www.arena.gov.au

The role of Government in improving the competitiveness of renewable energy technologies and increasing the supply of renewable energy in Australia

Solar Power 2013

19 February 2013

www.arena.gov.au

Summary

• Assisting relatively mature solutions to bridge the commercialisation gap by contributing to project financing

• Supporting off-grid applications of renewable energy• Developing industry learning and capabilities through an ongoing pipeline of

projects for widespread deployment of renewable energy• Reducing barriers to renewable energy technology deployment by sharing

project information and learning, and increasing awareness and acceptance of the technologies

• Australian renewable energy landscape• Solar landscape• Policy drivers• ARENA strategy and investment plan• Investment highlights.

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1. The Australian Renewable Energy Landscape

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Renewables in Australia’s energy mixRenewables in Australia’s energy mix

Source: ABARES, Australian Energy Statistics (2011)

Australian Electricity Generation 2009-10

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Australia’s renewable energy mix

This diagram shows Australia’s current mix of renewable generation capacity including bagasse, landfill gas, solar, wood waste, wind and hydro and the percentage of installed capacity for each between 2001-2012.

Source: CCA Discussion Paper Oct 2012

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Location of renewable energy capacity

Source: BREE (2012) Energy in Australia 2012

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2012-13 2034-350

2000

4000

6000

8000

2293 1996

105 145310 899

12681256

17602095

333

344

Electricity Agriculture Mining Manufacturing Transport Commercial and Residential

Australian Primary Energy Consumption By Sector: 2012/3 – 2034/5(PJ)

Sources: “Australian Energy Projections: December 2012”, BREE, 2012

Proportion of growth

2012/3- 34/5

2%

50%

6%

-45%

88%

-2%

Proportion of total in 2012/3

5%

29%

2%

38%

5%

21%

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Changing mix of Australia's energy demand

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2. The Solar Landscape

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Australia’s Renewable Resources: a Track Record of Innovation

Source: Professor Stuart Wenham, China: Threat or Opportunity? (2012)

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Compared to major solar markets, Australia is sunny

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Solar in Australia’s 2050 electricity mix

Source: BREE (2012d)

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Levelised costs in 2012 and 2020 – Photovoltaic, Concentrating Solar Power, Gas

Source: BREE, Australian Energy Technologies Assessment 2012

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LCOEs for renewable energy technologies - 2012Levelised energy costs in 2030

This slide shows the forecasted Levelised Costs of Energies (LCOE) across renewable and non-renewable energy technology in 2030.

Source: BREE, Australian Energy Technologies Assessment 2012

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Progress across the full set of costs is required to increase commercial viability and deployment

Solar Device Solar Device

Other Hardware,

Civils, Install, Land, O&M

Other Hardware,

Civils, Install, Land, O&M

FinanceChannel Margins

FinanceChannel Margins Local

costs70-80% of

employment in these areas

Global costs

TechnologyIP key value

LCOE Drivers

PV LCOE now <$200MWHr

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Solar innovation chain – key challenges

Research DevelopmentCommercial

Scale

Incubating Promoting SustainingImagining Demonstrating

PilotScale

Demonstration DeploymentSupported Commercial

CompetitiveCommercial

IMPACT

TECHNOLOGY PUSH MARKET PULL

Proving it Works

Higher Efficiency

Lower Cost Materials & Components

Thermal & Chemical Storage

Control Strategies – Demand side management, resource

forecasting

Securing Capital

Lower Technology RiskProof of CostSupply Chain Development

System Integration – improving capacity

factors & YieldsManufacturing Process

ImprovementO&M track record

Proving cash flows

Project Finance & Revenue Certainty

Maximising NPVForecasting, storage, PPA terms

Capturing PPA value in uncertain markets – carbon, regulation,

ownership structures etc

Cost of ownership, permitting, social acceptance, skills availability etc

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Unlocking the capital

Market

Commercial

Viability

Technolog

y Risk

Commercial viability– Upfront costs vs. long-term revenues– Highly sensitive to cost of finance– Bankable PPAs at market value

Technology risk (CSP)– Long-term nature of R&D– Funding the cost of proving its “bankability”

Market– Policy stability– Variation between jurisdictions– People and skills

$$$Debt & Equity

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3. Policy drivers

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Australia’s targets - projected growth in emissions and the abatement challenge

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Source: Treasury modelling, 2011 (medium global action scenario)

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Australian Government support for renewable energy technology development

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ARENA - objectivesThe basics

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4. ARENA’s Strategy and Investment Plan

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ARENA - objectivesThe basics

$3.2 billion in funding

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Strong foundations

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Doing business

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General Funding Strategy

GENERAL PRINCIPLES

ALONG THE WHOLEINNOVATION CHAIN

INVESTMENT PLAN

RESEARCH (basic and applied)DEVELOPMENTDEMONSTRATIONCOMMERCIALISATION

COMPLEMENTARITYCONFIDENCE BUILDINGDIVERSITY

STRATEGIC INITIATIVESSUPPORTING INITIATIVESCOMPLEMENTARY INITIATIVES

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Investment Plan

STRATEGIC INITIATIVESare larger in scope and scale and typically fund market-oriented, near commercial, demand pull projects

SUPPORTING INITIATIVESmore limited in scope and address specific roadblocks to the success of a strategic initiative

COMPLEMENTARY INITIATIVESprovide ARENA with the flexibility to do those things necessary to fulfil all of its functions

• Regional Australia’s Renewables

• Deploying utility scale renewable energy

• Removing roadblocks for regional and remote renewable energy

• Building Australia’s next generation solar

• Supporting High value Australian Renewable Energy knowledge (SHARE)

• Continuing programs such as ERP and REVCF

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Regional Australia’s Renewables

Industry

Size

Type of Support

Location of projects

Community

100kW – 1MW

Grants - capital subsidy

Off-grid

Roadblocks

No size

Grants – project costs

Focus on - system issues, demand management,

control systems, storage optimisation etc

1MW or more

Grants - capital / or revenue subsidy

Off-grid or fringe-of-grid

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PROPOSED OUTCOMES

2 xAt least 50 MW of renewable energy capacity installed

by 2020

10 MW or more renewable energy systems by 2018

Roadblocks removed. Trained

operators of renewables

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Demand for Off-Grid electricity is large in the minerals & energy sector

WA Forecast Increased Minerals And Energy Electricity Demand By Source

(GWh per annum, incremental above 2012 levels)

Sources: “WA State Growth Outlook 2013”, PwC 2012

95% of new energy demand

expected to be provided

off-grid

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There are successful Case Studies of renewables in the mining industry

Sources:Remote Miners Investing in Renewables to Power Operations”, Renewable Energy World 2012, accessed at:

http://www.renewableenergyworld.com/rea/news/article/2012/12/remote-miners-investing-in-renewables-to-power-operations, ARENA analysis

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5. Investment highlights

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$650 million in investments

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CS Energy Kogan Creek Solar Boost Project

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$A34.9m funding for $A104.9m project

• The project will be the world's largest solar integration with a coal fired power station.• 44 MW solar thermal addition to the

existing 750MW Kogan Creek Power Station in South West Queensland.

• AREVA Solar's CLFR technology.• 30 hectare solar field.• Operational in 2013.

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Solar Energy Management (SEM) system for utilities

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CSIRO, Ergon Energy, GWA Group$A0.2m funding for $A0.6m project

Combines CSIRO’s thermally-driven residential desiccant solar cooling technology with a novel SEM system and natural gas-powered back-up to reduce peak electrical consumption from the grid with certainty while providing continuous operation of air-conditioning.

The SEM technology will be tested in 3 residential buildings to verify its ability to address grid stability issues and testcustomer acceptance as “winx3” for the environment,consumers and utilities.

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Other Opportunities

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Current funding opportunities through ARENA:

• $126 million Emerging Renewables program

• $200 million Southern Cross Renewable Energy Fund

Coming up:

• PhD Scholarships and Postdoctoral Fellowships

• Regional Australia’s Renewables program