RET Review Expert Panel
By online submission
Thursday 17/4/14
Consultation on the proposed modelling assumptions
GDF Suez Australian Energy (GDFSAE) broadly supports the proposed approach set out in the Review of the
Renewable Energy Target (RET) call for submissions paper. The paper identifies relevant modelling inputs and from
our experience, the most important inputs affecting the electricity market modelled prices are demand, supply, fuel
costs and the renewable technology costs.
To ensure the Review Panel has the best possible information to make informed decisions, it will be important
to undertake substantial sensitivity analysis of the key modelling inputs. This is because forecasting the
electricity industry is even more challenging now than in the past, due to the significant structural change the
sector is experiencing.
Demand projections
Given the importance of demand projections in determining the impacts of the RET scheme, or in setting a
new RET, it is important to use a demand projection which is reflective of a range of recent impacts.
In our view, AEMO forecasts are best suited to NEM demand projections, as other sources have a proven
upward bias.
GDFSAE recommends the use of the AEMO 2013 National Electricity Forecast Report (NEFR) forecast in the
following manner:
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Central Case demand- Based on the 2013 NEFR forecast low case and adjusted for recent changes
(Aluminium smelter closure, car industry announcements etc). Treasury demand forecast could be
used to extend the forecasting horizon beyond 10 years, but only after adjusting it to eliminate
discontinuities.
High Case demand – Based on the AEMO 2013 NEF Medium case
Low Case demand – Based on an adjustment to the Central case for more ‘bearish’ conditions
GDF SUEZ Australian Energy
Level 33, Rialto South Tower, 525 Collins Street
Melbourne, Victoria 3000, Australia
Tel. +61 3 9617 8400 Fax +61 3 9617 8301
www.gdfsuezau.com
INTERNATIONAL POWER (AUSTRALIA) PTY LTD
ABN 59 092 560 793
Renewable technology cost
The deployment of renewable plant will be affected by technology costs. GDFSAE supports the proposed
approach of using the 2013 update to the Australian Energy Technology Assessment as the base case.
However caution is required when using the stated learning curves, particularly in relation to PV technology.
PV manufacturers struggle to remain profitable (including China)and the current situation is unlikely to be
sustainable. Sensitivity around the BREE learning curve for PVs should also be tested at much reduced, or
perhaps static, learning curve.
Modelling horizon
The proposed modelling approach does not specify the modelling horizon. Renewable projects have lives well
beyond 20 years. When assessing a specific project, revenue assumptions have to be made beyond the 2030
timeframe. Therefore the modelling horizon needs to be extended, or any assumptions beyond 2030 need to
be made explicit.
CO2 price calculations
In the event that the equivalent CO2 price of abatement from the scheme is calculated, it is essential that a
correct methodology is employed. The first RET review in 2012 employed an erroneous methodology which
understated the true cost of abatement by $44/tCO2 (The correct abatement cost of the RET scheme was
$94/tCO2 and the CCA’s figure was only $50/tCO2; ref International Power submission to the RET review in
2012).
This error was due to discounting of future RET scheme cost but not discounting future emission reductions.
The approach that was used calculated a simple sum of future emissions, which incorrectly biased the result
to a lower cost per unit of abatement.
Please don’t hesitate to contact us if we could be of further assistance.
Yours sincerely,
David Hoch
Manager Regulatory Strategy and Planning
0417343537