The ACT’s 100% renewable energy target and Australia’s changing generation mix Jon Sibley Director, Energy and Waste Policy Environment and Planning Directorate ACT Government Contents Energy efficiency Renewable energy Distributed battery storage Carbon neutral government operations Zero-carbon public and private transport

Australian Capital Territory Canberra: Australia’s Capital Population: 400,000 Advanced knowledge economy Ranked #1 in the world in the world for climate change targets 40% reduction from 1990 level by 2020 Carbon neutrality by 2050 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: SOUTH AUSTRALIA TASMANIA VICTORA NEW SOUTH WALES QUEENSLAND Fuel sources (2013-14)

Market structure $ LGC market National renewable energy target Electricity demand forecast Contract market Spot market Retail Generation $ Customer Embedded generators Distribution Transmission

Victorian spot market prices (Example: 17 July – 23 July 2016)

Survey result: Bankability of future revenues Significant policy and pricing uncertainty in Australia Lack of long term off-take deals Merchant risk greatly increases the costs of finance National 2020 target unlikely to be met Not bankable Bankable Asset life

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 Spot price $/MWh FiT price Payments to generators

Renewable energy reverse auction program 2012 2013 2014 2015 2016 2017 2018 2019 2020 20MW Solar Auction (Fast Track) 200MW Wind Auction 200MW Wind Auction II 1MW Community Solar 200MW NextGen Auction 20MW Solar Auction (Regular Stream) This slide shows how we are tracking against our 100% by 2020 target.

FiT prices Range of FiT prices (fixed nominal for 20 years) and median price 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

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

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

25 July 2016 http://energy.anero.id.au/solar-energy

South Australia’s changing generation mix Interconnector Imports from Victoria Exports to Victoria Source: http://reneweconomy.com.au/2016/wind-and-solar-become-new-base-load-power-for-south-australia-99364

Next Gen Battery Auctions Up to $220M in network savings! Next Gen Battery Auctions Pilot currently underway Next gen auctions to 2020 150+ homes, 5000+ homes, 36MW $600k subsidy $25M subsidy Tesla, Panasonic, LG Chem Winners TBA With our aim of 90% renewables by 2020 and zero emissions by 2060, the ACT has the most ambitious greenhouse gas reductions targets of any jurisdiction in Australia and, internationally, of any state or territory reporting under the international Carbon Disclosure Project. The ACT’s Renewable Energy Target and the Energy Efficiency Improvement Scheme are two initiatives that are placing the ACT well on the way to achieving the first interim target in 2020. Additionally the ACT has been supporting our community through helping businesses, schools and households to reduce costs of utility bills through energy efficiency measures. In 2014 the Territory also won the Gold Banksia Award for Innovation for the reverse auction feed-in-tariff entitlement that the ACT Government adopted for the first time in Australia.

Conclusion Australia has extensive experience in integrating renewables into advanced market systems The ACT’s reverse auction feed-in tariff program has delivered investor certainty, driving down prices We can prove potential for a 100% renewable grid by supporting renewable energy along with complementary technologies With our aim of 90% renewables by 2020 and zero emissions by 2060, the ACT has the most ambitious greenhouse gas reductions targets of any jurisdiction in Australia and, internationally, of any state or territory reporting under the international Carbon Disclosure Project. The ACT’s Renewable Energy Target and the Energy Efficiency Improvement Scheme are two initiatives that are placing the ACT well on the way to achieving the first interim target in 2020. Additionally the ACT has been supporting our community through helping businesses, schools and households to reduce costs of utility bills through energy efficiency measures. In 2014 the Territory also won the Gold Banksia Award for Innovation for the reverse auction feed-in-tariff entitlement that the ACT Government adopted for the first time in Australia.