Utilities must become energy platforms: AMP Capital
By Ben Potter
Australia Financial Review, 24 September 2017
AMP Capital has joined a growing band of large global investors urging utilities and electricity distributors to switch to a cleaner, distributed energy model before it’s too late.
The fund manager owns stakes in Endeavour Energy, the NSW poles and wires company, New Zealand’s Powerco, and Evergen, a CSIRO spin-off which creates technology that optimises home solar and battery usage and can facilitate peer-to-peer trading of surplus solar energy.
Michael Cummings, head of AMP Capital’s Australia and New Zealand infrastructure funds, said the energy sector was changing from a centralised, hub-and-spokes network into a two-way distributed system where utilities and distribution companies offering digital platforms to consumers.
The risk was that they didn’t move quickly enough, or that regulations stifled competitive “behind the meter” services such as solar battery management and peer-to-peer energy trading by seeking to “ring-fence” them too strictly from monopoly poles and wires businesses to prevent cross-subsidisation, Mr Cummings said.
“I think the world has changed and those companies to be successful need to recognise that they are a platform.”
AMP Capital believes poles and wires businesses will continue to have a role in the power grid of the future but that it will be more valuable if they pro-actively manage their networks in order to increase the amount of energy distributed relative to network capacity while maintaining security and quality of supply.
Rooftop solar a winner regardless
The fund manager sees rooftop solar photovoltaic power as the big winner regardless of policy, and says the need to “orchestrate” these behind-the-meter sources of supply to bolster the grid at times of stress will also make control and communications platforms such as Evergen more valuable.
“If you are not aligned with the long-term interests of consumers you haven’t got a business long term, so we have to make sure that’s aligned,” Mr Cummings said.
Electric vehicles will be a game changer, AMP Capital says, and 40 per cent electric vehicle penetration would equate to a 20 per cent increase in energy demand, which could help utility-scale wind and solar energy in their battle with nimbler rooftop solar energy.
Mr Cummings said AMP Capital was attracted to Evergen because of the intelligent way it integrated solar panels and batteries and other behind-the-meter energy resources, its smart algorithm that monitors battery health and weather forecasts and uses machine learning to anticipate the best use of a household’s energy resources.
“Those three points are resonating very strongly in the market,” he said.
Mr Cummings said developments such as microgrids, peer-to-peer energy trading and other potential retail applications created “an opportunity for Evergen to evolve into a much bigger player”.
“We are looking at this technology globally.”