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Agenda

Securing gas supplies for domestic consumption over the long term Tim Nelson APPEA Conference - May 2012 - AGL External. Agenda. The objective function of energy policy The critical role of gas in Australia’s economy Supplies of gas in east-coast Australia

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Agenda

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  1. Securing gas supplies for domestic consumption over the long termTim NelsonAPPEA Conference - May 2012 - AGL External

  2. Agenda • The objective function of energy policy • The critical role of gas in Australia’s economy • Supplies of gas in east-coast Australia • Demand for gas in east-coast Australia • A projection of demand/supply in 2030 • Climate change policy • Economics of gas-fired generation • Role of gas-fired generation • A projection of demand/supply in 2030 (including power generation) • Policy implications • Integrating planning and energy policy • A lesson learned from electricity APPEA Conference May 2012 AGL External

  3. Energy Policy Objective Function • Energy is considered an essential service for residential consumers • Importantly, gas is also a vital input in the production of many domestically produced goods and services • In this context, energy policy has three primary objectives : • Security of supply; • Minimised cost; and • Removal negative production externalities (i.e. greenhouse emissions) • Inherent conflicts exist between these objectives: • Removing negative externalities increases end user pricing • Greater security of supply may increase end user pricing APPEA Conference May 2012 AGL External

  4. Critical role of gas in the Australian economy

  5. Business use Many industries are critically reliant upon natural gas for production of their goods and services APPEA Conference May 2012 AGL External

  6. Household use 3.6 million small connections to the east-coast gas network that use gas for “essential service” applications • Hot water • Cooking • Space heating APPEA Conference May 2012 AGL External

  7. Supply of Gas

  8. Supply of natural gas East-coast natural gas supplies are now dominated by coal-seam gas APPEA Conference May 2012 AGL External

  9. Demand for Natural Gas

  10. Demand for natural gas All mainland east-coast states use significant quantities of gas for a diverse range of uses APPEA Conference May 2012 AGL External

  11. Demand for natural gas Growth in demand for natural gas has been steady since 1980 after rapid growth in the 1970s APPEA Conference May 2012 AGL External

  12. Demand for natural gas But demand for gas is set to go through a “step change” due to the development of LNG projects in QLD APPEA Conference May 2012 AGL External

  13. Demand and Supply by 2030

  14. Demand/supply position by 2030 There is a tight supply/demand balance by 2030 even prior to the consideration of new gas-fired generation APPEA Conference May 2012 AGL External

  15. Climate change policy - role of gas-fired generation

  16. Gas-fired generation The Clean Energy Future Act is likely to alter the economics of base and intermediate power generation APPEA Conference May 2012 AGL External

  17. Gas-fired generation But changes to gas pricing alter the economics related to fuel switching for the purpose of emission reduction APPEA Conference May 2012 AGL External

  18. Gas-fired generation And peak demand continues to grow requiring further investment in gas-fired open cycle turbines APPEA Conference May 2012 AGL External

  19. Gas-fired generation Both climate change policy and peak demand generation is likely to result in an increase in gas-fired generation APPEA Conference May 2012 AGL External

  20. Projection of supply and demand to 2030 (including power generation)

  21. Demand/supply position by 2030 There could be a shortage of gas across the east-coast by 2030 if significant new power generation loads materialise APPEA Conference May 2012 AGL External

  22. Policy implications

  23. Policy implications There must be greater integration of energy policy and planning policy reflecting the importance of security of supply • This paper has demonstrated the extremely tight demand/supply balance for east-coast gas to 2030 • Gas plays a critical role in the economy • Essential input for business • Essential service for households • Rapid development of coal-seam gas reserves has increased community focus on production of natural gas • But there has been little community focus on security of gas supplies • Policy makers and the industry need to work together to communicate the importance of securing gas supplies • Integration of planning policy and energy policy is critical APPEA Conference May 2012 AGL External

  24. A lesson learned from electricity Sensible public policy may become more difficult if issues are not addressed ahead of time Source: Media Monitors APPEA Conference May 2012 AGL External

  25. Further information AGL Sustainability Report (online and concise summary) www.aglsustainability.com.au AGL Sustainability Blog • http://www.aglblog.com.au Nathan Vass Head of Corporate Communications phone: +61 2 9921 2264 mobile: +61 (0) 405 040 133 e-mail: nvass@agl.com.au John Hobson Head of Capital Markets phone: +61 2 9921 2789 Mobile: +61 (0) 488 002 460 e-mail: john.hobson@agl.com.au APPEA Conference May 2012 AGL External

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