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A N N UA L R E V I E W • E N E R G Y & U T I L I T I E S 2 0 1 7
AUSTRALIA
CASSANDRA HOGAN
KPMG AUSTRALIA
HOGAN: In Australia, market forces are changing the energy and utilities
sector with a shift in customers moving toward the centre of the energy
market. The competitive landscape is dynamic, with all competitors
attempting to ‘own the customer’ with an ever increasing convergence in
products and services. New retailers have entered in the market, second tier
retailers have increased their market share and market concentrations have
declined for the large national energy providers. In response to the changes
in the market, retailers and distributors are establishing new energy business
units to defend against potential disruption and disintermediation. Enabling
technologies, such as smart meters, solar PV, battery storage and microgrids,
are creating opportunities for customers to choose how their energy is
sourced and used. Australia now has approximately 1.5 million ‘prosumers’
with solar PV on their rooftops.
HOGAN: Australia’s energy markets are changing dramatically with a
revolution in the way supply and demand interacts due to rapid technological
change,the increasing penetration of renewable energy,a more decentralised
generation system, withdrawal of traditional base load generation and
changing consumer demand.Policy reforms introduced in 2016 have focused
on facilitating competition in new energy services and included opening up
competition in metering services by removing networks monopoly in order
to give consumers more opportunities to access a wider range of new energy
products and services, as well as ring-fencing obligations on networks to
prevent abuse of monopoly position in new energy services.
Q COULD YOU OUTLINE
SOME OF THE MAJOR
TRENDS IN THE ENERGY
AND UTILITIES SECTOR IN
AUSTRALIA OVER THE LAST
12-18 MONTHS?
Q HAVE THERE BEEN ANY
NOTABLE ENERGY POLICIES
AND REGULATIONS
INTRODUCED IN AUSTRALIA
OVER THE LAST YEAR OR SO?
3. A N N UA L R E V I E W • E N E R G Y & U T I L I T I E S 2 0 1 7
FEBRUARY 2017 • FINANCIER WORLDWIDE • REPRINT
Q WHAT PARTICULAR RISKS
AND CHALLENGES ARE
ENERGY EXECUTIVES FACING
IN TODAY’S MARKET?
HOW ARE THESE FACTORS
IMPACTING BUSINESS
ACTIVITIES?
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AUSTRALIA • CASSANDRA HOGAN • KPMG AUSTRALIA
HOGAN: The major challenge for industry executives is to address and
successfully pre-empt the widespread and increasingly rapid amount
of change in the industry. This includes managing the impact of changes
in generation mix, increasing customer demand management, new retail
pricing models and critical issues of energy reliability and carbon constraints.
At a national energy market level, one major risk is the lack of political
consensus on how to address climate change through the appropriate mix
of energy policies and mechanisms. Instead of consistent national emission
reduction and renewable energy targets, each state is setting its own targets
to attract green jobs. The Australian energy market operator has reported
that power system security is at risk in South Australia because it has one
of the world’s highest proportions of wind generation, relative to its load.
Despite uncertainty over climate policy, energy companies are still investing
in renewable energy under the current targets. One Australian retailer has
announced that it will investAU$1.5bn in new wind and solar projects across
eastern Australia as part of a move toward renewables, while another has
signed a 15-year contract with a solar farm in northern NSW, which can
power 24,000 homes.
HOGAN: With greenhouse gas emissions of approximately 200 Mt CO2-e,
representing 35 percent ofAustralia’s annual total and an emissions intensity
that is among the highest in the world,the power sector will play a major role
in meetingAustralia’s commitments under the ParisAgreement and beyond.
Australia’s historical predominance of coal fired generation offers much
opportunity for emission reduction, which will likely be driven by a move
toward lower intensity fuels, a larger proportion of renewable energy and the
gradual retirement of ageing and uneconomic assets.The current electricity
sector emissions cap under the government’s safeguard mechanism is
unlikely to provide significant downward pressure on the sector’s emissions
for several years.
Q IN YOUR OPINION,
HOW WELL IS THE
SECTOR RESPONDING
TO ENVIRONMENTAL
CHALLENGES AND
SUSTAINABILITY ISSUES?
4. A N N UA L R E V I E W • E N E R G Y & U T I L I T I E S 2 0 1 7
Q TO WHAT EXTENT ARE
CLEAN-FUEL TECHNOLOGIES
AND UNCONVENTIONAL
GAS BECOMING A MORE
ATTRACTIVE PROPOSITION
FOR ENERGY FIRMS?
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A N N UA L R E V I E W • E N E R G Y & U T I L I T I E S 2 0 1 7
HOGAN: Unconventional gas plays a key role in theAustralian energy sector.
Australia has significant resources of unconventional gas,including coal seam
gas (CSG), shale gas and tight gas. Unconventional gas produced in Australia
is predominantly CSG – its production accounted for approximately 40
percent of Eastern Australian gas production in 2015. Most CSG production
is in Queensland, where major LNG facilities use CSG as a supply source.
Many CSG production wells use hydraulic fracturing, which has faced strong
opposition from environmental organisations and the community. Growing
opposition to hydraulic fracturing has become a major issue for future
development of coal seam gas industry in Australia. The market for clean
fuels has been challenging inAustralia – this is partially due to low oil prices.
A blend of 90 percent unleaded petrol and 10 percent fuel ethanol is available
through many petrol stations, especially closer to the sources of production
in Queensland and New SouthWales.
HOGAN: Privatisation of electricity networks in NSW has been a major
driver of M&A activity in the Australian energy market. InWestern Australia,
the state government has announced plans for the sale of a 51 percent
interest in its electricity transmission and distribution company. Both NSW
and WA state governments are seeking to redeploy the proceeds of sale of
their electricity networks into development of other essential infrastructure
in transport, education and health. Other major transactions included the
sale of gas pipeline assets and a recent bid by a Chinese consortium for an
Australian owner of gas pipelines, electricity networks and generation. The
renewable energy sector has also been a major driver of M&A activity in
Australia with both strategic and institutional investors seeking opportunities
to invest in wind farms and grid-scale solar PV.
HOGAN: Governments will want to ensure that energy policy promotes an
efficient,secureandreliableenergysystemthatkeepspricesaslowaspossible
for consumers while managing emissions.Energy policy in 2017 will focus on
three areas, firstly, promoting system security as the market transitions to
new technologies and renewables.The recent SA black-outs highlighted the
“Governments will want to ensure that energy policy promotes an
efficient, secure and reliable energy system that keeps prices as
low as possible for consumers while managing emissions.”
AUSTRALIA • CASSANDRA HOGAN • KPMG AUSTRALIA
Q WHAT FACTORS ARE
DRIVING DEALS IN TODAY’S
MARKET? ARE THERE ANY
SEGMENTS OR REGIONS
THAT SEEM TO BE OFFERING
AWEALTH OF M&A
OPPORTUNITIES?
Q WHAT MAJOR
DEVELOPMENTS DO YOU
EXPECT TO SEE GOING
FORWARD? WHAT ISSUES
5. A N N UA L R E V I E W • E N E R G Y & U T I L I T I E S 2 0 1 7
FEBRUARY 2017 • FINANCIER WORLDWIDE • REPRINTwww.financierworldwide.com
need to ensure that policy frameworks are sufficient to cope with increasing
volumes of renewable energy and higher uptake of distributed generation.
The second major focal point of energy policy in 2017 will be redesigning the
east coast gas market to free up gas trading and deliver efficient gas markets.
Governments will introduce reforms making it easier to buy and sell gas
in redesigned gas markets which will increase competition and lower costs.
This will also improve the power system’s ability to integrate renewables like
wind and solar. Finally, energy policy will focus on the integration of energy
and emissions reduction policy. Greater integration of emissions reduction
and energy policy is likely to be required to order to maintain and enhance
an efficient, safe, secure and reliable energy system that keeps prices as
low as possible for consumers and promotes certainty for investors. In a
customer centric energy sector, customers will increasingly dictate where
they source their electricity.The Energy Networks Association (ENA)/CSIRO
Electricity Network Transformation Roadmap suggests that, by 2027, with
the right policy settings, over 40 percent of customers will have adopted on-
site distributed generation supported by energy management systems.
Cassandra Hogan
Power & Utilities Leader - Australia
KPMG
+61 2 9455 9642
cjhogan@kpmg.com.au
home.kpmg.com
Cassandra Hogan is KPMG’s national sector leader for power and utilities. She has extensive experience in the
sector, including 16 years in the energy industry and 10 years consulting experience focusing on strategy, large-scale
business transformation and organisational change programmes in the power and utilities sector. Ms Hogan has led
over 15 transformation projects in the Australian power and utility sector since entering professional services.These
include working with national energy clients and state owned government utilities across all key elements of the
value chain in retail, distribution and generation.
AUSTRALIA • CASSANDRA HOGAN • KPMG AUSTRALIA
DO YOU BELIEVE WILL
SHAPE ENERGY POLICY
AND MARKET ACTIVITY IN
THE MONTHS AND YEARS
AHEAD?
6. FWS U P P L E M E N T
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