NSW: A Clean Energy Superpower Industry Opportunities Enabled by Cheap, Clean and Reliable Electricity FINAL REPORT Prepared by KPMG with the NSW Office of the Chief Scientist and Engineer for the NSW Department of Planning, Industry and Environment 23 September 2020 DISCLAIMER INHERENT LIMITATIONS This report has been prepared by KPMG, with input from the NSW Office of the Chief Scientist and Engineer, for the NSW Department of Planning, Industry and Environment, and as set out in the Scope Section of our engagement contract dated 18 May 2020. The services provided by KPMG in connection with this engagement comprise an advisory engagement, which is not subject to assurance or other standards issued by the Australian Auditing and Assurance Standards Board and, consequently no opinions or conclusions intended to convey assurance have been expressed. 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Executive summary Background The New South Wales (NSW) Government’s Net Zero Plan Stage 1: 2020-2030 sets an expectation to reduce NSW emissions by 35 per cent relative to 2005 levels by 2030 and achieve net zero emissions by 2050.1 It also outlines an objective to achieve this target via approaches that maximise economic opportunity, prosperity and wellbeing for NSW citizens. Renewable and low-emissions electricity is a key transition pathway to reduce emissions as NSW’s coal-fired power stations approach the end of their use life. The NSW Electricity Strategy, released in 2019, provides the overarching framework to support this transition in NSW. It interfaces with the Net Zero Plan Stage 1: 2020-2030 and seeks to coordinate private investment in reliable and clean electricity infrastructure and reduce electricity prices by addressing critical market barriers to investment. Additionally, the NSW and Commonwealth governments have entered into a memorandum of understanding (MOU)where $450 million has been prioritised for the Emissions Intensity Reduction Program, which will support large NSW-based sources of emissions to transition their plant, equipment and other assets to low emissions alternatives. The memorandum also prioritises the Clean Technology Program, which will research, develop and commercialise emissions reduction technologies. Together these support the transition to generating and using reliable, affordable and sustainable renewable and low-emissions energy.2 The MOU also includes significant funding programs for electric vehicles and emissions abatement in the agriculture and land sector. Electricity and energy are fundamental inputs to all households and industry, and there are significant current and emerging opportunities for industry growth and development in NSW over the long term. Some opportunities, such as hydrogen production, advanced manufacturing opportunities, and controlled environmental horticulture are already recognised, with industry and government already working together to coordinate efforts to channel investment and create the enabling market conditions. Other opportunities will continue to emerge over time. The NSW Government’s collective economic and industries development plans, all of which align to its overarching 2040 Economic Blueprint, seek to create the enabling environment for such opportunities to be realised in NSW. Reliable, clean, and lower cost electricity will be a necessary pre- condition to maximising the value and long-term impact of these opportunities for jobs and growth in NSW over the short, medium and long term. This report considers a range of these opportunities in NSW. Purpose and Scope This report has been developed for the NSW Department of Planning, Industry and Environment (DPIE). Its purpose is to prioritise actions for government, industry and other stakeholders to pursue and enable industry development opportunities that can leverage NSW’s transition to reliable, low cost clean energy. The scope of this report is as follows: • identify industry development opportunities associated with integrated clean energy deployment; • analyse potential costs and deployment rates of selected clean energy technologies; 1 Department of Planning, Industry and Environment 2019, ‘Net Zero Plan Stage 1: 2020 – 2030’, NSW Government, NSW. 2 NSW Government 2019, ‘NSW Electricity Strategy’, NSW Government, NSW. © 2020 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. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Document Classification: KPMG Confidential • analyse the preconditions (cost and readiness) for existing and emerging industries to leverage clean energy technologies; • analyse the potential economic size of industry opportunities to leverage clean energy technologies; and • prioritise industry opportunities and future considerations with respect to location, technologies and policy needs and potential infrastructure requirements. Approach and Limitations The report synthesises a broad range of domestic and international data, research, and industry information to consider each opportunity. It also includes illustrative projections of the potential long- term cost pathways of clean energy technologies to illustrate the sensitivity of opportunities to different drivers of cost. Further, it draws on available industry and government data and publicly available information to illustrate the relative size and significance of different opportunities. The report outlines the analysis method, assumptions, and data and research sources. The report has been prepared by KPMG with input from the NSW Office of the Chief Scientist and Engineer (OCSE) and a range of other NSW Government stakeholders. OCSE provided a range of inputs in relation to the various technologies and opportunities considered in this report and the technical assumptions informing the analysis and modelling. There is a range of potential factors impacting current and future costs and the realisation of the opportunities considered. Many of these factors are subject to significant uncertainty, particularly over longer time periods. The analysis for each opportunity is intended to provide a snapshot of the current evidence base and identify the key considerations and uncertainties associated with each opportunity. The insights from this report are intended to form one input to the NSW Government’s consideration of actions to further investigate and accelerate the delivery of the opportunities considered. It is not intended and should not be interpreted as an appraisal of the current or future feasibility, costs or benefits associated with these opportunities. These will need to be subject to further specific consideration as part of dedicated feasibility studies as the basis of investment and/or other decisions by government and industry. The body of the report provides further details of the approach and limitations. Key Findings Based on current evidence and the analysis in this report, the following table summarises the opportunity size and the key actions for the NSW Government to progress opportunity development. Table 1: Opportunity size and actions for consideration for selected industry opportunities Industry Potential Opportunity Size Potential Suggested Actions for Consideration by Opportunity Timeframe the NSW Government A NSW The National Hydrogen Strategy Short, medium • Continue to strengthen partnerships hydrogen estimated that the hydrogen industry to long term across industry, research and all industry in Australia could generate levels of government to accelerate approximately 7,600 jobs and $11 industry development. billion per year in additional GDP by • Continue to develop and 3 2050. subsequently