1. 1 Large-scale solar photovoltaics – competitive round Dan Sturrock Business Development and Transactions Presentation to Consultation Forums Sydney: 27 July 2015 Melbourne: 29 July 2015

2. 2 ARENA’s new open programme is ready for applications We have recently launched an “Advancing Renewables Programme” which will open for applications from 1 August

3. 3 Strategic priorities focused on 5 key areas Within ARENA’s investment focus areas, our 5 priorities for new investment are: Integrating renewables and grids Renewables for industrial processes Fringe-of-grid and network-constrained Increase the penetration and use of renewable energy generation and distributed energy eg. providing customer- focused solutions, facilitating greater renewables uptake in low-voltage networks, or addressing knowledge gaps. Off-grid areas Large-scale solar photovoltaics Application and economic benefits of using renewable energy within industrial processes, eg. displacing fossil fuels, or reduction of technical and commercial risks. How distributed renewable energy systems can alleviate the need for network augmentation or provide other benefits, particularly at the fringes of grids or where there are network constraints. Activities that integrate renewable energy with existing electricity supply to power industrial processes and communities in remote off-grid areas. Through the large-scale solar PV competitive round, pre-commercial deployment activities that show a clear path to commercial competitiveness for large- scale solar PV.

4. 4 Agenda 1.Context 2.Objectives 3.Key Features 4.Discussion Topics 5.Timetable 6.Q&A

5. 5 Context

6. 6 Current status of Utility Scale Solar in Australia 132MW of installed capacity operational 109MW under construction Pipeline…? Nyngan Solar Plant (Operational) Broken Hill Solar Plant (Construction) Moree Solar Farm (Construction) Royalla Solar Farm (Operational) 20MW 53MW 56MW 102MW >5MW Grid Connected Greenough River Solar Farm (Operational) 10MW

7. 7 Where is the pipeline? 2.7 GW of PV generation with permits 2.4 GW of early stages PV planning 100MW 60MW 350MW 2000MW +5 GW Pipeline in progress 50MW 60MW 30MW 15MW 10MW 13MW 20MW 1100MW 600MW 30MW 28MW 26MW 11MW 10MW 20MW 50MW 44MW 30MW Source: Bloomberg New Energy Finance

8. 8 How do we unlock the pipeline? Or put another way, how do we bridge the gap to wind? Utility scale solar PV (global) (1) New build coal (Australia) (2) Onshore wind (global) (1) Current LCOE of Solar PV in Australia (4) LCOE (USD$/MWh) Source: (1)Large scale solar PV and onshore wind projections are global averages (includes US, EU, China and India regions) from BNEF, New Energy Outlook Global 2015 (2)Coal projections are from Australian Bureau of Resources and Energy Economics, 2012 Australian Energy Technology Assessment model – they do not include a carbon price. (3)Estimated LCOE ranges (unsubsidised) (various sources) (4)Assumes average exchange rate USD:AUD (0.8:1) We are getting there, albeit slowly USA (3) Brazil (3) UAE (3)

9. 9 Objectives

10. 10 Solar PV in Australia is approaching comfortably the $[130]/MWh LCOE mark Accelerating cost reductions Target range Time to sharpen the pencils

11. 11 1.Further cost reduction in large scale solar PV 2.Maintain and build skills and supply chains 3.Provide a clear path toward competitiveness with other commercially viable forms of power generation in Australia 4.Provide transparency and price discovery in relation to the current and projected economics of large scale solar PV 5.Transparently sharing forecast and actual economics of both successful and unsuccessful projects What are we looking to achieve?

12. 12 Key Features

13. 13 Key features of this competitive round The key features were developed as part of an industry consultation that was conducted early this year What?How much? Program sizeca. [200] MW (DC) Individual project size[10] MW – [50]MW (DC) Budget$[80]m – $[100]m LCOE Metric$[130]/MWh as minimum benchmark Competitive metricARENA grant per MWh (calculated over 20 year life) Bid BondsTo act as a cost recovery mechanism for projects that receive a funding agreement but do not reach commissioning within a defined period Partial Cost RebateCost allocation for unsuccessful applications

14. 14 Timeline Detailed Timeline Late August ARENA Board approval Q3-15Q4-15Q1-16Q2-16Q3-16Q4-16 Dec 15 Invitations for Full Application Aug/Sep 16 ARENA Board decision May/Jun 16 Full Application due date Oct/Nov 15 EOI Due Date Dec 16 / Jan 17 Project Financial Close EOI open: [Sep 2015] EOI due:[Oct/Nov 2015] EOI assessment: [Nov/Dec 2015] Projects invited to submit full application [Dec 2015] Full Application due: [May/Jun 2016] ARENA assessment and external DD: [Jun/Jul 2016] ARENA Board decision: [Aug/Sep 2016] Funding Agreements signed: [Sep/Oct 2016] Financial Close: [by Jan 2017]

15. 15 Discussion Topics

16. 16 Discussion topics (1/6) Total FundingCapacity Target $[80]m to $[100]m budget for ARENA grant proposed ARENA will only fund high merit projects [200]MW (DC) [10]MW (DC) to [50]MW (DC) sized projects We expect no more than approximately [400]MW will proceed to the full application (final bid) stage

17. 17 Discussion topics (2/6) LCOE BenchmarkCost Metric $[130]/MWh Calculation methodology: 20 year P50 production 10% pre-tax discount rate Capital costs and operational costs exclude financing and tax Developer costs included Normalisation of other subsidies Template available on ARENA website ARENA$/MWh production P50 over 20 years MWh delivered Will require independent verification of project generation (P50)

18. 18 Discussion topics (3/6) Portfolio CriteriaOther location issues No less than [50]% of the total capacity allocated must be connected to the NEM No more than three quarters of the projects as measured by aggregate capacity can be majority owned utility projects Projects must generate 100% of their electricity from solar PV Permitted to co-locate with other generation Must be connected to the NEM or SWIS Clustering of projects not permitted

19. 19 Discussion topics (4/6) Knowledge Sharing Key financial metrics to be shared post bidding: Total Project Cost per MW (DC & AC) LCOE ($/MWh) ARENA grant funding amount per MWh of generation ARENA grant as a percentage of Total Project Cost Total Project Cost by location High expectation for knowledge sharing and provision of data to support aggregated independent analysis Feedback on Knowledge sharing plan template? Funding Agreement ARENA updating template to ensure Funding Agreement is bankable and otherwise efficient to manage for all parties Template to be provided at commencement of EOI period Comments on Funding Agreement to form part of assessment process Financial Close to be achieved within 4 months after ARENA Board decision

20. 20 Discussion topics (5/6) Partial Cost RebateBid Bonds Up to $[2]m allocated Full Application stage Up to [25]% of verifiable costs (which will be defined) from start of EOI Open Date Objective is to ensure project bids are in a position to meet financial close timetables Application will meet criteria to be eligible (e.g. lodged by due date, Financial Close within 6 months, $[130]/MWh LCOE) c.$[500]k bid bond Non-refundable upon execution of ARENA Funding Agreement Bid bond forfeited if Financial Close is not met by date specified in Funding Agreement Aimed to be a cost reimbursement mechanism to cover ARENA costs

21. 21 Discussion topics (6/6) Stage gate expectations EOI: a short form project plan document that includes (at a minimum) limited to 20 pages: Preliminary financial model, including LCOE calculation An outline of the proposed capital structure to fund the project The proposed location(s) for the project; development approval status; community consultation process and Indicative timetable for the project Full Application: a detailed project plan document that includes (at a minimum): Development approvals; outcomes of community consultation and completed connection studies Examples where the applicant have successfully delivered large scale solar PV projects A project development plan including the development budget and key milestones outlining the process to Financial Close A detailed budget and financial model for the Project; Evidence of funding commitments; terms associated with key contracts including but not limited to PPA, EPC and O&M Analysis to demonstrate a clear path to further cost reductions

22. 22 Timetable

23. 23 Key Dates Consultation period: 15 July – 5 August 2015 ARENA Board approval: End of [August 2015] EOI Open date: [September 2015] Full Application due date: [May/June 2016] ARENA Board decision: [August/September 2016] Financial Close: [no later than 31 January 2017] Commissioning date: Latest [January 2018]

24. 24 Q&A

25. 25 Find out more at arena.gov.au ARENA at LinkedIn @ARENA_aus on Twitter Subscribe to updates: arena.gov.au/subscribe