Michael Fraser, CEO of AGL Energy Limited, spoke at the Clean Energy Council Annual Conference in May 2010 about the importance of reforming Australia's Renewable Energy Target. He argued that passing legislation to reform the RET was urgent to avoid loss of jobs, investment, and confidence in energy policy. The reforms aimed to drive investment in renewable energy through mechanisms like the Small-Scale Renewable Energy Scheme and Large-Scale Renewable Energy Target. While the RET would contribute to slightly higher electricity prices, this impact would be minor compared to rises from network charges. Fraser concluded that with the reforms passed, billions could be invested in renewables and jobs.

1. 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. 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. 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. 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. 5
Transformation of
Global Energy Markets
» CEDA CEO Vision Series
» July 2009

6. 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. 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. 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. 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. 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. 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. 12
The Evolution of
Renewable Policy –
MRET to RET to....
» CEDA CEO Vision Series
» July 2009

13. 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. 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. 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. 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. 17
Reforms of 26
February – Driving
Growth in Renewables
» CEDA CEO Vision Series
» July 2009

18. 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. 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. 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. 21
Downstream
Customer Impacts
» CEDA CEO Vision Series
» July 2009

22. 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. 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. 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