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Clean Energy Council - Presentation by Michael Fraser
 

Clean Energy Council - Presentation by Michael Fraser

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Clean Energy Council - Presentation by Michael Fraser, Managing Director and Chief Executive Officer, AGL Energy Limited. May 2010.

Clean Energy Council - Presentation by Michael Fraser, Managing Director and Chief Executive Officer, AGL Energy Limited. May 2010.

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    Clean Energy Council - Presentation by Michael Fraser Clean Energy Council - Presentation by Michael Fraser Presentation Transcript

    • AGL Energy Limited The Importance of Reforming the Renewable Energy Target Michael Fraser CEO and Managing Director Clean Energy Council Annual Conference May 2010
    • 2 Disclaimer The information in this presentation: › Is not an offer or recommendation to purchase or subscribe for securities in AGL Energy Limited or to retain any securities currently held. › Does not take into account the potential and current individual investment objectives or the financial situation of investors. › Was prepared with due care and attention and is current at the date of the presentation. › Actual results may materially vary from any forecasts (where applicable) in this presentation. › Before making or varying any investment in securities in AGL Energy Limited, all investors should consider the appropriateness of that investment in light of their individual investment objectives and financial situation and should seek their own independent professional advice. » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 3 Agenda › Importance of the 26 February reforms › Sustainable Energy within the context of global energy market transformation › Renewable Energy Target: » MRET and the reforms of 2009 » Unintended consequences of complementary policies » Reforms announced on 26 February » Fundamental shift in supply options › Downstream customer impacts: » Impacts on prices » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 4 Importance of the 26 February reforms › 26 February reforms of the Renewable Energy Target were welcomed by the industry › There are serious consequences flowing from any delay in passage of the legislation: » Loss of jobs » Loss of investment confidence » Flow on effects for confidence in energy policy generally › Objective of the reforms have bipartisan agreement › No reason why the legislation should not be passed immediately » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 5 Transformation of Global Energy Markets » CEDA CEO Vision Series » July 2009
    • 6 Energy Market Transformation Global energy markets are undergoing significant transformation. Energy policy makers are responding to three key issues: Issue Global Policy Australian Policy Response Response Climate Change Greenhouse gas CPRS (deferred) emissions trading Energy Security Renewable energy 20% Renewable Energy targets Target Fuel Poverty Energy efficiency Emerging state-based schemes schemes » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 7 Global policies driving renewable investment Since mid-2009, a number of new policies have been announced that will drive renewable investment – Australian policy is consistent with global trends Country/State Renewable Mandate Spain 22.5% renewable by 2020 US – Colorado 30% renewable by 2020 US - Alaska 50% renewable by 2025 Israel 10% renewable by 2020 Kuwait 5% renewable by 2020 » Source: DB Climate Change Advisors » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 8 Renewables provide fuel cost certainty In an environment of increasing global commodity prices, renewable technologies provide certainty of fuel cost Source: Bloomberg (2010) » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 9 New investment More than half of new installed capacity globally was renewable $US bns 2008 Source: New Energy Finance (published 2009) 52 110 Investment in Wind Investment in Other Renewable Investment in Fossil Fuel Generation 88 » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 10 Investment in renewable technologies All technologies have a role to play – growth in global investment has been significant particularly for wind and solar Average growth rates of investment in wind and solar Source: PEW Centre (2010) are 49% and 120% respectively » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 11 Trend is forecast to continue Wind and biomass forecast by IEA to be the technologies of choice in developed countries through to 2020 Source: International Energy Agency (2009) » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 12 The Evolution of Renewable Policy – MRET to RET to.... » CEDA CEO Vision Series » July 2009
    • 13 The Expanded Renewable Energy Target… Renewable Target (GWh) 70,000 Pre-1997 Renewable Baseline Old MRET (9,500 GWh by 2010) 60,000 Expanded RET (45,000 GWh by 2020) Historical renewable generation 50,000 40,000 xRET: 45,000 GWh 30,000 20,000 Original MRET: 9,500 GWh 10,000 Pre-1997 generation - 15,000 GWh 0 Source: Roam, AGL Corporate Affairs » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 14 Role of complementary policies › Additional subsidies for solar hot water and solar PV have driven substantial uptake of these technologies in recent years › Recent example: solar hot water Rebate State RECs Total Incentives Subsidies $1,600 $500 $910 $3,010 › Recent example: solar PV FiT RECs Total Subsidies $10,500 $4,650 $15,150 » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 15 Historical REC creation RECs from SHW and solar PV grew substantially due to complementary policies. This negated the need for new investment. Source: Office of the Renewable Energy Regulator (2010) » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 16 Role of complementary policies REC prices declined substantially as complementary policies drove creation of RECs from SHW and PV preventing new investment $100 $/REC $90 $80 $70 Expanded MRET Announced SHW & PV Increases REC Bank $60 $50 Reform announced $40 $30 $20 Drought Impacting Hydros $10 $0 Sep -03 Mar -04 Sep -04 Mar -05 Sep -05 Mar -06 Sep -06 Mar -07 Sep -07 Mar -08 Sep -08 Mar -09 Sep -09 » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 17 Reforms of 26 February – Driving Growth in Renewables » CEDA CEO Vision Series » July 2009
    • 18 Small scale renewable energy scheme (SRES) › Small scale renewable energy scheme » Fixed $40 per certificate price for solar PV and solar hot water » All other technologies remain in the LRET » Uncapped quantity › Similar to ‘feed-in tariff’ › Uptake dependant upon numerous factors including » Ongoing complementary policies such as feed-in tariffs and capital rebates » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 19 Large scale renewable energy target (LRET) LRET to drive investment of up to 10,000 MW of new renewable investment » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 20 Impact of Renewable Policy Setting Fundamental changes required to generation mix. New Build Generation Mix Years of Forecast - 2010 to 2020 Coal Plant CCGT Base Plant OCGT Peak Plant Renewable Plant 20000 18000 Capacity required (MW) 16000 14000 Renewables dominate 9,500MW 12000 1,200MW 10000 8000 4,500MW OCGT peaking plant 6000 5,500MW displaces CCGT base plant 4000 5,500MW 2000 2,800MW 0 Original 2006 forecast Current 2010 forecast (ETS, 2% MRET) (ETS, 20% Expanded RET) Source: AGL Greenhouse modeling » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 21 Downstream Customer Impacts » CEDA CEO Vision Series » July 2009
    • 22 Cost impacts - LRET › At a REC price of $90, impacts of LRET are estimated to be about 1% pa (real) on electricity bills over the next decade › This should be contrasted with recent price increases driven by network charges of 10-15% (real) pa for three years › Important conclusion: renewable targets are only a minor contributor to rising electricity prices » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 23 Conclusion › 26 February reforms of the Renewable Energy Target were welcomed by the industry › There are serious consequences of the legislation not being passed before a Commonwealth election › Objective of the reforms have previously had bipartisan agreement › No reason why the legislation should not be passed immediately › With the legislation passed, the industry is ready to commit billions of dollars with associated increases in employment and economic activity » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited
    • 24 Further information AGL Sustainability Report (online and concise summary) www.aglsustainability.com.au AGL Sustainability Blog http://aglenergy.wordpress.com John Hobson Nathan Vass Head of Investor Relations Head of Media phone: +61 2 9921 2789 phone: +61 2 9921 2264 Mobile: +61 (0) 488 002 460 mobile: +61 (0) 405 040 133 e-mail: john.hobson@agl.com.au e-mail: nvass@agl.com.au » Clean Energy Council Annual Conference » May 2010 » AGL Energy Limited