AGL Energy Limited CPRS AEU Analysis and the

Cost of an AEU Relative gas and coal prices likely to be a key

Cost of an AEU Altering the gas/coal price spread significantly increases implied carbon price

Impact of CPRS on electricity prices 4 Estimated pass through of carbon prices varies

Prices are low but will inevitably increase Coal availability, technology and competition reforms have

Impact of RET also critically important 6 As a result of the Renewable Energy

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AGL Energy Limited CPRS AEU Analysis and the Electricity Sector Tim Nelson Head of Carbon and Sustainability IETA Side-Event, COP 15 December 2009

Cost of an AEU Relative gas and coal prices likely to be a key determinant of cost of reducing emissions (implied AEU price) » IETA Side-Event, COP 15 » December 2009 2

Cost of an AEU Altering the gas/coal price spread significantly increases implied carbon price » IETA Side-Event, COP 15 » December 2009 3

Impact of CPRS on electricity prices 4 Estimated pass through of carbon prices varies substantially across modelling studies 140% Roam Submission to Green Paper 2008 ACIL - TSY (2008) Roam Tsy (2008) MMA Tsy ACIL - ESAA (2008) MMA NETT (2006) Average 120% 100% 80% 60% 40% 20% 0% 2011 -12 2012 -13 » IETA Side-Event, COP 15 » December 2009 2013 -14 2014 -15 2015 -16 2016 -17 2017 -18 2018 -19 2019 -20

Prices are low but will inevitably increase Coal availability, technology and competition reforms have reduced energy prices but they will inevitably increase » IETA Side-Event, COP 15 » December 2009 5

Impact of RET also critically important 6 As a result of the Renewable Energy Target, renewable investment will expand significantly Source: AGL (2009) » IETA Side-Event, COP 15 » December 2009