Victorian Energy Overview June 2010. Victoria – Unique Energy Market Large Reserves of Brown Coal – 500 years No Black Coal Offshore Natural Gas ~ 25.

Victorian Energy Overview

June 2010

Victoria – Unique Energy Market

• Large Reserves of Brown Coal – 500 years

• No Black Coal

• Offshore Natural Gas ~ 25 years

• Good wind resources

• Privatised Energy Market

• Many Assets Owned by International companies

New Investments, wind, gas peaker, coal & solar

VENCorp SP AusNet Australian Energy Market Commission /

Australian Energy Regulator

Loy Yang A Hazelwood Yallourn Loy Yang B Southern Hydro

Snowy Mountains Scheme

Interstate and other

Generators

Powercor Jemena Citipower United Energy

SP AusNet

Consumers of electricity have been able to choose

their own electricity retailer since 13/1/2002.

Ecogen

AGL

Regulated / Non-regulated Pricing

• GENERATORS – Many – Less than 10– Prices NOT regulated, can make or lose lots of money

• TRANSMISSION – One only – Monopoly– Regulated, about a 6.8% Real Rate of Return (RROR)

• DISTRIBUTION – Five– Regulated, about a 6.8% Real Rate of Return (RROR)

• RETAILERS – Many – about 14 at present– Prices monitored, but NOT regulated, can make or lose lots

of money

Electricity and gas transmission

500 kV330 kV275 kV220 kV

Red Cliffs

Kerang

Horsham

Portland

Bendigo

Ballarat

WodongaShepparton

Glenrowan

Hazelwood/Morwell

Mount Beauty

Loy YangTerang

Dederang

Yallourn

DartmouthMcKay Creek/West Kiewa

Eildon

Anglesea

MooraboolGeelong

Pt. Henry

Victorian Electrical Network

Summer Peak ~10,300 MW Winter Peak ~7,500 MW

Major Generation

Major Load

Interconnection with Snowy/NSW

1900 MW from Snowy

Interconnection With SA300 MW from SA

Interconnection with Tas

MurrayLink

+/- 220 MW

Electricity generating capacity in Victoria

Wind

Biomass

Solar

Hydro

Natural Gas

Brown Coal

Renewables

Total Electricity Generating Capacity 10,000 MW

Total Renewable Generating Capacity 1,000 MW

Technology Cost of Power

-100

-50

0

50

100

150

200

Brown Coal Black Coal ClosedCycle Gas

Open CycleGas

Wind Geothermal Nuclear Solar

$ p

er M

Wh CCS

CPRS

REC

Principal Power StationsPower Station Company MW Units Type Year

Loy Yang A Great Energy Alliance CoTokyo Electric

2100 525 x 4 Steam/Coal 1984/87

Hazelwood International Power – UK 1600 200x8 Steam/Coal 1964/71

Yallourn ‘W’ Yallourn Energy - CLP 1450 350x2

375x2

Steam/Coal 1973/75

1981/82

Loy Yang B International Power, Mitsui 1000 500x2 Steam/Coal 1993/96

Morwell Energy Brix 170 20x1

30x3

60x1

Steam/Coal

Steam/Coal

Steam/Coal

1958

1958/59

1962

Newport Ecogen Energy 510 500x1 Steam/Gas 1980

Jeeralang Ecogen Energy 468 57x4

80x3

Gas Turbine 1979

Latrobe Valley International Power, Mitsui 300 50x5 Gas Turbine 2002

Somerton AGL 150 150x1 Gas Turbine 2002

Wholesale Price Variation

http://www.nemmco.com.au/mms/GRAPHS/INDEX.HTM

Regulatory SystemAustralian Energy Market Operator (AEMO)

The ‘manager’ of the market

http://www.aemo.com.au

Australian Energy Regulator (AER)

The ‘regulator’, guidelines and price determination

http://www.aer.gov.au

Australian Energy market Commission (AEMC)

The ‘rule maker’

http://www.aemc.gov.au

http://www.aer.gov.au/content/index.phtml/tag/AERMarketSnapshot/

Average annual wholesale prices (March ’10) - $/MWh

Victorian Wholesale Power Prices - In NOMINAL $/MWh

0

10

20

30

40

50

60

Years

NO

MIN

AL

$/M

Wh

Energy Support Programs

Commonwealth Government

• $1.6B renewable energy funds, including the $1.5B Solar Flagships

• $2.4B clean coal fund

• $50 million geothermal drilling program fund

• 45,000GWh of renewable energy certificates (eRET)

Victoria State Government

• $110m ETIS2 funds for CCS demonstration

• $72m ETIS2 funds for renewables demonstration

• $100m large scale solar power station

Renewable Energy Target (RET)

• Commonwealth Program / Policy

• Changes in March 2010– Yet to be legislated

• Split into large scale (wind) and small scale (solar etc,.)

• Large scale 41,000 GWh (~4500MW) by 2020– Market to set the price

• Small scale unlimited, set price of $40/MWh– To be reviewed in 2014

CPRS -5% Permit Price

CPRS -5% Permit Price

Planning Issues• Victorian Parliamentary review underway

• Need to plan well ahead

• Grid connections can take three years

• Some planning aspects two years

• Wind is particularly slow

• Flora/Fauna studies can be seasonal, requiring 12 months– Orange bellied parrots, legless lizards, growling frogs

• Parallel planning (environment / building planning / finance)– Fastest but is costly if projects don’t proceed

• Wind planning 100% (>2,000MW) over subscribed

• But is the policy there to give you certainty?

Victorian Wind AtlasLand reserved under the National Parks Act (1975)Angahook – Otway Investigation

66 kV electricity network220 kV electricity network330 kV electricity network500 kV electricity networkTerminal station

Substation

Operating wind farm

Win

d S

peed

(m

etr

es/s

econ

d)

8

7

6

5

4

Win

d S

peed

(m

etr

es/s

econ

d)

Wind Projects Status

http://new.dpi.vic.gov.au/energy/projects-research-and-development/wind-projects

Offshore Wind

• Victoria’s coastal waters are deep compared to countries with installed offshore wind energy

• With current technologies, offshore wind energy is not commercially viable in Victoria

> 300

m

0 – 40

m

Wave Energy

• Victoria has excellent wave resources, particularly along the Western coast

Mean Average Wave Energy(kW per metre)

20 to 5010 to 20

0 to 10

• Victoria - 2005 Biofuels’ Action Plan– $5m biofuels infrastructure fund

• Mandates in NSW, Manildra, not in Vic’ review in 2010

• Food vs Fuel, vs beer, wine, meat– http://en.wikipedia.org/wiki/Fuel_vs_food

– If move beer crops to food…….

– Energy cost in a packet of corn flakes, high fuel prices give more impact

– US President: Only 85% of cost increase fuel related (2008)

– 70% of USA crops for meat

• Australian input limits

• Need 2nd generation, cellulosic, straws, pasture grasses etc,.– Commonwealth - $12m, over three years…..

• Water and conditions tolerable opportunities– We have a lot of marginal land that could be used, (and improved)

Biofuels

Biofuels

Geothermal

Feed in Tariffs (FiT)• Victorian legislation 1:1 Nett FiT for up to 100kW of renewables

– Solar or wind or hydro– Liable party is the retailer– Cost passed through to all customers

• Victorian Premiuim Nett FiT for up to 5kW of solar. Solar specific.

– Liable party is the distributor, cost passed through to all customers

• No Gross FiT, considered too expensive– NSW just announced a Gross PFiT up to 10kW, $500m

• No national consistency– Introduced state by state

• No energy efficiency FiT, for example for high efficiency combined heat and power

VEET – Energy Saver Incentive (ESI)

• Electricity and Gas retailers are liable– Add a small amount to all bills

• Three year phases, starting 1 Jan 2009

• 2.7MT CO2e per year (Vic’ total 110MT/y)

• Domestic only

• Six prescribed activities so far, more can be added

– Water heating, Space heating, Space conditioning (insulation, thermally efficient windows and weather sealing products), Lighting, Shower roses, Refrigerators/freezers

• Who pays?– All customers

http://www.esc.vic.gov.au/public/VEET/

Energy Resource Efficiency Program (EREP)

Mother of EREP was Industry Greenhouse Program (IGP)

• At the end of 2007, IGP had delivered:– Cuts of 1.23 MTCO2e/year

– Savings to business of $38.2 million each year

– Average payback period was 20 months

EREP

• 100 TJ of energy and/or 120 ML of water

• 250 liable companies in Victoria. They use 700 petajoules of energy and 300 gigalitres of water a year.

• 45% of Victoria's energy use, annual water consumption of around 1.5 million average Victorian households.

• Is this enough for energy efficiency?– Not sure, would like to look at the 2nd tier energy users

http://www.epa.vic.gov.au/bus/erep

Web Links• Sustainability Victoria

• http://www.sustainability.vic.gov.au/www/html/1517-home-page.asp

• Department of Primary Industries

• www.dpi.vic.gov.au

• http://www.dpi.vic.gov.au/dpi/dpinenergy.nsf/Home+Page/Energy~Home+Page?open

• Department of Sustainability and Environment

• www.dse.vic.gov.au

• Department of Premier and Cabinet

• www.dpc.vic.gov.au

Thank YouLeigh Clemow

Regional Development VictoriaTel + 61 3 9651 9260

leigh.clemow@rdv.vic.gov.au