Navigating the energy transition in the water sector

As all industries work their way along the path to net zero, the rising cost of energy is necessitating a focus on reducing demand and cutting costs, particularly for large energy users like water utilities.

Ventia Energy Solutions General Manager Lena Parker said Australia is still in the education phase of the critical transition towards renewables for those that sit outside the sector, but mounting pressures are creating a growing urgency for utilities to address demand and shore up their energy supply.

“Regarding net zero, we often talk about taking care of the electron and then the carbon particle – energy security versus reducing emissions. They are two very different things,” she said.

“For critical assets, like water infrastructure, the priority is pretty clear: both are important, but we have to be able to manage the electron and make sure we have a secure, consistent electron being fed into our processes.”

When thinking about how to overcome the key pressures that are building around the energy transition, Parker said it’s crucial to get very clear on prioritising the steps forward.

“We have fluctuating costs in terms of electricity, and we need to make sure that we are able to decrease use as much as we can. But the situation we are in with energy is not just changing, it is uncertain,” she said.

“There is also growing regulatory pressure coming from a number of different angles. And sometimes regulators are still working through the next steps.

“We also have a lot of uncertainty around the transition risks that come with climate change. We are accustomed to using historical data to predict what we think is going to happen in the future. We are seeing unpredictable weather patterns and this ability to predict is decreasing.”

Among all this uncertainty, Parker said the importance of social license is also coming to the fore, with expectations around environmental impacts and servicing standards constantly increasing.

“Brand and public perception are important in this. It is so important that we get ahead of this. We have social license requirements with how we mitigate drought, but also in terms of how assets in pristine areas are being managed for the environment,” she said.

“With population growth, we need to expand networks to meet the needs of more people with consistent levels of service. All of this brings a need for transparency with communities and all stakeholders. Energy literacy and education is a really important focus that is needed for informed decisions to be made.”

Transition positions

In terms of where the Australian water sector is placed around energy security management, Parker said utility stakeholders are on a spectrum.

“There’s one end, where there has been very little planning. The other end of the spectrum is utilities that already have a whole portfolio of solar assets and a deep understanding of demand. Many utilities currently sit somewhere in the middle,” she said.

“Some organisations have little understanding of the opportunities available to them, and little provision made for the investment required to shore up their energy supply or reduce consumption. Having little investment isn’t always a barrier, as funding partners are available to step in.

“Many utilities have vast networks, and there are opportunities to bring on funders because there is the scale to do so. This is not an industry that is going away, given the nature of the service provided, which makes it a great place for funders to be putting their investment, particularly water utilities that are state backed.”

The first step to shoring up energy security is to reduce electricity consumption, Parker said, which can be achieved through efficiency programs.

“We have supply and demand to consider when it comes to electricity. First of all, this requires an understanding of where energy is being used across the network,” she said.

“If the information is available to be able to calculate and understand the demand side, then we can start to make informed decisions about what to do. Metering is a really important aspect of this.

“Some adjustments don’t need to cost a lot of money. It might be as simple as turning off a part of the network at certain times. It will also reduce water waste, and consumption of energy in pumping station and treatment plant activity.”

Parker said that, once overall consumption is reduced as much as possible, the next step is to rightsize supply by considering where to build generation and storage assets.

“Another opportunity is around how to work with the energy grid. Water utilities are massive energy users. Being able to curtail the use of electricity is valuable within the broader context of energy consumption. This is referred to as demand response and can be a revenue generator for the utility and materially benefit the grid when it is constrained,” she said.

“A number of utilities are already participating in demand response activities however not all are so there is capacity for improvement here.” 

Bridging the gaps

While there are lots of technological advances that can be made, in terms of implementing and investing in ways to reduce consumption and also generate, there are broader barriers that need to be addressed as well, Parker said.

“Energy literacy is one of those issues we need to continue to work on, but also cultural change within organisations, too,” she said.

“The third issue that is important to outline is the labour constraints and resourcing. None of the solutions required are specific to the water industry. Every industry has to do the same work to shore up the electron and reduce carbon.

“And if everyone is trying to do it at the same time, and all the same trades are being used to do this work, there is going to come a time when we are not going to have the people or resources to do it. When we talk about barriers, this is a really big one.”

While partnering to share the burden of transition is one way of trying to work through this issue, Parker said bringing all of this work to the market quicker is crucial.

“There is only one way for prices to go given the significant investment in network infrastructure. And bill payers are the ones paying for it in the end. Doing this work now, in the next two to three years, will help with this transition. Coal assets will retire in around 10 years. That will take a lot of supply off the table that the energy sector is working hard to backfill,” she said.

“Compared to a lot of other industries, the water sector has a substantial fleet of vehicles and trucks that need to be electrified, too. This will increase demand. Populations are also increasing, which is going to increase demand, too.

“If utilities can start to reduce energy consumption now, we will be in a better position to absorb those other energy demand increases that we know are on the way. We have got to move fast, faster than we have been moving so far. I can’t reiterate that point enough.”

And speeding up progress, as usual, is reliant on clear and actionable policy, Parker said, an aspect of the energy transition that requires concerted attention and effort on the part of the government.

“Policy is an important catalyst of change - clear, actionable policies are fundamental. If water utilities are to turn this around in time, there needs to be clear policy to help them,” she said.

“Policy drives outcomes. We need a really clear view of what the energy roadmap for the water industry will be in order to secure supply for this critical infrastructure.”