Are we expected to believe AGL Energy’s embrace of solar, batteries and stand-alone off grid homes?
If AGL’s claims have any credence then we’re expected to believe that it has embraced distributed energy, solar power, 'self consumption' with batteries and off-grid homes. As reported on Monday’s Climate Spectator, AGL claims it wants 40 per cent of the up to 2.5 million homes that will leave the electricity grid by 2020.
Firstly, it’s hard to believe that AGL actually believes those figures (though given the trajectory of the cost of storage, they may prove to be underestimates). A business change like that for AGL is like a Kodak past giving up on film and chemicals for a digital-only future, with instant processing at variety stores such as Kmart, Big W and supply stores such as Officeworks – it'd be selling digital cameras and dominating the space now owned by Facebook’s Instagram.
That’s not to say that Kodak didn’t try, in one of its many split personalities. In fact, back in 1975 Kodak developed the digital camera and updated it in 1986 to include 1.4 million megapixels, which would have been enough to start a business competitive with film.
In a growing market that now has a camera in everyone’s pocket – not just in the West but in developing countries, and in some places where maintaining daily sustenance is still a challenge – Kodak could have continued their 100-plus year domination of the market.
But it didn’t; it faltered and, in 2012, filed for chapter 11 bankruptcy protection.
Another case in point, close to home, is that of General Motors Holden. I did some consulting with them a few years back just before the Volt hit the US market. This was while Labor was in power at the latter end of the global financial crisis and the supposed $1 billion green car fund was a big announceable of Kevin Rudd’s government. I let the Holden's strategy guys know (yes, possibly an oxymoron but I didn’t name them) that their best way to survive given that their bankrupt US parent had all but cut them adrift was to come with a plan to replace the Commodore with the Volt. Still, call it the Commodore if that was what they believed was required to sell into our market but clearly use the Volt platform. Then lobby like crazy to get the federal government only procuring pure electric and range-extending plug-in hybrid electric vehicles (which is what the Volt is).
After a week of meetings, butcher's paper, marker pens in all sorts of effervescent colours as well as an overhead projector that could never quite get a sharp focus (also an analogy for their ability to perceive their plight), a summary was posted on the screen. It said that myself, representing the “Environmental position”, was encouraging them to set up a production line adjacent to the existing Commodore line at the Elizabeth assembly plant. Frankly, I was flabbergasted, I had told them 100 times (and I’m known for letting my opinion being known) that my proposal was that they upgrade and replace the existing production with the Volt or Volt rebadged as a Commodore.
The idea was never going to get through. They just had to die – 'be-Holden' to the olden days … is what they were.
That takes me back to AGL. In simple terms its business is about acquiring and growing customer numbers. AGL is fairly vertically integrated and has a huge exposure to lots of baseload power plants, including the nation’s single dirtiest carbon emitter Victoria's Loy Yang A power station. AGL needs to get as much of this power out to customers as possible, and preferably their own customers. In order to “help” customers or “facilitate” them getting off the grid, AGL has to go fundamentally and strongly against its own interest and main business imperative of matching supply that they possess (underutilised fossil fuel generators) with offtake (retail customers).
AGL tried to dabble in this previously when it bought residential solar outfit Rezeko. Since then we haven’t heard much from AGL Solar. AGL Solar doesn't have a strong reputation in doing a good deal, or a quality job. At best, some customers may ring them for a gas or electric hot water swap over when they fail, but that’s the extent of it.
To most AGL is just a necessary evil, a power company that you have to live with and can’t live without, at least those who haven’t discovered innovative lower priced Powershop that is, the electricity company which only owns renewable assets and which may have a few tricks up its sleeve and could be fresh and dynamic enough to really take on the opportunity. Or perhaps it will be a non-traditional entrant, SunEdison (formerly Energy Matters/Apollo Energy) which can arrange a complete package of finance, solar and batteries, stitching up a customers entire gross energy spend for 10-15 years.
Finally, even on the day of AGL’s announcement when it was claiming its new CEO was a man with a strategic eye on distributed solar energy and storage, another senior executive, Marc England, was out making false, misleading and self interested claims that “fly-by-night” outfits were upselling customers in Queensland to buy 5kW solar systems rather than 3kW systems. If AGL was truly all about the best outcomes for the grid and customer then they’d be encouraging customers to install bigger systems in preparedness for batteries and as a selfless act to supply other customers who aren’t as fortunate enough to have enough space to install a system on their own roof. No, AGL in its comments confirms that it's only interested in selling AGL’s old fossil power and will try and box and minimise the damage from solar at all costs, including by misleading the public through more creative anti-solar and anti-renewable messaging.
What’s more, AGL is claiming that solar customers are subsidised to the tune of $270 a year. This is a ridiculous claim. If you can imagine a solar customer’s generated units of electricity were each like little cars, what AGL would have us believe is that that for each unit all tolling points between the customer's house and the old outdated coal fired generators must be paid, even though the solar unit car only drives to the house next door or at most down to the end of the street.
This leads me to the basic conclusion that AGL – before it goes out and cannibalises its customer base and therefore guaranteed recurrent offtake – will falter and report many a loss, probably even be wound up, dismembered and acquired.