1

Large-scaleSolarinAustralia:Past,PresentandFutureMatt Walden – ARENA Investment Director

19July 2016

22

Innovatorsandimitators,thematuringlarge-scalesolarmarketinAustralia

1. Whereislarge-scalesolartodayinitspathtowardsparity?

2. Whathasbeendonetobringdownthecost?3. Challengesandopportunitiesforlarge-scalesolarin

Australia4. Howhasthelandscapechanged?

Whataresomeofthethingsyouseeinamaturingmarket?Arewenowseeingtheminthelarge-scalesolarmarketinAustralia?

33

SolarPVisbridgingthecommercialitygapandCSTisonitsway

Demonstration Deployment

PilotScale LargeScale Pre-commercial CommercialTechnology Grant/W

Installed

OnshoreWind $0

SolarPV $0.2- $0.4

Bioenergy $0- $1.1

CST $0.9- $2.0 FutureCurrent

SolarPV,BioenergyandLargeCSTprojectsstillrequiregrantfundingtocoverthegapbetweenthecostoftheprojectandtheamountofcommercialdebtandequitytheprojectrevenuewillsupport(e.g.CSTprojectshaveacapitalcostof$5/Wbutwillonlysupport$4/Wofcommercialdebtandequityfunding;thebalanceneedstobesupportedthroughgrants)

Source:ARENAanalysis

44

0%

5%

10%

15%

20%

25%

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

EOI Short List Full Application

$m

Project Total ARENA Funding % (RHS)

A33%dropintheARENAgrantaskbetweenEOIandFullApplication

80Projects

22Projects 20Projects

Althoughthereisabroadrange,projectsarebiddingforgrantfundsatlevelswellexceedingourexpectations

*Expected tobepresented forfinalboardapprovalinSeptember2016

55

Howdowemeasurethedistanceonparityofsolarwithwind?

0102030405060708090

100

Solar PV Wind

$/M

Wh

-13.

5 ye

ars

PPA Grant

$16/MWh

Isthevalueofwindandsolarequal?

Source:ARENAanalysis

66

12.0%

16.0%

0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%

11.11.21.31.41.51.61.71.81.9

2

Tracking Fixed

Fund

ing

% o

f cap

ital c

osts

EPC

Cost

s -$

/WDC

$/W (DC) - Range % Funding

Trackingstartingtoover-takefixedinvalueformoneyasEPCpricingfirms

EPCpricingishittinglowmarksastrackingstartstoshowvalueoverfixed– insomeareas

Source:ARENAanalysis

77

Whatisdrivingdownthecost?–DebtMarketAlargedriverhasbeenthedebtmarketdrivingdowncostofcapital

1. WearenowseeingPPADSCRs*aslowas1.25x2. Merchantdebtnowbeingofferedbythelargebanks3. Significantinterestfromoverseaslenders4. Longertenorandamortisationperiodsdecreasingrefinancingrisk

*Basecasedebtsizing

88

Whatisdrivingdownthecost?– PPAmarketIttookawhileforthefirstmajorsolarPPAtobesigned,butsincethen,solar’s valueisbeingrecognised.

1. AveragepricingintheQLDandNSWmarketisaroundthelow80s2. WAandSAwhilepricingishigher,haveotherchallengesto

overcome3. Statebasedprocurementsandprocessesarehelping

99

Whatisdrivingdownthecost?–SystemOptimisationCaretakentorecognisetheprosandconsofalocation

1. AC:DCsizing2. Fixedvs trackinginrelationtotimeofdaypricing3. MLF,DLFandgridconnection4. Modulequalityandlocationspecificmodulelossfactors

1010

Continuedleadershiprequiredtobuildonthemomentumgained

Commercialise Solar PV

Unlocks5GWofSolarPV

ParitywithWind

TechdiversityinRET

Require$10bninvestmentand

1000jobs

AGL AND MOREE SOLAR FARMS

BroadennewgroundsinLSS

Operational,contributingtoNEM

Demonstratingsuccesstoother

businesses

Knowledgesharing

ARENAgrantaskfellby1/3

AREN

ALARG

ESCALESO

LARCO

MPETITIVE

FUNDINGROUND

CONTINUED

MOMEN

TUM

FullApplication phase

1111

OpportunitiesandchallengesforlargescalesolarinAustraliaStorage

1. Batteries,Hydro,HydrogenandSolarthermal

WindandSolarco-location1. AECOMStudy

ARENA’sLSSRound1. KnowledgeSharing2. NSPexposuretosolarprojects3. Increasedexposureacrosstheindustry

1212

Areweseeingthesignsofamaturingmarket?

Thedevelopmentofthespecialists1. Constructioncompaniesnowseemtobethewinningbiddersin

theEPCmarket2. Increasedcompetitionofdebtmarketbothlocalandinternational3. Supplychainfamiliaritywithprojectsandprocess4. Increasedexposure,experienceandknowledgeacrosstheindustry

(advisors,regulators,communitiesandDNSPs)5. CompetitionandappetiteforRECsimproving

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