AGL Energy Limited · ASX:AGL
AGL Energy — Macquarie Conference 2016
28 slides from AGL Energy's conference presentation, April 2016
Slide 1: Managing climate change risks
Managing climate1 change risks Tim Nelson April 2016
Slide 2: Agenda
Agenda 2 1 AGL’s approach to sustainability and greenhouse reporting 2 Application of greenhouse data to financial metrics 3 AGL commitments and GHG policy 4 The public policy environment > Managing climate change risks > AGL External – Macquarie Conference > April 2016
Slide 3: AGL's generation portfolio
AGL’s generation portfolio 3 Similar in output to NEM generation with coal, gas and renewables > Managing climate change risks > AGL External – Macquarie Conference > April 2016
Slide 4: AGL's approach to sustainability and greenhouse reporting
4 AGL’s approach to sustainability and greenhouse reporting > Presentation title > Author > Date (Verdana 10pt)
Slide 5: AGL's Sustainability Report
AGL’s Sustainability Report 5 Awarded best sustainability report at the ARA in 2015 > Managing climate change risks > AGL External – Macquarie Conference > April 2016
Slide 6: Inclusivity, Materiality and Responsiveness
Inclusivity, Materiality and Responsiveness 6 › AGL cannot operate in a vacuum › Responding to stakeholder concerns is critical to long- term business success › Engaging with stakeholders is not just ‘doing what they tell us to do’ › Becomes critically important as complex energy markets change › e.
Slide 7: AGL's approach to greenhouse reporting
AGL’s approach to greenhouse reporting 7 • AGL uses three ‘Footprints’ to measure and report on greenhouse gas emissions: • Operational Footprint – emissions from facilities where AGL has operational control. • Equity Footprint – emissions from assets owned partly or fully by AGL (by percentage owne
Slide 8: NGER Reporting Boundary 2014/15
NGER Reporting Boundary 2014/15 8 Group Operations New Energy Great Energy Alliance AGL Macquarie Pty Ltd AGL HP1 Pty Ltd AGL Energy Ltd AGL Energy Services AGL South Australia Corporation Pty Ltd Pty Ltd Pty Ltd Bayswater Power Station Banimboola Hydro Brisbane Edward Street Loy Yang Power Station
Slide 9: Greenhouse Gas Emissions (ktCO2-e)
9 Greenhouse Gas Emissions 20,000 2013/14 2014/15 18,000 16,000 GHG Emissions (ktCO2-e) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - > Managing climate change risks > AGL External – Macquarie Conference > April 2016
Slide 10: GHG Emissions (excl. Bayswater, Liddell, Loy Yang & Torrens)
GHG Emissions 10 (excl. Bayswater, Liddell, Loy Yang & Torrens) 140 2013/14 2014/15 120 GHG Emissions (ktCO2-e) 100 80 60 40 20 - > Managing climate change risks > AGL External – Macquarie Conference > April 2016
Slide 11: Impact of climate change mitigation policy: applying financial metrics to greenhouse data
11 Impact of climate change mitigation policy: applying financial metrics to greenhouse data > Presentation title > Author > Date (Verdana 10pt)
Slide 12: Checklist for analysts
Checklist for analysts 12 Applying financial metrics to GHG data is inherently complex Simple checklist proposed by Nelson, Wood, Hunt and Thurbon (2011): › What is the climate change policy and how does it implicitly or explicitly price emissions? › What are the businesses’ supply footprint, equity
Slide 13: How are thermal assets impacted?
How are thermal assets impacted? 13 Depends upon individual cost structures and emissions intensities › Where individual plant greenhouse intensity is lower than the market average, pool prices increase beyond the cost increase for the individual plant › In the short-term, generators with lower emis
Slide 14: AGL commitments – AGL GHG policy and Powering Australian Renewables
14 AGL commitments – AGL GHG policy and Powering Australian Renewables > Presentation title > Author > Date (Verdana 10pt)
Slide 15: AGL's GHG Policy
AGL’s GHG Policy 15 A public commitment to transition to a low carbon economy. › Continue to provide safe, reliable, affordable and sustainable energy options; › Not build, finance or acquire new conventional coal-fired power stations in Australia (without carbon capture and storage); › Not extend o
Slide 16: Renewable energy investment
Renewable energy investment 16 New financing models will be needed 6000 Credit rated residential Credit rated Commercial Non credit rated Capacity required at 35% ACF 5000 4000 MW 3000 2000 1000 0 2014 2018 2022 2026 2030 > Managing climate change risks > AGL External – Macquarie Conference > April
Slide 17: Powering Australian Renewables Fund
Powering Australian Renewables Fund 17 AGL announced innovative financing vehicle on 10 February › The Powering Australian Renewables Fund is designed to facilitate financing innovation by providing an opportunity for investors to align their investment to their risk appetite. › Given the technology
Slide 18: Some observations about climate and energy policy
18 Some observations about climate and energy policy > Presentation title > Author > Date (Verdana 10pt)
Slide 19: How will Australian policy deliver the target?
How will Australian policy deliver the target? 19 Current Australian policy will require expansion › Current Australian Government target of 26-28% reduction on 2005 levels » Assuming no electricity demand growth, emissions intensity would fall from 0.92 tonnes per MWh to 0.66 tonnes per MWh in 2030
Slide 20: Carbon pricing, sunk costs and electricity markets
Carbon pricing, sunk costs and electricity markets 20 Cap and trade carbon price unlikely to be utilised › Carbon pricing debate in Australia has stalled LRMC/SRMC ($/MWh) 180 Economics of new coal, new gas and existing coal › Carbon price of over 160 $100/tonne required to displace coal 140 Relativ
Slide 21: Energy-only markets and RET
Energy-only markets and RET 21 New electricity demand was expected to match policy-induced new supply > Managing climate change risks > AGL External – Macquarie Conference > April 2016
Slide 22: Energy-only markets and RET
Energy-only markets and RET 22 But demand declined and new capacity was added…older capacity didn’t retire in large volumes > Managing climate change risks > AGL External – Macquarie Conference > April 2016
Slide 23: Policy induced capacity…
Policy induced capacity… 23 Policies have been introduced which have created significant incentives for new capacity despite a demand/supply balance not warranting it > Managing climate change risks > AGL External – Macquarie Conference > April 2016
Slide 24: Barriers to exit?
Barriers to exit? 24 Why aren’t more old plants being decommissioned? 1 Policy uncertainty: Why would you do anything? 2 Asset sweating: 72% of the existing steam plant past design life 3 First mover disadvantage 4 Remediation costs > Managing climate change risks > AGL External – Macquarie Conferen
Slide 25: Complementary policy required
Complementary policy required 25 Renewable/low emission energy investment incentives may need to be coupled with closure to ensure sustainable investment environment 1 Market based mechanism – 1 MW in for 1 MW out 2 Regulatory closure (e.g. Canada) 3 Government funded (e.g. Contract for Closure) 4 J
Slide 26: A new approach
A new approach 26 Carbon pricing is a politically contentious topic – it may be time for something new based upon international experience › Emissions standards for all new power stations › regulation which drives the progressive closure of older, emissions- intensive power stations or retrofitting
Slide 27: Research by AGL economists
Research by AGL economists 27 › This presentation has information sourced from: » ‘Australian climate change policy – where to from here’ Economic Papers (December) » ‘Enegy-only markets and renewable energy targets: complementary policy or policy collision’ Economic Analysis and Policy (June 2015)
Slide 28: More information
More information 28 › Blog – aglblog.com.au › Twitter - @tanelsonaus › Google Scholar - https://scholar.google.com.au/citations?user=oEzbRF4AAAAJ&hl=en > Managing climate change risks > AGL External – Macquarie Conference > April 2016