For those short of time, here’s the summary – all is well. For more detail, continue reading.

What have I been up to?
Since leaving Gadens Lawyers in June 2009 I have been searching hard for opportunities in and around the energy industry. And what an exciting time it is to be working in the energy business. While there’s little room for the little guys to challenge head-on Royal Dutch Shell and Exxon Mobil etc there is room for us to make space for ourselves in a decentalised energy market. But more on that later.

Australia’s energy renaissance
Australia is on the cusp of an energy renaissance. Natural gas, energy efficiency, wind, solar PV, solar thermal and geothermal energy are all terms you will hear more about in the decade ahead. I have been trying, as my father says, to “get between the wall and the wallpaper” in a number of these fields with varying degrees of success and patience but with relentless persistence.

Natural gas

Between the fledgling coal seam gas industry on the east coast and the conventional gas reserves in the north and west, Australia is set to become the world’s largest supplier of natural gas – bigger than Qatar (albeit with much higher costs of production). At oil prices of US$70 a barrel all of Australia’s LNG projects are economic. A golden age of gas approaches. It is half as dirty as coal and for power generation can be turned on and off very easily. And there is heaps of it. Unconventional gas reserves continue to rise and the opportunities are enormous.

Power prices and smart-grids
Power prices across the country are on the rise for a number of reasons but mainly because of distribution. An estimated AUD 45 billion of investment is required for power distribution (poles and wires) in eastern Australia just to keep the lights on (note that this is more money than the NBN and needs to be spent faster). This is the result of:
- people becoming more energy-intensive (air-conditioners, ipods, computers, digital cameras and mobile phones are ubiquitous and all need electricity),
- an increasing population density in urban areas, and
- general maintenance that is long overdue.

The power distribution network that we currently have is almost exactly the same as in Edison’s time – what a contrast to the difference between my first Nokia mobile phone and video calling through skype on an iphone. There is a tremendous opportunity as grids become more intelligent but the reality of the situation is that we don’t know exactly what to do with it? Do you really want your power company to be able to switch off your toaster when power prices spike? The trail ahead for smart grids is unexplored but it is sure to be an exciting journey for the brave adventurers along for the ride. We hope to be in a position to service smart grids as they are implemented.

Climate Change
I have many friends and mentors whom I consider to be sensibly skeptical of passing fads and popular culture that isn’t underpinned by a real value – not suckers and not easily fooled. Unfortunately, their inclination is misplaced with regards to climate change (I continue to respectfully disagree with my beloved grandmother who is still as sharp as a butcher’s blade for those of you who know her). Climate change is real but it is difficult to both quantify and qualify. As with all science, no theory is every proven but many theories have been proven wrong. In this case the evidence for man-made climate change stands soundly against the arguments of the deniers. Skepticism is sensible, obstinancy is not. The deniers’ campaign is better organised, better funded and has a clearer message than the scientists. Sad that so many have been led astray by the nay-sayers.

Regardless, man-made climate change has been accepted by the vast majority of nations and people world-wide are moving to remedy the situation. What remains unclear is how (if at all) the world will work together. Copenhagen, while a political and diplomatic disaster, was not useless it was simply non-binding. Along with Cancun recently it maintained (an admittedly jaundice) momentum. China is the world’s largest investor in renewable energy. They are also the world’s largest polluter. Australia is one of the world’s largest emitters per capita but could not Australia still be classed as a developing nation (we will have 36 million people in 2050)?

Climate change policy will define the Gillard government in Australia for better or for worse. A carbon price is essential for investment (even investment in fossil fuel technology). The writing is on the wall. There is already an implied carbon price but what’s lacking is the political pragmatism to make it explicit. Incidentally, the best model for a carbon price is that promoted by RBA board member Warwick McKibbon where an RBA for carbon permits would be established and carbon policy is managed independently of government. If it’s good enough for monetary policy then why not for climate change?

Energy efficiency
Australia has experienced generations of the cheapest electricity in the world. This has been thanks to an abundant resource of high quality black coal in NSW and Queensland and brown coal in Victoria. New generation capacity is required and will raise power prices for two reasons:
- higher input costs, and
- the Renewable Energy Target.

As a result of having a vast abundance of coal we have a very inefficient power supply chain. In Sydney, to make a cuppa, we burn coal in the Hunter – to boil water – to create steam – to turn a turbine – to make electricity – transmitted over high power lines to Sydney – which is then carried over the distribution network of poles and wires – to your home – where it heats an element in your kettle – to boil water! About 30% of the energy in the coal is transferred to you at your home. Not exactly efficient.

New investment needs to be more sensible. And the biggest savings are available by simply using less energy. It helps save you money and usually requires very little capital. Where it does require an investment of money as well as time the payback periods are usually within 2 years. With power prices sure to double by 2015 i hope that SMART Sustainability remains busy.

SMART Sustainability provides the products and services that produce and consume energy efficiently. Savings are usually possible for everyone in heating, ventilation and air conditioning (HVAC) systems and lighting. As long as we remain focused then there should be plenty of business for us in the year ahead.

We are also promoting and developing district energy projects such as cogeneration and shared services. Cogeneration is where you install a gas-fired generator with waste heat recovery close to the end user. This eliminates transmission costs as well as increases the efficiency of the use of gas (closer to 80% of the energy in the gas is transmitted to the end-user). You can use the waste heat to provide air-conditioning which works very well. Power price rises will see more and more of these units installed – but it will require some regulatory changes.

As for shared services, we can link the chillers of two or more buildings together so that they run more efficiently. We then sell tenants ‘cool air’ rather than sell electricity for them to create cool air from air conditioners. Again this works well in an environment of high power prices.

New energy
Renewable energy is transitioning from a concentration on wind to include other technologies as costs become more competitive and other factors are taken into account, such as reliability and market mechanics. The Clean Energy Council recently described home solar as the new Hills Hoist – probably a bit early for that but with very generous subsidies available and state based feed-in tariffs solar has had a massive year.

Through our subsidiary SMART Solar Australia we sold solar PV power systems to commercial and industrial clients across Australia (even sold a few residential systems to friends and family). SMART makes it easy for people to take advantage of subsidies to invest in new energy. New energy is simply non-traditional sources such as coal and oil.

In addition to solar PV there will be big opportunities for solar thermal technology in the coming decade as prices come down. Solar thermal involves using the sun’s heat (as opposed to light with solar PV) to heat a fluid or solid to a very hot temperature (say 2000 – yes two thousand – degrees C) to boil water to make electricity. Costs are high for the time being but this technology is very promising. There is already a solar thermal booster bolted on to the Liddell coal-fired power station near Muswellbrook in NSW.

Geothermal energy has great potential to power Australia despite the downhole risks. All geothermal projects across the world that have been banked have been successful. The trouble is getting a project to that bankable position. Despite allocating over a billion dollars to carbon capture and storage the Federal Government have only provided about $50 million to geothermal development. The lack of support by the Australian Government for geothermal is a glaring disgrace.

While we’re at it…
The key for Australia to take full advantage of the opportunities in energy (along with the resources sector) lies in sensible industrial relations and immigration policies. It is hard to find people and it is even harder to find skilled people. Immigration keeps a country young and provides cheap labour. We should have more of it.

So where to from here:
We are looking to hire about four new people for our new head office in Sydney (hopefully moving in by Australia Day). We’re focused on delivering energy efficiency products and services that can help almost everyone save money. Where you can’t pay for it we are hoping to be able to lend the money to you. It’s called energy performance contracting and the saving pay back the loan.

As technologies develop and regulation changes we will adapt SMART’s offerings so that we can provide you with the latest and greatest way to save energy and save money.

Merry Christmas
For those of you I haven’t seen or spoken to in a while please don’t feel it’s deliberate – you’re not alone! Pleas keep in touch. I love talking about this stuff so if ever you want to discuss any of the above or anything at all you know where to find me.

I’m off to get stuck into some Christmas ham and a glass of vino so please forgive the typos. Again, wishing you happiness, usefulness and blessings for the new year.

Merry Christmas.

David

David Lukas
Managing Director
SMART Sustainability

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