Victorian Energy Overview June 2010 Victoria Unique Energy

Victorian Energy Overview June 2010

Victoria – Unique Energy Market • • Large Reserves of Brown Coal – 500 years • • Privatised Energy Market No Black Coal Offshore Natural Gas ~ 25 years Good wind resources Many Assets Owned by International companies ØNew Investments, wind, gas peaker, coal & solar

Loy Yang A Hazelwood VENCorp Yallourn Loy Yang B Southern Hydro Snowy Mountains Scheme SP Aus. Net Powercor Jemena Ecogen AGL Interstate and other Generators Australian Energy Market Commission / Australian Energy Regulator Citipower United Energy Consumers of electricity have been able to choose their own electricity retailer since 13/1/2002. SP Aus. Net

Regulated / Non-regulated Pricing • GENERATORS – Many – Less than 10 – Prices NOT regulated, can make or lose lots of money • TRANSMISSION – One only – Monopoly – Regulated, about a 6. 8% Real Rate of Return (RROR) • DISTRIBUTION – Five – Regulated, about a 6. 8% Real Rate of Return (RROR) • RETAILERS – Many – about 14 at present – Prices monitored, but NOT regulated, can make or lose lots of money

Electricity and gas transmission

Murray. Link +/- 220 MW Victorian Electrical Network Summer Peak ~10, 300 MW Winter Peak ~7, 500 MW Interconnection With SA 300 MW from SA Interconnection with Snowy/NSW 1900 MW from Snowy Major Load Major Generation Interconnection with Tas

Electricity generating capacity in Victoria Total Electricity Generating Capacity 10, 000 MW Total Renewable Generating Capacity 1, 000 MW

Principal Power Stations Power Station Company MW Units Type Year Loy Yang A Great Energy Alliance Co 2100 525 x 4 Steam/Coal 1984/87 Tokyo Electric Hazelwood International Power – UK 1600 200 x 8 Steam/Coal 1964/71 Yallourn ‘W’ Yallourn Energy - CLP 1450 350 x 2 Steam/Coal 1973/75 375 x 2 1981/82 Loy Yang B International Power, Mitsui 1000 500 x 2 Steam/Coal 1993/96 Morwell Energy Brix 170 20 x 1 Steam/Coal 1958 30 x 3 Steam/Coal 1958/59 60 x 1 Steam/Coal 1962 Newport Ecogen Energy 510 500 x 1 Steam/Gas 1980 Jeeralang Ecogen Energy 468 57 x 4 Gas Turbine 1979 80 x 3 Latrobe Valley International Power, Mitsui 300 50 x 5 Gas Turbine 2002 Somerton AGL 150 x 1 Gas Turbine 2002

Wholesale Price Variation http: //www. nemmco. com. au/mms/GRAPHS/INDEX. HT

Regulatory System Australian Energy Market Operator (AEMO) The ‘manager’ of the market http: //www. aemo. com. au Australian Energy Regulator (AER) The ‘regulator’, guidelines and price determination http: //www. aer. gov. au Australian Energy market Commission (AEMC) The ‘rule maker’ http: //www. aemc. gov. au

http: //www. aer. gov. au/content/index. phtml/tag/AERMarket. Snapshot/

Average annual wholesale prices (March ’ 10) - $/MWh

Energy Support Programs Commonwealth Government • • $1. 6 B renewable energy funds, including the $1. 5 B Solar Flagships $2. 4 B clean coal fund $50 million geothermal drilling program fund 45, 000 GWh of renewable energy certificates (e. RET) Victoria State Government • • • $110 m ETIS 2 funds for CCS demonstration $72 m ETIS 2 funds for renewables demonstration $100 m large scale solar power station

Renewable Energy Target (RET) • Commonwealth Program / Policy • Changes in March 2010 – Yet to be legislated • Split into large scale (wind) and small scale (solar etc, . ) • Large scale 41, 000 GWh (~4500 MW) by 2020 – Market to set the price • Small scale unlimited, set price of $40/MWh – To be reviewed in 2014

CPRS -5% Permit Price

CPRS -5% Permit Price

Planning Issues • • • Victorian Parliamentary review underway Need to plan well ahead Grid connections can take three years Some planning aspects two years Wind is particularly slow Flora/Fauna studies can be seasonal, requiring 12 months – Orange bellied parrots, legless lizards, growling frogs Parallel planning (environment / building planning / finance) – Fastest but is costly if projects don’t proceed Wind planning 100% (>2, 000 MW) over subscribed But is the policy there to give you certainty?

Land reserved under the National Parks Act 66 k. V electricity network 5 Operating wind farm 8 7 6 Wind Speed (metres/second) Angahook – Otway Investigation Wind Speed (metres/second) Victorian Wind Atlas (1975) 4 220 k. V electricity network 330 k. V electricity network 500 k. V electricity network Terminal station Substation

Wind Projects Status http: //new. dpi. vic. gov. au/energy/projects-research-and-development/wind-projects

Offshore Wind > 300 m • • Victoria’s coastal waters are deep compared to countries with installed offshore wind energy With current technologies, offshore wind energy is not commercially viable in Victoria 0 – 40 m

Wave Energy • Victoria has excellent wave resources, particularly along the Western coast

Biofuels • • • Victoria - 2005 Biofuels’ Action Plan – $5 m biofuels infrastructure fund Mandates in NSW, Manildra, not in Vic’ review in 2010 Food vs Fuel, vs beer, wine, meat – – – http: //en. wikipedia. org/wiki/Fuel_vs_food If move beer crops to food……. Energy cost in a packet of corn flakes, high fuel prices give more impact US President: Only 85% of cost increase fuel related (2008) 70% of USA crops for meat Australian input limits Need 2 nd generation, cellulosic, straws, pasture grasses etc, . – Commonwealth - $12 m, over three years…. . Water and conditions tolerable opportunities – We have a lot of marginal land that could be used, (and improved)

Biofuels

Geothermal

Feed in Tariffs (Fi. T) • • • Victorian legislation 1: 1 Nett Fi. T for up to 100 k. W of renewables – Solar or wind or hydro – Liable party is the retailer – Cost passed through to all customers Victorian Premiuim Nett Fi. T for up to 5 k. W of solar. Solar specific. – Liable party is the distributor, cost passed through to all customers No Gross Fi. T, considered too expensive – NSW just announced a Gross PFi. T up to 10 k. W, $500 m No national consistency – Introduced state by state No energy efficiency Fi. T, for example for high efficiency combined heat and power

VEET – Energy Saver Incentive (ESI) • • • Electricity and Gas retailers are liable – Add a small amount to all bills Three year phases, starting 1 Jan 2009 2. 7 MT CO 2 e per year (Vic’ total 110 MT/y) Domestic only Six prescribed activities so far, more can be added – Water heating, Space conditioning (insulation, thermally efficient windows and weather sealing products), Lighting, Shower roses, Refrigerators/freezers Who pays? – All customers http: //www. esc. vic. gov. au/public/VEET/

Energy Resource Efficiency Program (EREP) Mother of EREP was Industry Greenhouse Program (IGP) • At the end of 2007, IGP had delivered: – Cuts of 1. 23 MTCO 2 e/year – Savings to business of $38. 2 million each year – Average payback period was 20 months EREP • • 100 TJ of energy and/or 120 ML of water • 45% of Victoria's energy use, annual water consumption of around 1. 5 million average Victorian households. • 250 liable companies in Victoria. They use 700 petajoules of energy and 300 gigalitres of water a year. Is this enough for energy efficiency? – Not sure, would like to look at the 2 nd tier energy users http: //www. epa. vic. gov. au/bus/erep

Web Links • • • Sustainability Victoria • • Department of Sustainability and Environment http: //www. sustainability. vic. gov. au/www/html/1517 -home-page. asp Department of Primary Industries www. dpi. vic. gov. au http: //www. dpi. vic. gov. au/dpinenergy. nsf/Home+Page/Energy~Hom e+Page? open www. dse. vic. gov. au Department of Premier and Cabinet www. dpc. vic. gov. au

Thank You Leigh Clemow Regional Development Victoria Tel + 61 3 9651 9260 leigh. clemow@rdv. vic. gov. au