Today, Cleaning Up launches its Deep Dive Australia series. Featuring conversations with nine leaders of the climate and clean energy scene, the series explores where Australia is leading the world, where it is not, and how it got there.
This is an important moment for Australia. The country was extraordinarily exposed to the closure of the Strait of Hormuz, being the largest per capita importer of diesel in the world. It's also uniquely dependent on China as the destination of its mineral exports and the source of a lot of its technology imports. And in November, Australia will be co-president with Turkiye of the COP Climate Summit in Antalya.
In the first of Cleaning Up’s Deep Dive Australia series, Michael Liebreich speaks with Darren Miller, the CEO of ARENA (the Australian Renewable Energy Agency), the federal body responsible for deploying over $14 billion AUD in grants to clean energy projects across Australia. Michael Liebreich speaks with Darren about where Australia is leading the world, and where it still has ground to make up.
They explore how ARENA funds innovation into pioneering clean tech, why Australia has quietly become the world's third largest battery market, and what it will take to turn the Pilbara's iron ore into green steel. They also discuss the Hydrogen Headstart Fund, the slow uptake of EVs, vehicle-to-grid, community batteries, and the moment the Hormuz crisis exposed Australia as the world's largest per capita importer of diesel.
Topics include:
Leadership Circle:
Cleaning Up is proud to be supported by its Leadership Circle. The members are Actis, Alcazar Energy, Arup, Copenhagen Infrastructure Partners, Cygnum Capital, Davidson Kempner, Ecopragma Capital, EDP, Eurelectric, the Gilardini Foundation, KKR, Mitsubishi Heavy Industries, National Grid, Octopus Energy, Quadrature Climate Foundation, Schneider Electric, SDCL and Wärtsilä. For more information about the Leadership Circle, visit cleaningup.live
Newsletter:
Sign up to the Cleaning Up newsletter at cleaninguppod.substack.com, for all the latest from the show, including new episodes of our Deep Dive Australia series.
Links:
Acronyms:
Darren Miller
The same consumers who put rooftop solar in are now interested in batteries, and we've had about 350,000 batteries go in under this cheaper home batteries programme over the last year. That's in the context of 10 million Australian households. So 3.5% of all Australian households have bought a battery for their home in the past year. I'm pretty sure that Australia is the number one battery market per capita on the planet by a long way. You add to that the enormous strides that have been taken in the large scale grid batteries, of which the Neoen Big Battery in South Australia, which was a bet between Elon Musk and one of our billionaires, Mike Cannon-Brooks, back in 2016 was the notable start of that.
Michael Liebreich
I think that's one of the things that our non-Australian audience will have heard about.
DM
You build it in 90 days or it's free, I think was the bet.
ML
Hello, I'm Michael Liebreich, and this is Cleaning Up. Keen fans of the show will have seen that in late May, early June, I took a mammoth trip around Singapore, Australia and New Zealand. It was great to meet so many of you in person at the Cleaning Up events that we hosted in Singapore, Sydney, and Melbourne, when I spoke at the National Press Club of Australia at the Energy Efficiency Council Conference, and at the Energy Retailers and Generators Association of New Zealand meeting in Wellington.
While I was in Australia, we recorded our first ever deep dive. That's a series of nine episodes with leaders of the climate and clean energy scene in which we explored in detail where Australia is leading the world, where it is not, and how it got there.
This is an important moment for Australia. The country was extraordinarily exposed to the closure of the Strait of Hormuz, being the largest per capita importer of diesel in the world. It's also uniquely dependent on China as the destination of its mineral exports and the source of a lot of its technology imports. And in November, Australia will be co-president with Turkiye of the COP Climate Summit in Antalya.
So it was really fun to go deep. And over the coming weeks, we'll be hearing from guests including Chris Bowen, the Minister for Climate Change and Energy of Australia, Lily D'Ambrosio, Minister for Climate Action of Victoria, Professor Martin Green, the pioneer inventor of so much solar technology, David Pocock, the former Wallaby rugby star turned senator, and thought leaders from across the energy sector.
What we're going to do with these episodes is put them out every Monday to compliment the regular weekly show that will still go out every Wednesday. Make sure that you don't miss any of the episodes of this Australia Deep Dive or any of our regular programming by signing up to our newsletter at cleaningup.live. You can also find it on Substack, and we'll put a link in the show notes.
To kick off the first episode of our first Deep Dive, I'm delighted to welcome Darren Miller, Chief Executive Officer of the Australian Renewable Energy Agency, ARENA, one of the key national organisations helping to fund and build the next generation of clean energy solutions and who also supported our trip to Australia. Please welcome Darren Miller to Cleaning Up.
ML
Before we get started, I'd like to acknowledge the Ngunnawal people, the traditional owners of the land on which we're recording. I'd like to pay my respect to their elders, past, present, and emerging. Darren, hello.
DM
Michael, hi, great to see you.
ML
We're going to start where we always start, with you saying who you are and what you do.
DM
Brilliant, yeah, so I'm the CEO of ARENA, the Australian Renewable Energy Agency. Been doing that for about eight years now. ARENA is Australia's federal government agency responsible for giving grant money to new renewable energy electrification and energy efficiency projects. We've done about 840 projects over the 14 years that ARENA's been around. I've obviously done eight of that.
ML
Eight years, not eight of the projects.
DM
Correct, eight years, hundreds of projects. And ARENA's got a capital base, if you like, of about 14 billion Australian dollars, so roughly 10 billion US. And we get to deploy that on new technologies right across the spectrum of energy, renewable energy, electrification, and energy efficiency.
Prior to that, I had about six or seven years in the renewable energy space, both as a innovator in technology, in rooftop solar, in batteries, and latterly in electricity retail before I sold that business and joined ARENA.
ML
So that was as an investor and entrepreneur?
DM
An operator, yeah. Investor, consultant, and operator.
ML
You are called the Australian Renewable Energy Agency. Now, some people might think that an agency is a team of bureaucrats writing reports, making plans, drafting regulations. There are agencies that do that. That is not what you do, correct?
DM
We're not a policy shop. The policy of renewable energy is done by the department attached to the ministerial, the government side of the business. The agency is a separate body governed by a board of eight board members.
We have our own active parliament and our own statutory funding. And our job is simply to provide funding to new technology projects in those domains of renewable energy, electrification, and energy efficiency. And we make our own decisions to a point.
Our minister has delegation for any project that needs to have a grant of over $50 million. Other than that, its board and CEO and management decision-making. And so we've been doing this for, as I said, 14 years now, over 800 projects.
And essentially, we have looked at the portfolio of opportunities and segmented our work into working in the solar space. We think Australia has a lot still to offer in both R&D as well as deployment of solar. So that's one of our priorities.
We're working in the grid and storage space. The grid is decarbonising and going renewable rapidly. And so there's a lot to do in that space.
We're still working in the distributed energy space because we're such a powerhouse in terms of our rooftop solar and increasingly batteries and soon to be vehicle to grid. And then we move into heavy industry, hydrogen, heavy industry decarbonisation and transport is a further pillar of our work.
ML
You talk about investing in projects. I've got the Australian pronunciation, project. I'd call them projects.
But are they actually projects? In other words, are they assets? And when you talk about a project, is it from your perspective, it's a project, but actually it's a company?
It's almost like a venture investment or what are these? Asset investments or venture investments?
DM
So I like to think of Arena as a benevolent equity investor in that we have the mindset of an equity investor. We scrutinise in diligence, the deals that we do, the teams, the definition of the projects, the finances that they bring along, the knowledge sharing that they offer. But ultimately we wanna give our money to that project and not see that money come back because we want that, it is uncommercial.
We don't expect that money to return, but we are not investing working capital in a company. We're investing in an experiment that that company wants to produce, whether that's further research, a first of a kind deployment or even a large-scale deployment of something that's not yet taken up by the commercial market. We define the scope of what we provide finance to as walled in a project.
It obviously does go and support that company's pathway, but we're often asking for co-investment, debt and equity from funders to come along and join that project definition, which we provide funding to. And we aim for about one-to-one as a rule of thumb, a dollar from Arena, a dollar from third-party investors into that company or that project. But yes, we're looking at the company's, the talent, the financing plan, but experimenting with a particular problem that that company is trying to solve.
ML
Okay, so now if that is a first of a kind project, then it's relatively straightforward because that project is a standalone thing. And so you put in some equity, you say, if you can match this one-for-one, we'll go build this. So it's non-dilutive funding.
So when it's building a first of a kind plant, I kind of get it. But when it is a company, you said you'll fund a piece of research. What about, could that be a trial programme, a rollout of a pilot or something like that?
DM
It could be.
ML
But it wouldn't be, if somebody just says, I'm building this business, we're doing commercial rooftops, and I just need core funding. I'm trying to raise 10 million Australian dollars to go and build a company, you would say, well, I'll fund some of your rooftops, but I won't fund the company, is that right?
DM
Well, we would say something like, okay you've got a business here doing rooftop solar. What's the innovative thing you're trying to do?
And they might say, well, we're trying to capture the heat from the back of the panel, for example. We want to put a heat sink in, and that's experimental and it's unproven. We would say, great, that sounds like a good idea.
Let's go and design, or you design the experiment to do the research and development for this new thing that bolts onto your core business. So we're looking for innovation. We're not looking just to fund that company's general journey. That's for the venture market and for other kinds of equity and data.
ML
Okay, but it's very interesting because I've been quite a few times on the other side trying to raise money. And most recently, my trucking company, Pragma Charge, non-dilutive funding is wonderful as long as it isn't too complicated. I hope you're not complicated, I think we need to come back to that.
So do you, because everything is innovative and the companies or projects are learning, do you insist, do you say, well why would we fund you? Okay, it is research, what are you researching? Help them with the protocol. Do they then have to publish that?
DM
Yes, so one of our core functions in addition to providing funding is also knowledge sharing. So we enforce that almost on every project, that that project has to open up as much as possible. We respect IP.
We're never looking to hold IP ourselves, nor are we looking to restrict how people use their IP. But we're always looking for help and how that project can inform the general industry and the general population about what they learn and do. We don't want to be funding the same mistakes over and over, or even when there's a success, we want that to proliferate.
And so a core part of what we do is knowledge sharing. In addition to that, we bring the industry together. So we're often bringing, if it's EV charging we've done, we might bring 10 or 12 of our projects who've done EV charging in different ways together in a room for two days, and they get to talk to each other and open up about what they've done.
That's also a core part of the knowledge sharing work that we do. And then taking insights back to government about sharing policy ideas, not formulating policy, but saying, you know, like for example, right now we've got an issue with heavy vehicle electrification. We've got a front axle weight limit threshold, which is breached by electric vehicles.
And we're taking that back to government and the department saying, look, we need to adjust this regulation to allow these heavy vehicles to compete on an even footing with the diesel.
ML
So you're doing some of the blocking and tackling using presumably you have a fantastic network at this point. 10 billion US, 14 billion Australian dollars. That's a lot of money.
Is it because it's been going 14 years, you don't notice that it's a lot of money or is it, it feels like a lot?
DM
For this sort of thing, it's a lot of money. It's an interesting journey. So we started with $3 billion when we were first born in 2012.
We lost a billion through some dark periods of time through government processes at the time in around 2014.
ML
Do you mean sort of clawed back?
DM
Clawed back because we had a coalition government that didn't want to fund this kind of work. And we were then the $2 billion agency. And in 2020, the coalition government actually to their credit, refunded ARENA with another 2 billion and the labour government in the last four years has added $10 billion to all of that.
So it has grown rapidly recently and the government has given us many, many programmes thematically themed, thematically designed programmes of work with money attached to them and given it to ARENA to do because we've been set up and operating successfully for so long.
ML
We'll get onto some of those because I know that some of those were the hydrogen, I've used that word, I lose hydrogen bingo, I have to buy the drinks. Hydrogen Head Start. And then you've got SAF funding. You've got, so you've got core funding and then you've got these programmes.
But before we go anywhere near that, I want to do our first, let's learn about Australia timeout. The coalition, because you said that there was the change of government, the 88% who are not Australian might not know the coalition between who and what and how does politics work?
DM
The coalition is essentially the liberal national coalition which is a centre right of politics in Australia. And the labour government is the centre left of politics here. We also have a further right, which is a group called One Nation and further left being the Greens.
Generally, well, in fact, in all times in Australia's history, a government has been won and governed by the centre right or the centre left. And right now we're in a centre left environment. As I said, in the 2014 period when ARENA was and the Clean Energy Finance Corporation we looked to abolish those two agencies.
That was under a coalition centre right government. The labour government came into power four years ago and has been scaling up its work in renewable energy in that time.
ML
And I'm not sure if you know, I think you may know, I was on the UK board of trade with a certain Tony Abbott. And so I've got, I actually spent quite a bit of time with him. And it's very interesting because in some issues he and I are very closely aligned in real belief in trade and wanting to get low costs for the general public and for, I think it's called the sensible centre actually, I've used that in my pragmatic climate reset and it turns out that that phrase was invented by Tony
And obviously in other areas like climate and the urgency and how much we should spend on it and how we should and governance in that area, we're not quite aligned. But I wanted to just take that opportunity and we'll do that a couple of times as we go through to make sure that our non-Australians are getting a little bit of a cultural or economic tour of Australia.
So you've got the core funding, you've got the top up funding. And I suppose we will need to talk about that top-up funding the hydrogen, because just recently some of that was also clawed back, but clawed back under the current government. In other words, there was a decision, I think you had 4 billion of Hydrogen Headstart money and that has been cut, but some other money has been given to you. So talk us through that.
DM
So just if we talk about hydrogen, for example, so when the Inflation Reduction Act came into being in the US, Australia, like many other economies said, what's our response to something similar? And so Hydrogen Headstart was born out of a response to that. It was firstly a $2 billion pool of funding that then got expanded to 4 billion, essentially for ARENA to pick hydrogen projects to fund to provide production credit subsidies.
So there's no risk to the taxpayer until the project is built and hydrogen is being produced and used and then we provide a credit. And we've been running that process for a number of years. Now we've actually just given the authority to seven further projects in the second round of funding to come forward for their full applications later this year.
Now, as you rightly said, we just lost a billion dollars of that in the last budget cycle. And really, ultimately, this is a question of reprioritizing. Hydrogen had its hype cycle, it hasn't performed as people wanted and expected and so there's been a moderation of ambition, if you like, in terms of the funding put forward.
We still think that there's some good projects there and we think we can do a good job with this remaining billion that we have. But in the same breath, we had the Hormuz crisis and the government has scaled up its ambitions into low-carbon liquid fuels, diesel and sustainable aviation fuel, most notably. So we actually got 1.1 billion given back to us to do sustainable aviation fuel. So it's swings and roundabouts for ARENA on some of these budget programmes over time.
ML
I'm reminded of the quotation from a US senator, I'm not quite sure which one it was, who said, you know, a billion here, a billion there, and pretty soon we're talking real money. But because you have, just on hydrogen, I should reveal my connection, just in case anybody afterwards finds out and says, well, why didn't you mention that? I'm an advisor to an ARENA-supported company, which is Hysata.
I hope it's going to produce the cheapest and best electrolyzers in the world. And also Copenhagen Infrastructure Partners is one of the leadership circle members supporting Cleaning Up. And they are one of the consortium, one of the winners who have not yet built, but they have won the Hydrogen Head Start 1.
DM
We announced that, that was our first project that we announced, the Murchison Project in Western Australia, which is a $16 billion project of which we're funding about $800 million through production credits once it's built and running. And they bid into Hydrogen Head Start 1 and we look forward to their getting to FID and production.
ML
I don't want to offend a sponsor or a guest by saying, perhaps we might say, if it gets funded, because the economics still have to pan out and we don't need to go into huge detail about hydrogen economics here. But just to complete on that, though, you have funded other projects in the past. So you've actually, not just Hysata, but there is a list of other hydrogen projects.
DM
We've funded about 60 hydrogen projects of various kinds.
ML
I think it's $75 million or hundreds or something like that.
DM
It's a lot more than that. It's about $300 million of projects across the hydrogen spectrum, including scaled up 10 megawatt electrolyzers. This is excluding the very large 1.5 gigawatt electrolyzer that is the Copenhagen project. But we've been doing this since 2017 off the back of what was a very hyped up, as we know, mindset around hydrogen. Arena, I think we always had a middle of the ground, middle of the road kind of mentality to it that we thought it would be needed for very hard to abate sectors and deep decarbonisation into industry.
ML
The top of my hydrogen ladder, yeah.
DM
Exactly. So we've never really funded road transport in hydrogen, but we have funded a gas injection project because we just wanted to make some hydrogen to get our hands dirty. We probably wouldn't be doing that again.
We're now looking to the much heavier industry space, especially the green steel opportunity is where we hope hydrogen plays a significant role.
ML
I have to confess, I've called blending of hydrogen into the gas network the stupidest idea from Stupidville because you take this incredibly difficult, expensive thing that you've made and you then reduce it to the value of its heat content only instantly. So you instantly essentially destroy its value. So I'm not a big fan.
DM
No. So we think that the most promising use for hydrogen, especially in an Australian context will be green iron production in the future. And so green iron or steel making, as we know, represents roughly about 10% of the world's greenhouse gas emissions on a CO2 equivalent basis, both the upstream methane leakage, as well as the actual energy CO2 emissions from the energy side. And interestingly, and the problem that we're trying to tackle here at ARENA in Australia is using our very low, lower grade Pilbara ores, which don't play nicely in a direct reduced iron process.
So we need to find a new kind of process to upgrade those ores to be ready for an electric arc furnace. And we're working with some of the very biggest steel producers and miners and industrial companies to prove out how we can use the Pilbara hematite ores in a green iron process. And we think the most likely pathway is using hydrogen of which we think green hydrogen should be the way to go if we can get the costs low enough. << 20.37
And we're both supporters and you're a supporter and we're an investor, if you like, in Hysata, it's the likes of that kind of innovation that has to be there for hydrogen to play a meaningful role.
ML
Green steel, that's one of the reasons I'm excited about being here in Australia because you can do as much desk research, in a sense this is desk research because I'm not out there in a mine or in a steel plant, but I'm looking forward to getting really under the hood of green steel, talking to Ross Garner, the Superpower Institute and so on, because there's a lot that you have to believe in order for it to happen. But it feels to me like figuring out how to use those Pilbara ores for DRI, because it could be green hydrogen DRI, it could be blue hydrogen DRI, it could be natural gas DRI, it could be in China, it could be in Australia, but you've got to figure it out because that's such a vital, vital resource for Australia.
DM
Yeah, and it's a two-step process for Australia. The first is to prove that those ores can be produced in a low carbon way. Whether Australia gets to then do the refining in Australia is a secondary question because you have to believe a few more things for Australia to be the one who both mines the ores as well as refines them into pure iron.
Now that obviously requires huge capex of both the midstream process of the green iron production plant, as well as the huge build out of solar and wind. I believe Australia can do the solar and wind very cheaply. I'm not yet convinced we can do the midstream bits cheaply because we're an expensive country to do business in.
It might be that we prove the technology in Australia through the work we're doing, but that the likes of China or the Middle East take those ores and produce them in a low carbon way. That is an open question. In fact, the whole thing is an open question, but we've separated our thinking into those two parts.
First, can we do something with the ores in a low carbon way? And secondly, where might that happen? Who can best build those facilities to make that happen?
ML
Yes, I'm very struck by the fact that right now you take Australian ore and Australian coking coal, move them to China and they combine them or they process them there. So it feels to me like the only reason to take, not to take Australian ore, but to process it in Australia is if your renewable electricity is cheaper than China's. And I guess my worry would be that their electricity would be cheaper than Australia's, which means the ore would still be exported.
DM
I'm not worried about that. I actually do believe that with the work that I'm seeing happening in Australia, and a lot of it is funded by ARENA, that we will get our electricity, core electricity price from solar down below $20, Australian a megawatt hour. So $15 US. I think we can do that.
ML
And you have a programme. I mean, you don't think it in an abstract way. You think it as the guy who's got 10 billion or 14 billion Australian dollars to deploy against things like that.
DM
So we've put exactly on that topic. We've got a programme which we call Mega Demand, which was a slogan just to say, what we want is large loads that are ready to go so we can experiment with new solar technology. We've provided $45 million envelope to Fortescue to allocate 500 megawatts of their 1.5 gigawatt solar portfolio that they're building out in the Pilbara to essentially experiment with new ways of deploying solar with robotics, AI, prefabrication. We had a global challenge that we launched a few years ago. We had 117 applications to come and do work in Australia. We're now deploying these technologies, or Fortescue is with our funding help.
24.40ish We're looking to replicate this model with two or three other EPCs and developers. So we will have, Australia will be a giant experimental sandbox of solar innovation through the work that we're putting forward. And I believe that through the work that the likes of UNSW and the other universities are doing on cell efficiencies, we'll get that way up. And the work that we're doing with Fortescue and the others in this experimentation in place in Australia, we'll get the cost of deployment way down and we'll have electrons at $20 a megawatt hour.
ML
Now we have a rule on cleaning up. You use an acronym, UNSW.
DM
You used SAF before and I didn't call you out.
ML
Did I use SAF? I'm going to apologise to the audience for breaking my own rules. Although I am the only person who's allowed to break my rules, but no. So SAF, Sustainable Aviation Fuel.
DM
UNSW, the University of New South Wales.
ML
Now let's just go off on a little bit of a diversion there because that is Professor Martin Green's university. And he's a legendary figure whom I will be speaking to on this trip. And what is the setup? Why UNSW, University of New South Wales? What's so special about them?
DM
I won't steal Martin's story because he'll tell the whole story, but essentially Martin and his team were the inventors of the PERC cell, the Passivated Emitter Rear Conductor Cell, which was up to about 85% of world solar production. The technology is moving to TOPCON, which is also a UNSW invention. So that core technology invented in Australia is in the majority of the world's solar modules today.
Now, Martin will tell you that there's a theoretical limit of a single cell silicon at 29% efficiency. We have modules today at about 25-26%. So we're approaching the theoretical maximum for the current technology set.
Through the work that we're doing and others around the world, and Martin and his team, we're looking at tandem cells. So stacking technologies on top of silicon. We have a target of getting above 30% efficiency, cheekily chosen by us because you can't do it unless you can unlock tandems.
But if you talk to the researchers, they believe they can get to 40% by 2040 and in that kind of timeframe. And we shouldn't underestimate what efficiency does for the economics of solar. It is an unlock for the cost right throughout the supply chain downstream of the module.
And so we're working, UNSW and other universities that we're funding are working hard on the efficiency angle and Fortescue and the others with our help are working very hard on the deployment angle. And these two things should come together within the next few years to prove we can manufacture electrons cleanly in Australia at under $20 a megawatt hour, which is the first ingredient you need to give yourself a chance of green steel.
But the other part of it is the capital expenditure on the actual plant, the green steel plant, which we have to make sure we're cost competitive globally. Otherwise we will have wasted our cost advantage on the electrons because we haven't got an efficient plant to produce the green iron.
ML
Now, my theory or my thesis, my thesis, I think it is, is that probably blue hydrogen remains cheaper than green. And the reason is just the amount of energy you have to put in to split water back into the products of... You're turning the products of combustion back into a fuel, essentially.
And it gets harder when it becomes an E-fuel, so an E-SAF and pure, because then you've got to collect the carbon as well as doing that to the water and then combine them and so on and so on. But when it just comes to the hydrogen piece, I've reached a point by looking at lots and lots of different cases and diving deep into the numbers where I think that just blue... Blue, and it can be done right, it has to be done right caveat, is going to stay cheaper than green.
Now, if that's right, is there another agency? Can you also research blue hydrogen? Or do you have to say, no, that's not renewable energy, and therefore we're going to let our colleagues over in the Australian, I don't know, non-renewable energy agency or somebody else research blue hydrogen, because you should have two horses in this race as Australia, right?
DM
So look, it's actually an open question. We're actually looking at turquoise hydrogen as an agency right now, which is methane pyrolysis, so the decomposition of methane in the absence of oxygen. We would be interested in looking at that technology, we just need to figure out if it's eligible under our act, and we're doing that work right now.
ML
But that would be potentially turquoise, that is, that's taking biomass and pyrolyzing it, so it kind of could count as renewable.
DM
We funded a company called Hazer, which is a publicly listed company, to do a pyrolysis project using waste biogas. That's not scalable. So if you're going to do green steel, you need massive volumes of input energy, feedstock, and so we would need to be using fossil methane at some point in that transition.
So I think there's an argument to say we're supporting a downstream electrification opportunity and displacing fossil fuels downstream. We're yet to make that argument with our lawyers, but if we can, and that's eligible, then we'd love to support these kinds of projects that look at alternative pathways.
ML
But it's a bit of an empretzlement because you could take the same natural gas, the same fossil gas, and you could make that hydrogen using steam methane reforming with carbon capture, which would be, in a sense, make the hydrogen. So pyrolysis is a process you think you might be able to make work through your mandate, but the steam methane reforming, not. And of course, those are just different chemical processes that get to the same thing, which is clean hydrogen.
DM
Yeah, well, we'll see. Maybe we can, and if I need you as an expert with us one day, I'll call you.
ML
It's just sometimes you get captured by the name because you've got the word renewable and because of the way that it's set up.
DM
And look, ultimately, part of our objectives in the ARENA act is lowering Australia's emissions. So I think that we need to bring any toolkit we can to that. Right now, the toolkit is probably mentally slightly constrained around the verticals, but I think a more expansive view about downstream electrification could help us.
ML
Cleaning Up is proud to be supported by its leadership circle. The members are Actis, Alcazar Energy, Arup, Copenhagen Infrastructure Partners, Cygnum Capital, Davidson Kempner, EcoPragma Capital, EDP, Eurelectric, the Gilardini Foundation, KKR, Mitsubishi Heavy Industries, National Grid, Octopus Energy, Quadrature Climate Foundation, Schneider Electric, SDCL, and Wärtsilä. For more information on the Leadership Circle, please visit cleaningup.live.
To keep up with all that's going on in the Cleaning Up universe, make sure you subscribe to our newsletter. Written and edited by my longtime New Energy Finance and BloombergNEF colleague, Angus McCrone, it comes out every second Monday. Angus provides the latest on the episodes we're recording, the events we're hosting, stories we're watching and what Bryony Worthington and I are up to. To sign up for the Cleaning Up newsletter, visit cleaningup.live.
ML
Let me come back to Professor Martin Green's enormous success over decades and decades. I'm going to assume, shall I assume, or do you want to say you have funded pieces of that activity?
DM
Yes. So we have, yeah. I mean, when ARENA was born in 2012, there was already a funding programme going, which we inherited, called the Australian Solar Institute.
We reformulated that as the Australian Centre for Advanced Photovoltaics. ACAP is the name of the programme. And we have provided more than $100 million of funding to that programme over the last 12, 14 years.
And we continue to support that programme of research, which funds postdoctoral research and heads towards this greater than 30% efficiency goal that is so important.
ML
And has technology from that programme already made its way into-
DM
It's in the Chinese modules that we're all buying.
ML
Great. You fell into my trap beautifully. How much money did Australia make from that? Because you give non-dilutive funding. In other words, you give the money away, and then the technology has ended up in China, Chinese modules. How has Australia benefited from that?
DM
Well, not directly through any licence fees. And when you ask Martin, he'll tell you that the technology took too long to get to the point where it was commercialised or commercialisable, the patent would have expired. So it wasn't able to be protected.
And in fact, I would argue, and I do, that having this proliferate in the way it has is the real benefit for the globe, for Australia from a climate perspective as well. But because it's been so open sourced, if you like, it's been able to be taken up by Chinese manufacturers to produce it at very low cost. In fact, below cost, if you want to call it that.
And we've all benefited from extremely low module prices and the decarbonisation benefit that we all get through that technology.
ML
Could you be accused of being a bit naive because you could say, well, we've got this fantastic technologies because you're presumably hoping that that's not the stuff that the patents expired, or it was too long in the tooth to capture and it was before your time and fine. But if there's technologies that are coming out of the Australian advanced, what was it called? ACAP, Centre for Advanced Photovoltaics.
If there's stuff coming out of that now, which is useful, could you not parlay that into, I don't know, investments by the Chinese module manufacturers to say, well, you can have this, we've figured out how to do the tandem cells, but you're going to have to put at least X percent of your production, or you're going to have to invest at least a billion if you want to get that technology or licence it. We want a certain percentage of the revenue from that set of cells because it feels very nice to be altruistic, but-
DM
So the easy answer is it's not ARENA's job to try and enforce or protect or create IP. That's the job of the companies we support. If they can do that good on them and they're welcome to, obviously, as I said, we have a knowledge sharing mandate, so it can't be totally secret.
You need to show some parts of your experiment or the results of your experience to the general public. But if people want to protect their IP, we respect that. And that's really up to the commercial player to do that.
ML
We had on the show quite a long time ago, Mariana Mazzucato, who wrote the book about the entrepreneurial state and tracked where all these technologies come from that went into, for instance, the iPhone. And her thesis is, well many, many, many of them come out of state-funded research, of which yours, ARENA, would be an example. And these companies become enormously valuable and the state gets nothing and she's offended by that and thinks that the state should always end up owning up.
Now, I have an issue with the thesis because I think it ends up being a tax on technology. Effectively, your most dynamic companies end up part state-owned and that's not gonna make them speed up, is it?
DM
Well, what I would say is that it's critically important that the technologies that are invented here, even if the IP is not commercialised at that level, that we have the access to that technology to deploy scalably in Australia. And fortunately, Australia doesn't have tariffs with this technology. So we are bringing in the technology at cost or below cost if other governments are subsidising their manufacturing, which is happening.
We are the beneficiaries of this extremely cost-competitive equipment that is out-competing coal and gas on our grids. And this is a real success story for Australia right now.
ML
So you want to have access to it and, of course, the Chinese solar manufacturers will say, fine, get your checkbook out. So that's access and you're saying that's okay.
DM
It's a global market and we're buying panels at below cost in some cases.
ML
Let's look at some of the other areas in which you operate. We talked a bit about steel. We talked a bit about solar. You've also got batteries and grid, which is now appears to be the big success story.
So what's happening in batteries? Just let's use this moment to kind of educate the world on Australia's.
You've got the solar rooftops, which I think everybody pretty much knows, more than 30% of homes, South Australia, cheap 75% renewables and so on. But batteries are the new big thing. Can you just educate our audience?
DM
So we've got three scales of batteries happening on the grid right now. We've got home batteries, which were going slowly for a while and the government put in a programme to provide about a 30% off the top of the cost stack rebate for putting home batteries in. That has created a huge demand from consumers.
The same consumers who put rooftop solar in are now interested in batteries and we've had about 350,000 batteries go in under this cheaper home batteries programme over the last year. That's in the context of 10 million Australian households. So 3.5% of all Australian households have bought a battery for their home in the past year. I'm pretty sure that Australia is the number one battery market per capita on the planet by a long way. You add to that the enormous strides that have been taken in the large scale grid batteries of which the Neoen big battery in South Australia, which was a bet between Elon Musk and one of our billionaires, Mike Cannon-Brooks back in 2016 was the notable start of that.
ML
I think that's one of the things that our non-Australian audience will have heard about.
DM
You build it in 90 days or it's free, I think was the bet and Elon Musk built it within 90 days and it's gone on to prove the business case and the physics of that battery supporting the grid in voltage and frequency services.
ML
I actually found recently when I was researching for this Australia trip, I found a tweet that I sent on, I'm gonna say 10th of March 2017 or something very, when that bet was made and I was very excited, I was on Twitter still and I said that this was Elon Musk and Mike Cannon-Brooks have just called the bluff of the renewable energy causes blackout and I'm not gonna repeat the word I used.
DM
Yes, okay, well.
ML
It wasn't actually very, actually I will repeat it. Whiners is what I called them. So it wasn't too bad, but I found that and that was an iconic moment that most people might remember.
DM
So that was then. These large-scale batteries are going gangbusters. I don't know if that's an international term, it's an Australian term.
It's going incredibly well in Australia. I think Australia is now in absolute terms the third largest battery market in the world behind China and the US for a country of 28 million to be the third in the world is significant. Our per capita battery installations I think almost double the next best in line.
So the, and if I could just say ARENA's role in the large-scale batteries, our sort of value add has been, we ran a programme in 2022 to provide, we put $100 million down, the government matched us with another 60, gave us another 60. So we said, here's $160 million for anyone who will, for their next batteries, turn on grid forming capabilities, not just grid following. Everyone was putting in batteries in grid following mode because it was the cheapest and easiest pathway into the market. And we said, hang on a second.
ML
Let's do the teaching moment. What does that mean? Grid following, grid forming.
DM
So the grid operates in Australia at 50 Hertz. That frequency signal is provided naturally by spinning mass in coal and gas.
ML
So everybody can just assume that the signal is there.
DM
The signal is there and it's modulated through inertia from those big spinning masses. In a world where you take out coal and gas and you want just inverter-based technology on the grid, you need something that can provide the signal to all the other devices to produce energy at 50 Hertz. And this can be done digitally through the inverter technology.
It requires some upgrades to the software and to the hardware. That wasn't happening. So we essentially provided this auction, a reverse auction to the market to say, bid for our money.
And in turn, you must enable grid forming mode for your batteries. And we had eight projects sign up of which five are probably going to get built. And they have proven the business case for grid forming technology.
And that is what will support the grid when we start really removing coal and gas in substantial numbers from the grid.
ML
Right, because the context here is, as an example, South Australia, 75% renewable electricity behind only Denmark. Denmark is somewhere around 90%. But of course, Denmark is connected to all of its neighbours. So it doesn't, it will almost always, you'd hope always be able to rely on its neighbours for backup and grid forming, et cetera, et cetera.
South Australia, very famously, does not have very thick connections to its neighbours. Famously, I say, because in 2016, there was a, what was it, three tornadoes and they took out some pylons and South Australia went black, went dark, right?
DM
And yeah, so we're building another interconnector this time to New South Wales. That's not yet live, but that'll support that. But yes, South Australia- When you say we, that's not ARENA?
DM
No, sorry I said the Royal We. Australia is, the Clean Energy Finance Corporation is helping with finance and the transmission companies and the government are helping with funding as well. So we're strengthening our grid right now through transmission lines. It is slow going, like it is everywhere in the world.
ML
As you get to these very high penetrations of renewables, you don't want a situation like Spain and Portugal where the grid was unstable, actually not caused by renewables, but just caused by the failure to plan. It wasn't an explicit plan. And they did not think about how many grid forming services, harmonic management and voltages and frequencies and so on. So you have a programme, you've mentioned, but are you doing more in that area?
DM
So we're doing a little bit more, but basically, the way arena works and part of our success is when we see a problem and we solve it with money and a programme, we like to think we can just step away and the market takes over from there. So right now, the vast majority of big batteries going into the market, and there are a lot of them, are all going in with grid forming capabilities. There's only one very small slice of the grid forming technology set that's left to be proven and we're working with researchers to help test that in the lab to ensure that the grid can actually run with no kinetic inertia.
ML
And when you say one subset, is that an industrial sector or is that one type of problem that happens on the grid?
DM
It's a protection grade fault current that has not been solved yet. And so we're working with researchers again from the universities we've mentioned before to test the hardware in real environments to see if they perform as expected before the grid operator, the Australian Energy Market Operator or AEMO will trust that these devices can do the job required.
ML
So I think we've touched on most of your programmes. Are there any we've missed? We've done the solar rooftops, we've done the batteries and the grid, we've done green iron and steel.
We've not actually, we've not talked a lot about transportation. So we talked a little bit about SAF, sustainable aviation fuel, and you've got some new money for that.
DM
I just wanted to mention one more kind of battery. I said there were three types of batteries. I had the home batteries, we had the very large scale batteries and then Arena has been running a programme called the Community Battery Programme, which is really called low voltage, but mid scale batteries.
So these are the neighbourhood things you might see on the street corners and in parks that look like, you know, sort of shipping containers. And the government gave us a pool of funding when it came into government four years ago to do these community batteries. And we were asked to do 350 of them around Australia.
I think it's been enormously successful and it's proven that there's a role to play for stabilising the grid at the distribution level with these larger batteries that are more cost effective per unit energy, as well as the portfolio effect that not every home is needing to use the battery at the same time. So you can actually put in fewer of them than were you to distribute that in people's garages. Now, all of that is happening. I don't think it's kind of one or the other.
We know that people are buying home batteries, but this community level batteries are a really interesting technology set because there's so much capacity in the distribution grid to host more solar, if we can move those electrons and get the grid stabilised locally rather than at people's homes or on the roads.
ML
And those community level batteries are very interesting because you've got to hang them on the distribution grid. So does that mean you let the distribution grid operator have those batteries? Because right now they're not allowed to.
DM
Yeah, well, now we're getting into a regulatory minefield, but yes, typically the distribution companies are not allowed to play in the wholesale energy market. So they have to sort of do a deal with a retailer who can be market facing, who can trade that battery into the market for their revenue stack and reserve some of the capacity for network services. So they've got a dual use, but it requires two parties to be involved in that battery.
ML
So I'm going to be speaking with Marc England, the CEO of Ausgrid, which is the distribution network
DM
DNSP.
ML
DNSP, Distribution Network Service Provider.
DM
Correct.
ML
In the Sydney area and going up, I think to the Hunter Valley. And down to Wollongong. And down to Wollongong.
So that's going to be an interesting conversation. Transport though, transport more broadly. What do you think about that? How do you deploy your funds? What have you got?
DM
So we've been doing work for a number of years. In the beginning, it was charging networks for passenger vehicles. We've moved into charging hubs for the likes of Ubers and the Splins and the car sharers of the world.
We've done heavy vehicle charging stations, the likes, I know you got-
ML
One of my favourite areas, because that's what I'm doing in Europe.
DM
That's your business, through PragmaCharge.
We've done a bit of all of that. We've done some very interesting technology to create backbones for buildings. So people who've got their own off-street parking have an easy time of it because you can get a very cheap EV charger.
People who live in strata apartments or communal apartments have a harder time. So we've done some great work putting in level one charging even for those buildings. So that's just your standard plug socket, but having a billing system to enable the transfer of funds.
And probably the most exciting thing we're doing in the transport space right now is in vehicle to grid. So in fact, on Friday, I was at an announcement with Amber, one of our innovative electricity retailers, launching a programme that we funded for $13.6 million to fund a thousand EVs with vehicle to grid technology, which really right now the barrier is that the OEMs, the equipment manufacturers, the vehicle manufacturers, original equipment manufacturers, if we stick to the rules of the acronyms.
I'll try and stay away from the acronyms, but the manufacturers of the vehicles are being quite conservative right now about the battery warranty in the event that they're used for home energy. And so they should be. That's an expensive piece of equipment, but BYD are very forward leaning and have essentially warranted their vehicles for this programme.
We're looking to expand to other vehicle manufacturers to test their technology at people's homes around Australia in this thousand vehicle programme.
ML
So that's really interesting. And I've just, congratulations in a sense, because there's an issue that I had not thought about or hadn't thought at all about, which is of course, if a vehicle manufacturer says, well, you've got a warranty which is 80,000 miles. Well, if you use the battery and you do zero miles, because it's actually powering your home in some way, then what do you do with the warranty?
And obviously the warranty needs to be turned into cycles or something else.
DM
Something, yeah. I imagine there's a way to solve that, but first is to test what is this use of having the battery used in the home actually doing to the chemistry of this battery. And the early evidence is, this comes from one of the embassy, I also take it from where it comes, but it may actually be helping the life of the battery by cycling at short amounts, actually improves the quality of the battery over time. So if that's true, then we should all be-
ML
Car owners should be paying to allow people to improve their batteries. I mean, it's great because if it's going to work anywhere, it would be in a country that's got now over 30% solar roofs and the home batteries, they're typically a lot smaller. The car batteries are 60 kilowatt hours, 80 kilowatt hours.
So it could be very interesting. Can I though challenge you because you said we did some great work on this, we did great work on that in transportation, but for all that Australia is the world champion in solar roofs and on homes, and also now approaching that on batteries and maybe vehicle to grid is the answer to the question, but you're quite far behind on electrification of transportation.
DM
Yeah.
ML
10% before the Hormuz crisis, I think it was 10%.
DM
Before it was 10%, now it's about 15%.
ML
Huge success, 15%, but that's below the world average.
DM
15% up on before Hormuz.
ML
But still behind the world average.
DM
So one thing that's interesting about Australia, and you'll know the stats about the rest of the world better than me, but we also have a huge volume of plug-in hybrids.
So people have been choosing plug-in hybrids in Australia because it gives them more confidence about the distances we travel. We obviously have a very sparse population, but large land mass. And so I think that the distance is on people's minds when choosing to buy a vehicle.
And we have, I think we've got 22% penetration of both pure EVs and hybrids and plug-in hybrids today.
ML
Some people in the audience, whether they're in Australia or not in Australia, will be shouting at their phones or their computers right now going, yeah, but plug-in hybrids are never plugged in or the very rare. So the effectiveness of a plug-in hybrid is heavily contested. And you've probably funded the research that has proved that. Or disproved it.
DM
Actually, the proof of that came through the Hormuz crisis because the EV charging networks were telling me within a matter of days after the Hormuz, after the US and Israel attacked Iran, that their charging utilisation went through the roof, back to Christmas levels when everyone's moving around. And the conclusion they reached is that people with plug-in hybrids were suddenly not filling the vehicles up with petrol or diesel, but actually getting a charge from these public charging networks.
So it shows you that people with plug-in hybrids were doing exactly what you said and not using them as EVs, but the fuel crisis caused them to switch fuel, essentially, in their vehicle to electricity.
ML
Having been on the Board of Transport for London, I know that some proportion of those, having figured out where their local charger is or just gotten used to using it, they will stick. And I like the idea that the plug-in EV is a resilience solution, because even if you don't use it, you could use it. And so that's an interesting spin.
But I rest my case, though, or I stick with my point, that Australia's got a long way to go. Maybe vehicle-to-grid will help, but it won't be in the next few years.
DM
And for quite a while, we didn't have a supportive policy environment to cause people to wanna put EVs in. This government has put in what's called the New Vehicle Efficiency Standards, which creates a signal to have the vehicle manufacturers put more EVs into their sales channels. So that's gonna help as well.
ML
But you also have, you are world champions in one other area, which is diesel subsidies. In fact, diesel use per capita, where Australia is just at the, right on the far right of the chart, the place that you don't wanna be, the far right.
DM
And- Yeah, and so diesel is an issue that needs to be solved.
ML
That makes it hard to sell against, particularly in larger vehicles, where they get those rebates.
DM
Yeah, so the rebates are there for the off-road vehicles and the miners. Essentially, there's a tax on, there's an excise tax on petrol and diesel, and then it's rebated to the miners and the off-road people, in theory, because they don't use the roads.
ML
But- Interestingly enough, I looked into this. It's in theory because the diesel tax or the fuel tax was used to fund the roads, and therefore people who don't use the roads get an obvious way out. But actually that system stopped in 1992.
So the fuel tax is general taxation, and you've got a whole bunch of users who don't put money into that pot. So I know that there's a big discussion about reducing the amounts, and it's heavily contested. I've picked that up already.
DM
Yeah, and obviously the thing that's gaining attention is whether to switch to a road user charge for kilometres travelled. And that's being debated and put forward by various states in Australia. It's quite a contested space right now, but that'll play out over time.
ML
So ARENA, founded 14 years ago, 2008.
DM
2012.
ML
Oh, sorry, 2012, 2012, 14 years ago. I got that bit right. I didn't do my maths right. So 14 years in operation. Oh, I know where I got the eight from.
DM
I've been CEO for eight years.
ML
You've been CEO for eight years. You must have a long, long list of fabulous successors having put 10 billion US, 14 billion Australian, well, you've either put it to work or you've got it in your back pocket. Long list of successors. What are your top few?
DM
Well, you're asking me to choose my favourite children now, which depends on what day of the week it is.
ML
How many children have you got, Darren?
DM
Well, 843. Look, I would say the work we did in that grid forming inverter space in 2022 was a standard success. That's caused the markets to adopt this technology. That's exactly the kind of model that we wanna see at ARENA. In terms of where I'm most pleased about right now, I think the vehicle to grid work we're doing is world leading.
I don't see other parts of the world putting forward the correct vehicle to grid standards the way we're doing it in Australia right now. And I think that this programme will be a huge success. I'm very fond of that programme, but equally, I'm very fond of the work we're doing with solar.
I am a true believer that Australia will be able to produce solar energy at a levelised cost of energy of $20 or under a megawatt hour. And the work we're doing with Fortescue in the Pilbara, when I see Fortescue, who are very ambitious, mine a very hard charging, surprised on the positive, on the upside, by the work that we're doing together, it shows me that we're on the right track with that kind of technology. So I would highlight for my legacy, if you wanna call it that, the future being that ultra low cost solar goal of $20 a megawatt hour is the thing that I think stands to not only change the dynamics for Australia and give us an opportunity to build an export market that we stand to lose over time through the decarbonisation agenda that we're all on, but to replace that with green iron, green steel, even one day, maybe green commodities, green refined commodities through the use of this very low cost solar opportunity.
ML
But you switched from favourite past successes to hopes for the future, which were, sorry, let me pull you back to past successes. Any others that you can, grid forming batteries.
DM
Yeah, grid forming batteries, I think the work that we've doing.
ML
The solar, presumably the solar to date, the Martin Green and others.
DM
Yeah, look, I mean, I think that that support is critical and so fundamental, so I'm very proud of that success. I'm proud of the success we've had in heavy industry. We're doing a lot of great work in thermal energy storage. So storing heat in industry to replace gas and coal use, which is such a huge part of Australia's emissions.
ML
I think it's one of your, I don't know if it's a graduate or one of your protégés, I'm not sure of past or present, doing solar, sorry, not solar, doing thermal batteries. I think it's called MGA,, yes.
DM
We're very proud of the work that MGA is doing up in Newcastle. Essentially storing heat in aluminium surrounded by graphite. So it's a heat transfer technology that is quite, quite unique. So this kind of technology, this heat technology, another great success of ARENA's funded three or four of these and we think it's got a huge role to play in industry.
ML
So Newcastle is in- North of Australia.
DM
North of Sydney, sorry, north of Sydney, yes.
ML
Okay, because I'm not due to visit them this trip, but maybe next trip, because I'm really intrigued by that technology. One thing that I want to ask you about, which is to go back to your model of how you give grants and how you manage the non-dilutive funding. You have mentioned, there's a couple of startups. We've talked a little bit. We mentioned Hysata, we mentioned MGA, but you give an awful lot of money to some very big companies.
I mean, Fortescue doesn't really need your help. And I know it's a challenge when you get so much money to distribute, 14 billion Australian dollars. It's a lot easier to give that money to somebody who's got all of the resources to go through the applications.
I mean, I've heard that it can take a couple of years between sort of knowing that you have a programme, there's an opportunity, and actually money hitting a bank account. And then it comes with all these strings because you're a public agency, you have to monitor it and there's a lot of costs, a lot of administrative overhead to that. So I have heard a few people, I'm not gonna say who, grumbling about that.
How do you respond to them?
DM
Look, we wanna work with as many people as we can. Not every project that comes to us is gonna be chosen. There might be deficiencies, lots of challenges in that world around financing, around capabilities, around the technology level, whether it's the right thing at the right time.
So we do, I make no excuse for the diligence that we do in our process to figure out if this project has a chance of being successful. We do understand that we can be a heavy process for very small companies and for small grant amounts. And we're looking for new ways to deploy our funding to solve that problem.
As an example, we've just funded a group called the Australian Manufacturing Growth Centre, AMGC. We gave them $10 million and said, you go and give this away to companies doing manufacturing projects for $500,000 kind of check size. We don't have a process that lets us do small changes and small check sizes like that, but we've got to fund a fund model where we can deploy that funding with somebody else who can then go and work with a smaller company.
So that's one way we're tackling that.
ML
So you are allowed to do re-granting, or you are allowed to do that?
DM
Yeah, nothing stops us from doing that. So we've done that with even the ACAP work that we mentioned earlier. These are small grants that are being dispersed by the ACAP body. We fund one check to ACAP and they disperse it to smaller companies.
So if that small company were to come to ARENA, if it wasn't suitable for ACAP or the AMGC programme I just mentioned, sure, it might be a bit difficult for us to work with the very smallest companies, but we're always looking to solve these problems. We even fund an incubator called Energy Lab. So we've given them some funding. They work with startups to help grow entrepreneurs in this space.
We're also looking at some new programmes for smaller startups just to make things easier. But yes, we've got a huge volume of things coming to us. Not everything is gonna be suitable for our programmes. We do the best we can to restructure and find new ways to give grants or to appoint them elsewhere if need be.
ML
Darren, it's great fun talking to you. As I travel around Australia, just give me a few thoughts on what are the issues? What do you think I would be interested in and the audience would be interested in in Australia?
What should I be sort of poking at? Either things that Australia is really good at or things that maybe Australia has not solved and you'd like me to focus in and talk to people and drill into?
DM
Well, I mean, maybe one of the very live topics right now is sustainable aviation fuel, which we haven't really talked about. Now, ARENA's got $1.1 billion of funding through this latest budget to deploy, to develop our capabilities in sustainable aviation fuel. But I think we're still grappling with the question of cost of this technology.
It's very expensive. We're talking about $800 to $1,000 a tonne of abatement on today's technologies. And the real live question for us-
ML
That's a bio-based fuel. That's not the pure e-SAF.
DM
That's bio-based. That's even much more expensive than that.
ML
But it's certainly not the standard HEFA process. It's kind of going beyond that for when you run out of that and you get into the complicated stuff.
DM
Yeah, so HEFA is in the mix of something we could do. Basically used cooking oils and tallow.
ML
But there's only so much of it.
DM
So you're now talking about the more- So then you go into canola plants, sugarcane, in methanol or ethanol processes.
ML
By gas or forestry waste or whatever.
DM
We've got huge feedstocks in Australia that we send overseas for processing. And then we buy back the sustainable aviation fuel. The government has set an agenda and it makes complete sense given the fuel crisis to have more sovereign capabilities.
But we need to address the cost. So you want to talk about something that is a live topic. The question is, what can that cost structure be in the future?
And how are we going to divvy up the subsidy between government and the taxpayer or the consumer paying extra on their air ticket for the technology?
ML
Because I've picked up that there's a conversation about blending mandates and I'm a big un-fan. I'm the opposite of a fan of blending mandates. I like dual auctions.
I like ring fencing being really clear that, so somebody, ARENA or whoever, CEFC, the Clean Energy Finance Corporation, somebody would buy over a 15-year period the output of a plant and then sell it back to an airline at a reduced price. So there'd be an auction to buy it and an auction to sell it. That's the approach that is used in the UK for hydrogen.
DM
Would you suggest that the traveller passenger pays nothing?
ML
I think that's a separate conversation because you have the same conversation, if you have a blending mandate, then you can either pass that cost onto the traveller or government can step in. And as they have in Europe, for instance, in the EU, they've stepped in and said, you'll get the proceeds of some carbon credit sales so that it doesn't go to the passenger.
The thing is, what I really like is, I'm looking for two things. One is real price transparency, a system which absolutely makes clear the most that anybody will pay for something and the least that it costs, which the dual auction does. And then the second thing I look for is, if it's not working after five years, they're not delivering the cost reductions, then it should be easy to kill the programme. And that's the big problem with blending mandates. They're very difficult to kill.
DM
Well, the design of this is happening live as we speak. So you can have some influence on how this plays out.
ML
Listen to that last segment, my last little rant. But any other things that I should be poking at and looking at while I'm here?
DM
Well, I mean, I think the one thing that's new news is whether electricity prices at the consumer level are going up or down. Now we've had years of it going up. It's finally, it seems to be coming down because of the role that batteries are playing, displacing gas in our system.
And given that gas plays that price setting role, I think we're on a new trajectory now of electricity prices either stabilising or going down through the penetration of technologies. This is a new phenomenon, if you like, for the debate in Australia. But testing that would be an interesting thing.
ML
That is on my radar screen. Great. Darren, it's a great pleasure speaking with you. And I'm very much hoping that our paths cross again later this year.
DM
Thank you.
ML
Perhaps in Antalya.
DM
Thanks for inviting me on your podcast, and I look forward to seeing you again.
ML
So that was Darren Miller, the CEO of ARENA, the Australian Renewable Energy Agency. As always, we'll put links in the show notes to resources that we referred to during our conversation and we'll explain what HEFA stands for. We will also post a selection of resources for anyone wanting to do a deep dive into clean energy, climate, and the transition in Australia.
With that, I'd like to thank our producer, Oscar Boyd, video editor, Jamie Oliver, head of operations, Kendall Smith, and Joe Jagger, who have both worked incredibly hard to put this trip together. The Leadership Circle, whose support makes all of this possible, and you, the audience, for spending time with us today. Please make sure you subscribe to our newsletter at cleaninguppod.substack.com to make sure you don't miss the next instalment of our Australia Deep Dive or our normal Cleaning Up Leadership Conversations. That's cleaninguppod.substack.com.
Cleaning Up is proud to be supported by its Leadership Circle. The members are Actis, Alcazar Energy, Arup, Copenhagen Infrastructure Partners, Cygnum Capital, Davidson Kempner, EcoPragma Capital, EDP, Eurelectric, the Gilardini Foundation, KKR, Mitsubishi Heavy Industries, National Grid, Octopus Energy, Quadrature Climate Foundation, Schneider Electric, SDCL, and Wärtsilä
For more information on the Leadership Circle, please visit cleaningup.live. If you're enjoying this episode, please hit like, leave a comment, and also recommend it to friends, family, colleagues, and absolutely everyone. To browse our archive of around 250 past episodes and to subscribe to our free newsletter, visit cleaningup.live.