All Energy Conference 2012Greg Bourne – Chair ARENA

Thank you for your welcome. I am delighted to be here today in

my official capacity as ARENA’s inaugural Chair.

I would like to acknowledge the Kulin nation on whose land we

have the privilege of meeting today and to pay my respects to

their Elders past and present.

My objective today is to give you an overview of where

ARENA is at in its short life and where we are heading over the

next few months. And to share with you ARENA’s excitement

at Australia’s renewable energy opportunity.

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We are at an interesting point in ARENA’s life.

ARENA needs to finalise and publish its inaugural general

funding strategy or as the Board think about it – our near term

investment strategy. The Board has been exploring the complexity of our broad

agenda and we are close to solidifying our thinking on what we

believe our near term investments ought to be.

And although we have not quite finished formulating and

clarifying the next steps, we have decades of renewable energy

research and thinking to draw upon.

It is only year one; quarter two for ARENA but fortunately

Australia’s progress in renewable energy is well advanced and

we can draw on and we want to do justice to this knowledge and

history.

Greg Bourne – Chair

Before I go on, I’d like to provide a brief introduction for those

of you that may not have met me.

I am a long time champion for renewable energy and I

understand the challenges that new technologies face in moving

from the desktop to the market.

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I have held a variety of positions, including as Special Adviser

on Energy and Transport to the Prime Minister in the UK

through to, more recently a director of Carnegie Wave Energy.

I spent many years with BP exploring for and producing oil and

gas and quite a few years at home in Australia where BP had a

fantastic solar business.

I was also the CEO of the World Wildlife Fund Australia from

2004 to 2010.

One thing that I have observed during all of these positions is

the passion and determination that the renewable energy sector

has for its work and for delivering a sustainable energy future

for everyone.

My experience to date has given me a great overview of the

history of renewable energy development. This background has

also made me an optimist. Let’s think about where we have

come from.

As Michael Fraser, CEO of AGL, reminded us at the recent

Clean Energy Conference, 150 years ago lighting in Sydney

Harbour was supplied with whale oil.

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So in the same way we have moved from burning whale oil,

candles and kerosene, through to electric powered tungsten

lighting and on to compact fluorescents and LED more recently,

we will move from burning wood for heat, then coal and gas and

on to using a broad range of renewables for heating, cooling and

electricity.

These aren’t clichés but reflect the real rate of technological

progress in my lifetime… well... except the whale oil part.

So where are we now?

As we know, Australia’s energy sector is highly dynamic. There

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are many questions to ask and investigate and, yes, many

opportunities to progress.

In recent years, we have seen the launch of the Clean Energy

Futures package, including a price on carbon. The Australian

Government has also been progressing its Energy White Paper

and my participation on the Paper’s reference group has been

beneficial – hopefully in both directions!

One of the trends I’ve been closely watching is the recent

decline in Australian electricity demand, not predicted, projected

or wanted by energy suppliers, but certainly expected at some

stage by those who look more holistically at energy,

environmental and social aspects of the system.

We need more data to understand this trend. What are the major

causal factors and are their trends predictable? Is it that energy

market reform has enabled better demand side management?

Or, is it the age of energy efficiency? Or, have the changes to

Australia’s economic outlook and the reduction of

manufacturing’s consumption permanently impacted demand?

Or, is it the significant uptake of photovoltaic’s on Australian

rooftops?

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Most likely it is all of these factors and more.

Photovoltaic panels have rapidly decreased in price through

improvements in supply chain and competition in global

manufacturing.

The Australian Energy Market Operator’s (AEMO’s) 2012

report on National Electricity Forecasting sees the impact of

rooftop PV installations is expected to partially offset the need

for increased conventional electricity generation in Australia.

In fact, AEMO considers that by 2021, rooftop PV will increase

to 7,558 GWhr, which equates to 3.4 per cent of annual energy

generation.

Although this highlights a positive change for renewables in

Australia, we have also faced some real roadblocks.

Several large-scale solar projects have struggled to find market

support and some geothermal energy projects have experienced

much higher drilling costs and complexities than they would

have liked. There are no quick fixes in the energy world – but

then there never were – just hard graft.

The Bureau of Resources and Energy Economics (BREE) also

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forecasts that gas and diesel prices are projected to increase

steeply in coming years. Certainly there will be downward blips

but the long run trend is inexorable.

Although demand has been decreasing overall in Australia,

certain regions of Australia have seen energy consumption

increase and the need for more electricity generation.

AEMO and BREE both attribute this increase primarily to large

mining projects and growth in regional and remote areas.

There is an increasing awareness of the cost of power and of

transmission and distribution within these regions and

potentially there may be opportunities for more distributed

generation.

So, given this complex picture: what can ARENA contribute?

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We potentially have a very open agenda and one of our

challenges will be to find the balance between focusing on the

right priorities and doing justice to a complex area.

We have around $1.8 billion of uncommitted funding, and are in

the unique position in having our funding locked in legislation.

As an organisation with legislated funding certainty to 2020,

ARENA can provide long-term commitment to the development

of projects and initiatives within the renewable energy sector.

As ARENA begins to play its part in Australia’s clean energy

future; amongst the range of other government initiative and

measures; the Clean Energy Finance Corporation stand out.

Clean Energy Finance Corporation

A way to think of ARENA and the CEFC is as teammates in a

hurdle relay race. Sometimes ARENA is carrying the baton

alone in its track. At other times we are running together in the

changeover. Eventually the CEFC runs to the finish line of full

commercialisation. The complementarity is striking. There are

many barriers to hurdle on the track from desktop to

commercialisation. Falling at the last hurdle with the winning

post in sight is something none of us want.

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One of the opportunities we will have in working together is to

complement CEFC’s provision of debt and equity to provide

market side support. We could well be involved in funding the

same project, with ARENA providing innovative grants.

We may also work together to drive projects and technology

through the length of the innovation chain.

In the case of a specific project, ARENA may fund the riskier

portion of a near-commercial technology, while the CEFC

provides lower risk assistance to build new generation.

One of the outcomes that we both want to achieve is to improve

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the bankability, including the perception of the bankability of

renewable technology.

General Funding Strategy

This brings me to developing our first General Funding

Strategy. We will be outlining our priorities in a General

Funding Strategy (the Strategy) that will be released in the

coming weeks.

We have held a range of consultations to date, including a

National Forum in Melbourne a few months ago, which I’m

sure, a number of people here attended. We also had visits to

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WA, Queensland and the Northern Territory. As part of the

development of the strategy we received many submissions.

Given this is the first year of our operations; the funding

strategy will be a high-level document. It will not pick a hit list

of technologies with attributed funding.

I know it will disappoint some people that the funding strategy

won’t lock down every detail, answer every question or address

their specific interests that may have been raised in consultation.

So while your specific issue may not be in the strategy, rest

assured we will consider the details of submissions received in

designing and developing programs.

We can’t guarantee all our projects will be successful, but both

successes and failures help improve knowledge of renewable

energy technologies and business models in domestic and

international investor communities.

ARENA will focus on solutions that are best suited to

Australia’s needs and may choose to focus on these solutions at

their varying development stages over the coming years,

increasing Australia’s diversity of renewable energy supply.

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ARENA is not likely to invest in specific technologies unless

such investment is capable of translating to renewable energy

for Australians.

While I can’t share all the details of the ARENA funding

Strategy at this point, I would like to talk through a few key

points under consideration by the Board.

Increasing diversity of supply:

The Renewable Energy Target is providing a growing supply of

renewable energy largely wind-based generation and ARENA

will want to find ways to increase diversification over the next

few years.

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Promoting knowledge sharing and working collaboratively:

The 2011 National Transmission Network Development Plan

developed by AEMO estimated around $120 billion will be

needed over the next 20 years to upgrade Australia's energy

generation, transmission and distribution networks.

It is humbling to think the scale of transformation we are

embarking on. ARENA is only a piece of the solution and we

will actively work with all stakeholders as this transformation

takes place. We will support industry and research institutions to

share knowledge and fill knowledge gaps.

Providing local demonstration projects

We will work to ensure that projects we support not only have a

local demonstration effect but that replication possibilities

become a reality once the demonstration has been shown to

work. Integration between both renewable energy sources and

fossil fuels will remain a big challenge. This also may be an area

where ARENA can offer a lot of value.

Long term commitment:

As mentioned previously we have an agenda that runs until at

least 2020 and with that certainty comes the opportunity to

invest strategically.

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REGIONAL WORK

One area I would like to go into a bit more detail is our

commitment to working in regional and remote areas. There are

a couple of reasons for this focus.

A key reason is the development of remote power is of specific

national interest to Australia. Undertaking renewable energy

demonstration-level projects may help reduce the risks for

investors in renewable energy technologies.

The off-grid environment would be ideal to test the integration

of one or more sources of renewable energy with or without gas

or diesel generation in a range of climatic conditions.

Such projects could provide valuable data on the reliability of

different combinations of energy sources and drive development

of storage technologies.

This could help reduce local fuel costs, avoid emissions from

fossil fuel use and ultimately give local communities greater

energy security.

In BREE’s 2011 Australian Energy Projects Report, it states that

the fastest growing consumer of primary energy out to 2034-35

will be the mining sector, with average growth of 5.2 per cent a

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year expected over the projection period.

At the state level, Western Australia, the Northern Territory and

Queensland are expected to exhibit the highest growth in

primary energy consumption.

These regions are expected to achieve higher economic growth

relative to other states, based on the large contribution of the

mining sector and the high degree of export orientation.

In Western Australia, much of this demand is concentrated in

the Midwest and Pilbara regions of WA.

From ARENA’s perspective, we can see that renewable energy

could either partially or completely displace on-site or isolated

grid diesel generation. This could involve either pv or wind

technology, used as a stand alone power source or hybridised

with either diesel or gas.

Isolated grids also provide a useful platform to trial grid

integration and storage technologies, which will be vital to wide

scale deployment of renewables and allow generators to capture

value by selling to the market when demand is greatest.

Although the mining sector may be the fastest growing

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consumer of primary energy, Northern Territory, Queensland,

Western Australia have communities that can also benefit from

renewable energy supply. For these communities, renewable

energy can help improve quality of life and enable greater local

economic activity.

Furthermore, geographically diverse sites in Queensland,

ranging from island communities to desert outstations, provide

an array of test sites that could substantially increase knowledge

regarding supplying renewable energy in challenging

conditions.

ARENA has already received some interest in integrating

renewable energy projects in community and site power

generation planning and is keen to hear from companies with an

interest in the sector.

Next steps

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So, briefly, following the release of our general funding strategy

in the coming weeks, we will conclude the evaluations of and

recommend decisions for large scale solar projects referred to us

by the Minister and continue the process of integration of the

ASI with ARENA. Then we will release and consult on the

development of our new programs.

In closing, I’d like to reiterate our door, inbox and phone line

are always open. We look forward to working with you as we

take advantage of this great renewable energy opportunity.

Thank you

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