Energy is expensive. How much does it take to fill up at the petrol bowser? How much are consumers paying to run their households, and businesses paying to operate?
It’s also dirty, with three-quarters of energy generation sourced from fossil fuels1.
While prices differ across states and territories, no matter where people live, lower socio-economic groups are likely to feel the sting of energy prices more than most.
It’s a puzzle energy software group Evergen is trying to solve.
“People that can afford to invest in things like solar and batteries and electric vehicles will end up doing extremely well out of this energy transition,” says Ben Hutt, CEO & Managing Director of Evergen.
“The question for me is what about the rest of society – the people who can’t afford to invest in those things, and maybe don’t have their own home and are going to have to pay for traditional electricity supply.
“How can we ensure everyone benefits from the transition to renewables? How can we finance everyone putting in solar and a battery at their home site?” he asks.
Evergen is working on a solution
Its software is aimed at allowing network operators and energy retailers to manage a fleet of distributed energy resources in real time to support grid operations. An example is Virtual Power Plants (VPP) within communities.
A VPP connects homes that are harnessing solar energy in a grid, uses batteries to store power, and distributes renewable energy on demand within that community. The energy is green, and the seemingly interminable problem of intermittency is overcome.
At the heart of Evergen’s business – which began as a collaboration between AMP Capital and CSIRO Energy - is a Distributed Energy Resource Management System (DERMS). It’s a software platform used to manage energy resources better.
“We connect thousands of sites across the energy system in Australia, from things like solar farms through to homes, businesses and shopping centres. And we seek to optimise the way that energy is generated and consumed in these locations.
“What we can effectively do is modulate when energy is used and stored. By being able to choose when to do things in a renewably powered environment where there’s lots of electrification and storage, means you can make energy cheaper,” Hutt explains.
While VPPs might solve the challenge for homeowners who put solar panels on their roofs, and are able to afford battery storage, it doesn’t help everyone.
“Those that can participate in VPPs can actually drive revenue from that investment. Effectively their electricity ends up being free and they might even earn an income from it. They’ll be insulated from many of the higher costs in the future that will come from the early retirement of coal fired power stations,” Hutt explains. “But for everyone else, events like power station closures are likely to cause volatility in the national grid, and that will be priced into tariffs.”
Hutt believes that given the abundance of sun and wind in Australia, energy should be free, though distribution should be charged. Eventually that may happen, but the transition from fossil fuel power, which still contributes around three-quarters2 of energy in Australia, to renewables is tricky.
“In the future we need more energy at a lower cost. It needs to be reliable and available when people need it. Storage is absolutely critical in ensuring the lights can stay on and the system responds in the way it needs to.”
Storage remains challenging. There’s a growing number of battery types, for different renewable sources, but they are expensive. Regulatory certainty is also critical to the development of the industry, Hutt says.
“I find the regulatory uncertainty frustrating because we need more renewable energy and we need people to benefit from the transition, and we need to retire the old ways of doing things as quickly as possible. But of course, that doesn’t always benefit the shareholders of these big legacy businesses,” he says.
Eventually costs should come down for all consumers of energy, Hutt says.
“The cost of solar has decreased very rapidly. Storage, unfortunately, is not declining as rapidly because there’s a raw material crisis and competition for those raw materials.
“And government policy around the world is shifting very much in favour of renewables, particularly in places like Germany and the United Kingdom.”
“In Australia we need government funding to help achieve equity for the average homeowner, otherwise the balance of power is generally going to lie with those who can most afford to insulate themselves from cost increases,” he says.
A different type of investment
AMP Capital has been part of the Evergen journey from the beginning, back in 2016.
“Evergen was an energy start-up at the time, so it was a very different type of investment for AMP Capital, more of a venture capital style play,” says Bopha Ly, Managing Director, Energy for AMP Capital’s Infrastructure Equity business. “But we felt it was important to participate, to support the energy transition, and Evergen is at the forefront of that.”
“The creation of virtual power plants is in my view going to be critical in solving the intermittency problem that comes with transferring from thermal generation in terms of coal and gas, to a landscape comprising largely of solar and wind.
It gives ordinary households access to technology that helps decarbonise the Australian landscape and allows them to be on the de-carbonisation journey,” says Ly.
For Evergen’s Hutt, it is about creating a better future.
“We are lucky. This is a business with a purpose and a legacy, and we get to think about the difference we are trying to make for our children and future generations.”
Ly says Evergen’s ability to get products to market, optimise battery usage and get the best outcomes for customers are in Ly’s view competitive advantages. These are some of the essential elements that Evergen will leverage when it thinks about its next phase of the energy transition, focussing on commercial and industrial customers and utility scale renewable assets.
For more information about Evergen, click here.
AMP Capital Holdings Limited owns the majority of shares in Evergen Pty Ltd, alongside CSIRO and other investors.
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