it's, yeah, a bit of a contrast to some of the sort of other projects I've seen from, like, yeah, in the UK, for example, which, yeah, are really going down as, like, market based solution service type approach. So, yeah, if it does work, then, like you said, that ultimately consumer that should be benefiting. I think just wrapping up then, we've kind of got two two questions. Firstly, is there anything you would like to plug?

So I think, you know, we talked about all the different initiatives that Ausgrid's doing, and I think they're the things that I'd like to I'd like to plug. So, obviously, my own project, Community Power Networks, we'd we'd love to see this thing get the opportunity to try this and and and see whether this does does work. The other thing which we're really trying hard to to get in place at the moment is the EV charging. My background coming out of the EV world, I have a personal passion for making sure that we've got the right amount of charging, and that's a really good solution because if you own an EV, there's nothing worse than the twenty thousand apps you have to have on your phone now to be able to access.

The experience that trying to drive up to charger you happen to walk in front of.

And so the solution that we're looking at is basically, you know, there's just there's a charger on the pole, and it kinda works out. I ATMs, I think, is the best parallel to that. If you remember ten years ago, you'd only be able to go to your bank's ATM to get money out, and if it was a different one, you couldn't use it. And then in the background, they've worked that out now that you can just go to any ATM now and just put your card in.

This is the same thing for charges. It's basically the charger is there. It's just an asset that's just part of the grid, part of the, you know, the common commonly owned stuff. And then all of the retailers sit on top of that, so I can be with any different charger operator, and I can just go on.

I can tap on to that particular charger, and I can use it. I don't have to worry about whose charger it is. So that's a really good solution. I can see that really helping for people who live in apartments and, you know, in areas who don't have a garage to be able to get access, easy access to overnight charging, which is definitely the way you wanna do charging if you own an electric vehicle.

Yeah. And that would have made a couple of my EV trips simpler Yeah. Than I've experienced so far. And the final question is, what is your contrarian view?

So I think I think the contrarian view is that the wholesale market knows best. So a lot of the pushback and the commentary is is that, you know, that we've had in this project is people with that base assumption that, well, why are you trying to distort the wholesale market? And that's the assumption there is that the wholesale market is always gonna drive the most efficient solution. And I just don't think it is.

Because like if you if you do say and you believe the fact that rooftop solar is the best way to get the cheapest power for customers. And then you look at what we're doing, and that's that's not the case. Know, we're not maximizing the amount of solar that we could possibly put into our local communities, and we're not then utilizing that first of all. So that to me says that something's not right there, and so that's what we're trying to fix with this.

Okay.

I think I'll definitely yeah. Take that as a dreary view.

Awesome. Well, Steve, thanks a lot for coming on the podcast. It's my pleasure. It's great to hear, and we're interested to see how it progresses. Yep. I am too.