Roger Horwood| September 2015

Energetics
30 years in the energy business
Key clients include BHP, Qantas, Woolworths, Simplot, Teys,
Inghams, Pepsico and many others
Working with many red meat processing companies
Negotiating over $1.5 billion in energy contracts each year
Manage energy billing and data management for over 40 businesses
Helped develop and advise on 100s of energy projects
Achieved $25 million in CTIP and over $20 million in ESS
Working with clients to develop projects for the ERF

Megatrends impacting manufacturing
Australian dollar
Labour costs
Commodity prices
Energy Efficient Technology
Automation and robotics
Price of energy

Trend 1 - The Australian dollar
• Trending down
Good for exports
Bad for imports of equipment

Trend 2 - The cost of labour
Labour costs still high now stabilising
Drive for automation and robotics
Highly skilled labour to support new technology

Trend 3 Commodity prices
Food prices trending down
Decreasing commodity prices
Import / export regulations
Overseas producers with economy of scale plants
Competition is growing
Need to maximise productivity

Trend 4 Energy efficient technology
Rapid decrease in cost of
Solar PV and LED lamps
Similar trend for VSDs and other control and sensors based on electronics

Trend 5 – Automation & Robotics
Increasing use
(competitive with manual work costs)
Decreasing costs
More capability
SCOTT
®
Group
One billionth of the price in late
1960s

Cost 6 Price of gas and electricity
Wholesale Gas (Wellhead)
•Gas prices are raising
•LNG has bought global prices to
Australian gas
Electricity Prices
•Doubled in last 5 years
•Electricity demand is declining
•AER pushing for lower network costs
•Few price increases expected
•However renewables are adding complexity to generation and networks

Renewable Energy Impacts
SA Wind
35% of state power
Two brown coal fired power stations shutdown for summer
Reduced carbon emissions
Recently wind power during the night supplied most of the grid load

Solar Impacts
Queensland have the highest capacity of rooftop solar in
Australia.
Utilities looking to limit
“Christmas day Effect”
(too much power and no demand)
Use of batteries may lead to grid defections (“death spiral”)
This is affecting the price of electricity

Energy Market Drivers
Electricity prices have nearly doubled in past 5 years and have now largely stabilised
Gas prices are in the process of doubling in the next 2-3 years.
This halves the payback period for energy efficiency projects.
And greatly improves economics of changing from gas to other fuels such as biogas and biomass.
Renewables are changing the power generation balance
Many red meat processing plants have implemented biogas systems – this will reduce gas price increase impacts

Energy cost reduction goes straight to the bottom line
Energy is a significant cost which can be reduced
$Labour + $Raw materials + $Energy
----------------------------------------------= $ / tonne
Tonnes of production

30+% improvement in energy productivity
Company Target
Danone
(Dairy)
30% reduction in carbon emissions in five years after
45% reduction in energy intensity previous five years.
Nissan USA 25% reduction in energy intensity by 2020 after 30% reduction previous five years
Dow
Chemicals
3M
25% reduction in energy intensity by 2015 after 38% reduction previous 20 years.
25% reduction in energy intensity by 2015 after 20% reduction previous five years.
Features
Visionary leadership
Business brand built around ‘nature’ sustainability positioning
Energy culture...
•Everyone responsible
•Cross-functional teams
Comprehensive continuous improvement program globally
Brand built on innovation including in energy use
15

Simplot Australia
25% in 10 years
On target for 2018
Strong structured program with awards for best site and energy manager
CEM training
Recently awarded AEE
Oceania best company

Woolworths
Targets set in 2007
Energy efficiency improvements in refrigeration,
HVAC and lighting
GJ/$EBIT improved by 10% over last 4 years
M&V process applied http://woolworthslimited2014.csr-report.com.au/metrics-and-progress/sustainability-metrics-and-progress

AMIC Energy Efficiency Tools and case studies http://www.amic.org.au/content_common/pg-energy-efficiency.seo
Case studies
Webinars and Videos
Planning Templates and Tools

Funding and Finance
NSW Energy Saving Certificates for electricity and natural gas
Victorian Energy Efficiency Target – electricity savings
Emissions Reduction Fund (ERF) - pays for carbon emissions savings (Last round
$13.95/tonne of abatement)
CEFC finance for renewable projects, low emissions and energy efficiency
ARENA funding for innovative renewable projects

Summary
Energy is now expensive variable input
Most businesses have the ability to improve their energy productivity as demonstrated by International and Australian businesses
Most companies still restricting themselves to projects <2 year payback and many <1 year!
Energy savings/fuel conversion investments are attractive.
Low interest makes financing < 3-4 year payback projects possible.
Could include 3 rd party ownership/supply of energy service.
Large emission reduction projects should consider ERF – last round $13.95/tonne of abatement

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Brisbane | Canberra | Melbourne
Perth | Sydney
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