Alinta Energy MD & CEO Jeff Dimery's speech to the National Press Club of Australia

Our MD & CEO Jeff Dimery addressed the National Press Club today with a speech on Australia's energy transition.

Good afternoon everyone, and thank you to the National Press Club for hosting today’s address. It’s an absolute honour.

I would like to begin by acknowledging the Traditional Owners of the land in which we meet, and pay my respects to Elders past and present.

I grew up on Evans Street in Port Melbourne, Victoria.

My late mum, Wilma, and my five siblings and I lived in a worker’s cottage… and then moved into a small housing commission flat a few doors down the street.
My mum - who raised us from when I was three on her own - worked in a pub on the same street.

I went to visit Evans Street last year.

Jeff Dimery, Alinta Energy CEO giving his speech in front of a large screen

The pub was still there… although it’s changed its name and it’s had a pretty substantial refurb since last time I last peeked in.

I couldn’t help but reminisce about my first job selling newspapers outside the pub – my first taste of entrepreneurialism.

I did deals and upsold newspapers with jars of pickled mussels that I’d scraped off the pier at Port Melbourne earlier that day.  

I have great memories of my childhood.

My mum - with the help from our neighbours, and the help of us kids - did an amazing job of ensuring we never went without.

But, we lived in housing commission for a reason.

We were a tight knit and loving family… we just didn’t have much money.

I’m not sharing my story to elicit sympathy.

I’ve obviously been fortunate with my life and career… and my childhood situation is not my situation today.

I’m sharing my story because I genuinely understand what it’s like for families struggling to make ends meet.

And I’m sharing it because I know, of course, that many Australians today are finding it tough.

Our cost-of-living challenges are real… and it’s been a difficult few years.

I mention this at the outset, because the task ahead of us – the energy transition… the most important economic and engineering change in our lifestyles… one that’s moving us away from an energy and industrial system based on fossil fuels, to one built on renewables – is challenging.

And, if we don’t get this right, then it won’t just be people who share my childhood experience that feel the pinch.

We’re all here in this room today because of the Australians we serve and work with in one way or another – whether they’re constituents and communities, customers, or industry partners.

At Alinta Energy, our focus is on working safely with each other to run the most efficient business we can… to put downward pressure on the price consumers pay, to keep the lights on and keep industry competitive.

People need, and rightly demand, that focus… and recent RedBridge polling confirms that the highest energy priority for almost two thirds of Australian voters is ‘lower costs’.

Today, I want to do three things:

I want to respond to the myths and misconceptions about the industry… and talk about the important role that pricing has to play in enabling our critical energy transition.

I also want to explain what’s caused the drop in investment for large-scale renewables… and the role households can play in the transition from this point forward.

And, I want to leave you with the view that how we successfully work together – industry, governments, and consumers – and blend different energy sources efficiently… will be what sets Australia on the right track to manage and succeed in the transition.

I promise I’ll try my best not to bombard you with stats... but, I did study economics and finance, so expect there to be a few.

I want to start by saying clearly: I support the energy transition, 100 per cent.

I support the lowest cost, most economically efficient transition.

We know Australians want it… and we do too.

But, I’m standing here today because I don’t think we’re having clear conversations and public debate about all aspects of the transition.

Despite some recent great strides and clear direction from government… unfortunately, the transition is getting harder, not easier.

The era of easy wins is over… the hard wins lay ahead.

In January, AEMO released a draft of its 2024 Integrated System Plan… in which it outlined the significant task that utility-scale wind and solar has ahead of it to replace coal-fired capacity and provide for tomorrow’s industry and transport.

By 2035, the NEM is forecast to need 82 GW of utility-scale solar and wind… that’s four times the current capacity.

By 2050, we need to hit 126 GW.

That means we need to develop more than seven times the current NEM capacity of 19 GW to phase out coal by 2050… that’s close to a doubling every decade!

We don’t have time to get distracted by fringe voices anymore, or to get lost in the ‘gonnas’ – as in ‘there’s gonna be 20,000 jobs’, or ‘there’s gonna be some new technology that comes to the rescue’.

We have to work with what we know today.     

This task is vast, and the large energy players in Australia today are crucial to our success.

And it’s organisations like Alinta Energy that have the skills and track record to make an impact.

So, how’s the industry shaping up to get the job done?

Well, the hard truth is that it’s not the greatest time to be an energy retailer… here’s the big reveal – we don’t actually make amazing returns.

There’s a powerful misconception out there that, because energy prices have increased, we therefore make super profits.

That isn’t the reality.

According to the ACCC’s recent pricing report, retail margins are down to their lowest levels.

The average annual household electricity bill is $1500.

The average annual retail margin for electricity is… $34.

That retail margin accounts for about two per cent of that average $1500 bill.

The biggest costs are network fees and charges, which represent around 45 per cent… then wholesale electricity at 33 per cent… followed by retail and other costs, and environmental costs – both at 10 per cent.

That two per cent average retail margin per residential customer – the $34 per year – that’s a little bit less than a family meal at my local Red Rooster.

If we have a peek over the fence at the industry superannuation sector – let’s compare the pair, as they like to say.

The average industry super fees for a 45- to 50-year-old with an average $250,000 balance is about 90 times more – at $3,100 per year.

Now, I’m not picking on the super sector… I want my super to do well and to deliver healthy returns just like everybody else.

But, super is almost universal, and energy costs are almost universal – hence the comparison.

So, the margins are modest.

"The era of easy wins is over… the hard wins lay ahead."

But has the energy sector delivered great returns in Australia over the last five years?

There’s an easy answer, and it’s no.   

Any profits made on generating and trading wholesale energy on average across recent years have generally been in the single digits.

In the last five years, the top three gentailers in this country have collectively written off in excess of $10 billion of shareholder funds.

There’s a race to net zero… but it’s supposed to be for emissions not profit.

In the early era of renewables, Australia had the perfect investment climate for wind, solar, and pumped hydro.

It could’ve been seen as the goldrush for renewable generation… and certainly we saw no shortage of companies trying get a piece of the action.

But, very quickly, projects started to fail, loss factors increased, and investment cases started to crumble.

With a lack of planning and proper infrastructure, we quickly found the grid overwhelmed… leading to instances of curtailment and a lack of profitability… like the aptly named “rhombus of regret”.

I’ve had the benefit of working on every part of the energy supply chain for approximately 30 years.

I was a pioneer of the earliest large-scale investments, and the formation of the industry bodies and policies that supported their entry.

You can look at my track record, and Alinta Energy’s track record – I’m happy to be judged on our performance:

  • 98.5 per cent commercial availability over the past three years for our brown coal-fired power station in the Latrobe Valley; that’s no clunker
  • The first grid-forming battery in Australia
  • What was at the time Australia’s largest remote solar farm
  • The development and continued operation of a wind farm that produces more renewable energy than any other in Western Australia

The list goes on.

Allow me to use this forum today as an opportunity to be clear about what is needed to make more progress…

The energy transition cannot be achieved by simply having small entrants building new, shiny, low-capex, quickly built projects that throw extra generation into the grid.

The energy transition requires a group of energy participants capable of leaning into the bigger issues… to build portfolios that provide generation and firming… that give power back to consumers to invest directly into this transition… to fund and enable community batteries, selling back to grid, peer-to-peer energy trading – empowering the “prosumer”.

Indeed, AEMO notes that the plan for true transformation of the National Electricity Market from fossil fuels to firmed renewables – quote – “calls for levels of investment in generation, storage, transmission and system services that exceed all previous efforts combined” – end quote.

So, why has there been a halt in the progress we require?

What’s stopping more private investment in renewables?

I’ve mentioned that retail margins are relatively low, and that the industry has written off $10 billion over the last five years.

If it’s not an industry flush with profits then how can it invest in new generation; not on the scale required for the transition in any event.

And, despite the profits reported in the last financial year, the investment outlook for large-scale renewables is challenging.

Let me tell you why.

Higher costs and uncertainty about recovering those costs – that’s why.

In 2017, Alinta Energy developed and built the first big battery in Australia for around $1.5 million per MW.

Right now, we’re building another one that will cost roughly $1.7 million per MW.

That’s up. 

In 2020, it cost around $850,000 to insure a gas-fired power plant.

Today, it’s around $1.175 million.  

That’s up 40 per cent.

I shocked people when I spoke at a conference two years ago and said that it would cost $8 billion to hypothetically replace our brown coal-fired power station, which was acquired for $1.1 billion. Replacing it with pumped hydro and offshore wind today would now cost in excess of $10 billion, up $2 billion in a mere two years.

Developers, rightly, are afraid to lock in high costs in case they can’t be recovered.

When I sat down to write this speech, the future Victorian energy price for the 2026 calendar year was $58 a megawatt hour.

In 2026, we’ll still have plenty of brown coal in the system, producing ‘round the clock baseload energy, topped up by a decent amount of large-scale renewables and rooftop PV… that’s great.

"The energy transition requires a group of energy participants capable of leaning into the bigger issues..."

But, at $58, I can’t build anything to meaningfully prepare for coal to come out of the system.

I can’t build more solar, because we already have a solar glut in the middle of the day, which is sending spot prices deeply negative.

If I was just looking at that forward price, I would also be very wary about building new wind, because the margins would be slim to non-existent, and any curtailment – which is a growing problem – could be disastrous.

And, I certainly couldn’t reach financial close on pumped hydro without a clear price signal or support – which, in our view, will be critical technology in our future blended energy mix.

Australians got a sense of how bumpy the transition might become when Ukraine was invaded, and the government stepped in to shield them and businesses with caps on coal and gas pricing.  

Intervention may be, at times, necessary… but it can also be difficult to undo.

One intervention can quickly lead to another.

It’s a bit like trying to make one of those stress balls filled with liquid smaller by giving it a bit of a squeeze.

You can’t... It just expands between your fingers.

Governments are acting in a way that shows they appreciate this dynamic and the challenges at hand.

Funding via the Capacity Investment Scheme and state government contributions is becoming essential for large-scale renewables.

The ‘Rewiring the Nation’ commitments and supporting the transmission required so that new renewable projects can connect to the grid.

But, there are gaps and risks.

Our goals can’t be achieved without the deployment of new private capital.

State and Commonwealth balance sheets simply cannot carry the financial burden.

We have a glut of daytime rooftop solar energy, at the same time as 95 per cent of all large-scale renewables are getting curtailed – basically switched off – in some hours on high rooftop solar days.

The percentage of all energy produced by large-scale renewables that was curtailed increased from 10 per cent in the last quarter of 2022, to 13 per cent in the last quarter of 2023.

Now, you might think ‘three per cent, who cares’?

Well… boards care, investors care, and developers care.

No one wants to lose 13 per cent of their output – and no one dares think just how much more could be lost.

That could be the difference between profitable and unprofitable.

In short, ladies and gentlemen… continued subsidies at one end of the market are driving higher uptake into a glut and undermining the economics of new and existing large-scale renewables.

It means we need to focus on delivering a blend of energy reliably and affordably.

Now, don’t get me wrong – I know how much households love their solar, and how important solar energy is to the transition.

But – as with any of the intermittent technologies – on its own, it has plusses and minuses we need to solve for.

The daytime production from rooftop solar needs to be stored and shifted to when it’s required.

We’ll need household batteries… but they’ll fill up quickly.

We’ll need big batteries… they’ll also fill up quickly too.  

EVs will take time to build up to a critical mass, and for vehicle-to-home and vehicle-to-grid models and standards to flourish.

The keys – which have been pointed out by others, but bear repeating – are long-duration storage, high-capacity renewables like offshore wind, gas to fill in the gaps, and empowering and being honest with customers.

Long duration storage – particularly projects like Snowy 2.0 in NSW and Kidston in Queensland – that can be dispatched quickly, are urgently needed to help deal with the daytime solar glut.

Without pumped hydro – or in Victoria’s case, if the generation profile isn’t uplifted by offshore wind to something closer to baseload – then coal and rooftop solar will be locked into a negative feedback loop.

This will undermine emissions reductions, and it will undermine the economics of new large-scale renewables and storage developments.  

Even if pumped hydro and offshore wind are more expensive upfront, how will it compare to leaving the grid issues unchecked?

These are the urgent conversations we need to have.

As I mentioned at the beginning, one of the big drivers for me personally – and for Alinta Energy – is making this transition as equitable for customers as possible.

And, there are opportunities available to industry to help customers through technology.

For example, Alinta Energy is scoping the ability of customers with rooftop solar and batteries to transfer or trade a portion of their output to family members.       

We know it’s technically possible on our platform, and it should help to alleviate some of the imbalance of homeowners dominating solar and battery installations.    

"Our goals can’t be achieved without the deployment of new private capital."

We’re exploring other options too – like inviting retail customers to be co-investors in wind farms and giving them a portion of the output offset against their bill… as well as providing better insights about their appliances via itemised bills that show what’s being spent on heating and cooling and refrigeration – and even suggesting replacements that would be funded by energy savings.

We’re also doing our best to operate efficiently to keep costs low, and to leverage scale and technolog, to make our impact count.

From an asset development perspective, with limited labour available, large engineering, procurement and construction contractors don’t get excited about the prospect of installing one big battery… but we can get their attention by talking about a $10 billion pipeline.

You came here for truths and straight talking about the transition… so, here’s a doozy.

Australians will have to pay more for energy in the future.

We will spend more as a percentage of GDP on energy, energy services, and energy infrastructure.

Whether we pay through the tax base, or pay the large upfront costs of an EV, or batteries and solar… or we’re paying more for electricity from the grid – we’ll all pay more in aggregate.

We need to be honest about that.

And, I don’t think the average Australian is prepared for that reality.

Capital costs more. Labour costs more. Transmission costs are rising.  

But, there are going to be alternatives.

Electricity might cost more, but your petrol bill might disappear.

And, if you’re prepared to change your behaviour and use most of your energy within certain windows of time, you will be able to have greater control of your bill.

Getting over the hump of this very difficult part of the transition is going to require partnerships in all directions.

Australia has a real opportunity to leverage renewable energy in this country, with proven technologies that we can work to firm up our economic security and resilience.

For governments, that means maintaining clear public policy, and not getting distracted with new ideas without a firm social mandate.

We know what energy mix we need to blend together today… we just need to get on with it.

And, for industry, we’ll partner with customers to help them store and shift their load to when energy is cheap…

And, hopefully, we’ll partner with governments to bring on large duration storage to help shift the glut of solar out of the middle of the day for use during peak times.

Alinta Energy is spending tens of millions of dollars of development on a multibillion-dollar pipeline of renewable projects because we’re optimistic that these issues can – and will – be resolved.

Australia has made tremendous progress on the transition so far, and we’re optimistic about the industry’s ability to deliver more, if the settings are right.

Ladies and gentlemen, the energy transition is tough and getting tougher, but it is doable.

In my view, the greatest challenge will be achieving our shared goal while ensuring efficiently priced and reliable supply is maintained.

We need to be optimistic, yes … but also realistic.

The industry costs have risen, and current margins and returns are relatively modest.

Developers are pulling back on commitments to build large-scale renewables because they don’t want to lock in high prices that may not be recouped.  

Rooftop solar is contributing to low energy prices at various times in daylight hours, but it isn’t affected by price signals in the way large-scale generators are.

It’s a problem we need to solve, yes with gas, and with pumped hydro, and offshore wind, and more batteries... in partnership with households and governments.

We’re all on the same team – and all we’re really debating is the pathway.

It can’t be an all or nothing game – the risks are too great.

So, let’s be straight up with each other about the transition.

Let’s do our best to keep costs down, and get the blend right, and the timing right.

And, let’s get on with it.

Thank you.

More than great energy. 

That’s better.™