The Challenge of Shaping the Intellectual Capital for National Resilience: Building a Collaborative Generational Knowledge Focus Based Effort

By Robbin Laird

During my visit earlier this year to Australia, the Williams Foundation seminar focused upon the sustainability challenge facing the Australian Defence Force as Australia confronted the changing geo-political dynamics in its region.

That seminar highlighted the importance of shaping a more sustainable ADF, and one in which Australian industry and trusted supply chains could reinforce sustainability.

During the current visit, many of interviews and discussions have broadened the aperture of sustainability to the next but interactive level, namely, how much resilience does Australia need to prevail through disruptions in supply chains aided and abetted by 21st century authoritarian states?

In effect, given the engagement of 21st century authoritarian regimes in globalization, the shrinking of national manufacturing and other vital skill sets has seen Australia along with most other liberal democratic states to face significant problems if the supply chains associated with globalization are deliberately disrupted.

During this visit, one of the very enlightening discussions with Australian analysts occurred at ASPI with Paul Barnes, Head of ASPI’s Risk and Resilience Program and with Neil Greet, who is an engineer and owns the consultancy Collaborative Outcomes, which provides strategic advice on resiliency and humanitarian action to federal and state government, industry and NGOs.

The two men have co-authored a report released during my visit which highlighted the opportunity and the need for the older generation of engineers working with new engineers to shape imaginative ways forward to design new energy systems and policies which can deliver the kind of resiliency and innovation which they believe Australia needs.

In our discussion, they highlighted that Australia has built its energy system around what the global market can deliver, and at the lowest cost. The infrastructure, physical and intellectual, to support a resilient energy system, simply has atrophied. And they argued that it needed to be rebuilt to recapture Australian capabilities for energy security.

They discussed both in our meeting and extensively in their report, the atrophy of the kind of systems wide thinking engineering and managerial talent which Australia needs to be able to do the kind of risk assessment which Australia needs to shape a more resilent approach to energy security.

As John Blackburn has put it elsewhere, “We cannot take an industrial age government stove-piped decision-making system and deliver the kind of compressive rethink and redesign which Australia needs to have a more resilient infrastructure and system of supply.”

What Barnes and Greet have focused on is the challenge of building the kind of intellectual capital which could lead such an effort

Paul Barnes underscored the core necessity to build knowledge bases to deal with disruption.

He argued that “we need to shape, build and sustain the relevant knowledge to be able to do risk assessment to prepare to anticipate and deal with disruptions. With regard to disruptions there are three key questions which need to be answered and domain knowledge shaped to be prepared.

“What could occur that is disruptive?

“How do you prevent the disruption?

“How do you recover once the disruption has occurred?

“And we need to invest in the kind of thinking and skill sets which can answer these questions, prior to having to muddle through a crisis”

Neil Greet focused on the need to shift from mindless market globalism to shaping the kind of collaboration needed both within Australia and trusted partners to deliver greater resilience for Australia and its trusted partners abroad.  He underscored that not only has Australia outsourced its supplier in energy but the skill sets and knowledge base to do the kind of systems engineering which could built out a more secure and resilient energy system.

Put in blunt terms, if infrastructure capabilities and security are not prioritized or acted upon by the Australian government and society, then the impressive modernization of the ADF will simply not be effective in times of crisis.

They emphasized in their report that “big changes are coming” in the energy domain, in terms of approaches and technologies. What they warn is that as Australia prepares for these changes, simply relying on the globalization system and market of the past thirty years will not give Australia what it needs for the future.

As Greet puts it in his chapter in the report: “There is a risk that Australia across government, industry and community will complacently mismanage the energy transformation and the transition from old to new will become dysfunctional.”

They pose in their report the question of what would a viable model for a next generation integrated energy system look like?

And built into that answer is clearly the question of energy security and resilience as well.

From the Report

The Persepctive of Dr. Paul Barnes

A reality of modern times is the public expectation that not only will flows of potable water from their taps and home sewage systems simply always be there, but their lights will always turn on at the flick of a switch. An enabler that underpins all these expectations is an effective and efficient electricity supply.

These services along with transport, and telecommunication systems are universally considered to be essential for raising the quality of life for humans. Access to these services is also a central factor in the productivity of firms and thus of entire economies, making them a key enabler of economic development.

Electricity networks are complicated technical supply systems with attributes that are more than a composition of many parts; they are a collective of many different types of parts, linked together and interacting with each other at different levels of scale.1 They are systems nested within systems, and it is their coupling and ensuing interactions that make them dynamic and at times unpredictable.

Essentially, the networks are complex adaptive systems, even those operating under conventional linear settings of generation, transmission and consumption. This is an important issue in our current complex ‘always on’ world where there is a need for assurance of reliability and interoperability within and across infrastructures.

Significant vulnerabilities in large power systems come from the complex interactions between the physical infrastructure (generation stations, transmission lines), the governance systems connected to them, as well as fluctuation in demand, diversity of generating sources, public policy, cost incentives and – not the least – weather.

It should not be surprising that a popular and recurrent catchphrase central to essential service providers (public or private) is resilience. Resilience is a relatively new concept in applied engineering. It is different to robustness which is more familiar and central to many design approaches used in buildings and structures. It’s about a capability inherent to a system to remain functioning even when affected by disruptions.

A recurrent theme in the management of such systems has been the failure to detect signs of trouble in one section of a wider system that fails or triggers significant disruptive effects in other systems via the inter-connectedness of these systems. Such phenomena have been referred to as ‘network events’ or ‘normal accidents’ in relevant literature.

The potential for the rapid spread of consequent impacts, geographically and through time, often renders a comprehensive understanding of a network crisis beyond the grasp of system operators or regulatory authorities. These events have been variously described as ‘outside of the box,’ ‘too fast,’ and ‘too strange’.

Beyond issues of reliability, resilience and complexity is the significant global trend of transitioning from the use of carbon-based fuels (coal and oil), as a predominant source of electricity generation, towards the use of renewable sources. One factor that complicates this transition is the high proportion of the world’s population still relying on these carbon-based energy sources in their daily life, while another is the simple sunk cost investment in existing carbon-based energy infrastructure.

As noted by the Australian Chief Scientist, Dr Alan Finkel, in the 2017 report Independent Review into the Future Security of the National Electricity Market – Blueprint for the Future, our complete electricity system is also in the middle of this energy transition. Dr Finkel states that there is ‘no going back from the massive industrial, technological and economic changes facing our electricity system’.

The review also suggests that ensuring reliable, affordable and secure electricity supplies will require an orderly transition, better system-wide planning and stronger governance. Together these factors will depend on a strong commitment to national coordination involving all levels of government, industry groups and the private sector.

A further factor in this transition is the increased prevalence of new types of electricity transmission networks such as smart grids. These can be more complex than the conventional network infrastructure by orders of magnitude given the use of enhanced connectivity and flexibility provided by using ‘internet-of-things’ mediated control systems.

These innovations will result in a completely different energy ecosystem that enables new means for operators and consumers to: influence the efficiency, sustainability and safety of electricity production; optimize electricity generation, transmission and consumption; manage introduction of renewable sources; deliver faster detection and restoration of services if lost; and importantly, create new business models.

This new electricity landscape has been described as a prime example of the Fourth Industrial Revolution resulting from a convergence of ‘game changing’ technologies such as distributed storage and generation, smart meters and smart appliances. It has been estimated that adoption of new [on the] ‘edge of the grid’ technologies globally could bring more than $2.4 trillion of value creation for society and industry over the next 10 years, by increasing the efficiency of the overall system, optimising capital allocation and providing new services for customers…..

The Perspective of Neil Greet

Change simultaneously embraces creating a competitive advantage in a world that is always offering new opportunities and fear as it causes old industries to lose market share. The transition detailed here is more than change at the margins, as it needs to continue across multi-segments of society and will take decades to be implemented. It is a mass movement supported by change across many dimensions; political, social, and technical. No one company, industry or nation can exercise all the levers of transition alone.

To think the ‘transition’ is just a complicated change process and assume the mantra of ‘we always deal with change’ is to misunderstand the complexity of the process at hand. Australia cannot afford to simply manage the energy transformation like a change management process or mobile phone upgrade, as the multi-dimensional nature and the ubiquity of the changes at hand exhibit all the characteristics of a wicked problem.

The emerging changes could be described as a revolution. The language of revolution however is often used to excite people to victories against the odds probably stemming from an overly romantic view of historical revolutions like those in American and France. Each of these wrought positive political and societal effects but with significant costs. Popular narratives often concentrate more on the success of revolutions and gloss over the attendant disruptions.

The renewable energy ‘revolution’, the big data ‘revolution’, and the clean coal ‘revolution’ are just some of the revolutions that are currently being publicised and marketed. Historically accurate views of revolutions suggest that they can be dangerous, often with unexpected impacts on individuals, regions and whole economies. More practically, this language of revolution probably mischaracterises what is going on.

To successfully engage in this transition, there must be a vision of the future and clear direction of how to get there. This does not imply such an expressed vision is somehow a locked-in statement of immutable certainty. There are multiple pathways with decision points that will shape our steps to this future. The challenge for leaders during the transition is to steer a path to opportunity while carefully mitigating vulnerability.

As a country that understands the global energy and resources trade, a focus for Australia can shift from mass exports of fossil fuels to a revolution of jobs flowing from new energy industries. There is direct jobs growth potential in new generation (wind, solar), storage (batteries, pumped hydro), construction of new microgrids and the use of data analytics to better manage outcomes.

This can further provide opportunities in advancing research and educational capabilities in an innovation ecosystem which thrives on a ‘next generation’ energy approach. Sizable employment capacity remains in the old energy industries, but they cannot be maintained for ever.

Perhaps the best opportunity will come from emphasising non-economic drivers and defining outcomes that enhance direct wealth generating benefits. Gauging success might vary from monetary benefit, reduced parts per million of carbon dioxide or stabilising or reducing ambient temperatures. Individuals and communities are also expected to have greater control over their energy demand and make contributions to supply.

Such localised benefits have already manifested with capital costs of storage and solar technologies reducing sharply and increased access to data analytics allowing some households to manage their individual needs through linked community virtual grids. Thinking about different outcomes and measuring different value chains allow alternative future pathways to be constructed.

The ‘Next Generation’ energy solution embraces integrated components within complex systems. The yet unexplored benefit is the combination of technologies to achieve an advantage that further drives the energy transformation. So, the question is, ‘What would a viable model for a Next Generation integrated energy system look like?’

The National Resilience Taskforce examined the fundamental drivers of vulnerability in framing the challenge of planning to manage significant national disasters. As part of this process the taskforce defined vulnerability as:

[It] arises from the relationships that we have with the things we value (people, places, objects, critical services, emergency services, etc.) and how these things may be disrupted as a result of an emergency or crisis. Vulnerability also arises from the tensions and trade-offs we have to make about where to allocate limited time, effort and money in disaster preparation, response or risk reduction to protect those things of value.

The current energy system has technical and economic vulnerabilities which are managed daily through well-developed processes and regulation. For instance, in the National Electricity Market the regulator (Australian Energy Regulator – AER), the operator (Australian Energy Market Operator – AEMO) and the rule maker (Australian Energy Market Commission – AEMC) operate as a collective team adapting to change in various forms.

Consideration of catastrophic network failure or pre-existing vulnerability is not in the remit of this regulatory trio.

In Australia, as in most modern economies, institutional trust is being eroded as communities become confused about offerings within the energy system and trajectories of future development. The United Kingdom Energy Research Partnership provides an example of what it considers needs to be done to address failures in community engagement on energy issues. The partnership made a call for a strategic narrative accessible to affected end users in its 2014 report Engaging the public in the transformation of the energy system. However, while the public largely supported transformation in energy policy, trust in the UK Government and energy industry was low.

A lack of trust in the energy system as a public entity was a fundamental vulnerability.

A little recognised societal vulnerability in Australia is a lingering sense of complacency. As a settler nation Australia has been imbued with a narrative of hard work and aspiration leading to success. This may have been reinforced by having experienced 27 years of uninterrupted annual economic growth. Australia has sustained its wealth throughout these years of economic success and so contrary opinions, or warnings against complacency, can easily be ignored by a narrative that because Australia has repeatedly ‘pulled through’ tight spots in the global economy where other economies have not, we simply will this time. This is not just an economic narrative; it has become a strong national narrative emphasising confidence of success.

While complacency may be ingrained to varying degrees in the stories we tell each other, the growing complexity of our electricity systems is an empirical factor that – while easier to address than beliefs – remain a significant concern.

The least understood vulnerability arises from the nature of interconnectivity of the component parts of the systems. Complex energy networks have intrinsic vulnerability due to dependency on other systems which may exhibit varying levels of stability. These threats can manifest themselves in many ways, but particularly in the cyber domain.

Some examples are direct attacks on critical infrastructure involving the acquisition of remote control of decision-support software and the theft of market-sensitive information that provides advantages to competitors. Planning for a range of potential and likely disruptions is critical to the normal functioning of existing systems and the uneventful transition to newer forms. The identification of vulnerabilities and development of risk mitigation options are important activities across the networks.

Elements of Australia’s wider energy sector operate in an ad-hoc system, organised within stovepipes of energy types (electricity, liquid fuel, gas). The Independent Review into the Future Security of the National Electricity Market: Blueprint for the Future report emphasised the importance of a coherent approach to future energy needs and security of source and supply.

It could be argued that the review constitutes a de facto blueprint for a national energy security strategy. Without this, the absence of a coherent strategic road map on energy futures creates wider systematic vulnerability and uncertainty as well as reduced security.

The reliability of supplies of liquid fuel supplies in Australia exhibits characteristics of a systemic national level vulnerability. Australia is an outlier in the global community in the way we think about liquid fuel security.

When we consider similar sized economies to Australia, most see fuel security as part of their strategic capability and take steps to manage fuel security with that in mind. For instance, European countries seek assured liquid fuel supply not only to meet International Energy Agency agreements but to hedge against aggressive Russian energy policies.

Australia, by comparison, has chosen to apply minimal regulation and government intervention in pursuit of market solutions that deliver fuel to Australians as cheaply as possible. The recent draft report into liquid fuel security in Australia details reserves at 22 and 23 days of consumption cover for diesel and jet fuel respectively.

A national energy strategy could also be effective in shaping longer term policy to reduce reliance on just-in-time delivery of refined fuels across extended maritime supply chains.

The notion of resilience becomes a key consideration in framing the complicated nature of the energy transition. Resilience does not simply mean rebounding after a disruption – it is not the stoic staring down of vulnerability and remaining unchanged. Resilience can be construed as an attribute of a system (electricity network) to remain functional when placed under pressure; in other words, a tendency to remain stable and functional by adapting to changing circumstance or operational conditions – avoiding crises versus needing to recover from them…..

Enhanced resilience for energy systems is not an ephemeral concept but a pragmatic goal that requires comprehensive understanding and appreciation of the challenges of managing complex technical systems and the nature and sources of disturbances that can occur and that are likely to occur.

From a whole-of-economy perspective this would mean the alignment of policy, practices and decision-making across public and private sectors to ensure wide geographic stability of energy supply. If this stable system of supply is disturbed, there must be a planned set of processes and activities and the intent to regain and sustain optimal capacities for energy production and utilisation should significant losses occur.

ASPI Report on Designing for Resilient Energy Systems

Also, see the following:

Shaping Infrastructure for Resilience In Protecting the Liberal Democratic Nations: The Case of Energy

The Return of Direct Defense in Europe: The Challenge to the Infrastructures of the Liberal Democratic Societies