1. Victorian Energy Overview June 2010

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

3. VENCorpSP AusNet Australian Energy Market Commission / Australian Energy Regulator Loy Yang AHazelwoodYallournLoy Yang B Southern Hydro Snowy Mountains Scheme Interstate and other Generators PowercorJemenaCitipower United Energy SP AusNet Consumers of electricity have been able to choose their own electricity retailer since 13/1/2002. Ecogen AGL

4. 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

6. Electricity and gas transmission

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

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

10. Principal Power Stations Power StationCompanyMWUnitsTypeYear Loy Yang AGreat Energy Alliance Co Tokyo Electric 2100525 x 4Steam/Coal1984/87 HazelwoodInternational Power – UK1600200x8Steam/Coal1964/71 Yallourn ‘W’Yallourn Energy - CLP1450350x2 375x2 Steam/Coal1973/75 1981/82 Loy Yang BInternational Power, Mitsui1000500x2Steam/Coal1993/96 MorwellEnergy Brix17020x1 30x3 60x1 Steam/Coal 1958 1958/59 1962 NewportEcogen Energy510500x1Steam/Gas1980 JeeralangEcogen Energy46857x4 80x3 Gas Turbine1979 Latrobe ValleyInternational Power, Mitsui30050x5Gas Turbine2002 SomertonAGL150150x1Gas Turbine2002

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

12. 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

13. http://www.aer.gov.au/content/index.phtml/tag/AERMarketSnapshot/

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

19. Energy Support Programs Commonwealth Government $1.6B renewable energy funds, including the $1.5B Solar Flagships $2.4B clean coal fund $50 million geothermal drilling program fund 45,000GWh of renewable energy certificates (eRET) Victoria State Government $110m ETIS2 funds for CCS demonstration $72m ETIS2 funds for renewables demonstration $100m large scale solar power station

20. 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 (~4500MW) by 2020 –Market to set the price Small scale unlimited, set price of $40/MWh –To be reviewed in 2014

22. CPRS -5% Permit Price

24. 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% (>2,000MW) over subscribed But is the policy there to give you certainty?

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

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

28. Offshore Wind 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 > 300 m 0 – 40 m

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

30. Victoria - 2005 Biofuels’ Action Plan –$5m 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 - $12m, over three years….. Water and conditions tolerable opportunities –We have a lot of marginal land that could be used, (and improved) Biofuels

32. Geothermal

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

34. 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 2.7MT CO2e per year (Vic’ total 110MT/y) Domestic only Six prescribed activities so far, more can be added –Water heating, Space 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/

35. 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 MTCO2e/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 250 liable companies in Victoria. They use 700 petajoules of energy and 300 gigalitres of water a year. 45% of Victoria's energy use, annual water consumption of around 1.5 million average Victorian households. 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

36. Web Links Sustainability Victoria 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/dpi/dpinenergy.nsf/Home+Page/Energy~Hom e+Page?open http://www.dpi.vic.gov.au/dpi/dpinenergy.nsf/Home+Page/Energy~Hom e+Page?open Department of Sustainability and Environment www.dse.vic.gov.au Department of Premier and Cabinet www.dpc.vic.gov.au

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