ARENA’s ocean energy sector reviewClean Energy Week 2014Andrew NewmanStrategyARENA23 July 2014

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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

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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

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Initial findings from ARENA’s review

• TECHNOLOGYo Some Australian companies at cutting edge of marine

R&Do Designs yet to converge, reducing economies of scale

• DATAo Paucity of data in real operating conditions

• OPPORTUNITIESo Significant global investment planned in R&Do Largest wave/tidal market projected to be in

Europe/Canada, some opportunities in Asian/South American markets

• ARENA’S CONTRIBUTIONo 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

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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 turbineLittle convergence in design of foundation and support structures.

Wave

Tidal

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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)

China A$172.8m US$0.15/KWh

United Kingdom

A$150m A$513/MWh (contract for difference strike price – auction, caps to be advised)

Ireland A$49.3m Proposed

Canada A$7.1 m (+ provinces) A$382.50-A$586.50/MWh (depending on stage of project)

France Grant figures not supplied $A259.50/MWh

Portugal Grant figures not supplied Halted –A$285-390/MWh

Spain A$34.5m Suspended $A103.50/MWh

Australia

A$21.3m (spent to date) REC price approx $30/MWh

Denmark

A$23.2m $A120/MWh

US A$17.3m RPS rates vary from state to state

Chile A$15.1m N/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

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Significant challenges facing marine energy

$0.18m-$0.9m

$18m-$54m

$54m-$180m

Technology 2020 2030 2040 2050

Onshore wind 84 87 90 92

Combined cycle gas

120 135 144 146

Supercritical coal 135 163 187 195

Solar PV single-axis 139 120 86 80

Offshore wind 161 147 137 127

Solar parabolic trough + 6hr storage

197 166 155 147

Tidal* 260 194 199 197

Wave (AETA) 300 218 224 224

Wave (AETA – high Capacity Factor)+

276 179 184 184

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 deploymentSource: 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)

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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

UK strike price for marine

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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 COSTo cooperation between companieso capitalise on wave, tidal and offshore wind deployment

globallyo 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 marketso 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)

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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

Country

RE target (2020)

RE target (2050)

Wave/tidal capacity target (2020)

Ireland 16% N/A 500 MW

France 23% ~75% 380 MW

Canada 250 MW

UK 15% 80% 200-300 MW

Taiwan- 200 MW

Portugal 31% N/A 250 MW

Spain 20% N/A 100 MW

China+ ~400 GW N/A >50 MW

Denmark

35% 100% N/A

Australia

20% N/A N/A

US 25%* N/A N/A

South Africa

6.7 GW N/A N/A

Wave

Tidal

+ China target for 2015

- Taiwan target for 2025

*US Federal Government including Defence, 2025

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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

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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

arena.gov.au

Thank you