Apa Group · ASX:APA
Apa — Investor Presentation (June 2023)
33 slides from Apa's investor presentation, June 2023
Slide 1: The Role of Gas Infrastructure in Australia's Energy Transition
THE ROLE OF GAS INFRASTRUCTURE IN AUSTRALIA'S ENERGY TRANSITION Supporting Slides June 2023
Slide 2: Context of this report
Context of this report APA Group, Australian Gas Infrastructure Group, and Jemena are the three largest investors in Australia's gas infrastructure. Each has an individually stated commitment to achieving net zero emissions. Aware that the energy transition will change the way energy is produced, tr
Slide 3: BCG terms and disclaimer
The services and materials provided by Boston Consulting Group (BCG) are subject to BCG's Standard Terms (a copy of which is available upon request) or such other agreement as may have been previously executed by BCG. BCG does not provide legal, accounting, or tax advice. The Client is responsible f
Slide 4: Summary: Gas infrastructure could play a pivotal role in an orderly energy transition
Summary | Gas infrastructure could play a pivotal role in an orderly energy transition TODAY 1 TRANSITION 2 NET ZERO 3 Natural gas and its infrastructure form one of Natural gas will play an important role in an Gas infrastructure could transport low-carbon three pillars of today's energy system eff
Slide 5: Natural gas and infrastructure form one of three pillars of today's energy system
Natural gas and its Natural gas and gas infrastructure form one of three pillars of today's energy system Natural gas is a critical component of Australia's energy supply, and is supplied through gas infrastructure infrastructure form • Today, natural gas represents 27% of Australia's primary energy
Slide 6: Natural gas represents 27% of Australia's primary energy supply
Today, natural gas represents 27% of Australia's primary energy supply for domestic consumption, supporting majority of domestic industry and households Australia's energy flows Source (PJ) End uses (PJ) (excludes exported sources) (excludes exports) Coal own use & losses (90) Power station Power st
Slide 7: Natural gas is used by a broad range of customers
Natural gas is used by a broad range of customers for electricity generation, mining, industrial, commercial and residential use, and for export ~70% ~15% ~15% Direct use Gas-powered Household & in industry generation3 commercial Australian annual Energy (PJ) 491 237 391 216 166 43 24 Total 1,568 PJ
Slide 8: Natural gas characteristics make it useful for current end uses
Natural gas has specific characteristics that make it particularly useful for the range of energy end uses it currently serves Lower unit cost Lower Only available Future alternative Natural gas end use Reliable Responsive per unit output capex technology Past alternative to gas Renewable Mid-merit
Slide 9: Natural gas contributes ~18% of Australia's total emissions
However, natural gas – as a fossil fuel – contributes to ~18% of Australia’s total emissions, and ~22% of domestic energy emissions – and needs to decarbonise ~90Mt of Australia's ~500Mt CO2e emissions come from domestic natural gas use Emissions (proportion of state total) (Mt CO2e)1 168 142 86 24
Slide 10: Electric appliances such as heat pumps have become more efficient and lower cost
Electric appliances, such as heat pumps, have become more efficient and lower cost to provide an alternative for customers, but with practical limitations Heat pump costs have declined1 Heat pump efficiency has increased2 AUD$/KW Cooling Energy Efficiency Ratio (EER)4 4k France: Small AWHP (7-8 KW)
Slide 11: Natural gas will play an important role in an efficient and orderly transition
In the transition to a clean energy system, the growthof renewable primary energy sources will drive a realignment of the energy system architecture • Variable renewable electricity will increasingly provide primary energy Natural gas will play • Electricity infrastructure and electrical end uses wi
Slide 12: Literature anticipates natural gas will play a role in the transition
Literature anticipates that natural gas will play a role in the energy transition, but views vary on the nature and extent of this role Recent study Use of gas in 2040 Range of 2040 gas use by scenarios In all scenarios, at 2040 domestic demand for natural gas declines to ~40-80% E+ Rapid electrific
Slide 13: Role of gas infrastructure depends on renewable development and electrification
The role of gas infrastructure through transition depends on rate of renewable energy development and electrification of end-use Three conceptual sequences Energy transition scenarios from literature, 2025-2040, illustrative scenario placement In 'Electrify first', natural gas end-uses are FOSSIL-FU
Slide 14: Renewable electricity has greatest impact displacing coal generation and liquid fuels
Grid-connected renewable electricity will have the greatest impact if used to displace coal generation and liquid fuels before displacing gas end uses Benefits of deploying 1 MWh of grid-connected solar/wind Legend Excludes renewable energy generation and transmission costs for all end uses Greater
Slide 15: Natural gas can serve critical end uses hard to electrify
In the transition period, natural gas can serve critical end uses that are hard or expensive for the system to electrify (peaking applications in particular) Illustrative potential order of transition for the greatest system savings and emissions reduction benefits Potential renewable electricity ap
Slide 16: Natural gas supports peaking end uses
Natural gas supports peaking end uses which, if electrified, would increase peak electricity demand and electricity infrastructure needs Natural gas demand is correlated with electricity demand in winter in cold climates Hourly distribution-level gas demand vs total electricity demand, VIC, 2021 Add
Slide 17: Low-carbon pathways could provide alternatives to natural gas
In a future integrated clean energy system, low -carbon pathways could provide alternatives to natural gas and increase network resilience If low-carbon gas prices reduce as anticipated and networks costs are managed, they could provide total cost competitive offers for some customers to decarbonise
Slide 18: Current gas end uses can be decarbonised with renewables or low-carbon gases
Current natural gas end uses can be decarbonised using renewable electricity or low-carbon gases Example of lifecycle emissions intensity for an energy application Lifecycle emissions intensity for electricity generation (kgCO2e/kWh) Brown coal1 966 1,221 Black coal1 849 1,084 Natural gas emissions
Slide 19: Low-carbon gas could provide competitive offers for customers
If low-carbon gas prices reduce as anticipated, they could provide competitive offers for customers to decarbonise Summary of least cost options, by customer group, if low-carbon gas prices reduce1 Customer Near-term least cost option Long-term decarbonisation pathway RESIDENTIAL Highly individual;
Slide 20: Residential: total customer cost is highly individual
Residential | Total customer cost is highly individual: lower for gas in existing cold-climate homes; lower for electric for new builds in 'central' cases Least-cost solution is Warm state (NSW, today) COP = 3.75 (space), 4.10 (water) | 21GJ pa New builds: highly individual, depending Existing house
Slide 21: Residential: individual factors include appliance and installation cost
Residential | Individual factors include appliance and installation cost, house type, size, consumption, and fuel pricing Cold state (VIC), today, existing house: end-of-life appliances Total cost of ownership will depend on a balance Relative total cost of ownership, all-electric savings versus nat
Slide 22: Residential: low-carbon gas could be competitive in the future
Residential | Low-carbon gas could be competitive in the future if costs reduce and network charges are managed – especially for costly-to-electrify households Warm state (NSW), 2040, EOL appliances Cold state (VIC), 2040, EOL appliances Low-carbon gases could be cost- COP = 3.75 (space), 4.10 (wate
Slide 23: Leveraging existing gas infrastructure could support a low-cost net zero system
Estimates in literature show that leveraging existing gas infrastructure could support a low-cost net zero future energy system Lowest system Savings versus Implications for gas infrastructure cost scenario other scenarios Leveraging gas infrastructure could lower system cost <2% Final modelling (E-
Slide 24: Net Zero Australia modelling illustrates role for low-carbon gas
Recent Net Zero Australia modelling illustrates the potential role for low-carbon gas in a low system cost scenario Domestic pipeline gas demand in 2060 ranges from ~30–85% of Of the core scenarios, E- is narrowly lowest 2020, with 0–92% residential & commercial volumes2 cost, and minimises demand-s
Slide 25: Least-cost net zero solution likely differs by location
At a system level, the least-cost net zero solution for distribution-connected customers is likely to differ by location Favours low-carbon gas Factor Favours electrification Warm = lower peak energy demand from Cold Climate Warm electrification, likely summer peak limiting additional infrastructure
Slide 26: Existing gas infrastructure could be repurposed for low-carbon gases
Elements of existing gas infrastructure could be repurposed to accommodate low- carbon gases; existing studies show that distribution can accommodate hydrogen Feasibility studies of H2 compatibility in existing gas networks Distribution networks largely Distribution need minimal modifications VIC VI
Slide 27: Three stages of action for gas infrastructure
In the near-term, natural gas could contribute to the reliable, Three stages of action affordable and lower-emissions energy transition would be needed for Avoid near-term supply shortfalls gas infrastructure to Meaningfully abate fugitive and operational emissions play this role in As the syste
Slide 28: Other jurisdictions are pursuing low-carbon gas to support electrification
Other jurisdictions are pursuing low-carbon gas to support electrification, with the exception of warmer climates, with increasingly location-specific planning Decarbonisation approach • All seek to electrify where feasible Electrification Low-carbon gas • Low-carbon gas generally for hard to Electr
Slide 29: Infographics of gas infrastructure during the energy transition
during the energy transition Infographics of gas infrastructure 28 Copyright © 2023 by Boston Consulting Group. All rights reserved.
Slide 30: Natural gas is one of the three pillars of today's energy system
Best viewed in A3 when printed Natural gas (and gas infrastructure) is one of the three pillars of today's energy system Australia's energy system today Natural gas Coal contributes to customers: ~29% of Australia's 5.1m residential primary energy 190k small and supply1 large business4 11% of natura
Slide 31: Growth of renewables will drive a realignment of the energy system architecture
Best viewed in A3 when printed In the transition to a clean energy system, the growth of renewable primary energy sources will drive a realignment of the energy system architecture The energy system in transition Renewable Transport: ICEs electricity build (liquid fuels) start will accelerate, being
Slide 32: A future integrated clean energy system with low-carbon pathways
Best viewed in A3 when printed In a future integrated clean energy system, low-carbon pathways could provide alternatives to natural gas and increase network resilience A future clean integrated energy system Primary energy source maximises At anticipated use of renewable costs, customers energy whe
Slide 33: Boston Consulting Group
BOSTON CONSULTING GROUP