EUAA TEF Energy Market Update

Consumer Panel Session Opener

Marc White

November 2015 8 March 2018 AGENDA

1. 2017 Recap 2. Big Picture 3. Local Scene 4. What to Do?

Goanna Energy Consulting Pty Ltd 2 What have you done for me lately? Goanna, TSBC, ECA Advocacy

“The TSBC Submission was the most detailed Small Goanna (John Devereaux) – Chairing consumer Business Submission input to Rate of Return review – impacting received” every energy consumer in the country”.

Goanna Energy Consulting Pty Ltd 3 Goanna - Private Clients

Goanna Energy Consulting Pty Ltd 4 AGENDA

1. Recap 2. Big Picture 3. Local Scene 4. What to Do?

Goanna Energy Consulting Pty Ltd 5 We started with a pretty basic electricity system

Goanna Energy Consulting Pty Ltd 6 Making an effort to reduce Emissions - Mandatory RET & NEG

Goanna Energy Consulting Pty Ltd 7 Record prices for Electricity, LGC’s & Natural Gas drives behavior

Goanna Energy Consulting Pty Ltd 8 Investment in Renewables doubles in 2017 to $11.3Bn & Consumers will pay for this over time

Goanna Energy Consulting Pty Ltd 9 Natural Gas in awaiting outcome of Arbitration in April

Goanna Energy Consulting Pty Ltd 10 “While our forecast transmission augmentation capital expenditure remains modest, we have identified five contingent projects…”

Tas $550M share of Second HVDC interconnector; Significant new wind generation NW & Burnie to Smithton 110 kV transmission corridor; Rationalisation of our ageing 110 kV transmission network in the Upper Derwent region to align with Hydro Tas relocation of ; Augmentation of the 220 kV transmission system between Sheffield and Burnie. Goanna Energy Consulting Pty Ltd 11 Second Bass Strait Interconnector Tamblyn Report April 2017 ~$900M +/- 20%, 8 Years, 600MW

Preconditions Not Yet Met Goanna Energy Consulting Pty Ltd 12 Hydro Ups the Ante on • Not only the $140M - $180M of consequential costs of the Energy Crisis • Hydro advice hints at the economic value lost from a 20% (130MW) cable derating of the Northern Flow, over the remaining ~12 years of the contract. Depending on the Vic spot price, this could be big bucks???

Will we get our money back? Or has it Sunk?

Goanna Energy Consulting Pty Ltd 13 Pumped Storage Fever Rises Again

$2B quickly turns into $3.8B - $4.5B, Feds to buy Snowy for $6B Marsden Jacob Associates say Snowy 2.0 project is "least cost" option

+ $100’s M for on island Transmission?

Goanna Energy Consulting Pty Ltd 14 Record LNG Exports with Price & Consumption expected to double by 2030

“Australia’s east coast gas market remains incredibly tight and users are paying for this with high prices and limited sources of competing supply. The east coast gas market is at a crossroads and the only real choice is to address the fundamental supply problem, particularly in the south.” ACCC 28 Feb 2018

Goanna Energy Consulting Pty Ltd 15 What does it all mean? • Higher costs have now been locked into the system: – Generation (Transition to Wind & Solar, higher water reserves & TVPS costs). – Transmission (~$130M Waddamana – Lindisfarne) – Distribution ($12M Solar Subsidy 2018, System Automation & Adv. Metering) – Retail (Increased spot, forward & volatility = Increased cost of Risk Management, with increased hardship & community NFP support) • Question of “Strategic Calibration” of our current initiatives against our goals. With potential for more initiatives & costs to come. Eg. – Generation (Hydro Pumped Storage & New Wind farms which need FCAS) – Transmission (Second DC Interconnector, Interest rate increases?, $20M - $30M George Town Static Var Compensator) – Distribution “Techno-Plating” (Interest rates, IT, Comms & Controls) – Retail (Replacement of PAYG System) – Pro-Sumers (Making their own investments, in some cases duplicating network investments)

Goanna Energy Consulting Pty Ltd 16 AGENDA

1. Recap 2. Big Picture 3. Local Scene 4. What to Do?

Goanna Energy Consulting Pty Ltd 17 The Solar Scallop: Changing Intraday Price Profiles 2007 2017

… and will continue to change, changing definitions of Peak and Off Peak.

Goanna Energy Consulting Pty Ltd 18 Gas Premium - Positive

Goanna Energy Consulting Pty Ltd 19 Wind Premium (Negative) & becoming more so

Goanna Energy Consulting Pty Ltd 20 Matching Solar Output in Tassie to your Consumption Profile is a Challenging task

Goanna Energy Consulting Pty Ltd 21 Risk!

Firming Product Firming Product

Goanna Energy Consulting Pty Ltd 22 Retailer Hedging Mis-Match = Risk Risk management tools include:

Financial Demand Side Products

Dispatchable Spot Market Generation Speculation

User Pays or in some cases Takes the Risk

Goanna Energy Consulting Pty Ltd 23 What does it all mean? • The Supply/Demand Balance has changed and will continue to change • There is a growing mismatch between supply and demand on an intraday & FCAS basis, most notable in SA but rapidly emerging elsewhere. • Tasmania is not immune, as wind and solar penetration increases, so to will Firming Costs. • All roads lead to Hydro Tas “Dispatchable” Gen & FCAS “Dancing Partner”. • Wind is increasingly attracting a negative price premium, or put another way, the new “Off Peak” is when the wind blows. • The new “Peak” energy rate, is when the wind doesn’t blow and the sun isn’t shining. • Solar & Wind proponents want 15 + year deals, but supply is intermittent • Consumers need a 100% Firm supply, so Retailers must seek out Fixed Price “Firming” products, which may only be available for 1 – 3 years. • Dispatchable and controllable generation providers, such as Hydro & OCGT are in high and growing demand, where the Supply/Demand curve rules.

Goanna Energy Consulting Pty Ltd 24 AGENDA

1. Recap 2. Big Picture 3. Local Scene 4. What to Do?

Goanna Energy Consulting Pty Ltd 25 What Should I Do? • Customers are sick of energy price rises, uncertainty and risk, so are responding by Taking Back Control, at every level, in some cases irrespective of the economics. – Residential Solar/Battery Systems (despite batteries not yet economical in most cases) – Average Res Solar system size has doubled from 3KW to 6KW – C&I Long Term Power Purchase Agreements & LGC’s with wind developers – One client seriously considered a $25M proposal to go Off Grid. • Take control of your electricity bill (Get on top of the housekeeping) • Be fully Informed, (arrange your tailored Executive/Board Presentation). • Be Proactive, (Run market engagement early, Don’t wait until the last month) • Be Knowledgeable (Attend EUAA National event, you’re not alone!)

• Remember, Change results in Winners & Losers, band together and advocate for your interests.

Goanna Energy Consulting Pty Ltd 26 Cloud Based Business Intelligence • BI Started with over 1,100 Tasmanian Water & Sewerage sites in 2016 • BI now rolled out to multi-site clients as Multi $M savings achieved

• Now also covering: – Over 280 State Government sites – Over 17,500 Public Lights (Contract Savings ~$1M pa) – Major Aged Care provider

• About to onboard major Tas Education provider – Targeting sites with high consumption to solar production correlation. I.e. Best RoI sites

Goanna Energy Consulting Pty Ltd 27 What to do Next? • Depends what stage of the energy management journey you are at • Housekeeping – Budgeting, Budget to Actual, Monthly Accruals & EOFY Cost Outlooks – Cost drivers Fixed & Variable – Invoice Validation & Network Tariff Optimisation • Operational Controls – Daily Reporting, Consumption & Demand – Exception reporting, E-mail Notifications & SMS Alerts – Maximum Demand Specification & Control – Power Factor Correction – Automated dispatch of major controllable Plant & Equipment based on price signals • Capital Investments – Ranking all competing Energy Initiatives by Payback period and/or RoI – Solar Inc. Production meters, Savings Tracker (Shadow Pricing) & exception reporting – Weather/Consumption correlation, Production/Consumption Correlation

Goanna Energy Consulting Pty Ltd 28 Time to be Bold or left in the Cold?

Goanna Energy Consulting Pty Ltd 29 Thank you

General Information Only: Whilst Goanna has endeavoured to ensure that the information contained within this presentation is accurate, we do not make any warranties or representations in Marc White relation to the accuracy of the information contained herein. This presentation is intended as general advice only and is not (03) 6223 7253 intended to constitute personal financial product advice. It is has [email protected] been prepared without taking into account the personal circumstances, financial needs or objectives of anyone person or www.goannaenergy.com.au organisation. Accordingly individuals or organisations, who seek to rely on information contained within this presentation, should undertake their own independent enquiries and seek legal or financial advice prior to doing so. Examples used in this presentation are for illustrative purposes only. Goanna Energy Consulting Pty Ltd 30