The Energy Policy Context for the Australian Energy Technology

AssessmentDrew Clarke

Secretary, Department of Resources, Energy and Tourism

Australian National University 30 October 2012

Outline

I Energy Policy- drivers and opportunities

II Electricity Markets - prices, demand and investment

III Gas Markets- reserves, production and consumption

IV Australian Energy Technology

Australian Energy Policy

Market drivers

Energy Opportunities• Sustained economic growth

• Higher standard of living

• Healthier environment

Key Variables

Security

Environment

Policy drivers

Price

Energy White Paper: Priorities

Strengthening the resilience of Australia’s energy policy framework

Reinvigorating the energy market reform agenda (markets and

energy productivity

Developing Australia’s critical energy resources – particularly gas

Accelerating clean energy outcomes

II. Electricity Markets

Electricity price, 1981/82 to 2011/12(index, 1989/90=100)

50

100

150

200

250

300

1981‐82 1986‐87 1991‐92 1996‐97 2001‐02 2006‐07 2011‐12

Index 1989–90 

Residential CPI Business

Source: BREE; ABS

Australia’s Projected Electricity Demand:NEFR 2012 vs ESOO 2011 Annual Energy

NEM Peak vs Average Demand Growth2005-11

ENA 2012, AEMO 2011, AEMC 2012

NEM generation capacity by fuel – 2000 and 2012

NEM – Generation Development

608 60 21 Committed 

3 Advanced

13,427 1,228 40 525 273 3,270 17 11,720 2,950 Publicly announced

WindSolar Hydro Geothermal Biomass Black coal Engine (gas fuelled)

Open‐cycle gas turbine

Combined cycle gas turbine

III. Gas Markets

Australia’s Gas Resources

0 .0 0

0 .5 0

1 .0 0

1 .5 0

2 .0 0

2 .5 0

3 .0 0

3 .5 0

1 9 8 2 1 9 8 4 19 8 6 1 9 8 8 1 9 9 0 1 9 9 2 19 9 4 1 9 9 6 1 9 9 8 2 00 0 20 0 2 2 0 0 4 2 0 0 6 2 00 8 20 1 0

t cm

c onve n tional gas c oal se am   gas

Australian Gas Consumption

Source: BREE 2012, AES Table C

Consumption by Sector, 2009-10

Australia’s Gas Balance to 2035

Australian LNG Production Capacity

World Unconventional Gas Outlook – 2035: Ten Largest Producers in the Golden Rules Case

IV. Australian Energy Technology

World energy-related CO2 emissions abatement

Source: IEA, WEO 2011

Global investment in renewables

Source: Bloomberg New Energy Finance (2011)

Australian Government support for renewable energy technology development

Australian Renewable Energy Agency

Australian Government funding in CCS

• Major government funding support flows from:

– CCS Flagships program ($1.7 billion)– National Low Emissions Coal Initiative

($370 million), established in 2008– National CO2 Infrastructure Plan

($61 million) – Global CCS Institute ($315 million)

“Australian Government funding is aimed at providing the framework and investment support needed to accelerate the development and deployment of CCS”.

Large Scale Integrated CCS Projects

Source: GCCSI, 2012

AETA 2012 Timelines

• Project initiated on 4 October 2011 to assess LCOE for 40 different technologies by state (and some cases sub-state) for 2012, 2020, 2030, 2040 and 2050.

• Work undertaken jointly with AEMO (Stage I). WorleyParsons (WP) has been primary contractor to deliver component costs and LCOE. WP sub-contracted ACILTasman to provide fuel costs and CSIRO provided use of its ‘learning rate’ model for long-term cost projections.

• Release of AETA Report and AETA Model 31 July 2012.

Levelised Cost of Electricity (LCOE)

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rFMI

LCOE

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Key Assumptions

• AETA was developed to be consistent with the Australian Energy Market Operator’s (AEMO) National Transmission Network Development Plan (NTNDP), and its ‘planning scenario’.

• Key assumptions include: (1) economic growth of 2.5%; (2) $23/tonne CO2-e leading to a 5% reduction in CO2 by 2020, and 80 % by 2050; (3) AUD moving to peak of 1.13 USD/AUD by 2016-17 and low of 0.86 USD/AUD by 2031-32.

• Capital costs are provided on the basis of an Nth-of-a-kind (NOAK) plant in Australia and at a utility-scale.

AETA Technologies

• 40 electricity technologies evaluated:• Coal-based (14 options with different fuels & technologies)• Gas-based (CCGT with various options)• Solar-thermal (CLFR, parabolic trough, central receiver)• Solar-thermal hybrid (solar-coal & integrated solar

combined cycle)• Photovoltaic (fixed and tracking)• Wind (on-shore and off-shore)• Wave (reaction point absorber)• Biomass (landfill, sugarcane & other)• Geothermal (HSA and EGS)• Nuclear (Generation III)

AETA Common Technology Parameters

2012 2020 2025 2030 2040 2050

O&M Escalation rate 150% 150% 150% 150% 150% 150% % of CPICarbon Price 23.0 32.2 43.2 57.6 97.0 143.4 $/t CO2Carbon Price Modifier (% of core price) 100% 100% 100% 100% 100% 100%O&M Improvement Rate 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%

Common Technology Cost Forecast Data

Common Escalation Factors

USER INPUT

UnitsYear

AETA: Specific Technology Parameters16. Combined cycle plant burning natural gas (CCGT)

Basis: Single F Class gas turbine

Inputs ValueBase Value Units Capital cost construction profile

Plant Capacity (Net) 374 374 MW Year 1 Year 2 Year 3 Year 4 Year 5

Plant Capacity Factor 83 83 % 60% 40%

Thermal Efficiency 49.5 49.5 % Base: 60% 40%

Auxiliary Load 12 12 MW 0 0 1 1 1 1 1 1 1

Emissions 368 368 kgCO2e/MWh (Net) Capital Cost Forecast Summary ($/kW) 2012 2020 2025 2030 2040 2050

% Emissions captured 0 0.0 % North Queensland 1167 1185 1189 1203 1211 1243

First Year available for construction 2012 2012 South Queensland 1139 1157 1161 1174 1183 1214

2012 Overnight Capital Cost 1062 1062 $/kW NSW (including ACT) 1089 1105 1109 1122 1130 1160

Fixed O&M cost 10000 10000$/MW/year Vic 1043 1059 1063 1075 1083 1111

Variable O&M cost 4 4$/MWhsent out Tas 993 1008 1011 1023 1031 1058

Local equipment and commodity split 18 18% of Capex SA 1097 1114 1118 1131 1139 1169

International Equipment split 56 56% of Capex Northern Territory 1134 1152 1156 1169 1178 1209

Labour split 26 26% of Capex SWIS (WA) 1135 1153 1157 1170 1179 1210

Discount Rate 10 10 % Pilbara (WA) 1194 1212 1216 1230 1239 1272

Amortisation Period (Life of Plant) 30 30 years

Australian Energy Technology Assessment 2012 (for 2030)

Australian Energy Policy

Market drivers

Energy Opportunities• Sustained economic growth

• Higher standard of living

• Healthier environment

Key Variables

Security

Environment

Policy drivers

Price