Allens Energy Sector Lead Kate Axup reflects on the year that was and looks ahead to the challenges and opportunities presented by Australia's energy transition.
If there was one moment in 2022 of particular significance in Australia's energy transition, it was the Australian Energy Market Operator suspending the wholesale market in June. That was a big deal – it had never happened before in the history of the National Electricity Market.
For me, that brought together so many strands of the challenges faced by Australia in the energy transition. We had coal-fired power stations offline because of maintenance issues and gas prices had gone through the roof given the war in Ukraine. It was a shock and a moment when people really accepted that the system isn't working anymore and needs to be fixed.
We are grappling with an issue that has real-world implications and needs to be solved in the next 10 to 15 years. But work has to be done at a frenetic pace, starting now. The sector is feeling the pressure.
There is a huge amount of infrastructure and investment required. We have state governments making announcements and commitments relating to new energy generation and storage infrastructure projects, but Australia is facing significant supply chain and labour challenges.
As the energy transition is an international challenge, in many ways all countries are competing for the same resources – in terms of tangible materials (like wind turbines and lithium for batteries) and an experienced labour force.
We need to invest in transmission infrastructure, which not only requires immense levels of funding, but raises social licence issues as transmission lines have to run through forests and over people's farms and properties.
It will take some time to solve those problems. But the change in government at a federal level has been positive. There is much more support for the transition and more emphasis placed on reducing emissions.
Being involved in the energy transition makes me and my team feel like we're doing something that really matters. It's an interesting and important area of law, and it's in the news every day. It's of such importance to everyone's lives – we all need electricity and we care about climate change. My children, who are 18 and 20, are really interested in what I'm doing, and are proud of the fact that I was recently involved in building the world's most powerful battery which I'm pretty chuffed about.
When energy clients come to us, they engage us for a transaction, but I think what they really value is the experience we can bring to them and our understanding of all of the various pieces that need to come together for an energy project. We put together teams of specialists with deep expertise from across the firm, because energy projects are not just about energy – they require real estate, approvals, construction, regulation and funding expertise. I think a good lawyer is not only technically excellent, but also really curious about what their clients are doing and the industries in which they operate.
Central-West Orana renewable energy zone (CWO REZ) shortlisted bidders announced
4 May: The CWO REZ will be delivered under the NSW Government's Electricity Infrastructure Investment Roadmap. It is the first of a series of renewable energy zones to be delivered under this new statutory framework, which seeks to involve private capital and expertise in the construction of new transmission infrastructure to connect new renewable generation and storage projects to the network.
AGL demerger withdrawn
30 May: AGL Energy announced that it was abandoning its proposal to demerge AGL Energy into AGL Australia and Accel Energy. This followed a prolonged campaign by Mike Cannon-Brookes, and Cannon-Brookes' Grok Ventures securing an 11% interest in AGL Energy. This then led to the resignation of multiple directors and the chief executive, and the announcement by AGL Energy of a review of its strategic direction.
National Energy Market (NEM) suspension
15 June: The Australian Energy Market Operator (AEMO) suspended the spot market in all regions of the NEM on the basis that it had become impossible to continue to operate the spot market while ensuring a secure and reliable supply of electricity to customers. This was unprecedented in the history of the NEM and was prompted by a combination of factors including the war in Ukraine (causing high gas prices) and coal-fired power stations being offline for maintenance. During the period of suspension, AEMO applied a pre-determined pricing schedule for each region of the NEM.
Commonwealth emissions targets legislated
8 September: The Albanese Government's Climate Change Bill passed the Senate, enshrining two important commitments in legislation: an emissions reduction target of 43% below 2005 levels by 2030 (being an increase of 15% on the previous target) and achieving net zero emissions by 2050.
Origin Energy takeover
10 November: Origin Energy announced that it had received an $18.9 billion takeover offer from a consortium comprised of Brookfield Asset Management and EIG, with the bidders planning to divide the company's energy markets and integrated gas businesses between them.