Video transcript: Bridging the gaps - Paul Nillesen and Reid Morrison interview

Paul Nillesen

Hi, my name is Paul and I'm joined here by my dear colleague Reid, a co-author of Bridging the Gaps, our latest publication, looking at what needs to be done to get the energy transition done in an orderly fashion.

Question

Reid, maybe you can summarise what the original idea was behind this publication.

Reid Morrison

When you think about the quality of life we have today and the resource systems that have taken well over 150 years to develop, people are speaking in pretty ambitious terms around how they're going to change it.

And it starts to strike us as being really counterintuitive that nobody's really paying attention to - how do we become good stewards of the current system while we think of an evolution of it?

And we've seen some pretty unpleasant situations over the last 18 months where the resource systems were taken for granted and then we had to replace certain energy systems. And there wasn't an alternative.

Sustainability is something that we all care about, we’re all on the same rock, but nobody really seems to realise we've only got a limited amount of resources.

And when you look at the energy system and the other resource systems, be it plastics or fertiliser or steel, we're really entitled. We don't think about these as being a limited quantity.

Meanwhile, we're talking about a transition when it's going to take both policy and capital, but brilliant engineers and scientists.

And what we were trying to do is call all the parties together to have a discussion that actually was respectful and understood the gravity of it.

Because we're seeing some pretty significant risks being planted right now around these transitions with no real consideration of is it resilient, is it affordable, is it clean? And I'm speaking of all the above.

We're just trying to say, if we're going to solve this, we’ve got to work together. And then these are the gaps that we have to look at because the quality of life as we have it today wasn't just imagined, it took hard work.

Paul Nillesen

When we were looking at these targets that we've set up, highly ambitious targets set quite far out. In the sense that you can think 2040 to 2050, that's still some way out. But you and I know, and a lot of people in the energy sector know, that these things take decades to build.

So when we started walking it back saying if we want to get there in 2040, then we need a lot more of many, many things. And that's how all these gaps started to appear.

So maybe let's pick out a couple. One is around technology and the gap that we have there.

Question

Can you comment on that, where that big technology gap is?

Reid Morrison

The energy system's not going to be replaced by an innovator in a garage. This is deep science and this is stuff that is really heavy.

When you think about what we're trying to do - hydrogen hubs: awesome, carbon capture: cool. Why geothermal doesn't get moved to the front of the line is besides me.

There's some technologies that are more behavioural based. I think energy demand - we don't manage it. I'm as guilty as anybody, I don't know how much energy I use every month and I'm the grumpy person that goes around turning off the lights.

But when I'm driving in downtown Houston at night and I see all those lights on, it's like, why? Well, that's where you get into energy demand management.

And that's where we can get into actually using things like the artificial intelligence, the sensors and whatnot, to get to the point where we aren't using as much of it as we are.

Paul Nillesen

I think you need to invest in innovation and new technology, but relying on this miracle breakthrough technology that might then appear isn't enough to get you there. So I think doubling down on how do we use what we have much more efficiently, and how do we apply the technologies that are out there at scale more rapidly?

Question

Maybe let's pick up one more gap and then you can maybe ask me about a gap. The gap that I find interesting is this financing gap.

We also have some numbers in our report. I think it's based on Bloomberg’s New Energy Finance. So that just shows the amount of investment that's required if you want to get there.

What's your view on that? Is that going to slow us down or is that a way maybe to accelerate the energy transition?

Reid Morrison

I don't think money's the problem. It's an interesting situation because the capital is ready to invest, but one thing people were somewhat overlooking is capital wants a return.

And I was in Australia a couple months ago and had a conversation with a big infrastructure fund, and they asked about the inflation reduction act.

It was all designed around incubating industries, prompting the adoption of new technologies.

And they asked, is it going to be a profitable business after the subsidies and after the incentives which end in 2035?

I hadn't actually thought about it, but then going deep into that conversation, they invest for a 50 year cycle. They're willing to help subsidise the beginning of this, but they want to know when the incentives are gone, will this still be profitable?

The answer is, I don't know. Because it requires a certain cost of hydrogen and carbon and others that today just don't exist.

And so that's where the role of the government can come in and help offset some of that.

But they have to understand that setting a timeline for the next 12 years, it's a good first step, but now you've got to write it into legislation. And that's one of the other gaps that we talked about was there's not really the proper governance of our energy system.

You need to have a mature set of governance mechanisms to look at the stability of the energy system, make some decisions around the introduction of new technologies without abandoning the current one.

Question

So I'm curious, from your standpoint, given your years of expertise in power and utilities, what are the gaps that have you the most concerned and what prompted you to want to co-author this?

Paul Nillesen

That's great. So there were I think two. One is I think we've tended to focus on electricity because it's very visible.

So with solar panels, wind, but the electrons are only 20% of our primary energy demand. 80% is molecules, which are also then predominantly still hydrocarbons.

And so we tend to get the idea that, when you read the media, broadsheet, mainstream media and the conversation that we're there, that we've done it. I mean, solar panels, I have an electric vehicle, I'm done.

And so I think it was very important for me to also sort of highlight that 80%.

So it's great what we've done in electricity. We're not there yet, but there's a bigger part of our energy system that people don't really see.

And then the other big gap, of course, is connecting all of this stuff. It's the infrastructure and given that our molecule system is five times the size, four times the size of our electricity system, from an infrastructure perspective, that means that we need to build so much.

And we're already seeing that in many countries, this is now the bottleneck in many places. You can't feed in renewable power. You can't take out more electricity if you want to switch away from gas.

Anyway, I think we can talk for another couple of hours, Reid, about the gaps, but we don't have that. So I want to thank you and, and suggest if you're interested in learning more about the gaps that you visit our website, where the publication is, and look forward to hearing from you if you have any questions or new gaps that we should investigate.

So thank you and thank you Reid.

Reid Morrison

Thank you Paul.