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News from the front desk: Issue No 246 – Grant King & disruption

Origin Energy's Grant King

On Origin Energy’s Grant King and disruption, coming ready or not

What does Orgin Energy boss Grant King think about Adelaide City Council’s news this week that it would subsidise battery storage to the tune of $5000 for battery storage, another $5000 for solar energy and a raft of other energy efficiency measures.

Did he think it would be disruptive?

“It’s not disruptive because it’s not necessarily the better way to use their money,” the Origin managing director said. “I’ll make a prediction that if it goes faster than they think then they’ll stop it because they haven’t got unlimited buckets of money.”

It was an interesting response.

King was speaking amid a “presser” after his address to the Australia-Israel Chamber of Commerce lunch in Sydney on Wednesday to outline his position on fossil fuels – gas in particular – the next round of climate talks in Paris at the end of this year and what he thought about the “crazy” 20 years that followed the Kyoto agreements.

Above all, King spoke about the to urgent need to stop the thing that he thought had been truly disruptive in recent years, changes to legislation and regulation in the energy space.

But talk to any of the deep thinking, wide-vision industry leaders about sustainable precincts and what our buildings of the future will look like, and they will tell you that’s exactly what’s in store.

As one engineer put it this week the exciting thing now is buildings as “nodes of connection” to utilities and the rest of the built environment. How might they produce energy and water and share it with their neighbours? Who would own the wires? You might cobble up a specific contract for one property but what we really need is new legislation and regulation.

King is a kind of lightning rod for climate agitation given he aggressively attacked a higher Renewable Energy Target and carbon tax. So we made it our business to see what the man would say in public now that it’s pretty clear the world is moving rapidly to a climate action footing, and a determination to be rid of fossil fuels as far as possible. Rival AGL has signalled a fossil free future which analysts say will happen by 2020, not the 2050 the company says on the record.

What would King say about Paris? Would he mention the growing rally in support for climate action, evidenced by the latest Lowy Institute poll? Would he mention Fairfax Media’s major “Climate for Change” campaign that has swamped its daily newspapers with pro-climate copy and an inspired alliance with leading world newspapers from the Huffington Post, China Daily, the Guardian and India Today?

On the Adelaide question King was clearly anticipating another overcommitted solar scheme. It seems he could be wrong. Asked what the budget was Adelaide Lord Mayor Martin Haese said on Thursday it would be $150,000. So, clear cut. It was also no shot in the dark, but part of a strategy that aligned with that of the state government to attract business and investment to SA, Haese told us.

Already inquiry has shot up.  “We’re seeing business and residents ditching halogen downloads and going to LEDs and we’re seeing initial inquiries for batteries,” Haese said.

This isn’t about waiting for the Tesla product to hit the shops, either. SA  already has local companies such as OZRoll Industries and Zen Energy Systems that “already have existing products [including batteries] in the market and installed”,  the Mayor said.

King, though, was looking at history. In particular the $14 billion of solar incentives that the Grattan Institute identified in a recent report, with the widespread conclusion that this must have been wasted. (We’re not so sure.)

King said, “Did anyone calculate in advance $14 billion on solar?”

It “grossly overstimulated the market.”

But it changed the game, we suggested. Not just homes with solar on the roof but whole towns are planning to go off grid.

King thought this would not eventuate when they “run through all their numbers”.

“However, in a market of 220 terraWatt hours by 2020 what you say might be right but it won’t be cheaper,” he said.

“If people invest to provide for their own peak it will cost more than the grid.”

(Assuming that price is always the driver.)

King said people worried about clean energy could just buy Origin’s clean energy, which was “guaranteed” carbon free. The company had 360,000 “loyal customers” who had been buying green power for 14 or 15 years.

“They don’t have to invest a dollar and it’s absolutely guaranteed.”

Since the numbers of customers had remained “steady” during a period of growing concern about climate and appetite for divestment we asked if new green energy customers were not flocking to rivals such as Greenpeace-endorsed Powershop ,instead of supporting Origin with its track record of anti-climate politics.

King said Powershop bought some of its power from the grid which is 80 per cent coal. This was “greenwash” he said.

We contacted Powershop chief executive Ben Burge for his response.

He said all customers of Powershop were covered for carbon neutrality through UN carbon certificates bought on customers’ behalf, whether they bought green power or not. Some elected to buy green power specifically which was sourced (notionally and in equal amounts) from renewable energy sources. He said the company now had 50,000 customers mostly in Victoria, but with NSW now growing fast.

A sophisticated presentation 

King is clearly a complex person.

We were there to see what one of the main proponents of the fossil fuel industry would say to an intelligent and informed business audience. One that judging by the questions at the end of the session was clearly at least partly concerned and aware of climate change. First, like all corporate heads King is first and foremost the lead marketer for the company. Like all the sales manuals say, to be effective you first need to get your audience on side. So say things up front the target will agree with. Like, in this case, “we all know that fossil fuels create pollution… we know pollution kills 4.3 million people a year.. we all know it is affecting the climate.” Then slip in the definer, the key message. In King’s case it was a call to be balanced, to treat the “two goods” of climate and economic growth as equal.

King opened his address saying the last 20 years since the Kyoto agreement, could make great thriller, replete with good guys and bad guys and massive amounts of capital destroyed. (He might have added a whole lot of conspiracy theories and some of the best-paid spin merchants on the planet, mostly from his neck of the woods). It was a “crazy” and he hoped the 20 years after the world met again this year in Paris would not be as crazy. He hoped there would not be an insistence on keeping warming to just 2 degrees.

Energy, he said, was the most important of all industries.  Humans had lived with the polarity of energy versus side-effects for millennia, he said, right from our days in caves when our forebears balanced the benefit of warmth and cooked food with the discovery of fire with stinging eyes and dreadful smoke.

There’s been deforestation and biomass chopped down, King said. “Extraordinary deforestation and you can see how we’ve lived with this trade-off”.

“In London everything was black when I first went there, and it didn’t strike me as unusual until I went back and it wasn’t black any more.

“Fossil fuels have had a terrible impact on people. Natural gas allowed that to be cleaned up.”

It was critical to address pollution, he emphasised. “An estimated 4.3 million die from indoor air pollution from coal each year”, he said.

“So here we have this long standing link between use of energy and quality of indoor environment.”

“Now the issue has gone from indoor air to climate”.

 It’s not what you measure but how

But what of Australia’s contribution?

King suggests we’re using the wrong measure.

Instead of absolute carbon emissions per head of population Australia should be more fairly measured on carbon emissions per unit of GDP.

Deloittes has put out such a measure and presto, Australia is no longer the worst polluter but one of the more moderate ones, in fact a “gold medal” performer, King said.

We needed to differentiate between pollution caused at home and pollution that we export, he said. The UK had reduced emissions by 20 per cent since 2012, but it had done so by outsourcing its emissions and importing more goods.

With LNG (liquid natural gas) Australia will export cleaner fuel to places such as China, which will pay higher prices for this because it wants to clean up its economy, but at home, King thinks we will turn to burning coal to plug the price differential.

King mentioned equity in the developing world in relation to economic growth and fossil fuels (not an issue we recall the fossil fuellers ever raising in the past) and at home in relation to the subsidies for fossil fuels he said were paid by those who lived in apartments and rented property. (But no mention of the subsidies paid to the fossil fuel and mining industry).

King attacked the European oil companies such as BP, Shell and Total which recently called for a carbon price.

This was “evidence of old world thinking” Europe was resource-scarce and had a history of conflict, which meant it was more likely to solve problems through intervention, he said.

On the other hand, in the US – the new world – “they say, ‘why would you do that when it’s detrimental to jobs and growth?’.”

The clever advocates say let the “markets work and be patient” he said.

“We should have the patience to wait for those gains to come in by not throwing out the old system.”

(No mention, we noticed, of whether the Earth would also be patient and wait for us to get our economy right.)

What fuel is best?

On what fuel is best, King said, “We need to be fuel-agnostic. At the end of the day it’s a simple practical problem how do we reduce emissions?”

“There’s nothing wrong with the old fuels provided we get the  ratio right.”

Surprisingly, he focused strongly on hydro. In response to a question after the speech about the potential for battery storage he said there was already a huge reservoir of storage, in hydro. (Was Origin moving into infrastructure construction?)

Australia should not rule out nuclear, he said, as we had ample uranium reserves. (But there was no mention that every nuclear power plant in the world relies on massive government subsidies and that we still haven’t resolved nuclear waste.)

On the question of subsidies King thought we should not have subsidies for energy efficiency because it makes no sense to intervene…”the markets will implement it anyway.”

(Again, this is not quite the full story. In the property industry it was a major government stimulus that kicked off energy efficiency at the top end of the market. At the levels below that in the B and C grade buildings– around 80 per cent of building stock – there has been abject market failure, despite the huge and sometimes easy benefits of taking action.)

On a question from Wendy Simpson from the John Monash Foundation on which fuels would be the best bet for attention and whose job it was to educate and stimulate investment, King was brusque.

“I don’t think there are new fuels, there is new technology.”

But he said solar was moving rapidly and will continue to do so.

Disruption is only when you don’t see it coming, King said, forgetting that the industry didn’t see energy demand dramatically plunge.

So does King see the energy industry about to radically change?

Absolutely he does. He’s clearly a highly intelligent man, but he’s been paid to plug up the dyke with all the might he can muster.

 

Comments

2 Responses to “News from the front desk: Issue No 246 – Grant King & disruption”

  • Peter Allan says:

    Across many sectors we have seen leaders see the change coming and take their companies to a place where they have a role. Others watch their companies wither as they protect the status quo. Grant King may be eloquent but he is not a leader.

  • Alan Pears says:

    Grant King is indeed a complex person – with a long track record of undermining renewable energy and promoting his own firm’s interests (which is his job – if you take a narrow view). Mr King was present at the secret 2004 mtg with John Howard, Ian Macfarlane, the resources industries etc at which they decided not to increase the original MRET 2010 target, against the recommendations of the independent Tamblyn inquiry. The Australia Institute published notes of that mtg made by a participant….

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