Episode #003 - Simon Chau
Episode #003 with Torsten Brammer & Simon Chau:
Similar to a few of our other guests, Simon Chau is a serial entrepreneur having started a number of enterprises in the renewable energy space. Having had a background in the financial industry, Simon decided to pivot into the sustainable energy space mid-career. Wanting to make a difference and leave a legacy with his work, Simon finds himself onboard the exciting "solar-coaster" on a daily basis. He has now been in the space for a little over a decade.
Simon is currently working at Canadian Solar Inc, managing the commercial and industrial divisions of one of the largest vertically integrated solar PV module manufacturers in the world. Connect with him on LinkedIn.
Interesting points covered in this episode for those of us on our own Solar Journey):
Why would someone pivot mid-career to start their own solar journey?
How did Australia manage to find themselves with 1 in 5 homes having a solar system installed?
How does Simon view large oil and gas companies entering the alternative energy space?
What is the role that government policy plays not only in solar project pipelines but in the financial health of entities involved with project development and operation?
How could an electric vehicle become your family home’s rechargeable battery?
Hydrogen battery cells – how does this energy platform compare to more "conventional" renewable energy sources like solar?
[00:00:01.700] - Torsten
All righty, so welcome, everybody, to a new episode of The Solar Journey. And our today's guest is in Australia. It's Simon Chao. Welcome Simon, welcome.
[00:00:17.090] - Simon
Thank you, Torsten. Nice to be here.
[00:00:20.890] - Torsten
So, he's in Australia. I'm in Germany. Eight hours difference. First international guest. Thanks a lot for making this happening.
[00:00:33.050] - Simon
I'm not up at 4:00 in the morning like you. So its fine with me.
[00:00:35.360] - Torsten
Yeah. So we both have met. But we know both, Jason Natta, he's one of the co-founders of the Solar Journey. And so he put us in contact and Jason said that you should be a great guy to talk to. When it comes down to the aspect of selling solar, no matter if it's a large power plant or small rooftop systems. Yeah, you know, everything about solar selling, solar electricity and operation and maintenance contracts and how to sell them.
[00:01:13.570] - Torsten
But before we all go to these questions or subjects. Let me just sketch out the CV of Simon. So right now, he's a business development manager for Canadian Solar. One of the top 10 solar module manufacturers worldwide. He's got a bachelor in banking and finance, so he knows all about the dollars. He worked in banking, in industry for four, eight years. And he also ran his own show, a multimedia company, for 10 years.
[00:01:53.960] - Torsten
And then in 2009, there was a switch. To the subject of sustainability. And in 2010, the switch within sustainability to solar. He started to sell PV, solar PV and services in various functions since then. He never left solar, among other companies. He also worked for the multinational company Flex or Flextronics. That's a gigantic company. But he also worked for smaller, medium sized companies selling solar in Australia. So he's a vast interest in the scope of his working in solar. And since 2017, he's been with the Canadian Solar Canadian Chinese enterprise and which is among the top 10 solar module producers worldwide. So, again, Simon, thanks for coming onto the show. That was a correct recollection of your CV.
[00:03:01.160] - Simon
Thank you, Torsten. Yes. That's a summary and seems like forever. Yes. So like many people, I've changed my career over the course of the journey, as you point out, on Solar Journey.
[00:03:15.290] - Simon
And my interests initially through school and university was banking, finance and then I found that was not an industry I particularly enjoyed, but it certainly gave me some great grounding into corporate structure and finance. And then from there, in two totally different area of multimedia import export components and electronics. And that was quite interesting. But the switch really came about when I started having children and contemplated what I would like to do and sort of what sort of impact I'd like to have in this world, in this life.
[00:04:00.810] - Simon
And, you know. Renewable and the transition of renewable energy particularly has been of interest to me for now 10 years. But if it was just the questions I had in my own mind was what would I like to be remembered for? If anything, part for my family is something that I felt became a passion for me and certainly something that I've enjoyed over the journey. It's a challenging space, but it certainly has. I believe I mean, in a place to transition the energy transition and formation through solar and other renewables is really exciting.
[00:04:48.470] - Simon
And I can't see myself ever retiring from this space. I really love this area as challenging as it can be called. The, you know, I'm sure you've heard the term, the solar coaster. That's the journey, the ride that I'm on. And I will continue doing it for as long as I can. I guess so. Yeah. Here we are. And then you mentioned the different types of companies I worked for, and in that sort of history.
[00:05:20.490] - Simon
It's been a number of smaller companies, Australian based companies, national companies and then international companies. And the scope and size of the projects has changed from residential, which is really in terms of size. That's the rooftop of the household. Yes, residential. The market here in Australia is quite large. But I was there very early on working and talking to clients and helping households benefit with solar and then moved into commercial industrial, which is effectively small business, large business.
[00:06:00.270] - Simon
And again, that was more on the financial side of things to assist them to benefit from renewable energy.
[00:06:10.990] - Torsten
The commercial, how large are these systems? Sorry. The commercial solar systems. Is it the type of customer you specify with commercial or is it the size of the system?
[00:06:28.070] - Simon
It's strange. You know, when I first started across with residential and then into what's called the SME market, small, medium enterprise. That effectively is it could be a person working from home to a large factory premises. Anybody with a roof. I think the way that uses energy that operates as a business. OK. So the scale of those projects got larger as I gain more experience. And the largest was probably around the shopping centers, around two megawatt. Two megawatt thereabouts.
[00:07:10.800] - Torsten
Yeah. Two megawatts. Right. Okay. Let's make some sense. Right. And then you also now also work for selling industrial sized and utility scale systems.
[00:07:27.930] - Simon
So it's an interesting path, Solar, and I say, you know, we any people, we we explore different opportunities. And as I sort of went through and progressed in my career, I discovered the large scale solar space, which is effectively solar farms and utility scale, those type of projects.
[00:07:56.130] - Simon
You know, they range from maybe one hundred acres of maybe 10 megawatt, five megawatt up to the largest project we've been involved with is two hundred and fifty five megawatt. Great.
[00:08:17.000] - Simon
So those numbers, when I start putting them into context, so, you know, there is one side that we're actually on right now which has in excess two million solar modules outside. The length of the perimeter of the properties around 16 kilometers long, all the fence pointing and the scales huge. If you look at what you could put onto a household roof, to the size that I'm talking about, a two hundred fifty five megawatt. It's a big difference.
[00:08:52.970] - Simon
But, yeah, that that's that's where I've ended up at this stage. And I will say that at this stage, because the journey never ends and I'm actually not selling the project so much as during the operation and maintenance. So the projects are generally built by the time I'm involved or they're in construction. And we offer long term contracts to actually service and operate the sites. So when you think about and just use the example of two hundred and fifty five megawatt sized farm, there is around twelve hundred hectares of land that needs to be maintained.
[00:09:35.180] - Simon
There is trying to think the number of inverters on site, probably around 80. OK. Oh, my. That's the pacing. And you said, yeah, it's probably in excess of 140. Yeah. Yeah.
[00:09:57.590] - Torsten
The investment volume for the 2015 megawatt site. Roughly you've got.
[00:10:05.120] - Simon
While I didn't have the real numbers, but I'm assuming it's close to around nearly 300 million. Really? Yeah. Okay, so. Yeah, I guess it's a different market, of course, but in effect, it's still the same process or technology that's being used to generate power. Solar voltaic, voltaic panels, modules, converting that energy into electrons and then going through transformers and down the grid, the pipeline and being injected into the grid.
[00:10:41.930] - Simon
So it's the same principle. It's just a much larger scale if you know this journey. I guess for everyone in this space, if you've been in it long enough, you tend to find out quite a bit about the market. And I've always been interested in trying to learn more. And, you know, I find that Australia is a population. We have one of the highest penetrations of solar in the world. One in five households have solar PV on their roof, which to me is fantastic.
[00:11:22.330] - Simon
And it really shows the benefit of solar to a country like ours and the potential beyond. This is really what I'm excited about, too, is where do we go from here? So, you know, I guess the selling is really just the idea that you can communicate an idea to someone so that they can then look at it and say, this is worth my while to go. And I guess that's why I like solar. I'm not offering something that's not tangible.
[00:11:52.250] - Simon
You know, when you talk about an energy system, you're actually talking about a benefit to that person directly. So they look at it, say, well, OK, well, I can use this energy in my household, in my business or in the guise of a solar farm. It's actually a financial benefit. I look at it as a long term asset and how they can turn those electrons into actual dollars and cents to a power purchase agreement. In the case of an asset manager or an asset owner, it's the yields and returns per year.
[00:12:27.430] - Torsten
And the private household, maybe we can switch to the private households, so the penetration now in of Solar for the private households is now pretty large. You said, compared to other nations in the industry.
[00:12:39.670] - Simon
You know, I haven't really done a comparison on the rest of the world, but I understand what this is.
[00:12:45.080] - Torsten
It's a lot yeah.
[00:12:47.270] - Simon
Well, you are in a country that has some very high uptake considering the amount of [unintelligible] you have or sunshine compared to us. It's like, well, you know, I congratulate Germany, fantastic renewable energy policies, but we have the advantage of actually having sunshine here and turning that into something that's beneficial.
[00:13:10.010] - Torsten
I was in Australia in a part of my degree in the mid 90s, and back then solar wasn't the. Let's say it would have been popular. Everybody liked the idea, but it was little. There was a small market, right? And then Australia took off only a few years ago. Could you illustrate why suddenly that big change happened now that. Suddenly, Australia is one of the top countries for solar worldwide, particularly also in private households.
[00:13:42.800] - Torsten
How did that change came about? Because when I read about the solar policies in Australia, I would assume that the opposite. Right, because it sounds as if. From governmental side, it's no, it's a. Solar is not so popular. But it seems like that the market does the opposite of what the policies is intended to achieve.
[00:14:08.090] - Simon
Well, there's been a policy in place for quite a long time now. I would suggest it's over 10 years. Learnable Energy Target was in place through government, Labor government, maybe even the Liberal government before that they instigated a renewable energy target and incentivized that target with a rebate, particularly for households. The initial rebate was quite a lot. It was around eight thousand dollars from memory, which was if you were to install a solar system on your roof, you save a government rebate of eight thousand dollars.
[00:14:50.610] - Simon
Okay, but back then, a one kilowatt system or one point two kilowatt system was around ten thousand dollars to install onto your roof. All of which you'd get eight thousand dollars back from the government. So there was a huge spike. The problem, of course, is with that sort of number and that sort of size system, it's really not that effective. One point two, kilowatt power or solar system on your roof has a potential in Australia maybe to generate four, five kilowatt hours a day of energy and most households in Australia will use around 20.
[00:15:37.600] - Simon
On the other side of this is the state based governments also incentivized people to take on solar with these things called tariffs, which were feed-in tariffs that if you put onto your roof or solar system and you exported that energy back into the grid, you could get upwards of 60 cents Australian per kilowatt hour for that energy put back into the grid. That incentive sort of meant that you could potentially, depending on the size of the system, you could pay back very quickly the investment that you made in putting solar on your roof.
[00:16:22.010] - Simon
So that was the initial inertia. That was a sort of driving demand for solar at that early stage. As the government had actually put a lot of incentives in place, larger scale. They had this thing called the LGC, which is a large generation certificate. And they had the STCs. So beyond the eight thousand dollars, which didn't last very long. They brought out this thing called the STC, which is a small training certificate, small generation.
[00:16:55.160] - Simon
So every time you purchased a solar system as a residential customer, you would get a refund from the government, which was in terms of something called an STC rebate. So depending on the size of the solar system would depend on the number certificate's you'd get. Which again, subsidized the cost of solar in Australia quite significantly. So. Over the years. The government has incentivized consumers to take on Seoul, which meant that although one kilowatt was not hugely effective as a system size, there was quite a lot of people rushing to buy these one kilowatt systems because it was basically free.
[00:17:50.430] - Torsten
It was a gigantic incentive. It wasn't. Yeah.
[00:17:56.190] - Simon
Now we still have some rebates in place. The STCs still exist. And, you know, on average, after rebates, a solar system of four to five kilowatts will cost some between 3000 to 4000 dollars in cost to the consumer. And that's four to five times the size of the original solar systems that were first designed and built and installed. But they generate. Quite a lot of energy in in the renewable space. Trying to think if I had any numbers. But we do see now that the energy load profile, the energy profile in Australia has changed because of this number of solar systems that have been installed in households.
[00:18:52.550] - Simon
So we have a dark curve now which shows that during the day there is quite a lot of generation through or reduced demand for energy because of this. I quickly installed solar lids on commercial roofs and households. It's quite significant.
[00:19:14.770] - Torsten
So you have it all over noon. You have a dip in the consumption. Yes. So from the truth.
[00:19:25.410] - Simon
Yeah. So I guess one of the things that it's changed the market in Australia. We have this thing called the national energy market, the national electricity market, which is a platform where people can trade energy. Traditionally, it had been supported by what was called baseload power. So power, coal fired power stations generating quite a lot of energy via a constant number.
[00:19:57.040] - Simon
So their outputs don't really fluctuate that much. It's just that with the uptake of renewables, we've now seen a change in this market where you have a spot market that has negative numbers now. So natural fact, there's just too much production during those periods, particularly on the weekends where you don't have manufacturing or any industry you see really. So you have actual negative price across Australia. And then for energy, wholesale energy. But, look. I think you know, I if I say this is a benefit, but I also say it is a slight hurdle at this stage in to how to manage power in the future and how we actually look at Solar.
[00:20:49.790] - Simon
How it integrates into the Australian energy market. And, you know, this is probably of interest to me is where do we, where will this end up for Australia? I imagine with Germany, you've had similar issues around production and how you manage renewables in terms of the energy loads and profiles. But, you know, this is where we see the exciting part of the transformation of energy in Australia and solar as well. I guess if I was going to bring in another topic, it's around storage because with this much energy being produced during the daylight hours.
[00:21:38.380] - Simon
The question is if it's not being used. What is happening? How do we manage this to shift the load towards the end of the day, when the profile energy profile in Australia is that many people? We have this thing called peak demand, which occurs around the hours of four to eight pm or thereabouts.
[00:21:59.890] - Torsten
This is why. Because everybody's at home and cooking, preparing dinner is that the reason.
[00:22:03.810] - Simon
They come home from work. Kids come home from school. Everyone rushes to the kitchen, starts cooking, preparing meals.
[00:22:11.490] - Simon
People are using electric hot water and doing whatever things they may be doing, washing, dishwashing, whatever. Yes. It all happens at that point. And consumers maybe take TVs, gangs. What I see in terms of the energy transition in Australia is how best to manage that period and how best to actually, you know, there's a thing called energy security, I guess, which is the concern that a lot of conservatives bring up around renewables.
[00:22:44.700] - Simon
What if the sun's not shining? What if the wind's not going, what happens then? So really, there is a slight gap in this energy profile that is being introduced with storage. Residential, commercial and utility scale. I think when we get to the point of having cost effective measures for storage, we will see that renewables will completely take over the energy transformation.
[00:23:16.600] - Torsten
And that doesn't require the right politics for that to remove legal barriers. Oh, would you say the market will fix it all? And once the costs for storage just keep going down, then there will be an automatic shift to renewables in general or...
[00:23:35.700] - Simon
I feel that using the example of the government incentives that were in place for solar initially really need to have the same policies in place for electric energy storage. I was going to say electric vehicles because I feel that that's one where they could really make a difference.
[00:23:55.230] - Simon
Quite a few years ago, I had a number of discussions with Research Laboratory Lab. CSIRO in Australia, and I'm speaking to a gentleman there who, his main purpose, research scientists around battery storage. And he said to me. And this is going back maybe six or seven years ago. I said, where the future is, electric vehicles, a way to manage electric vehicles is to use them as a stored energy source. So not just an operation for a motor transport, it's actually their capacity in terms of energy storage.
[00:24:33.180] - Simon
And I'm seeing that's happening now very early stages, I think, in Hyundai and Nissan have both introduced vehicles that you can. Then why did he have the right inverter technology and battery management system so you can plug them into your home grid or home network. And then use that energy instead of going and drawing on the grid, which I find is perhaps where I see things really working for that heat shift or energy demand changing and really supplementing in and giving all the renewables the opportunity to be more secure and say that this is how the future will look. So I feel that's really exciting, that particular technology.
[00:25:35.260] - Torsten
So how would that look like? So you have your car connected to the grid and all of during phases of high solar production. The car would then store the energy. And then at late at night, they would then also work as a supply of energy, as it gets still connected to, though, again, connected to the grid after you came home from work, for example, is that the idea?
[00:26:07.100] - Simon
Yeah. Yeah, that's in its simplest form. I mean, there's a lot of moving parts to any type of solution. But I guess from a consumer's perspective, it would be that they could use their vehicle to drive to work and then at their work that have an electric charging station, therefore their electric vehicles and on their roof. With that building that they're in, it'd be solar, which would then be used to charge their vehicles and on return from work back to home that plug their vehicle in.
[00:26:38.670] - Simon
And instead of drawing current from the grid, they would be actually pushing current back in to the grid to supply the demand that they'll have with TVs, heaters, hot water systems, whatever it might be, and cooking, of course, during that period of peak demand. And then at the end of that, that either charge, what we would call and there is a single time of use in terms of metering that's done in Australia at a lower rate to recharge the battery in the vehicle. And then, of course, start the process again in the morning.
[00:27:17.110] - Torsten
So that requires some. OK. That require some smart billing system. Right. So it's you know, when you work, your employer might not. They'd like to pay your electricity bills. Of course. To bring home electricity, but only the shop.
[00:27:37.010] - Simon
Well, yeah. Look, you know, I think that it's always hard to. I mean, it sounds obvious. It sounds like a very simple solution because there's so many moving parts to it. And who's going to pay for what is? One of the questions that you're asking. But this is in an ideal format. And really what I would suggest is that if we had a government that was proactive towards renewable in the transition and then they could see that electric vehicles as a way for consumers to buy into the idea of storage and reducing carbon emissions, I'd be saying that's a first step beyond that in terms of using it as a storage bank and eventually supplying to their home.
[00:28:23.940] - Simon
That will evolve and I think that evolves through demand. So really, what will happen in terms of the market economics? You're really looking at it. So let's get some vehicles into the Australian population, electric vehicles. Let's build up this demand and let's build up the infrastructure for charging. Let's have this happen to point out a critical mass within people say, well, what's what else can I do with this electric vehicle? So, you know, the Tesla vehicles are running around with a 90 kilowatt hour, 100 kilowatt hour battery.
[00:28:58.230] - Simon
That's a lot of energy that they've got in their, in the battery. To me, it seems like, well, why wouldn't you offer that as a service or part of your why wouldn't you multi use that electricity? And then I've heard all comments about how manufacturers don't want to do that. It's gonna be damaging to the battery. I just believe that really it makes a lot of sense. What consumer would want to have two batteries of the same size in your home when one battery could do all.
[00:29:31.020] - Torsten
So. Yes, I totally agree. I'm just given that as an idea. So Tesla has got a, let's say, 100 kilowatt hour battery. How much energy is that? And when you think about the standard Australian household, how long could they live on a Tesla?Put it as well.
[00:29:49.750] - Simon
The average standard home. So Family four is around twenty five kilowatt hours per day. So that's four days.
[00:29:57.730] - Torsten
Four days, one Tesla four days. Yes, but that's a lot of storage capacity. Way too much right. For most possibly for the standard commute. Right.
[00:30:07.810] - Simon
So do you think, you know, battery management is a critical part of anything around how batteries are used and what sort of life cycle they have? You know, I guess this is an evolution of energy and transport. And I think, you know, in these difficult times that we're in, of course, we all have plenty of time to think and contemplate where the future might be after, you know, see some light at the end of the tunnel.
[00:30:49.360] - Simon
I would like to think that, you know, the brains trust is many smart people and they are far smarter than me that we'd be sitting there thinking, well, how do we turn this application or how do we turn what effectively is a very large storage unit into a multi-purpose opportunity? And I feel that. You know, I hear the stories about hydrogen as a fuel cell and potential fuel. And the fact that it has zero emissions and, you know, it has some fantastic benefits and potentially solar in Australia being such a lucky country in terms of irradiation, we could, of course, generate enough energy to produce hydrogen as a potential export of energy.
[00:31:35.620] - Simon
You know, there's all these sort of considerations around hydrogen. What I see in front of me is that. Batteries in electric vehicles. Right now. Kind of makes sense. So it makes a lot more sense than burning days or burning any type of fossil fuel. So I guess, you know, we may evolve and this technology is forever evolving. And the purpose of solar initially was to allow people an opportunity to have some control and to offer some a way of actually.
[00:32:18.740] - Simon
Taking back, you know, one of the things that I remember when I was very early into residential solar was the first question people would ask me is, well does it work? You know, I guess that would probably seek a cure. And people saying we can get this for free and put it on your roof. And, you know, it's gonna do this, it's gonna do that. And really. Initially, we saw in those early days, one kilowatt really didn't do a lot for people, the size of the system was way too small.
[00:32:53.250] - Simon
Now that we were down, you know, eight years, 10 years down the track, we're really looking at systems that are four, five times larger than these. And then you're looking at something like a car battery for an electric vehicle, which holds that much capacity. And to me, all these numbers are starting to make sense. We're now at a point where you can actually use this. It has value. So I guess it was my wife to support us.
[00:33:23.640] - Torsten
[00:33:27.010] - Simon
You know, for me, it's exciting that we've developed the technology to a point where you can put that much on a roof and the batteries in vehicles and get that capacity. So we now sort of saying some things that actually have real, real opportunity to be used and developed a bit more. So that's it.
[00:33:50.490] - Torsten
There you go, sorry.
[00:33:52.350] - Simon
I was just gonna say, I mean, I'd love to see hydrogen as a format of energy that we could use as well.
[00:33:58.580] - Simon
And I don't think there's any particular technology that's better than others. It's just different. Fit for purpose. You know, I think it's exciting times ahead. It's just that solar is a lot more integrated. It's part of the package as opposed to standalone by itself, because it's really not. It doesn't do everything, but it does some things very well.
[00:34:22.880] - Torsten
Excellent. Yeah. Maybe we can. So it's so basically, you see, the future is solar. As the costs come down, it's gonna be used quite more widely and widely. And electric vehicles could fill the gap in the which solar needs due to fluctuation in bringing energy. Availability to the rest of the day when there's no sun. You mentioned the hydrogen economy. Is this something which is maybe on the agenda of Australian politics? Because it's like I would assume to a certain extent, a big companies business. Not that small decentralised format.
[00:35:16.680] - Simon
I say that, you know, there's been conversations had around hydrogen fuel cell development, whether it's large scale is one in W.A. and this one in the Northern Territory, which is the conversations are really by large business. You're looking at a potential income earners. Potential revenue streams that are really to do with export. So we're fortunate in this country that we have a large landmass with a small population and very good renewable factors in terms of energy generation.
[00:36:01.140] - Simon
So solar and wind is fantastic in Australia. The idea that you can capture that energy via converting it to hydrogen is. It has been discussed for a number of years, but I think. I get the feeling and this is just a feeling I can't really put any numbers and figures to it, but that the people that are interested in this space, entrepreneurs that have a long strategy in place, a long game strategy, where they see that if they capture the market early, they could certainly own it.
[00:36:40.370] - Simon
And it's building that technology and the cost in that infrastructure, it's quite high. It's quite expensive to develop these type of products. I've heard the numbers around 10 gigawatts of solar and wind in the WA plant, which would then be converted into hydrogen, which would then be exported by ship. Now, I'm not an expert in this space, so I'm not really familiar in terms of the cost. But my understanding is that to build these facilities, particularly beyond the solar, the actual hydrogen plant and then the storage and then the shipping containers or the the ships that need to store this hydrogen is billions and billions of dollars.
[00:37:26.370] - Simon
That needs to happen before that'll take off. So I see that as where the initial conceptual take off. I can't see hydrogen as a fuel cell in someone's car at this point. I have seen, you know, there's been some prototypes that ran around California for a little while. I think Honda made them.
[00:37:51.840] - Torsten
Because of the costs or of the, let's say, risks of acceptance by the users.
[00:38:01.780] - Simon
I think it's more that the. My understanding was that in order for hydrogen to be transported, it needs to be kept at a fairly low temperature and it needs a fairly high threshold.
[00:38:20.840] - Simon
And. To do that in terms of cost, particularly in terms of the small scale into a car or anything of that nature is quite high. Now, I don't know if it's ever going to be cost effective. Perhaps if we get to scale in terms of numbers and people say that this is the way the future and automotive companies invest billions and whatever to develop that technology to commercial level. I just feel that electric vehicles are a lot further down the track in terms of development as opposed to hydrogen.
[00:38:57.980] - Simon
And really the hydrogen fits right now is in the large scale stored energy potential export market from Australia on that basis.
[00:39:09.290] - Torsten
Yeah. I mean, also in Germany, there's the government just released a hydrogen strategy. Actually, three do. What would you call them, ministers, secretaries of state?
[00:39:26.570] - Torsten
I guess that's what you would call them in the U.S. It was a big press release, a big event. We're talking about the national hydrogen strategy. And it's interesting that. There's a lot more, let's say a press awareness for four hydrogen, than for solar. Right. Um, it's like people might be against solar, but they are pro hydrogen. And it's, uh. Interestingly, I haven't understood it myself why?
[00:39:59.420] - Torsten
This is the case, right, because they should harmonize and if hydrogen is also quite often used as the, a way better solution than the battery storage, right, which I haven't understood myself either. Right. Because, as you said, standard battery technology. Lithium based technologies is already a far way down the track in terms of costs and proven usability. Right. So I do assume also that there's other players now involved who want to get this. Safe stake in the future energy industry. Right.
[00:40:45.750] - Simon
I mean, it is altruism. Yeah.
[00:40:47.920] - Torsten
So in a way, it's a big threat for some players. Right. I mean, you have these big coal companies, I would assume, in uranium mining companies in Australia. So you wonder where they end up if all go solar. Right. Everybody's got his solar system on the roof. And then there's the common factories. So where do the standard utilities and mining companies end up? Right. Where do they go? Right. Is that because let's say conventional energy.
[00:41:22.170] - Torsten
Stakeholders push for hydrogen because it is this big business. CapEx, which they can handle but not the let's say private households as small and medium enterprises.
[00:41:37.910] - Simon
Well, I guess what I am saying, and this is on a larger scale, is companies like Shell, which you would have obviously heard of before, have moved towards becoming energy providers and energy owners. They're looking at a vertical chain. So they're looking at it from no longer just one particular type of energy. It's all sources of energy. For them, it's to own the energy platforms.
[00:42:04.600] - Simon
And then they can say, well, we can deliver transport, produce any type of energy. My thoughts will be it'll be someone like that. That type of company that will look at hydrogen and how best to make it cost effective. We do have fossil fuel companies and fossil industry who are hugely influential in terms of government decisions. They have influence to governments to a point where investment in solar has actually reduced significantly in the large scale solar side before COVID 19.
[00:42:49.900] - Simon
There was already a significant drop in investment in large scale solar in Australia. I think I recall seeing a number somewhere around 60 per cent drop in investment dollars in Australia for large scale solar. And that's in no part. It's certainly due to the influences of fossil fuel lobbyists that have encouraged the government to look towards boosting and really taking away any initiatives and incentives for solar investment in Australia. So I guess. The one heartening thing I have at all this in the struggles that we have in this industry in Australia is that the energy transition is occurring on.
[00:43:44.850] - Simon
The household perspective, people believe it. They understand it, so the general population in Australia is very much on board with the idea of renewable energy. Unfortunately, the larger companies that have very deep pockets and an industry they need to protect continue to hinder what is effectively something that will have to happen. You know, there's a lot of emotive positions people take because particularly when you talk about climate change and the impact of carbon emissions on climate change. That kind of cloud, what is actually happening in the world? And, you know, if anything, this period of lockdown that we have had occurred and the reduction in air travel and an overall cleaning of the environment. I guess in some ways, this is what we could see if we were all transition to renewable as an energy source. My only fear is that everyone want to get back to normal as soon as possible once this lockdown is finished.
[00:45:06.350] - Simon
I'm saying, you know, the air's carbon pollution affected me. So I guess from my perspective, you know, that is part of the reason why I continue being in space for as long as I can. Is that the message needs to get there and we need to continue until transitions occur. And we're no longer using fossil fuels. So. In some ways, I'm happy that a company like Shell, who was acquired a number of energy providers in Australia and purchased solar developers have done a number of things actively seeking to become a multi stream revenue or energy source provider.
[00:45:57.840] - Simon
And because to me, that's showing that they see the future and the future is not fossil fuels.
[00:46:05.510] - Torsten
I mean, they they've released studies a few years ago where they clearly say within a few decades, few years, solar will be larger than oil. So they do. And this is their own data. That's their own study. So they do clearly see that study.
[00:46:23.900] - Torsten
But at the same time, I've been in PV for since 1993, and Shell was even a producer of solar cells at least once, if not multiple times. So critics say all the you know, that goes already into conspiracy theory, say they are in for the wrong reasons, right? So. And so it's I would definitely say also the energy business, there's plenty space for all and any money is welcome to to finance and push the energy transition. But at the same time, as you mentioned, there's many people who want to save their own stakes, their own way of doing things right. So it's definitely got to be interesting.
[00:47:10.160] - Torsten
Right. So I am super happy, too, to see, of course of both. But as many say who? Oh, I'm scared of that. They they are voting for the wrong. Right.
[00:47:21.140] - Torsten
And you mentioned once there that previously the the drop off new solar parks. Of 60 percent on a, I guess, annual basis. And there was due to some. How does it happen? Change in legislation did something, actual laws were changed or. Oh, I just hope...
[00:47:43.520] - Simon
Right. Well, this is quite a. It takes a little bit of answering, so I hope you don't mind. You have to indulge me with this one, but essentially.
[00:47:55.430] - Simon
When I tell you about 60 percent drop or 60 percent reduction in investment, it's project developers. Who were seeking funding for projects that had been looking to establish in Australia. We have. I guess the difficulties with energy transition is that the model that occurred before was traditionally based on large power plants, coal fired power plants, where the infrastructure to support those power plants and then transmit that energy through a grid on the eastern seaboard of Australia, we have this thing called the national energy market, which has the longest single grid infrastructure anywhere in the world, its can't remember the exact kilometers of grid infrastructure. It's massive, but highlighted in that with these coal fired power stations essentially were plugged into this grid to generate the energy. Since the development of renewable energy and wind and solar has come on board. And what we have now is we have dispersed energy storage or energy producing plants across Australia, which they need to find a way to inject into the grid. And because the grid is quite antiquated, its design was not built around this new form of of of generation.
[00:49:30.370] - Simon
We have a regulator, a number of different regulators and authorities and bodies in Australia that manage this grid. Within that, we have these restrictions. So what essentially is happening is a developer, solar developer is going out there acquiring land saying this would be great to put a 100 megawatt farm. They get a lease long term lease with the landowner. Then they go through what's called a development approval process, where they'll go through local council to line engineering.
[00:50:06.280] - Simon
They'll go through apply to IMO for connection. So there's a lot of work in this, thousands of hours and many dollars are engineering, design, all that work to effectively build the plant. Now, because this infrastructure is so. It is is quite outdated. Many of these plots of land that the developers have found are not in. They may have a connection point, which is to a high voltage line. That's not far from them to reduce the cost of connection.
[00:50:46.770] - Simon
But the actual strength of that grid or that line is questionable at best. And we're having this problem in one area called the western multi-region of Victoria, New South Wales. So it's on the border, the transmission lines that actually. Transport that energy have quite a lot of redundant. They're not strong and. What's happened is that we have a bottleneck of legislation and. Delays in connection to those particular projects. One of the plants that we're dealing with this, five plants, just to give you an example.
[00:51:34.660] - Simon
This five plants in this region that had their curtail, they were curtailed to 50 percent of their production because IMO had to do some studies to actually work out. How to support those plants after they've already been built? So which really impacted the investor, because now they were looking at a model which instead of having 100 percent production there at 50 percent cent but no choice, they have to wait until they got approval. And it happened on Friday. That could now produce 100 percent of their energy.
[00:52:05.310] - Simon
Problem with this, that's just one side of it. OK, so that's the actual logistics than the actual grid infrastructure and getting into allowing you to connect into this grid. We also have a government that does not incentivize. Investment in Solar, they spend billions of dollars and invest in rebates and government initiatives to encourage coal, more fossil fuel energy.
[00:52:40.170] - Torsten
But there's still high investors, government of public money going into coal.
[00:52:45.930] - Simon
Oh, and then may top tax offsets or any number of ways to encourage investment this space because they see it for them. They have vested interest with the lobbyists and the money that they get given to them. The other side of this is this grid being what it is. The infrastructure is not strong enough to support these type of farms on a consistent level. They also have this thing called Emma Liffe, which is marginal loss factors.
[00:53:21.580] - Simon
So you build a farm 500 kilometers away from the nearest large energy user, for instance, and maybe that's a small town or a medium sized town. There is a calculation that the regulars had used to. Say that if you produced 100 percent at your site, by the time it reached that point of destination, the MLF could be up to 20 percent loss. So you've modeled your business on 100 percent production or 90 percent production, whatever it might be.
[00:54:09.950] - Simon
You then have to factor in that, whatever this arbitrary number is that is being calculated. You then have to assume that that's all you will earn or the amount of energy you'll be able to. Reading is 80 percent of the total. So these are the factors that really encourage people not to look at your investing history. The other side of this is we've had in the large scale side of the business or industry, there's been a number of EPC, so I'm not sure I'm familiar with an EPC is an engineering procurement company.
[00:54:51.770] - Simon
So they construction, they do the project. So a developer may get the funding and the permissions and the land they know, engage and contract with an EPC to build it. The EPC is in the last few years, a number of them gone out of business simply because the margins weren't there and they didn't cost or didn't quote the project critically. And one of the risks that they were taking on was the connection. So in order to get their payments at the end, I'd have to say that they could get the project connected to the actual connection of the project is quite a significant process.
[00:55:37.110] - Simon
And because of the poor infrastructure, you find that these sites, some of the sites and there's there's a number of sites that have been completed that are not yet connected in Australia.
[00:55:50.070] - Torsten
So it's a technical issue or an administration issue to get this these large projects.
[00:55:57.720] - Simon
It's a technical issue. It's a technical issue. It's getting permission through the regulators to say that, yes, you will be able to be connected. So AMO made to do the testing to allow you to actually connect to the grid? But that happens at the end of the project. When you construct because you can model all you want, but until you've actually built the site and then actually turned it on. You still don't have permission to actually generate or export to the grid.
[00:56:30.960] - Torsten
[00:56:31.890] - Simon
So that risk has seen us a couple of EPCs go to war because they actually until they have connected, they're losing money.
[00:56:47.660] - Torsten
So a more delays the process. That is the technical connectional.
[00:56:52.830] - Torsten
But what's. I mean, I'm sure you could technically understand it's like a I don't know, 10 megawatts, you want to connect, you know, precisely what the can kind of voltage and current you've got and what kind of inverter you require. Transformers. What was the risk? If it's a technical issue, what's the problem? It's a delay by the administration or.
[00:57:25.950] - Simon
Well, just to use the example of the five sites that they were held to 50 percent. So these sites have been built. We're operating at full capacity. And then AMO, in their wisdom, realized that the load on the grid was creating some stability issues. And they immediately curtailed those five sites. What's had to happen since then is that the five sites, for fortuitous reasons, had the one inverter manufacturer on those five sites, which is SMA.
[00:58:05.530] - Simon
SMA did some modelling for. And it's taken months. Did some modelling for AMO to enable them. To say that they could actually manage the sites and reduce the risk that they saw instability in the grid, for them to say yes will turn your back on this modelling that occurs for connection. Even though they've done all the modelling beforehand, when they go through what's called G.P.S., this modelling for connection is the one that is the stumbling block. And there's no way anybody could have modeled for what AMO did and could tell those five sites for 50 percent.
[00:59:00.090] - Simon
That's because, unfortunately, there's a lack of communication between developers and AMO, the grid, who's putting what into where? How many people are actually putting, injecting energy into that particular zone or region? So all those factors create a lot of confusion and doubt. So if you're an investor and someone said to you, okay, well, you could invest something in Europe, 100 megawatt, you can get a PPA for this amount. And the connection would be stable.
[00:59:37.790] - Simon
Or you could invest in Australia.
[00:59:40.070] - Torsten
But you don't know if you can connect.
[00:59:42.600] - Simon
You don't know if you can connect. Your rights are fairly low for PPAs they're not fantastic here. And there's high risk that you won't even get your full return on your essay. I mean, it's it's just that's the thing. It's a global market. Solar is a global market.
[01:00:01.100] - Torsten
So the money goes where it's a low risk. Right.
[01:00:06.590] - Simon
I think this brings me back to a point that you raised earlier about, you know, these type of large companies getting involved in renewables. If that's a good thing or a bad thing and really the problem or when I put my finance head on. I understand that it's not about renewables. It's got nothing to do with renewables. It's about the opportunity, the LCOAs that levelized cost of energy. But the profit, the risk and the profit is what businesses of that nature look for them to turn and say, well, we're now energy agnostic.
[01:00:43.550] - Simon
We'll take on any sort of energy. No, they won't take on any sort of energy. They'll take on energy sources that make them money. And that's what we have to deal with. I don't think that's a bad thing in the context that as a as a marketplace. By getting. People like companies like Shell and the like involved in investing in renewables. It affirms for them that this is an area revenue. And it sort of encourages that type of growth and investment.
[01:01:19.400] - Simon
If I had a magic wand, I would be looking in Australia to change the structure and energy markets. Allowing a lot more investment and managing it a lot better and having a secure, a stronger government actually managing it. Because this is an opportunity that we're actually delaying our transition.
[01:01:46.460] - Torsten
So for Australia, you would really see the need of a change in policies. Pulling down Edman barriers. Creating the mindset in these authorities to bring solar in Australia to them to the next level. Is that correct?
[01:02:08.860] - Simon
Well, that at a high level, of course, you know, I mean, I don't have anything except an opinion. So it's, you know, from my perspective.
[01:02:19.580] - Torsten
But you have a long, good, good experience, hands on experience, on knowing what the solar energy market is like on Australia.
[01:02:27.990] - Simon
So, yeah, I feel like I feel the energy transition is something that if it was taken on a national level by a government body that actually had wasn't politically driven and was able to have the power to generate or to make change, there would be a huge thing for Australia. And I see. And perhaps I'm misreading things that are happening, but I think with this virus that's occurred with COVID 19. You hear a lot of reports about people saying globalization doesn't work.
[01:03:05.260] - Simon
This is what's happened because of globalization. The world is a different place now. I look at it and think, well, if that's the case. Food security, energy security for your country would be as important as border control because you would then be thinking, well, we need to be self-sufficient. We need to be making sure we generate enough energy and we have enough internally to make our country work. And it's sort of sad socialist or something, I guess.
[01:03:41.910] - Simon
But I want to say that there should be a government body that is in control of this at a level that is nonpolitical and it's more about those essential securities. We would see change happen a lot faster. Yeah, know what I see?
[01:04:02.060] - Torsten
Yeah, sorry. I mean, Australia could easily be self sufficient right energy-wise with that much of sunlight and wind and ecology.
[01:04:11.630] - Simon
I really see that we could be, you know, if the borders were opened again, I could see us being an exporter of energy. We have that much resources, natural resources here in Australia, that our position as an energy provider and energy positive in the world would be quite strong. But what I see happening, I think it's really more consumer driven. They simply have. High uptake of Solar on households and a high uptake in commercial and international investment into solar in large scale.
[01:04:50.770] - Simon
What I would like to see is that we have the same pushing to electric vehicles for transport. And I would really like to see government incentives in that. That would drive. I guess what I was talking about in terms of our use of energy storage. And, you know, I feel that's an easier path to take than trying to convince a government that's so anti climate change. I think if they were just to incentivize a little bit on electric vehicles. We'd be in a much better place.
[01:05:31.850] - Torsten
Excellent. But this is now really a logical next question from you would be. The politicians are only the ones who are elected by the people right. So. If all those Australians are so pro or many are pro solar, why? But we have this kind of policies and policy makers. Yeah, it's a tough question, I know, but I just sits that this question and looks, bring it out.
[01:06:12.020] - Simon
I think the reason why and it's been reviewed a number of times against the last election was won by the liberals when they didn't think they would win the election. It was a lot to do with people's perception of the opposition party and the risk of taking on. Such a wide and varied policy change. But I think they narrowed it down in terms of the reason why the liberals got in was more about marketing of perception. Nothing to do with climate change.
[01:06:53.020] - Simon
The vote was not about climate change. In the end, it was about people's pensions and super funds and things that might be impacted by this Labor Party. The opposition coming in. So it was really decided by something that had nothing to do with climate change. I think if you asked people in Australia on a vox pop tart, you know, interview, you would find that. Particularly now we had these bushfires throughout November, December, which impacted huge amounts of land. And I'm not sure if you saw it in Europe.
[01:07:33.300] - Torsten
Everybody was in the press and on TV, like every night. Yeah.
[01:07:41.300] - Simon
And living through it and only from a metropolitan city, I know you had this dense smoke in the air continually, which it had an effect on people in Australia that we wanted to see something done about it. There was early warnings about the bushfire occurring and the mismanagement of policies around how to minimise fire risk. Also, the funding around fires and bushfires.
[01:08:18.900] - Simon
And the question came up, well, why we had the hottest summer and why we had droughts. And it was all related back to climate change. A lot of that came back. This is the result of increased temperatures across the globe. We're having much higher, hotter summers and higher risk in bushfires. Now, had we not had COVID 19 come through in the last eight weeks, 10 weeks, we may have seen a very different outlook in terms of what was happening in the momentum around change for climate change in Australia, because I felt like.
[01:09:03.740] - Simon
It was a move, not the management of that in terms of the government was a little bit poor representation around how they manage the bushfires. And I feel that there was a little bit of a negative press about that and could have provided some impetus to change climate at that point. But I honestly think that the base issue in this country and it comes back to the initial question, why do we still have the same government in place? Is that as much as we care about our climate and our country?
[01:09:45.640] - Simon
We also care about what's in our wallet and what someone who's prepared to do to take our money from our wallet or our quality of life and be impacted. So the decision to vote in liberal as opposed to the opposition. Was more about financial risk. I feel that. If we had our time again and we had a different outcome, perhaps we'd still be here. You know, in this space, COVID 19. So I feel like right now it's not really relevant that we have an entity of government in place.
[01:10:27.390] - Simon
It's that beyond this government and we've still got another two years of them in power. We have to keep. We just have to keep going. You know, I can't vote them out. Because there won't be another elections for another two years.
[01:10:47.780] - Torsten
Do I understand you correctly? So you think that there was a positive impetus from the bushfires towards solar, but then COVID 19? You could possibly. This is a push back off let's say a broader move to. To renewables in Australia Because I mean, this is actually also being discussed in Germany and I guess all over the place that no, possibly. Multiclass it. Was that about. Bringing up the economy, bringing up the economy or do the conventional thing, rather than carry it in to care more, to keep caring about climate change.
[01:11:42.030] - Simon
Torsten I feel that we are. I don't think we've ever had this economic situation occur globally. And, you know, people do worry about the security in terms of income and, you know, whether they'll have enough food on the table for their family. And this current government has certainly provided quite a lot of resources and around supporting people through this period. They have a timeline. Six months. But what happens after six months in terms of the return of some sort of economy and how we actually get to a point where people are comfortable again?
[01:12:33.620] - Simon
I. I guess the only thing I see happening right now is the. Simply by the fact that we're in lockdown and people aren't doing the same stuff that they were doing before in terms of consumerism and driving and transport and overseas holidays, and a lot of that won't come back that quickly. So we. We still have opportunities for climate change. To be beneficial to to have some benefit right now in terms of solar. I think that our investment strategies and long term investment into solar farms, that won't change any time soon.
[01:13:22.880] - Simon
I think that will be at least another 18 months or two years before we'll see some. And we will need some government assistance with that. Well, you know, it's I think you're right Torsten, that this is really not the time for people to concentrate on climate as much as we would like them to and concentrate on solar. Everyone will be racing towards how do we fix what we have a problem that's generally the economy.
[01:13:55.040] - Simon
I mean, it's frustrating.
[01:13:58.570] - Torsten
It's tragic that there's a few voices who say actually the real political decision would be now to because there will be a lot of money poured into the economy, whatever that is, government money.
[01:14:16.260] - Torsten
And you might as well spend it on something which has a future. So you might as well spend that money on. Into the energy transition rather than supporting the conventional way of doing things. But I guess well, we will see. One day and that's yet to come. Right. So it's an open race.
[01:14:39.490] - Simon
So there's no answer for that. Right. So this is the thing. There is no right answer. There is no wrong answer. It is, unfortunately, a situation where we're all stumbling through it. And there is no set time either in terms of, okay, let's just assume that they ease restrictions. Now, is there a risk of a second wave of infection? Yes, there is a risk. Will that mean they'll lock down again? And how can we afford this?
[01:15:10.950] - Simon
The question I hear from a number of different people is, well, we're spending all this money to stimulate and maintain. People in jobs or not jobs or what's going to happen after this? How is this? I mean, I don't think there'll be a lot of money in the bank, in the government's kitty at the end of it. I think they'll be thinking, well, I've spent in Australia, it's about 180 billion dollars, maybe even more on incentive packages, jobseeker and job keeper for the long term, for those that have been immediately unemployed through this virus.
[01:15:56.550] - Simon
Beyond that, I have not heard anything from any government person saying, well, we're going to do this to rebuild the economy. It's not about rebuilding the economy now. It's just keeping people afloat. So there's not enough there's not financial stress to the point where, you know, we had a massive collapse of the industry and the economy. I agree with you. If we encouraged investment. It's not even actually putting government money into investment.
[01:16:34.410] - Torsten
It would be private money.
[01:16:35.630] - Simon
Right. Private money, providing them with opportunities to build plants into areas where we all understand that the coal fired plants have got a life cycle, which I think is between 30 to 50 years, that they're all being decommissioned.