AMIC Securing The Future Megatrends - Focus on energy and automation Roger Horwood| September 2015

Energetics 30 years in the energy business Key clients include BHP, Qantas, Woolworths, Simplot, Teys, Inghams, Pepsico and many others Working with many red meat processing companies Negotiating over $1.5 billion in energy contracts each year Manage energy billing and data management for over 40 businesses Helped develop and advise on 100s of energy projects Achieved $25 million in CTIP and over $20 million in ESS Working with clients to develop projects for the ERF

Australian dollar Labour costs Commodity prices Energy Efficient Technology Automation and robotics Price of energy Megatrends impacting manufacturing

Trend 1 - The Australian dollar Trending down Good for exports Bad for imports of equipment

Trend 2 - The cost of labour Labour costs still high now stabilising Drive for automation and robotics Highly skilled labour to support new technology

Trend 3 Commodity prices Food prices trending down Competition is growing Need to maximise productivity Decreasing commodity prices Import / export regulations Overseas producers with economy of scale plants

Trend 4 Energy efficient technology Rapid decrease in cost of Solar PV and LED lamps Similar trend for VSDs and other control and sensors based on electronics

Trend 5 – Automation & Robotics Increasing use (competitive with manual work costs) Decreasing costs More capability SCOTT ® Group One billionth of the price in late 1960s

Cost 6 Price of gas and electricity Wholesale Gas (Wellhead) Gas prices are raising LNG has bought global prices to Australian gas Electricity Prices Doubled in last 5 years Electricity demand is declining AER pushing for lower network costs Few price increases expected However renewables are adding complexity to generation and networks

Renewable Energy Impacts SA Wind 35% of state power Two brown coal fired power stations shutdown for summer Reduced carbon emissions Recently wind power during the night supplied most of the grid load

Solar Impacts Queensland have the highest capacity of rooftop solar in Australia. Utilities looking to limit “Christmas day Effect” (too much power and no demand) Use of batteries may lead to grid defections (“death spiral”) This is affecting the price of electricity

Energy Market Drivers Electricity prices have nearly doubled in past 5 years and have now largely stabilised Gas prices are in the process of doubling in the next 2-3 years. This halves the payback period for energy efficiency projects. And greatly improves economics of changing from gas to other fuels such as biogas and biomass. Renewables are changing the power generation balance Many red meat processing plants have implemented biogas systems – this will reduce gas price increase impacts

Energy cost reduction goes straight to the bottom line $Labour + $Raw materials + $Energy = $ / tonne Tonnes of production Energy is a significant cost which can be reduced

Case studies

CompanyTargetFeatures Danone (Dairy) 30% reduction in carbon emissions in five years after 45% reduction in energy intensity previous five years. Visionary leadership Business brand built around ‘nature’ sustainability positioning Nissan USA 25% reduction in energy intensity by 2020 after 30% reduction previous five years Energy culture... Everyone responsible Cross-functional teams Dow Chemicals 25% reduction in energy intensity by 2015 after 38% reduction previous 20 years. Comprehensive continuous improvement program globally 3M25% reduction in energy intensity by 2015 after 20% reduction previous five years. Brand built on innovation including in energy use 30+% improvement in energy productivity 15

Simplot Australia 25% in 10 years On target for 2018 Strong structured program with awards for best site and energy manager CEM training Recently awarded AEE Oceania best company

Woolworths Targets set in 2007 Energy efficiency improvements in refrigeration, HVAC and lighting GJ/$EBIT improved by 10% over last 4 years M&V process applied

AMIC tools and case studies Funding and finance

AMIC Energy Efficiency Tools and case studies Case studies Webinars and Videos Planning Templates and Tools

Funding and Finance NSW Energy Saving Certificates for electricity and natural gas Victorian Energy Efficiency Target – electricity savings Emissions Reduction Fund (ERF) - pays for carbon emissions savings (Last round $13.95/tonne of abatement) CEFC finance for renewable projects, low emissions and energy efficiency ARENA funding for innovative renewable projects

Summary Energy is now expensive variable input Most businesses have the ability to improve their energy productivity as demonstrated by International and Australian businesses Most companies still restricting themselves to projects <2 year payback and many <1 year! Energy savings/fuel conversion investments are attractive. Low interest makes financing < 3-4 year payback projects possible. Could include 3 rd party ownership/supply of energy service. Large emission reduction projects should consider ERF – last round $13.95/tonne of abatement

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