Annual reports

AEMO’s annual reports provide an overview of the organisation’s performance, financial reports and governance, as well as an understanding of the key changes in the energy sector.

  • CEO & Managing Director Address To Annual General Meeting - 27 Nov 2020

    - E&OE -

    Thank you Drew.

    I want to start by respectfully acknowledging all the Traditional Custodians of the land where each of us are located today.

    For me here in Melbourne I acknowledge the Wurundjeri people of the Kulin Nation and pay my respects to their Elders past, present and emerging.

    I would like to begin my final address as CEO of AEMO by taking you back to January, long before the COVID pandemic impacted our lives, and the subsequent recession impacted our businesses.

    While 2020 will long be remembered for the global pandemic and economic hardships, we should not let this cloud the lessons from last summer, when Australia’s increasingly harsh climate and associated bushfires placed great strain on our industry.

    Australia’s energy industry stood strong in the face of unprecedented climate challenges, overcoming the extreme heat and devastating fires, ensuring a reliable supply of energy to millions of Australians through outstanding industry-wide collaboration and cutting-edge technology.

    We are proud of the role AEMO played in managing both the NEM and WEM power systems through these challenges, including leading the unprecedented re-configuration of the South Australian electricity system to incorporate the Mortlake Power Station and Portland Smelter following the failure of part of the Heywood Interconnector due to storms.

    For me there are a great many lessons to be learned from that long hot summer and the months that have succeeded it.

    First, there is no substitute in this industry for having accurate shared information – a fidelity to truth, collaboration and a respect for institutional and technical knowledge.

    We simply could not have maintained the power system when we were all feeling most vulnerable without the great acumen, innovation and communication of the people at AEMO and throughout the industry.

    Second, we need all of these capabilities as well as an ambition to continue to innovate and search for and apply technology to solve the complex challenges in front of us as well, to assure that now and into the future Australians can continue to rely on an energy system – gas and electric – that is reliable, affordable and meets their environmental objectives.

    To me all of this, including the ability to adapt to change, is the very definition of resilience.

    Third, we cannot afford to nor should we even attempt to solve this on our own.

    Rather, we need to have the humility and wisdom to recognise that the power system itself is a giant ecosystem and our success in planning for, investing in and managing this system rests on our ability to collaborate and create a unified vision of the future, develop the market and regulatory tools to invest successfully, and above all, demonstrate in all that we do that it is foremost and ultimately for the benefit of consumers and society – both today and into the future.

    2020 is a year that portends accelerating change and a moment of historical inflection, and I do think these events are creating an inflection point for our country, in the AEMO journey and in the journey of the energy industry in Australia. 

    The actions we take over the next twelve months, and in the years to come, will have a dramatic influence on our economy and the important and critical role energy plays in future prosperity.

    What I would like to review with you today are the changes we have embraced at AEMO and the changes we are working to address throughout the organisation.

    The release of the 2020 ISP was testament to the collaboration of the industry and consumers with AEMO.

    Developing a whole-of-system plan that provides an integrated roadmap for the efficient development of the National Electricity Market over the next 20 years and beyond is a mammoth task. And work has already commenced on the 2022 incarnation.

    Just this month we announced the appointment of the five-member Consumer Panel tasked with engaging with AEMO throughout the development of the 2022 ISP.

    We were pleased to announce Dr. Andrew Nance as chair, along with panel members Mark Grenning, Gavin Dufty, Stephanie Bashir and Richard Owens.

    The connection and integration of renewables on the scale we are witnessing in Australia remains a significant challenge for the energy transition.

    AEMO has made a number of organisational improvements to better support developers and has initiated a collaborative industry process to develop an improved assessment approach and identify new innovative solutions. 

    This includes:

    • developing and implementing generator control systems to meet new system performance requirements;
    • identifying and closing system strength gaps; and
    • developing a world-first cloud-based PSCAD power system model for new generators to complete their system strength assessments.

    We also recognise that moving forward we have to develop a much better approach to designing and building the network resources that are required for timely and cost-effective investment in the complementary renewable and firming resources required for the transitioning sector. We are working closely with industry, the ESB and government to support these changes.

    Further, our Renewable Integration Study laid out the technical challenges we need to solve to integrate very high penetrations of variable renewable energy and we are now working with members on the engineering framework required to support the ongoing transformation underway across the country.

    This year AEMO commenced the proof-of-concept phase for the implementation of a high-performance simulator for the NEM, which is expected to be deployed in 18 months and provide a cost-effective step change in transparency and visibility for proponents and policy makers alike.

    We are investing in a simulator with the initial capability to manage threats to the power system, such as bushfire and storms, and a new generation connection tool to enabling faster and more efficient approval of connections applications for new generation plant.

    After many years of accumulating a technology deficit, AEMO’s digital strategy is a major focus of our capital program as we work to improve the sharing, access and useability of data.

    As part of this program, AEMO developed a Consumer Data Platform enabling third parties to access actual electricity usage data to offer consumer-focused services and associated benefits, such as comparing energy deals and accessing new products and services. 

    This year, both the Victorian Government and the AER re-launched their energy comparison websites with AEMO’s CDP.

    In the first 10 months of operation, AEMO’s solution enabled 250,000 users to access services based on their consumption data, allowing them to switch providers and save an estimated $200 on average on their electricity bill.

    Meanwhile in Western Australia AEMO played a key role in developing the State’s first ever Whole of System Plan for the SWIS this year.

    We were also proud to partner with the Western Australian Government in the development and implementation of the WA Govt’s DER Roadmap and other key WEM Reforms including preparing for the move to Security Constrained Economic Dispatch in 2022.

    We have also worked hard with each of our government members to support the delivery of their priorities.

    For example, in South Australia we have supported significant government reform to manage the emerging challenge of minimum load.

    In Victoria I am delighted we were able to achieve very significant savings in the procurement of the system integrity protection scheme – better known as a big battery – through the competitive tender process we ran.

    We often forget to talk about gas operations because the team does such a good job.

    This was particularly evidenced through COVID, when Victoria’s third coldest winter in the last 20 years combined with stay at home restrictions to create unprecedented operational challenges.

    Increased demand of up to 5% was observed on cold wet days – creating demand uncertainty due to no real history of this demand behaviour.

    This resulted in an increased incidence of low system linepack prior to the evening peak.

    Despite these challenging circumstances, supply was maintained, and customers would have been unaware of the management behind the scenes – a testament to the operational capability of the team.

    The huge raft of reforms that are being completed by the Energy Security Board are nearly ready for decision by Energy Ministers.

    I want to acknowledge the great work of our colleagues and AEMO staff in the support of this work.

    It is hard to understate the importance of these reforms and the potential for them to create a modern energy market that delivers cheap, clean and reliable electricity to better support the nation’s economy.

    As everyone on this call understands, the pace and scale of change in the power industry requires us to take a number of actions to secure the benefits of these changes for consumers.

    At AEMO we are committed to both understanding the technical challenges and economic opportunities, and working with all of you to identify and implement the necessary market and regulatory reforms so we can realise these benefits.

    What I urge us all to consider is that the time for acting on making these changes is now, while the risk of indecision and inaction may be the greatest risk we all face.

    At AEMO we have identified four cultural values:

    • being inclusive, showing strength through diversity and collaboration;
    • maintaining our integrity and fidelity to truth and science;
    • empowering our employees to be as effective and efficient as they can be; and
    • pursuing excellence through continuous learning and development as an organisation.

    Throughout the last year and into the future, we are pursuing our values by making sure that as an organisation we always ‘walk the talk’ of who we are and what we want to become.

    We heard from many of you last year that while you are confident in our technical capabilities and our aspirations to do the right thing, we need to do more to make sure we are transparent on what we are working on and why, and to be more commercially minded about both the timeliness of our decisions and our own fiscal discipline.

    The Board and management also recognised through its own work that the challenges confronting AEMO, both financial and in helping both understand and articulate the changes required, are not going away and that we need to explore ways we can make these easier.

    This effort led to four reviews. These are progressing, and implementation will commence this fiscal year.

    Our stakeholder engagement review was designed to elicit thoughts on how we can better engage with market participants and members to make certain there is good understanding on how we should work together and foster improved collaboration.

    We recognise that transparency and engagement is a continuous process and one that occurs both informally and formally.

    We are also mindful of your time, and the need for alignment and avoidance of duplication with the work done by our fellow market bodies.

    We appreciate the input we have received on our proposed refreshed models for engagement and will be responding soon with a proposed model for your further consideration.

    The second major review was conducted in connection with our Operational Excellence Program, our overarching internal reform activity focused on improving how we work.

    We had initiated this program of work shortly after my arrival.

    COVID, financial pressures and opportunity to work differently led us to accelerate this activity, and last year we engaged EY to do a comprehensive review of our digital program and operational structure.

    As a result of this review, coupled with the efforts of management and staff, we will be implementing a number of operational reforms next year that will allow us to work more efficiently and productively, while reducing our operating and capital expenses – all while meeting our organisational obligations.

    The result of these two reviews will be an improved process to engage with members, and greater clarity of AEMO’s costs in order to maintain fiscal responsibility and financial integrity.

    These changes will be launched along with the stakeholder engagement review and will be in place for our 2020/21 budget.

    Our third review was to look at our corporate structure and governance model.

    As many of you know, AEMO’s current structure was designed for a very different time.

    We have reviewed comparable organisations and from there identified changes we can make that will strengthen our abilities as an organisation to meet the challenges ahead.

    Our fourth review was into our fee structure. Next week, following nearly six months of engagement with our members, we will be releasing a draft fee allocation proposal for consultation.

    Our fee review produced insights into how we spend our time as an organisation, and we look forward to sharing what drives our investments, and how we might structure a more equitable approach to charging costs to market participants.

    This fee review is about the size of each sector’s contribution to the workload of AEMO, and a more equitable sharing of our costs based on that analysis.

    It is a regulatory requirement and doesn’t go to the level of any particular fee, but rather the relative size of each wedge in AEMO’s cost base.

    We look forward to engaging further with all of you on these important questions.

    I can’t end without addressing the organisation I have had the honour of leading.

    AEMO is fortunate to have passion and capability represented by our Board, management and all of our employees.

    In settings outside of Australia, I often represent what we are doing as a postcard from the future.

    When I engage with international colleagues it is apparent that energy systems are changing here as fast as and, in many ways, faster than anywhere else.

    While we can do better, as is always the truth, I am immensely proud of this organisation and what we have accomplished.

    And while I am leaving AEMO and adding a US address, in this virtual and connected world we all inhabit, I do not consider it a departure from Australia or this industry, but look forward to the opportunity to be a part of this community as we collectively steer Australia towards a different energy future. 

    Thank you all, and I’ll hand you back to Drew.

    - ENDS -

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