By our projections we think that about 45 per cent of total generating capacity in Australia's grid will sit ‘behind the meter’ by 2040. So this is a real megatrend, which is changing the structure of the system from centralised to distributed, with a legacy centralised backbone.
The other megatrend is of course decarbonisation and the continuous march of clean energy. Clean energy technology costs have fallen continuously - for instance solar panels have fallen 99 per cent in cost since the 1970s - and will continue to fall because they are driven by very powerful experience curves. These are relationships that say the more of something you produce, the cheaper it gets.
Solar panels, wind turbines and batteries are just going to keep getting cheaper and cheaper. Already they're easily the least-cost form of new electricity supply. If you want bulk new electrons, the cheapest thing to do is to build a wind farm followed closely by a PV plant.
Through batteries and other sources of flexibility, like demand response and electric vehicles, technology is also finding the cheapest way to firm renewables and provide reliable supply.
So we're going to see the gradual and continual attrition of our coal plants. No new coal generators will be built in Australia. And almost everything that replaces it will be renewable.
We'll still need a bit of gas in the mix for the long periods when renewable supply is low but coal will be obsolete. So all up we're heading towards a low-carbon and highly-decentralised system, all thanks to technology and economics.
Herd: I guess I would take decentralisation and turn it perhaps into mainstreaming as a key theme.
That mainstreaming is not just about embedding it in how you do business every day as an investor but also in how you assess the risks and opportunities at an industry sector level, at an asset level, at a company level for investments.
So that increasing sophistication around the different dimensions of the decarbonisation trend, what that means for your investments is it’s only going to continue to become more mainstream, more decentralised, more sophisticated, more common in the way people do business.
So less people specialising in sustainability and more people having sustainability embedded in their day jobs.
The second theme I want to talk about is increasing competition. Whether it’s investment managers pitching to asset owners, product innovation, whether it's infrastructure funds emerging.
You see it already in the property sector in Australia. There's a huge amount of competition in the private sector around harnessing the competitive opportunities of this transformative trend.
This is one of big areas of innovation we see and when you get competition, you get acceleration and where you get acceleration, you get scale, continued investment and activity.
I guess the last point that I wanted to pick up on is for a long time in Australia we've been having a very binary conversation around carbon and energy issues. Basically we've been having ‘to price or not to price?’ debate.
We priced and then didn't price and now we're sort of pricing and shadow pricing. The core proposition which sits at the heart of it is climate change is a financial risk and is the overarching theme that will continue here.
I think there is absolutely no doubt increasing pressure from investors to companies to be disclosing the financial implications of climate change for their business - and then more importantly what they do with that information - is where you're going to get that continued acceleration of mainstreaming within the finance sector.
Thornton: The way that I think about this is in terms of both cost and then integration. If we accept the emissions debate in this country has over the last decade has been a waste of time, for us in terms of really developing and accelerating the transition it's been about dealing with cost and dealing with integration.
The reality is today if you're building a new power station the lowest cost is clearly renewable power. That's obviously why we’re seeing unprecedented levels of private investment in energy generation in this country
There was about $A10 billion worth of utility scale wind and solar projects in Australia and about $A2 billion worth of rooftop solar built throughout the course of last year. In my mind the cost issue is bedded down
I guess the real challenge we're right in the midst of now is about integration. It's in the context of an energy system, a market and a set of regulations designed for the 20th century - not for the sort of smart technologies we're deploying now in very different ways.
I think the next decade is the decade where we will truly evolve our market and evolve the regulatory framework.
Tapley: Focusing firstly on my very specific world of lending I think we will see the development and the emergence of products beyond green bond.
For example, the green loan market is now gathering momentum with the release of Green Loan principles to guide it. Investors are indicating interest in structures that give them access to project level exposure, so the green project market has some potential.
On the enduring pricing question, I think in the longer term ‘green’ isn't going to be the challenging asset class, the challenging asset class is going to be the brown…… I can't wait for that moment because that's when the pricing conversation really changes
The second part for me and I think the more interesting one is this theme of decentralisation we have already touched on, layered with consumer-driven demand and technology.
People want to control the goods and services which previously corporates have controlled for them. Putting this into the context of this topic – just like consumers want to control their power supply, so they want to control where they get their money from and how they move it round.
What is fascinating is the potential for integration between those two things as a result of technology.
I think in less than 10 years’ time we we're going to be generating our own power and we're going to be selling it to each other or bartering it for other consumer goods in a shared economy enabled by technology that consumers literally hold in their hands.
Andrew Cornell is managing editor at bluenotes