The ACTs 100% renewable energy target and Australias

The ACTs 100% renewable energy target and Australias

The ACTs 100% renewable energy target and Australias changing generation mix Jon Sibley Director, Energy and Waste Policy Environment and Planning Directorate ACT Government Australian Capital Territory Canberra: Australias Capital Population: 400,000 Advanced knowledge economy

Ranked #1 in the world in the world for climate change targets o 40% reduction from 1990 level by 2020 o Carbon neutrality by 2050 o 100% renewable energy by 2020 SECTION 1: National policy context The National Electricity Market (NEM)

National market established 1998 40,000 km of transmission, 9 million customers Five interconnected states/price regions

50,000GW, dominated by coal and gas: QUEENSLAND Fuel sources (2013-14) SOUTH AUSTRALIA NEW SOUTH WALES VICTORA

TASMANIA Market structure LGC market Electricity demand forecast National renewable energy target $ Embedded

generators Contract market Retail Generation Spot market Customer Distribution

Transmission Victorian spot market prices (Example: 17 July 23 July 2016) Survey result: Bankability of future revenues Not bankable Bankable Significant policy and

pricing uncertainty in Australia Lack of long term off-take deals Asset life Merchant risk greatly increases the costs of finance National 2020 target unlikely to be met

Survey result: Importance of factors in investing in developing Asian economies Other factors: Cultural and social understanding. Land law and ease of planning regulations. Clear ability to connect to grid. Absence of corruption. Possibility for the foreign investor to be a majority owner of the assets. SECTION 2: ACT renewable energy policies Large-scale Renewable Energy Auctions Reverse Auctions based on value for money

Open to projects across the National Electricity Market (NEM) Costs recovered from all ACT electricity users via local network operator 20-year fixed feed-in tariff rate Contract for difference approach Contract for difference payments Example: FiT payments in Victoria (1/7/2016) Payments by generators

$/MWh Spot price FiT price Payments to generators Renewable energy reverse auction program 60% 80%

100% Renewable Renewable Renewabl e 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020

202 20MW 200M 200MW Solar W Wind Auction Wind Auction (Fast Auctio

II Track) n 1MW 200MW 20MW Commun NextGe Solar ity Solar n Auction Auction (Regular

Stream) FiT prices Range of FiT prices (fixed nominal for 20 years) and median price Year N = 18 MW (average) 2014 18 72.9

2015 15 77 2016 19 84.9 Project re-bidding Prices for 4 projects re-bid between the Wind 1 and NextGen auctions CAPEX changes Capacity/MW for 4 projects re-bid between the Wind 1 and NextGen auctions

Revisions to capacity factors Capacity factors for 4 projects re-bid between the Wind 1 and NextGen auctions Debt gearing ratio Range of debt gearing ratios and median ratio Year N = 18 MW (average) 2014 18

72.9 2015 15 77 2016 19 84.9 Debt costs (base rate + margin) Range of debt rates and median rate

Year N = 18 MW (average) 2014 18 72.9 2015 15 77 2016

19 84.9 Internal rate of return (IRR) Range of IRR and median IRR Year N = 18 MW (average) 2014 18 72.9

2015 15 77 2016 19 84.9 SECTION 3: Managing a changing generation mix Source: http://energy.anero.id.au/wind-energy/2016/june

25 July 2016 Source: http://energy.anero.id.au/wind-energy/2016/june Source: http://energy.anero.id.au/wind-energy/2016/june June 2016 http://energy.anero.id.au/solar-energy 25 July 2016

South Australias changing generation mix Imports from Victoria Interconnector Exports to Victoria Source: http://reneweconomy.com.au/2016/wind-and-solar-become-new-base-load-power-for-south-australia-99364 Up to $220M in network savings! Next Gen Battery Auctions

Pilot currently underway 150+ homes, $600k subsidy Tesla, Panasonic, LG Chem Next gen auctions to 2020 5000+ homes, 36MW $25M subsidy Winners TBA Conclusion 1. Australia has extensive experience in integrating

renewables into advanced market systems 2. The ACTs reverse auction feed-in tariff program has delivered investor certainty, driving down prices 3. We can prove potential for a 100% renewable grid by supporting renewable energy along with complementary technologies

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