1. MELBOURNE RENEWABLE ENERGY PROJECT
Adam Zaborszczyk
Senior Sustainability Officer – Sustainable Energy
12 June 2016
How to drive new investment in renewable energy through customer led solutions.
Focussed on upstream solutions. Local rooftop solutions insufficient to meet City’s needs.
Local Government, Institutions (Universities); Corporates.

2. CITY of MELBOURNE CONTEXT ZERO NET EMISSIONS
AIM: To change the source of our stationary energy supply, ultimately using 100 per cent renewable energy within the municipality.
The City set a target of 25% of the City’s electricity being sources from renewable sources by 2018.
There is a national target in Australia of 20 renewable energy by We know that there is currently some voluntary purchase of renewable energy by customers in Melbourne, which makes up about another 1%. Additionally, there is some local rooftop solar (about ) with potential for some more.
So 25% really represents a little bit more on top of the national policy targets and voluntary actions that are occurring currently.
So the question then is, what can the municipality do to affect this additional 5% or so.

3. Most of the electricity supply in Victoria comes from fossil fuels – specifically coal.
Only about 12 – 14% of our electricity supply comes from renewables. – mostly hydro and wind.
We assessed the potential of rooftops for solar and local generation. If you look outside, the central city is characterised by large tall buildings, with relatively small rooftops. There is some potential, but relatively, it is small.
We had to look outside the city, upstream in the grid.
We don’t control the electricity supply.

4. THE CONCEPT
We quickly recognised that we would need to focus on voluntary purchasing decisions by customers, to drive new investment.
20% RET
However, we recognised the lack of investment and the uncertainty in the renewable energy sector
There was a ‘buyers strike’.
The policy uncertainty led to investor uncertainty.
Investment in renewable energy dropped by 85% last year.
Elsewhere investment was growing
Large energy retailers are not signing contracts for offtake agreements for new electricity facilities. Many retailers have existing generation assets, and we have an over supply of coal and gas plant.
So the question for us. How do we use customer demand for renewable energy to drive new investment in large utility scale facilities.
We set out to develop a model.
So we developed this concept as a way to aggregate the purchasing power of large users who share ambitious sustainability targets
The concept we aimed for was for customers to be able to buy electricity from a new, utility scale, renewable energy project.
NEEDED MINIMUM 10 YEAR OFF-TAKE AGREEMENT.
To provide investment certainty.

5. MARKET INVESTIGATION What we learned
Abundant proposals for new projects
Sufficient generation until 2024
Contracts for new projects not being signed – ‘buyers strike’
Renewable projects driven by RET
Price premium
So we identified: (slide)

6. MARKET RESEARCH Customer Attitudes - What we learned:
GreenPower and Renewable Energy Certificates:
Purchased on (short term) merchant market
Don’t provide long term price certainty
Relatively expensive
Not linked to specific projects
Lack of consumer confidence
Lack of branding ‘value add’
Additionally to our investigation of the electricity sector,
We commissioned customer focussed market research
To understand attitudes towards renewable energy among large electricity customers

7. ACHIEVING REPLICABILITY
New procurement pathways
Achieve scale and reduce overall costs for renewable energy
Demonstrate additional benefits of renewable energy (reputation, brand, direct association with projects)
The most important aspect to our work was that the model should be replicable.
Want others to do the same thing – voluntarily
Want to achieve scale.

8. ORGANISATIONAL DRIVERS
Identifying additional value to drive renewable energy.
VISION
Our initial research indicated that large users could see greater benefits in a tangible connection with a renewable power facility rather than generic GreenPower™
And as we approached potential partners, we found there was a valuable intersection between leadership, reputation and a strong connection to Melbourne
Furthermore, we concluded that we could secure a more cost effective option than GreenPower™ if we acted together
This as a whole forms the vision that we hope to achieve through this project.
Having identified an initial group of potentially interested customers, we undertook a market test. Not a full tender, but a REQUEST FOR INFORMATION from the market to enable us to support a business case.

9. Local Governments
Universities
Banks
Post Office
Data Centre
Public organisations:
- zoo,
- convention centre,
- federation square
Focussed on Melbourne brands
Some of these organisations could have done this on their own,
But didn’t want to commit time and cost on something unknown.
Safety in numbers.

10. Challenges Business case
Premium compared to black power, cheaper compared to Green Power
Shifting to a long term contract (10-15 years – locking in price)
Stakeholders
Managing purchasing group (14 organisations) – no. and size of load
Aligning private and public sector purchasing process
Process
Timelines
Developing new contract structure
Different procurement processes across group

11. Opportunities for local government
Relatively stable electricity portfolio
Able to take a 10 year view
Similar types of organisations & procurement processes
Used to undertaking group procurement
Electricity contract timeframes are mostly aligned
Community support

12. THANK YOU
MELBOURNE RENEWABLE ENERGY PROJECT FINANCIAL & OPERATIONAL CONSIDERATIONS