2. AUSTRALIA Taipei AUGUST 2016 Simon Every
APEC Green Energy Finance Initiative
Session IV: Best Practice & Policies:
AUSTRALIA
Taipei AUGUST 2016
Simon Every
Head of Government and Stakeholder Relations

3. Agenda Australia’s energy challenge Challenges for green energy
The role of the CEFC
Case studies

4. Electricity in Australia
2 major markets
A few remote grids
Multiple isolated settlements
~85% Fossil Fuels
NEM
SWIS
Customers
9 million
1 million
Generating Capacity
45,000 MW (~71%)
5,800 MW (~9%)
Consumption
200 TWh/per annum
18 TWh/per annum
Transmission length
40,000 km
7,800 km
Value of trade
$5.9bn USD
$385m USD
Cities over 1 million pop.
Cities million pop.
Source: AER, AEMO, Office of Chief Economist

5. In 2015, ~15% of Australia’s electricity came from renewable sources
35,000GWh from renewables
205,000GWh from fossil fuels
Source: Clean Energy Council

6. Australia has commited to reducing emissions by 26% by 2030
2005: 612MtCO2-e
2030 target: MtCO2-e
Source: Climate Change Authority, Australian Government

7. Energy and transport are responsible for 70% of Australia’s emissions
536Mt* in 2015
Electricity, stationary energy and transport account for 70% of Australia’s emissions.
Land-use changes have traditionally been big driver of emissions in Australia
In recent years, emissions from the electricity sector fell, due to decreasing demand and lower emissions intensity
*estimate
Source: Australian Government

8. New build renewables are competitive with or cheaper than new build coal
(no CCS)
Source: BNEF, coal range uses BNEF for upper estimate ~$120 and CO2CRC for lower estimate $70

9. Agenda Australia’s energy challenge Challenges for green energy
The role of the CEFC
Case studies

10. What is “green” finance in Australia
CEFC Definition:
Renewable energy (wind, solar, hydro, oceanic, geothermal, biomass & waste to energy)
Energy efficiency (either absolute or energy intensity per unit produced/consumed basis)
Other emission abating activity (generally less than 50% emissions intense than baseline e.g. green vehicles, waste coal mine gas or landfill gas to energy.)
Input goods and services, related technologies or hybrids of the above
But not
Conservation or recycling if unrelated to the above
Nuclear energy – prohibited 1/3 of world’s known uranium resources but only 1 nuclear plant in Australia
Carbon capture & storage – prohibited

11. Challenges for “green” finance in Australia
Regulatory and policy uncertainty
Energy market characteristics and constraints
Finance market characteristics and constraints

12. Challenges: Regulatory and policy uncertainty
1. Kyoto Period – signed 1997 but did not ratify Protocol until 2007
2. Mandatory Large Scale Renewable Energy Target –
2001 Initiated with a target of 9,500 GWh by 2010
2011 Expanded to a target of 41,000 GWh by 2020
2015 Reduced to a target of 33,000 GWh by 2020
2016 Not clear at present what post 2020 regime to look like, but scheme continues until 2030
3. Pricing Carbon
2007 Promised
2008 Delayed due to GFC
2011 Legislated
2013 Repealed
4. Emissions Reduction Fund
2013 Legislated
2016 Post initial funding period unclear
5. Inconsistent state-based schemes (e.g. wind farm regulation, landfill fees, reverse auctions, feed in tariffs)
But post Paris policy “fusion” between energy and climate ministries gives much more hope for emergence of stable consistent schemes going forward

13. Challenges: Energy Market characteristics and constraints
Very long skinny network with limited interconnectivity between NEM regions – “national” system masks great degree of regional variability in nature of generation assets
Very strong uptake of household PV – highest % household uptake in world
Carbon not currently part of the administrative scheme
Concentration of ownership:
State/Territory Government heavily invested in SOEs in 6 of 8 jurisdictions
3 x large private “gentailers” vertically integrated generation and retail + large gas interests
3 x large state gentailers
4. Small market e.g. no Australian biomass specialist utility

14. Challenges: Finance Market characteristics and constraints
Small market – 23m people
Domestic capital markets not deep – 4x large private domestic banks whose rate of lending to business has been in decline, lack of appetite for long-term debt
Finance market gaps:
lack of angel investors
lack of venture capital
lack of patient capital
small project finance
capital willing to take merchant price risk on energy projects
market locked out of financing many government facilities
split incentives (e.g. street lights, hotels, tenanted buildings)
lack of knowledge among investors and facility owners
“chicken & egg” scenario – who comes first – debt or equity?

15. Agenda Australia’s energy challenge Challenges for green energy
The role of the CEFC
Case studies

16. CEFC – Facilitating flows of private sector finance
Driving productivity gains, lowering energy costs and reducing emissions
Independent, Australian Government institution that operates like a traditional financier
Private sector expertise with public purpose - Finance for energy efficiency, low-emissions and renewable energy projects and programs across the economy
Access to AUD 10 billion by July 2017
Commercial return on investment (debt or equity)
Projects that are smaller, more complex or new to the Australian market
Operates as a co-financier to encourage participation in the sector from private sector financiers

17. Australian Opportunities: CEFC strategic framework

18. The CEFC’s business platforms and programs

19. Where we invest across the commercialisation pathway

20. Our investment process
ELIGIBLE TECHNOLOGIES
Renewable energy
Energy efficiency
Low-emission
PROHIBITED TECHNOLOGIES
Nuclear and CCS

21. The CEFC currently has ~$1.8bn of investment commitments
AUD m
At June

22. The CEFC’s portfolio is invested across different finance types and technologies
Project
finance
Corporate
loans
Co-finance or
aggregation
Equity
At March

23. We invest across the capital structure
Direct investments
Indirect investments
Seed and venture e.g. Innovation Fund
RISK
Expansion capital
e.g. Innovation Fund
Property equity e.g. High Income Sustainable Office Trust (HISOT)
Infrastructure equity e.g. Palisade, Aus Bioenergy Fund
Mezzanine debt, corporate finance and bonds e.g. CBA, NAB, Westpac, Firstmac, Eclipx, Origin
Senior debt e.g Moree Solar Farm, DeGrussa Copper Mine Solar and Storage, Barcaldine Solar Farm
RETURN

24. CEFC role: an example of solar
Cornerstone investor for new solar technologies
New financing models, setting a precedent for the financial market
Finance for smaller utility-scale projects
Financing merchant solar, when needed
Underwrote debt for Sundrop Farms solar thermal greenhouse
Solar leasing and PPAs.
$250m large-scale solar program.
$13m for Uterne PV plant in NT. $15m for DeGrussa solar and storage in WA
56MW Moree Solar PV Farm

25. Agenda Australia’s energy challenge Challenges for green energy
The role of the CEFC
Case studies

26. Replacing diesel fuel with solar and storage
Debt financing for solar and storage at remote copper mine
Action
Impact
CEFC COMMITMENT
Up to $15 million
A commitment of $15 million to Sandfire Resources for Australia’s largest integrated off-grid solar and battery storage facility
Installation of 34,000 solar PV array integrated with battery storage and existing diesel generator at DeGrussa Copper Mine
Peak-load power expected to offset nearly half of mine’s daytime electricity consumption
Reduces reliance on diesel fuel and exposure to oil price volatility.
PROJECT VALUE
$40 million
EXPECTED CO2 REDUCTION
12,000 t/CO2-e annually
MW OF RENEWABLES
10.66MW battery storage with existing diesel system
MW solar PV

27. Remote Industrial: Replacing diesel fuel with solar and storage
Debt financing for solar and storage at remote copper mine
Action
Impact
CEFC COMMITMENT
Up to $15 million
A commitment of $15 million to Sandfire Resources for Australia’s largest integrated off-grid solar and battery storage facility
Installation of 34,000 solar PV array integrated with battery storage and existing diesel generator at DeGrussa Copper Mine
Peak-load power expected to offset nearly half of mine’s daytime electricity consumption
Reduces reliance on diesel fuel and exposure to oil price volatility.
PROJECT VALUE
$40 million
EXPECTED CO2 REDUCTION
12,000 t/CO2-e annually
MW OF RENEWABLES
10.66MW battery storage with existing diesel system
MW solar PV

29. NEM Utility Solar: Tracking the sun to drive performance for
large-scale solar farm
Debt finance for 56 MW solar power station
Action
Impact
CEFC COMMITMENT
Up to $46 million
Funded in conjunction with FRV and ARENA
CEFC underwrote the senior debt
CEFC provided finance even with merchant power price risk
Investment supports innovative on-grid, large scale solar with single axis tracking to increase performance
Employing more than 150 people during construction and benefitting up to 40 local businesses
TOTAL PROJECT VALUE
Up to $46 million
NEW RENEWABLE CAPACITY
56 MW
LOCATION
Moree, NSW
TECHNOLOGY
Solar

31. Urban Energy Efficiency: Better social and affordable housing
CEFC finance gives community housing a clean energy boost
CEFC COMMITMENT
$60 million
Not-for-profit community housing provider SGCH and the CEFC have reached an agreement to develop environmentally-friendly social and affordable housing projects
CEFC has committed up to $60m
Expected to build over 200 new energy efficient homes.
Upgrade a proportion of SGCH’s 4,300 existing, older properties with energy efficient technologies.
EXPECTED RATING
4-star Green Star
7-star NatHERS
TECHNOLOGIES
LED lighting, energy efficient appliances, smart meters and solar, window glazing, insulation
PROJECT PARTNER
St George Community Housing (SGCH)

32. Opportunity: the Future is Now