House Standing Committee on Infrastructure, Transport, Regional Development and Local Government

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Transcript: Session 2 – Plenary

Benefits and challenges of integrating smart technology into existing infrastructure

• BURNS, Mr Alan, Partner, Strategic Connections Group

• PERCIVAL, Dr Terry, Laboratory Director, NICTA

• THOMAS, Mr Martin, AM, Chair, Dulhunty Power Ltd

• WIGHTWICK, Dr Glenn, Chief Technology Officer, IBM Australian and New Zealand

CHAIR—It is terrific to hear the buzz in the room with people coming out of the workshop sessions, hopefully meeting with people that you may not have met before but have heard of by reputation. I thank the convenors. We have four of them up here at the front and they will be giving some summaries but obviously there were some other convenors as well. I thank them for providing us with your expertise to facilitate those workshops. I did manage to pop my head into each one of the workshops, only for a brief period of time at each one, and it was terrific the level of discussion and the level of detail of the discussion that you managed to get through and across in less than an hour. So, well done to everybody.
We are now going to hear from some of the workshop conveners to give a brief report on the contents of their discussion. Can I invite Glenn from IBM to come up and report on the water workshop.

Dr Wightwick—Thank you very much, Catherine. I should point out that not everybody who works for IBM’s name is Glenn! We had a very vibrant discussion in our workshop. I think it is amazing what you can achieve if you limit the time to one hour. I would like to acknowledge Tom, who was my co-convenor, and all the other panellists in our session. We addressed the three key questions that were raised earlier on. I will read briefly from some of my notes across each of those different areas.

The first one was the question of the critical management challenges in the water sector and how these may be addressed by smarter infrastructure. I think there was unanimous agreement about the challenges we face in water here in Australia and very broadly, across all aspects of the environment, cities, population growth and so on. Whatever we do in terms of smart infrastructure needs to address all of those issues.
We talked a lot about—and, again, had very strong support around—the critical role that information plays in this space. There are a lot of aspects of information that are critical. We talked a lot about spatial information—knowing where water is, knowing where the resources are and knowing where the infrastructure is. We talked about the importance of open access to that information and the role that standards play to enable interoperability and applications to be built on top of this information.

We referenced some of the current Gov 2.0 Taskforce work, which I think demonstrated the level of innovation that can be built and, therefore, potential services that can be created on top of open access to information. We also talked about the timely, or real time in some instances, value of information—as a consumer using water at home, being able to understand immediately each day how much water is being used versus understanding that three months in arrears when a bill arrives, or, in the case of the environment, understanding the health of a river system, not necessarily on a daily basis but perhaps more often than might be published now on an annual basis and so on.

We also reflected on the fact that the systems that we are putting in in the area of water are becoming more complex. We are talking a lot about recycling and so on. As the systems become more complex, the role that information will play in helping to manage that complexity is also critical. Again, this reinforced the notion of the importance of smarter infrastructure in that space.

Moving on, the second question was around public and consumer education, awareness and support of smart infrastructure in the context of water. We recognised that there were different communities that we would be dealing with here—people in rural environments, people in urban environments and a whole class of different communities and users of water. We identified the fact that the perception of the value of water has dramatically improved in Australia over the last few years, obviously mainly as a consequence of drought, but that perception may vary over time. An example given was that, in Queensland, going from 18 per cent full dams to 100 per cent full dams would change people’s perception of the value of water. But, of course, the infrastructure that we are building lasts for a very long time and is incredibly expensive, so we need to balance the fact that that perception of the value of water may vary.

We talked very much about the requirement—again, coming back to information—for people to trust the value of that information, to trust its transparency, its immediacy and timeliness. We also talked quite a lot about things like recycling and the acceptability of recycled water as a potable source. It is half as costly and twice as energy efficient as desalination and yet we seem to have been suffering from a set of ill-informed decisions. We were wondering again about the opportunity to have accurate and trustworthy information in providing confidence and trust in alternative uses of water.

The final area we talked about was the question of the cost-benefit of retrofitting smarter technologies into the existing infrastructure versus imbedding it in the design process. I think we very quickly converged on the fact that the reality is that the vast majority of the infrastructure in place in the water area is old infrastructure. If, in 12 months time, I went and looked at what is in the ground today, 99 per cent of it probably would not have changed. We obviously need to figure out how the cost-benefit will work as we retrofit smart infrastructure into the existing infrastructure. There are some very good examples where that cost-benefit is being demonstrated. For example, the Rubicon technology developed in Victoria applied to the Murray-Goulburn basin has delivered significant benefits in terms of the efficiency of the irrigation system there—retrofitted, obviously to a system that has been developed over the last 50 or 100 years. It is of course immediately obvious that any new infrastructure that is deployed needs to have smart infrastructure in place. Again, we can relate that back to the importance of data standards and all the rest of it so that all of the new infrastructure can interoperate.

I will finish with two conclusions which we applied across all of the different questions. It really came down to the notion of efficiency of use. We have challenges at the border. We are seeing an increase in the population of Australia and more use of water in manufacturing and various different areas, so we really need to understand how it is collected and how it is used to ensure that we are using it as efficiently as possible. The last point was around the cross-jurisdictional challenges that we face. I think we acknowledge that work has obviously progressed there in terms of information networks and Bureau of Meteorology water divisions collecting information across boundaries and so on, but there was a strong acknowledgement that there needs to be continuous and constant focus on those cross-jurisdictional challenges. I will leave it at that point. Thank you.

CHAIR—Thanks very much for that, Glenn. I know it is not an easy task to try and consolidate, in a very short period of time, the complexity of the discussions that you had. Alan Burns from the Australian Railway Industry Corporation is going to report back to us for the transport workshop.

Mr Burns—Thanks, Catherine. We had quite a diverse discussion. We were looking at transport, which means that sometimes we are looking back to the 1930s in technology and also to roads that are not yet built in Australia, and yet we are looking towards the future. So there is clearly some conflict and some difficult decisions to be made there. I recognise Max Lay, my fellow convenor and prodder. We actually visited the Ten Commandments at one stage!

Much technology is available or under development now, and we all recognise that, but it is disparate in where it lies, where it is up to, its potential and where it might be used. We recognised that we are already a smart country but we are not necessarily, without being too critical, integrated or working together as strongly as we could. Smart infrastructure has a lot to offer the transport sector; there is no doubt about that. But we need a national strategy for smart infrastructure and leadership, and we look to the committee to assist industry in going about that.

The committee should also consider the wide diversity of stakeholders in both freight and passenger transportation in Australia, in all modes. Our efforts at pre-implementation stage—for instance, in the EU—are often very collaborative. It is not necessarily the same in our country at this stage.

We identified some concerns and challenges, which I will outline, not necessarily in order but as they came to us in our discussion. There is a large quantity of data. We have to ensure we have virtual digital corridors, if you like, for that data. We used to have land corridors set aside for development of transport networks in the past. Now we need to do something similar in the digital age. Some networks are at capacity and we need to collectively examine enablers or blockers for technology and how to take those forward. We need a centre of excellence approach distributed across stakeholders and we need coordination of input. We still do not have road and rail base pricing, although another five minutes would have fixed that, I think!

Freight and passenger priority needs to be recognised. It is a problem. It is not solved and we do not necessarily have plans to take it forward properly yet. We did recognise that there is no doubt that smart infrastructure can reduce greenhouse gas emissions. The numbers stack up with regard to that. But some fundamental questions do emerge out of this sort of discussion. What do we want roads to do in the future? As we move forward from 30-year designs for transport networks and hardware, we are now looking at something that might last only five to 10 years before it is completely overtaken by new information technology. That is a different approach to infrastructure.

Turning to our history in ITS, moving into the 2000s our technology was up to scratch, as reported by a number of people, but we have lagged. We need to leverage off what the world has developed, so let us not reinvent the wheel. There is a need to change user behaviour. It is critical to ensure better acceptance and use of technology—it is a key leverage tool—and through that we need early involvement. I also mention that in terms of quick wins so that we do get the support of government and the community on side.

There would seem to be maybe four key areas to consider. The first one, which came up time and time again, was collaboration. I do not think anybody in the room representing the industry was scared of that in any way, shape or form. But we are probably talking to people to whom we have never talked, so collaboration in new areas and even amongst rivals is a challenge. In relation to the state-to-state focus, we need national leadership. I think everyone recognises the value of having a national system architecture. I will probably mention that again in a minute but that was a strong point of consideration and this is an ideal time in the development of new technologies. There are road safety benefits that come out of incident management and the better use of technologies, and this is very much a transformational process. As I said before, the future is no longer a 30-year design.

There needs to be clarity about the investment and business case. There was much discussion around that. The questions are: how do we value the social impacts and why are we not valuing them as we move forward? The other key element that came out of our discussions, one way or the other, was the lack of common standards. Potentially, we need to develop new standards but, again, let us not reinvent the wheel: there are standards being used effectively in other parts of the world. We need stakeholder input to make sure that we get quick and easy access to those. There needs to be a national ITS architecture and that was a common theme with a full-stop after it.

I have already mentioned basic road conditions. There is a need to link the environment at the design stage. I saw one comment which seemed to echo the comment of the Privacy Commissioner and which was an interesting thought—in our changing world it is probably essential that we do it now as we develop our thinking. Smart infrastructure: ITS cannot operate without data. The spatial information is inconsistent and we need to invest in data collection. It is something we can actually get underway now. What do we have, what do we know and where are the gaps—let us do something about picking that up. That is going to be essential as we start to develop policy in the next few years.

There was an interesting comment about freight logistics but it is much the same in the passenger area, the passenger rail area, at least. It is a disparate industry and reorganisation is critical. Possibly, new paradigms between stakeholders have to be established. The rivals, as I mentioned, now have an opportunity to work more collaboratively and we have seen that over the last 10 years in rail. As road operators have moved into the rail space, it has been not so much about competition but more a matter of how we are going to cope into the future. Road safety may provide a development implementation model. I am not familiar with that model but it is something that the committee could consider. High-occupancy vehicles and high-occupancy tolling are aspects that might change with potential priorities given to new vehicles, electric vehicles and different technologies that might have an environmental advantage. Land-use connectivity to virtual transport solutions is another area where we need to lift our thinking, have a look at where we want to go and overlay that in terms of the creation of our cities as we develop in the future.
My critical comment is that we do not seem to have a shared vision so let’s develop that and, in terms of the road and rail industries, work more closely together. That is absolutely possible. The transport committee might also like to pursue a common approach to standards development with this committee. That was strongly put forward from Lyn O’Connell. Maybe a reference group should be created so that standards being created for the current transport sector do not overlook ITS input.

Systems integration and standards development is critical. Contestability, and not public sector monopolies, is critical in what is developed, what is going to be rolled out and the advantage and effect on those. I will complete it there and say early gains are important to get buy-in from the public and other stakeholders. We have seen that. Where it is looking good we will get more and more support and maybe more funding from the feds. Also we should determine what our goals for the future are; maybe they are different from what they are today. Thank you.

CHAIR—Thanks very much for that, Alan. Martin Thomas, chair of the energy forum at ATSI is going to give us a report back on the energy workshop.

Mr Thomas—Thank you for allowing me to be the third speaker off the rank. I could not possibly have got my remarks together as well as the previous speaker in that time. In our working group, we had quite a number of extraordinarily intelligent people, apart from the chairman, and I hope I have been able to capture what they said.

I started the thing with some thought starters of certain areas. With respect to my contributors, rather than go through contribution by contribution, which were random and coming from interest areas, I will go through the headlines and see what the response was from the floor. If I fail to capture what any of you have said, please forgive me—I will do my best.

We started off with what we might call a SWOT analysis for Australia. What are our strengths? They are plainly obvious: we have numerous physical resources and incredibly, but not so incredibly, brains. We have an extraordinarily well-educated brain, and I am coming back to education. We are brainy, innovative people. We can do anything with pliers and a piece of fence wire. We have a lovely freedom in our culture to talk to each other and to listen to each other across boundaries. One contributor pointed out that in another very large country, the world’s second-largest economy, this was not quite so easy.

What are our weaknesses, though? In the energy sector, I go back, as I have frequently in the past, to our Constitution. Our Constitution at the time, when we were several nation states, quite reasonably put the powers of energy with each of those states. That was quite a reasonable thing to do at the time. The whole notion of interconnection was inconceivable. It is now not only immensely conceivable but it is the way it works and it is the way the smart grid will have to work. But still the powers lie with the states. I am not a politician. Catherine, you are and I know that hospitals were done in a week last week. Maybe energy would take a little longer—I am not quite sure. But at the moment we have some quite serious differences and the old rail gauge issue is a wonderful example. In the energy sector the rail gauge issues are not quite so visible because we all see wires in the sky and they all look the same. But they are actually not. The control systems, the interests and the cost recovery systems are different. The ownership patterns are dramatically different. Victoria and New South Wales are dramatically different. For investors that is quite difficult. Those are Australia’s strengths and weaknesses.

I come then to regulation, which flows on from the legal surround of the whole thing. Do we have too many or too few? I simply repeat what I heard in the conference yesterday that we have no less than 12, and possibly more, energy regulators of gas, electricity, renewables and so on in Australia. Is this too many? I will leave you to make your decision on that. I have a view and perhaps it is obvious. As long as the functions of the regulators were all identical so that they all provided a clear common set of rules for those who would seek to invest then it would not matter—that is, if functionality were common throughout—but it is not.

The suggestion that we might come up with a single regulatory authority or, at the very most, two with appropriate departments talking to each other might very well be a model for a way ahead. It will be hard to do; I am very aware of that. Having said that, if we were to do that, I hope that it would not be a political football and that it would carry with it much community consultation and certainly governmental bipartisan support. Without that it will simply be kicked around for years ahead. We do not have to start from scratch with such models. There are very many overseas models that we can draw on in the regulatory environment, and perhaps we have in the past, but certainly we are far too scattered at the moment in the regulatory area and it is quite hard for investors.

The next heading is markets and price signals. Are our market signals sufficiently appropriate? Are they adequate? Are they driving investment where investment should be, whatever ‘should be’ might mean? The answer is clearly no. I happen to live in New South Wales, and New South Wales is faced with a very clear shortage of power by 2014. It will of course overcome that by the very rapid deployment of gas turbine power stations, just as it did when the Liddell Power Station collapsed back in the eighties. But, having said that, do our gas turbine power stations open cycle the right technology? For baseload they patently do not unless you are really excited about the costs of your power going up quite considerably. Are they the only thing we can do? At the moment it seems that yes, we are caught in a cleft stick but we tend to focus very strongly on renewables. As I have said to people, if I sound as though I am anti renewables I am absolutely not. I was the founding director of the Cooperative Research Centre for Renewable Energy. I love renewable energy dearly, and it is an appropriate technology in a certain place. But it really is not the baseload technology that drives our industries, and if we think it is, because of feeling green—and I am a real greenie, I promise you—then we are going to find the costs will go up and industry will go offshore, as others have said.

We need to be very careful how we do that without forgoing our environmental credentials, which are very strong. We have got to be very careful that we do the right thing. Dare I say, Madam Chair, that I need to admit to you that, as some of you would know, as a member of the UMPNER review, the Switkowski review, back in 2006, I have come to the feeling that this country at least should consider nuclear energy as part of, but not the only thing in, its portfolio. That is not anti renewables at all; it is just one of the things in the portfolio. I find it illogical and curious that we can sell about 25 per cent of the world’s uranium to create a total of 15 per cent of the world’s electricity to 29 different countries and yet pretend, for some reason that I cannot understand, that it is inappropriate for Australia. Anyway, it is a hard one. I do not think the community is quite as anti it as some might think.

Let me just go back to business models. Yes, there is a business model. Professor Hill told the group of a business model from the UK which might enable us to consider more intelligently the whole across-the-board modelling of all the different technologies available to us and apply sensitivity analyses in the way that most of you have done in your own businesses to the whole global picture. I suggest that that might well be followed up, perhaps through Professor Hill.

In the technology area, a number of speakers touched on the huge energy efficiency dividend through a great raft of technologies, none of which are rocket science literally or metaphorically. But are the incentives there? Are the price signals there? No, they are not. Are the regulatory barriers, the perceived difficulties which are thrown in front of you, there? Yes, they certainly are. I made the comment that I am a chairman of a company which has invested in that and that company is on the shelf with accumulated tax losses. It is not a happy environment for investors in that most wonderful of all technologies, energy efficiency.

Technologies I have touched on a little bit; I do not want to go on with that. Is it economics alone? To some extent it is. We had one strong investor representative there who said, ‘Look, the returns and the assurance of the environment of investing in any technology at the moment is just not there, be it coal, carbon capture and sequestration or any of those kinds of things. The environment is just not strong enough.’ Perhaps that is an underlying message coming through from my group.

Then we looked at the smart grid itself. There were one or two specialists in our group, which was a pleasure because I am certainly not. One of the key points they made was that there is no point having all the elements of smart grids—and the elements are very many; the value chain is very long—if there are not assured communication pathways. We know the NBN is coming along. That might be part of it. Some utilities are developing their own communication networks for their own purposes. But the full potential of the smart grid, certainly in electricity and perhaps in gas and water, will not be there unless there is access to appropriate spectrum for this purpose, and I understand that that is not really there at the moment.

Research, development and demonstration: are we spending enough in this space? We currently spend, in aggregate, according to an academy report—for which I was part of the steering committee, so I guess it is probably right—around $500 million per annum on industry and government assisted RD&D in the energy space. The International Energy Agency norm—that is, average, normal curve—for other industrialised countries of our type and stature is roughly three to 10 times as much as that. I will just leave that with you. But I did have several researchers from the floor in my group echo that very, very strongly, and say they might even be persuaded to go back offshore again because they were getting 10 times as much money to their laboratory as they might get here.

Could we do with a single energy research council? We once did, but it was killed. That is an interesting item that could come back, and those of us in the techo area believe that could be true.

On education and training: are we educating enough people for the smart infrastructure? The answer came through fairly clearly: no. Are the young being attracted into this area? Do they even know what it is? No, they do not. Are we training enough apprentices in this sort of area? We gutted the apprentice thing about 10 years ago when we all went private, and the point was made very strongly by one contributor that we do that at our peril. We may end up buying expertise from other countries at a very great price.

Last of all: marketing. At the end of the day, it is every one of you, as consumers, who will pay for the smart grid. Do any of you understand what the value proposition is? My guess is: you might think you do, but every one of you would have a different view. So, just like selling high-definition colour television to the populace, who are buying it like crazy, if we want to do the same with the smart grid and suck out the benefits that will certainly arise from that—and all members of the value chain will get a benefit, not just some—then the marketing of the value proposition in simple lay terms to us, the unwashed public, has to be very carefully and smartly done.

Chair, thank you very much indeed for this opportunity. May I applaud this committee for having in its due process this interaction with us, the general public. I think that is a nice form of government. Long may it exist. That is why I am an Australian.

CHAIR—Thanks very much for that, Martin. As a Victorian politician who is receiving a number of letters from constituents who are concerned about the smart grid and about paying for it, I think your reminder around marketing was very timely. Dr Percival from NICTA is now going to give us a report-back on the communications workshop.

Dr Percival—I shall be brief. The problem with speaking last is that it is now almost an hour since half the discussions and I have forgotten them all, so it is going to be quite simple! I would not say we were the ugly duckling of the groups, but communications is itself a smart infrastructure; communications and IT are the foundation of smart infrastructure, so we are slightly different.

One interesting point that was made is that $43 billion or thereabouts is being spent on an NBN, but it is not being spent on a network that will give you access to the internet faster. It will give you access to e-health services, better education services and better transport services. Anything as crazy as precision agriculture or precision mining will all be enabled by the NBN, so it is much more than just broadband for games and the internet and Facebook.

Precision agriculture is an interesting one that cropped up. I was not expecting it, so I will give it a bit of time. To do precision agriculture—get the tractor or the mining vehicle going exactly within a centimetre of where it should—you need GPS correction, which means you need reference sites spaced everywhere and they need to transmit back to you. That is another interesting aspect to the smart grid that I have not heard mentioned before. Building on that, lots of industries will benefit from the smart grid, but we collectively decided, as communications experts, that it was up to us to educate the industry about the benefits. IT and communications are a very complex and quite scary thing, as anyone knows who tries to plug their laptop into a projector and get a PowerPoint presentation to work immediately. That’s an in-joke here!

But the complexity needs to be hidden from the users. I think the iPhone came up as yet another good example. You do not have to know how to program in Java to use an iPhone and get all the hundred thousand possible applications on your phone that can find you the closest restaurant or anything else you need. It is an education to the consumers, because suddenly they have got to make an informed choice. Twenty years ago, when I bought a house, I did not have a choice as to what electricity supplier or what water supplier I got; they were just there and I signed the paper and started getting bills. Now you are going to have choices about electricity suppliers, gas suppliers and the internet even. You are going to have to make choices about getting fibre to the home. It is going to cost you. It is going to be a different world. Am I getting pay TV? Am I getting IPTV? It is an education process there.

Another part of the education process for us as telecommunications providers or the IT community is reliability. All these different industries have different requirements on the reliability of what they want. With some things it does not matter if it is out of action for 30 seconds. With some things it is absolutely critical that the connectivity has to be there all the time. If you are doing precision agriculture, you do not want the GPS to suddenly tell you to turn right—or a mining vehicle can go off a cliff. There is a reliability issue there. There is also a time-bound issue. Some of that information, like in the mining  industry, has to be there instantly, whereas other information does not. With the electricity meter, maybe you have got a minute to update the tariffs—or the water things.

Consumer acceptance and knowledge of what is required are very important. This is an area where the general consensus was that you need some good trials to do this—not only to get consumer acceptance, government education, but really to do proper return-on-investment analysis, cost-benefit analysis, to work out the benefits of doing it. We know there is not an infinite supply of money. I have been told that about five times in the last two hours, I think. It is working out where to do the smart infrastructure rollout, which particular bit to do and when.

Privacy came up. The interesting thing is that, in this world, there is a need to give up some of your privacy to get better services. We had a talk in our group about a free bus service in Wollongong that they are gathering information on. In order to get the shuttle bus to come to you, you have got to give up the information that you are at a bus stop and want a bus. But then you are giving up the information that you happen to be in that particular spot. That is a balance that consumers are going to have to work out. They are going to have to give up a little bit. There is also an issue that maybe they want to be able to pull their smart phone out of their pocket and turn off the GPS. You can do that with most of the phones, but it is something you have got to be educated to do if you do not want anyone to know where you are. The Privacy Commissioner talked about microwave ovens telling someone out there that you cook microwave meals every night. Maybe you need a feature, when you get a microwave oven, that allows you to say that you do not want it talking to the home network, you do not want people knowing that information.

My final message is: integrate and collaborate as much as possible. The NBN is being rolled out. The smart grid, smart meters, are being rolled out. Smart water systems and geospatial reference sites are being rolled out. Smart transport sites are being rolled out—ITS. We should get as much collaboration and integration as we can. I think the analogy is: don’t dig up the road five times. You can tell when your gas or water is about to be upgraded because the council resurfaces the road and, within two weeks, someone comes in and digs it up. I think the message is the same as with the rail gauges. We do not want to repeat those mistakes of the past.

CHAIR—Thanks, Terry. I hope many of you get the opportunity to talk to Terry, because NICTA is doing some really interesting work in this space and Terry also has an interesting personal story to tell about the Wi-Fi case against the US. It would certainly be worth having a chat to him. Can I get everyone to again thank Glenn, Alan, Martin and Terry for acting as our convenors. Well done.

Proceedings suspended from 12.45 pm to 1.33 pm

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