1. ARENA’s ocean energy sector review Clean Energy Week 2014 Andrew Newman Strategy ARENA 23 July 2014

2. 2 Aims of the review SNAPSHOT OF KEY CHALLENGES AND OPPORTUNITIES ASSESS AUSTRALIA’S CONTRIBUTION TO POOL OF GLOBAL KNOWLEDGE HOW ARENA/AUSTRALIAN GOVERNMENT CAN BEST SUPPORT THE MARINE ENERGY SECTOR

3. 3 Today’s presentation INITIAL FINDINGS (DRAFT ONLY) MARINE TECHNOLOGIES STATE OF THE INDUSTRY COST CURVE FOR MARINE ENERGY OPPORTUNITIES AND OUTLOOK ARENA’S FOCUS ON DATA ARENA welcomes comments from the sector on our initial findings

4. 4 Initial findings from ARENA’s review TECHNOLOGY o Some Australian companies at cutting edge of marine R&D o Designs yet to converge, reducing economies of scale DATA o Paucity of data in real operating conditions OPPORTUNITIES o Significant global investment planned in R&D o Largest wave/tidal market projected to be in Europe/Canada, some opportunities in Asian/South American markets ARENA’S CONTRIBUTION o Data on economic case, environmental impact and grid integration o Monitor progress of ARENA projects, encouraging dissemination of energy output and environmental impact data, re-evaluate following project completion Biopower’s O Drive

5. 5 Wave, tidal, other ocean were considered for this review Oscillating Wave Surge Converter Oscillating Water Column Point Absorber Use surge motion of waves to produce horizontal oscillating motions Chamber part filled with water to drive air through a turbine Buoy connected to fixed mooring heaves with waves Attenuator use oncoming waves to induce an oscillatory motion between two (or more) adjacent components Terminator converts wave energy into potential energy by collecting water in reservoir and releasing it to flow through hydraulic turbine 5 main types of wave devices demonstrated Power can be generated either at sea or water pumped to onshore turbine Tidal current devices sit in water in arrays like wave devices, wind turbines Tidal barrages are dams which control the flow of water across tidal waterways to generate power Other ocean technologies including thermal current and salinity gradient at very early stage Offshore wind not considered ARENA supported Sources: SI Ocean, State of the Art (2014) ; UK Carbon Trust, Accelerating Marine Energy (2011) Horizontal axis device common (see left) Similar to underwater wind turbine Little convergence in design of foundation and support structures. WaveWave Tidal

6. 6 Both Atlantic and Pacific nations have invested in marine energy Sources: SI Ocean: Ocean Energy in Europe’s Atlantic Arc; US Department of Energy; Wall Street Journal; Technology Push (Grants) Market Pull (Revenue support) ChinaA$172.8mUS$0.15/KWh United Kingdom A$150mA$513/MWh (contract for difference strike price – auction, caps to be advised) IrelandA$49.3mProposed CanadaA$7.1 m (+ provinces)A$382.50-A$586.50/MWh (depending on stage of project) FranceGrant figures not supplied$A259.50/MWh PortugalGrant figures not suppliedHalted –A$285-390/MWh SpainA$34.5mSuspended $A103.50/MWh AustraliaA$21.3m (spent to date)REC price approx $30/MWh DenmarkA$23.2m$A120/MWh USA$17.3mRPS rates vary from state to state ChileA$15.1mN/A South Korea Approx A$1 billion invested by state owned power company in deployment of tidal barrages A$1 = US$0.93, 0.67 euros, 5 Danish Krone, C$1.02

7. 7 Significant challenges facing marine energy $0.18m- $0.9m $18m- $54m $54m- $180m Technology2020203020402050 Onshore wind84879092 Combined cycle gas120135144146 Supercritical coal135163187195 Solar PV single-axis1391208680 Offshore wind161147137127 Solar parabolic trough + 6hr storage 197166155147 Tidal*260194199197 Wave (AETA)300218224 Wave (AETA – high Capacity Factor)+ 276179184 CAPITAL INTENSITY Initial mooring, cabling costs high, decrease with economies of scale POWER OF THE OCEAN Specific technology issues not faced by on-land renewables PROJECT FINANCING UK and Ireland recovering from GFC Australian banks, utilities reluctant to invest at early stage MARKET Low demand in eastern Australia Developers targeting competitiveness with offshore wind by 2030 Dependent on global deployment Source: BREE, Australian Energy Technology Assessment (2013) AETA 2013 Cost Projections Sources: SI Ocean, State of the Art (2014) ; UK Carbon Trust, Accelerating Marine Energy (2011)

8. 8 Deployment key to reduce costs for wave, tidal Wave Tidal UK LCOE expected to be around $A225/MWh for wave/tidal current if 2GW installed globally (green line) UK government has indicated it will enter into wave/tidal current contracts for difference up to a total value of £305 (A$513) UK contract for difference scheme uncertainty affecting market investment According to above, only the most competitive wave would be supported, but tidal current more viable Blue line indicates projected build by 2020 with current funding (assuming split 50:50 between wave and tidal current – approx 25MW of each) Note – LCOE in Euro cents Sources: Renewable UK, Wave and Tidal Energy in the UK Conquering Challenges, Generating Growth (Feb 2013) ; UK Carbon Trust, Accelerating Marine Energy (2011) UK strike price for marine

9. 9 Australia’s marine sector and market outlook CURRENT LCOE APPROACHING REMOTE DIESEL COST o niches such as off-grid, coastal infrastructure protection o Australian companies targeting cost competitiveness with diesel by 2020 and ultimately on-grid power o European companies are not generally considering niche opportunities SYNERGIES MAY FURTHER REDUCE COST o cooperation between companies o capitalise on wave, tidal and offshore wind deployment globally o alignment with offshore gas, automotive, shipbuilding manufacturing skills POSSIBLE DEPLOYMENT OF INTERNATIONAL DEVICES o tropical tidal testing if European companies wish to explore Asian/South American/African markets o wave/tidal testing if Southern hemisphere lessons transferrable (i.e. to South Africa, Chile etc) COMMERCIAL ON-GRID POWER POSSIBLE IN AUSTRALIA o Depending on pace of deployment overseas, cost reductions expected to occur – timing to commerciality - tbd Sources: Conversations with Oliver Wragg (EMEC), Shawn and Glen Ryan (Bombora), Dr Peter Osman (CSIRO)

10. 10 Europe, Canada key markets with opportunities in Asia, S America, Southern Africa Sources: SI Ocean: Ocean Energy in Europe’s Atlantic Arc; Marine Energy Development: Taking Steps to Develop the Chilean Resource CountryRE target (2020) RE target (2050) Wave/tidal capacity target (2020) Ireland16%N/A500 MW France23%~75%380 MW Canada250 MW UK15%80%200-300 MW Taiwan-200 MW Portugal31%N/A250 MW Spain20%N/A100 MW China+~400 GWN/A>50 MW Denmark35%100%N/A Australia20%N/A US25%*N/A South Africa 6.7 GWN/A Wave Tidal + China target for 2015 - Taiwan target for 2025 *US Federal Government including Defence, 2025

11. 11 Our resources are great but challenging to exploit Sources: CSIRO, Ocean Renewable Energy 2015-2050 Wave resources excellent in South-West Australia between Geraldton and Melbourne, but accessibility and Southern Ocean conditions challenging Demand an issue in Victoria Water depth, grid makes Australia largely unsuitable for fixed offshore wind Tidal resources at King Sound (WA) and Banks Strait (NE Tas) 2nd and 3rd best in the world, but remote

12. 12 Data from ARENA projects will add to pool of global knowledge ECONOMIC CASE o where the best sites are for marine energy investments o understanding of performance and project cost o skills and infrastructure needed to support wave energy projects ENVIRONMENTAL IMPACT o impact of wave arrays on marine environments o managing risk issues INTEGRATING WAVE POWER INTO THE GRID o better understanding of how marine energy fits with demand Cable laying at test site: Source, European Marine Energy Centre

13. arena.gov.au Thank you