Renewable Energy Off-Grid Presentation - WorleyParsons.com

Progressing Renewables in the Pilbara andMid West Off-Grid Power SystemsBarrie Brandt, Executive Consultant, PerthCEC Off-Grid Workshop, Perth, 27 September 2012

Presenter & acknowledgementsBarrie Brandt (Perth)Executive Consultantbbrandt@evanspeck.comAntony Piccinini (Perth)Principal Consultantantony.piccinini@worleyparsons.com“Assessment of the potential for renewableenergy projects and systems in the Pilbara”“Assessment of the potential for renewableenergy projects and systems in the MidWest”Evans & Peck for the Federal Department of Resources &Tourism, October 2011Paul Ebert (Australia)Global Lead – RenewableEnergypaul.ebert@worleyparsons.comStuart McCreery (Sydney)Principalsmccreery@evanspeck.com2

Talk synopsis• Who we are– Evans & Peck– WorleyParsons• The assignment– Pilbara– Mid West– Most of discussion around Pilbara, but the outcomes are broadlyattributable in off-grid Mid West and elsewhere• Issues around renewables• Thoughts on progressing renewables in that context

Evans & Peck• 100% owned by WorleyParsons, independently operated• Complimentary focus to WorleyParsons• Corporate advisory company with a business outcomes focus– Business case support– Contractual services– Contracting strategy & procurement– Independent audit, due diligence and health checks– Delivery support• Major infrastructure and energy focus, including for resources industry– Renewable and conventional generation, transmission, market advice andnegotiation

StrategicPlanningRegulatorySupportBusinessDevelopmentProcurementStrategyProgramDeliveryAssetManagementE&P adds value: renewable and conventional energy areasProjectSolar Dawn ProjectCollie South West CCS HubBurdekin Hydro projectGrid connected PV impact studyWater use in power generation450 MW CCGT Pilbara power plantColongra 600 MW OCGT projectVarious Pilbara power opportunities and projects

WorleyParsons• Leading global professional services provider to energy, resource andcomplex process industries• Full lifecycle of services– Infrastructure & Environment– Minerals, Metals & Chemicals– Power: renewable, conventional and hybrid– Hydrocarbons• Centred around project delivery, project optimisation and valuerealisation• Worldwide power and renewables teams

WorleyParsons Australian Renewables Involvement….part of a much bigger international renewables and conventional scene

What is Renewable Energy?Water Sun Bio-energy Earth WindStored hydroRun-of river hydroWave powerTidal powerPhotovoltaicSolar ThermalSolar hot waterPassive solar heatingHeat pumpsCo-firingBagasseBiomassSewage gasWaste to energyLandfill gasGeothermalEGSHeat sinks/sourcesWind energyPropulsionPumpingMillingBlack liqour

The assignment• Client: Australian Centre for RenewableEnergy (ACRE), within DRET– ACRE incorporated into the AustralianRenewable Energy Agency (ARENA) on 1 July2012• Task: Investigate opportunities in the Pilbaraand Mid West for off-grid applications forsustainable use of renewable energy:– market nature, size, demand forecast– conventional generation types and costs– renewable resources– renewable technologies and costs– policy settings– barriers and enablers to more renewables

The renewable macro value propositionRenewableresourceTechnicalmaturityCost offinanceSiting,socialissuesEnergyoptionsOff-gridrenewableenergy valueproposition?

In a broad pricing sense….Macro price commentsRenewables can be price competitive nowagainst liquid fuels (for power generation)Competitiveness hugely dependent onquality of supply requirements whichdrive integration costsGenerally downward pressure onrenewable capital costsMany renewables difficult to cost,particularly those (or their enablers) justemergingRenewable price competitiveness alsoneeds to consider external valueNote: Very general price indication only, as actual price dependssignificantly on project details

In the Pilbara (and little difference in Mid West)….

But…• Some renewables are competitive now• Capital costs have, as generally accepted, decreased– especially for PV, panel costs have decreased and efficiency increased– A $1/GJ increase in fuel cost increases conventional generation by >$10/MWh• Still not a major take up of renewables. Why?– Time horizons for contracting can be too short, eg: 5-10 years, to recovercapital, due to limited mine reserves life– Risk of mine’s viability adds to cost of capital off-grid– Perceptions about reliability risks. What happens if…?– Miners require low risk & high availability; production loss = cash flow– Integration costs and risks: Low up to 10-20% renewable penetration– Fossil generator characteristics re load profile– Requirement for simplicity– Absence of renewable resource quality information

Source: Verve Energy Source: Horizon PowerGeneralised study results – the top 51. There is a significant opportunity – but the value proposition is notstraight-forward. For large players, getting attention is difficult as energy isa secondary issue, investment time scales short and competition tough.2. The business case is almost completely around fuel offsets (greencertificates are a small component). Saving fuel ($) is the big issue andthis is proportional to renewable system penetration.3. Reliability, practicality & cost are primary drivers. The systems mustwork, be rugged and reliable in hostile, remote environments. At largescale there is a perception that renewables do not offer this.4. Enablers are a key. Integration of renewables will be in hybrid form,including smart devices, energy storage, good control design & novelthinking around “energy products” (heat, bio-fuels) – all are key enablers.5. Policy is only part of the solution. Policy setting is important, butsome renewables are competitive now – why aren’t they being used?

Investment issues for resource sector• With large, remote loads, resourcecompanies appear sensible for “off-grid”renewables– Process risk a considerable issueExtremely competitive businesses– Shorter term investment horizons (generally)• “Single customer” risks– New entrants, higher capital costs and less certain onfuture – shorter term focus, less efficient low capital costgeneration plant– Established miners, lower capital costs and longer termfocus – more efficient generation investment but moredifficult for renewables to compete• Issues which could cloud the renewable value proposition

Progressing off-grid renewables generally

Conclusions• Some renewables viable now, but its an issue of what does thecustomer want• Costs are declining with worldwide penetration and experience– Perceptions about:• Cost• Continuity of supply• Technical risks• Crawl before you walk before you run• Reports available on the DRET website at:– http://www.ret.gov.au/energy/clean/acre/studies/Pages/Studies.aspx• This page provides access to both Pilbara and Mid West reports– But, note the changes, even since the report was prepared last year.

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