Renewable energy overview...Global context Investment is flowing Global investment has increased substantially over the past decade However, softening in 2012/13 and likely in 2013/14

Renewable energy

overview Resources Industry Productivity

Business Breakfast

Matt Herring

KPMG National Leader Renewables

October 2013

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Focus areas for discussion

■ Global context

■ Australian context

■ Technology alternatives

■ Challenges and opportunities in SA

■ Mining and renewable energy

Can renewable energy

improve productivity

in the mining sector?




Global context Renewable energy is moving forward rapidly

17% of

global

energy

consump-

tion in

2011 (35%

by 2030)

Strong

growth as

prices fall

and

policies

spread

50% of

new build

in 2011

was RE

World-

wide jobs

exceeded

5 million

in 2012




Global context Renewable energy in the world

Source: Ren21 Renewables Global Status Report 2012

UN Goal is to double share

of RE globally by 2030




Global context Investment is flowing

■ Global investment has increased substantially

over the past decade

■ However, softening in 2012/13 and likely in

2013/14

■ Expected to be $395b in 2020 and $460b in

2030

■ Wind and solar continue to attract most

investment

Source: Ren21 Renewables Global Status Report 2012

China will become the top

spot for investment in 2014,

overtaking the US




Australian context The focus on renewable energy is shifting…

■ Renewables development previously lagged

due to:

– the abundance of coal

– low electricity prices

– remotely located resources

– unsupportive government policy

– transmission and infrastructure constraints

■ However, the market is changing due to:

– the quality of our resources – world class

– improving regulatory/policy environment

– minimal jurisdiction risk and increasing

electricity prices

– Environmental concerns

Source: Clean Energy Council Annual Report 2012

Australia is increasingly

becoming a global leader in

renewable energy – 9% total

energy capacity is RE




Australian context Australia’s energy challenge

■ Energy White Paper 2012 released November, outlining a number of challenges:

**Delivery of clean energy listed as a core component of future energy policy ($100b

required by 2050)**

…… …… …… ……

……

…… …… ……

Attracting

investment

($240billion)

Improving

productivity

Reducing prices

Ensuring fuel

supply

New technologies

to market

Managing

transitional

pressures

Sustainably

developing

resources

Promoting choice

Reducing

emissions




Australian context However, what impact will the new government have?

■ Coalition is generally supportive

■ Carbon tax and CEFC to be removed – timing still unknown

■ But the Renewable Energy Target (RET) has bipartisan support (guarantees 20% of

Australia’s energy (45,000GWh) in 2020 will come from renewable sources)

■ Australian Renewable Energy Agency (ARENA) will continue

■ Coalition’s Direct Action plan will provide support for emissions reduction projects – however

details are still unknown




Australian market and policy overview Primary barriers to the uptake of renewables

Access to debt and equity is an issue for all infrastructure projects

Especially renewables, which is perceived as high-risk

Higher cost, lack of base-load alternatives, and transmission

constraints

Renewables is a new sector – technology improvement is required

RET price is still very low and policy position is uncertain

Impacts cost of renewables - and accessing PPAs is difficult

Many other barriers

Volatile perception in the market, political change, lack of knowledge and

capability, lack of understanding etc….




Technology alternatives Wind energy – a renewables mainstay

■ Australia has some of the world’s best wind resources in

with capacity factors in excess of 30% not uncommon

■ Currently 22% of all renewables capacity

■ SA has half the nation’s capacity

In the past year wind power

generated enough electricity

to power over 900,000 homes


1%

17%

47%

9%

19%

5%

m/s

Western

Australia (WA)

Queensland

(QLD)

New South

Wales (NSW)

South

Australia

(SA)

Tasmania

(TAS)

Victoria

(VIC)




Technology alternatives Wind energy – facts and challenges

■ Australia’s geography is particularly

suitable to wind energy generation

■ Nearly 200,000 square kilometres of

land which can be utilised for wind

farms

■ Fastest growing renewable energy

source…

■ …although its current share of total

energy generation is only 2%

■ Capacity has doubled in two years

■ Wind energy is an increasingly cost-

competitive using proven technology

Social /environmental

concerns

Many good sites taken

Intermittent supply and cost

Transmission and location of supply

Challenges

Stage of development Operating Under construction Proposed (future pipeline)

No. of projects 37 3 100+

Capacity (MW) 2,567 495 16,000+

Australian wind projects – status as at June 2012




Technology alternatives Solar energy – the emerging opportunity

■ Australia has the highest average solar radiation per square metre of any continent in the

world, yet its solar potential remains untapped

The number of Australian

households with solar

panels has increased more

than 35 times over the last

three years

Source: http://www.matthewb.id.au/solar/solar-thermal-energy.html




Technology alternatives Solar energy – facts and challenges

■ Currently 7% of all renewables

capacity

■ Installations to date are mainly small

direct-use application such as water

heating and roof-top PV

■ Currently >150MW of installed capacity

from Solar PV – increasing rapidly

■ No large-scale plants, however

potential is vast

Considered by many as unproven

High cost, particularly thermal

Intermittent supply Transmission and location of supply

Challenges


When will utility scale

projects be developed?




Technology alternatives Geothermal energy – what does the future hold?

■ Australia’s geothermal resources

represent a potentially large-scale base

load opportunity

■ However the industry is in an embryonic

stage of development

■ Technology is yet to be proven

commercially or technically

■ Australia has no active volcanoes and

few hot springs, but does have good

reserves of hot dry rocks

■ Potential for innovation to reduce the cost

by ~30%

■ Economics are favourable: analysis

suggests a price sub $100/MWh when

commercial

Unconventional is unproven

Significant upfront capital costs

Fragmented industry

Transmission and location of supply

Challenges




Technology alternatives Ocean energy – substantial long-term opportunity

■ Near shore wave energy resources are

significant – estimated at four times

current power needs of Australia

■ However, relatively new technology and

not proven technically or commercially

■ Australia has >4 pilot and

demonstration plants – all small-scale

■ Australia has numerous strong R&D

companies focused on developing

ocean energy projects

■ Potential to work with global companies

to develop projects – particularly R&D

and pilot projects

Cost Size of projects

Proximity to grid Transmission and location of supply

Challenges





Technology alternatives Biomass and biofuels – an emerging opportunity?

■ Currently Australia’s biomass is sourced

mainly from sugar cane residue, wood

waste and capture of gas from landfill

and sewerage facilities

■ Interest in small-scale biomass projects

is increasing

■ Many global technology providers

investigating Australia

■ Ethanol is gaining wider community

acceptance

■ Support at national and state levels for a

greater role for biofuels in transport

■ Australian Government regulations limit

the proportion of ethanol in petrol to 10%

Fuel source and supply

Market acceptance

Size of projects Biofuels in early

stages

Challenges





Technology alternatives What is the ultimate tipping point for renewables?

Baseload and low cost

Non-baseload and high cost




South Australia What are the key issues?

What is the long-term strategy for renewables in SA?

SA is the Australian leader but are other states bridging the gap?

How do we create an enduring industry around renewables?

Currently only have projects, but no manufacturing, supply chain etc

Can we create a knowledge economy focused on renewables?

Opportunity to integrate with mining and manufacturing…

How do we overcome infrastructure and other (eg community)

constraints?

Critical to the long-term future




Renewables and mining Is it possible to utilise renewables in mining projects?

Rising and volatile

energy costs

Mining project

challenges

Reliability of energy

supply

Productivity Carbon policy

legislation

General

environmental

concerns

Resource

depths

Resource

location

(remote from

grid)

Energy

security




Renewables and mining Projects are being developed to address these challenges

Many of the first applications of renewable energy technologies for mining operations are

hybrid solutions using a combination of renewables and diesel gensets, eg:

■ Generally all are new projects with limited performance data available, but evidence of cost

reductions through diesel consumption reduction

■ Productivity improvements? Probably not yet the primary focus

■ Few if any meaningful examples in Australia – we are lagging other mining jurisdictions

Pacific Hydro – wind in Chile

Vale – wind in Brazil

Rio Tinto – wind in Canada

Codelco – solar in Chile

Croniment – solar in South Africa

Teck – hydro in Canada

© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International

Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG

International.

Possible benefits…

Can reduce energy costs/ consumption/

volatility

Supply: abundant resources located close

to mines

Can address environmental concerns

Can be built at scale and for discrete

applications and improve reliability

Can augment/enhance fossil fuels

Overall productivity

© 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International


International.

Constraints…

Concerns about unreliability and immaturity of

technology

Concerns about high costs

Lack of baseload alternatives - intermittency

Lack of knowledge and understanding

System integration and grid stability issues

General perception and suspicion

22 © 2012 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International


International.

Renewables and mining WA study focusing on renewables in the mining sector

Assessed

various

renewables

technologies

Identified

potential

opportunities

and barriers

Analysed five

scenarios

(case studies)

Made key

recommen-

dations

Assessment of the potential for renewable energy projects

and systems in the Mid West



International.

Renewables and mining Study concluded:

RE has difficulty being accepted as there are few if any off-

grid exemplars

Solar (PV and thermal) and wind are the principal viable

renewable energy sources

The most suitable renewable power solution is seen a hybrid

solution

Renewable energy generation is capital intensive

Miners perceive RE to be unreliable and not dispatchable



International.

In summary

■ RE is increasingly being adopted globally

■ SA has a clear opportunity to be a global leader

■ There are opportunities for RE in the mining

sector, including reducing energy costs and

improving productivity

■ However, there are many (technological and other)

barriers to overcome

■ Particular opportunities in hybrid and storage

solutions with intelligent communication

systems to overcome stability issues

■ Reliable operational data highlighting real-life fuel

savings and other benefits is required

■ Without it many mining companies will not

embrace renewable energy solutions

“Once miners trust the

technical solution and the

stability of the system, they

are eagre to delve into the

financial business case”

Can SA become an R&D

leader in mining and

renewable energy

solutions?




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The information contained herein is of a general nature

and is not intended to address the circumstances of any

particular individual or entity. Although we endeavour

to provide accurate and timely information, there can be

no guarantee that such information is accurate as of the

date it is received or that it will continue to be accurate

in the future. No-one should act upon such

information without appropriate professional advice

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Documents

Renewable energy overview...Global context Investment is flowing Global investment has increased substantially over the past decade However, softening in 2012/13 and likely in 2013/14