1. Outline The key findings What the SGA Summit did Smart City Amsterdam Some more detail on the disrupters – Ecosystem of the Grid – Distributed Generation and Storage – Future of Transportation – Renewable Economics – Cost to Value Summary 18/11/2015 Alex Cruickshank Consulting 1

2. The Five Disrupters What are the key energy grid or market disrupters to be addressed by the energy industry and customers? This is the question that the Smart Grid Australia (SGA) Board thought should be addressed. This is what they found. Alex Cruickshank Consulting SGA International Summit 18 November 2015

3. The future shape of the market 18/11/2015 Alex Cruickshank Consulting 3

4. The Key Findings Customers are the focus There is a need to trial, build and experiment Flexibility, open access and interoperability are required Transportation will be a key component Storage is an enabler 18/11/2015 Alex Cruickshank Consulting 4

5. Customers are the focus The “edge of the grid” is now moving to the centre. Customer control and choice are the new focus Customers are able to access a wider range of providers and products. Collaboration between providers to meet customer needs will be important. Customers still want low cost, reliable supply A large proportion of customers want a simple, cost effective solution. Customers are becoming trading partners. 18/11/2015 Alex Cruickshank Consulting 5

6. There is a need to trial, build and experiment The exact future state of the industry, the business models and path to the future are uncertain. The new approaches will need to start small and then scale up to meet customer demand. Will require flexibility by all involved. Collaboration between the customers, cities, industry and rule makers will be important – to both foster the new business models; and – to provide access for new entrants. 18/11/2015 Alex Cruickshank Consulting 6

7. Flexibility, open access and interoperability are required The network remains central to supply in the near terms – but must become a platform for competition, access and choice. This requires – open access to information; – true cost reflective tariffs; and – efficient product pricing. To allow flexible bundling of services and allow customers to choose the services they require. Standards are still required – they must be minimal; and – focused on supporting the business models. 18/11/2015 Alex Cruickshank Consulting 7

8. Transportation will be a key component The direction and adoption of electric vehicles will impact the efficiency of the grid. How the forces of efficiency, technological advancement and driverless cars combine will determine the take up. The grid and providers will need to be able to support wide scale adoption of EVs. – Network flexibility and capacity is an issue. – Markets and trading arrangement will need to change. 18/11/2015 Alex Cruickshank Consulting 8

9. Storage is an enabler Unlocks renewable energy allowing it to support the market and the grid. Allows more efficient products for customers. Assists the network providers to provide better, more efficient services to customers. The regulations surrounding storage need to balance customer needs with the development of the industry. 18/11/2015 Alex Cruickshank Consulting 9

10. The Summit The role of SGA is to foment discussion on key areas and bring international and national issues together. Start with an international focus, in this case Smart City Amsterdam. Five issues, five thought leaders and five rounds of discussion – Following the “Delphi” approach. – Issues work-shopped by SGA members. – Thought leaders provided opening thoughts. Summary on the day and a report. 18/11/2015 Alex Cruickshank Consulting 10

11. 11 Smart City Amsterdam - introduction

12. Smart City Amsterdam – key points Think global but act locally – work with the local community and municipality to get local change. – start with small projects and then scale them using living labs. Change is a collaboration between citizens, businesses and governments – a bottom up or “pull” approach. – to identify viable projects that can work without subsidies. The SCA platform is open – open innovation, open knowledge and open data. Communications is a key underpinning technology – fibre to the home provides an open marketplace for innovative services and economic growth. The best city will be the city with the best “Apps”. 18/11/2015 Alex Cruickshank Consulting 12

13. Ecosystem of the grid The customer is at the centre of the ecosystem – only 30% understand it. – the balance want reliable service with minimal cost and effort. The nature of the connection is changing – we have both prosumers and passive users; – the connection is becoming both a load and a supply with many to many interactions; and – the customer will become a trading partner. There is a paradox of engagement where the customer wants to be more in control but may not want to put in the effort – “set and forget”. Customers still want low cost, safe and reliable power. There is a trade-off between products and services and low cost, which some customers will explore. 18/11/2015 Alex Cruickshank Consulting 13

14. Customer interest 18/11/2015 Alex Cruickshank Consulting 14

15. Distributed Generation and Storage Supportive regulation is required to provide confidence for investors and to ensure the value is shared – enable customer choice, control and flexibility. Tariffs are important – cost reflective pricing that reaches the customer. – customers must see the value of the alternatives. Collaboration will be important to remove roadblocks, align incentives, develop new business models and address the real problems. Advanced metering and open data will be essential – to allow the value and costs of products to be measured. The systems will need to allow for easy connection to the grid and the marketplace. – “Plug and Play” using standards and protocols. 18/11/2015 Alex Cruickshank Consulting 15

16. Future of Transportation The future is electric – when it becomes the normal mode of transportation is anyone’s guess – new opportunities will open up as technology develops Storage and charging facilities are likely to be key factors for adoption – some countries already provide assistance. Convergence of EV and self-drive and shared cars – the drive for EVs and other forms of transport comes from many directions. Interaction with the grid – when will the grid be “mobile ready”? – we cannot be passive. – must address the issue to avoid problems. Government regulation will be important – must recognise the changing nature of transport to a shared/common resource. SGA can play a lead role to align the industry and use local governments as a partner. 18/11/2015 Alex Cruickshank Consulting 16

17. Renewable Economics The grid as the platform for market and value exchange The connection point becomes an exchange point for the buying and selling of energy. Recovering sunk costs will be an issue – need flexible pricing and to maintain relevance – incentives for transformation. The edge of the grid is now the primary focus and is pushing into the centre for attention. The issue of customer devices and network devices is emerging – who has precedence, who can manage. Partnerships will be important – combined selling of services 18/11/2015 Alex Cruickshank Consulting 17

18. Cost to Value Customers assume reliable supply at the right voltage. – Will this change to being a negotiable service? Customers will value choice, control and flexibility – They also want to save money. To do the “Jobs to be done” – heating/cooling lighting, cooking and the things that are essential to modern life – the customers may want choice or full service. Unbundled services with true costs are the building blocks that allow pricing on real value. Businesses need to offer the combinations that meet the customers needs – including the need to not be bothered by it all. 18/11/2015 Alex Cruickshank Consulting 18

19. Cost to value 18/11/2015 Alex Cruickshank Consulting 19

20. Summary Customers are the focus There is a need to trial, build and experiment Flexibility, open access and interoperability are required Transportation will be a key component Storage is an enabler 18/11/2015 Alex Cruickshank Consulting 20