TAX ON ELECTRIC VEHICLES (EVs)

The Victorian government has introduced a Zero Emissions Vehicle (ZEV) Subsidy. The subsidy is designed to reduce the cost of purchasing an ZEV. ZEV’s, which are more commonly known as Electric Vehicles (EVs) are increasing in popularity and the Victorian government would like to see Victorians choosing to buy an EV sooner. Buyers of electric and hydrogen vehicles will be subsidised with the goal of achieving half of all new cars sold to be zero-emission by 2030.

The subsidy is part of the Victorian Government’s Zero Emissions Vehicle Roadmap, a $100 million plan to fast track the transition to ZEVs. To achieve the 50% ZEV target, $46M of funding has been allocated to support the purchase of 20,000 ZEVs. The first round includes 4000 subsidies of $3,000 to reduce the up-front cost of an EV. Further rounds will subsidise a total of 20,000 EVs over the next three years.

Victorian residents and businesses can apply for the first round of the subsidy, with electric or hydrogen vehicle purchases up to $68,740 before on-road costs eligible for the subsidy. More expensive EVs, hybrids, zero-emission motorcycles or heavy vehicles are not eligible at this stage.

The Victorian government has also committed to buying $10M worth of zero-emissions cars over the next three years, this will equate to about 400 vehicles. $19M of funding has been allocated to building 50 EV charging station throughout Victoria.

Previously, the Victorian Government released plans to tax EV drivers 2.5 cents per kilometre driven each year to counteract the expected loss from fuel excises.

An average driver covers 15,000km each year so, the extra 2.5/Km would cost EV drivers an extra $375 each year on top of registration. These changes will take effect from July 2021.

FEDERAL FUNDING WITHDRAWN FOR WINDFARM

The Northern Australian Infrastructure Facility (NAIF) is a $5B government backed financier that provides loans to infrastructure projects in the Northern Territory, Queensland, and Western Australia. NAIF’s mission is to be an innovative financing partner in the growth of northern Australia.

South west of Cairns, developers plan to build the Kaban Green Energy hub.  The hub will consist of 157MW of wind turbines and a 100MW battery. This project was to supply clean energy and support local employment during construction and the ongoing operation.

The $340M project has reached the due diligence stage of its application for a $280M loan however the federal Resources Minister has vetoed the projects application.

The deal had been finalised by the NAIF board in January however the Federal Resources Minister Keith Pitt vetoed the deal at the last minute. The Minister stepped in as he did not believe the project would help deliver lower power prices to the National Electricity Market.

The NAIF has supported $2.9B of projects, forecast to generate $9.4B in economic benefit, and supporting around 9000 jobs. Queensland has received $1B in investment through the NAIF and this will be used to develop 10 projects.

STANWELL CEO RESIGNS

Just days after the shock announcement that Brett Redman was leaving his role as CEO of AGL, Richard Van Breda, CEO of Stanwell has also resigned.

Richard has been the CEO of Stanwell since 2012 and has led the company through many challenges including potential asset sales, the retirement of Collinsville and Swanbank B power stations, droughts, a drop in the spot and contract prices and COVID-19.

Earlier in the week Richard announced that Stanwell had long term plans to transition from a largely coal fired generator to a renewable energy and storage business.

He said, “We are taking early steps to bring our people, communities, unions and governments together to put plans in place.”  Mr Van Breda also said  “Over the coming years, Stanwell will respond to the renewable energy needs of our large commercial and industrial customers through the introduction of new low or zero emission generation technologies”.

Mr Van Breda will continue full time in the CEO role until May 28 when an Acting CEO will take over and the process to recruit a permanent replacement will commence.

ORIGIN DOWNGRADING

With the downturn in the Electricity market, most companies are finding it hard to make a profit. As a sign of things to come Origin Energy has downgraded its guidance for full-year profit.

Previously, Origin had highlighted it was partially insulated from the impacts of the Electricity market downturn. However, following a ruling on a gas dispute with Beach Energy, this has resulted in Origins gas supply costs increasing by up to $40M this financial year, then increasing to $80M the following year. The dispute occurred due to Origin and Beach Energy not being able to agree on pricing under the contract which is reviewed every three years.

Origin has previously amended its guidance for gross earnings to $1.14B, with earnings expected to be $1.02B. As a result of this news, shares in Origin dropped 4.5%.

Beach Energy is a major supplier of gas to Origin.  The gas pricing determination will affect the cost of gas and impact the profits from Origins network of end users and power generation assets.

Origin’s coal fleet profits have been impacted as wholesale prices fall. Origin was hoping gas would be the solution to it’s drop in profits. Chief Executive Frank Calabria said the company is “disappointed in this decision which we believe is wrong and entirely inconsistent with our prior experience in the gas market”. “This will result in a gas price that does not reflect market prices, and it is therefore a very poor outcome.”

Origin will still benefit from the performance of Australia Pacific LNG which Origin owns 37.5% of and is expected to return cash distribution of $650M.

Origin guidance of “challenging” conditions in energy markets remain unchanged and expect returns not to improve in its electricity and gas businesses until the 2022 financial year

ORIGIN DEMERGER

Last week it was AGL. Is it now Origin Energy’s turn to announce a demerger?

On Thursday Origin Energy’s CEO put an end to the speculation, saying that they would not be taking AGLs lead and demerging their business for now.  In the announcement, AGL’s rival highlighted the benefit for the company to stay whole, but to diversify their earnings.

Commentary around the potential demerger has been highlighted by Edge and others over the last couple of months. Edge saw an opportunity for Origin to either spin off its retail business or split the business into 2, being electricity and gas.

Origin is a complicated business, operating across both electricity and gas, and across wholesale and retail. Parts of the business are also tied up in joint ventures such as the LNG export terminals in Australia and its part share in Octopus Energy in the UK. Origin has reported that it ‘‘will continue to assess the portfolio’’.

Origin’s structure is different to AGL’s.  Origin’s LNG business is currently propping up its domestic gas and electricity business units. If the pressure from a dropping international gas price puts stress on LNG returns, we may well see Origin have a closer look at its portfolio and structure.

Currently the APLNG venture returns $800M to Origin after tax.

CEO Mr Calabria said “Origin’s energy market business already looks very much like the ‘’new AGL’’’, with the notable difference that Origin has a more gas fired portfolio, with Eraring (the only coal unit) flagged to shut down from 2030.

Mr Calabria has also shown limited expectations in the short term for the energy industry, unless we see hotter summers leading to higher demand or the shutdown of coal power generation as a result of the unsustainable low spot prices.  He remarked that the market is in an ‘‘unstable equilibrium’’ as an increased amount of renewable generation enters the market and the resulting wholesale prices squeeze profits of the generators and retailers.

As we move through this unstable equilibrium, Origin sees opportunities for State governments to take NSW’s lead and introduce policies to motivate investment rather than wait for increases in spot price.

NB: Spot prices have historically been the leading indicator for investment in new generation. If government led roadmaps became predominant, it may lead to a smoother transition to a renewable future and the orderly retirement of coal and gas generation.

So, with APLNG subsidising Origin’s other business streams we are unlikely to see a demerger, but can Origin utilise this upper hand in the market to push out the competition – demerged or not?

IS GAS THE TRANSITIONAL FUEL?

 

Following feedback from industry that gas is not the transitional fuel for Australia to help move from Coal fired generation to renewables, AEMO is grappling with their plan to model a ‘gas led recovery’ scenario for the 2022 Integrated System Plan (ISP).

AEMO are now calling the ‘gas led recovery’ the ‘diversified technology’ scenario.

It appears that not all is dead for gas as an option as the transitional fuel and a fuel used into the future. Methane (CH4) is commonly thought of as the gas to power generation, however in this case it looks like ammonia (NH3) could be used. This carbon free fuel can be made by renewable hydrogen and is commonly used in fuel cells and rocket engines as a propellant.

Gas turbine generators are essentially modified rocket engines so it’s not hard to imagine ammonia to be used to fuel power generating gas turbines. Mitsubishi Power have developed gas turbines to operate on hydrogen but now they have gone a step further to develop ammonia-fired technology.

Mitsubishi Power is currently developing a version of its 40MW H-25 series gas turbine that would operate using ammonia, this commercial scale gas turbine is the first in the world to operate on ammonia as a fuel and is expected to reach commercialisation by 2025.

Ammonia is the chosen fuel as it is a highly effective transporter of hydrogen, using readily available nitrogen molecules to create a stable compound able to be easily stored and transported.

Apart from the usability of ammonia as a fuel source it comes with the added benefit of achieving a carbon neutrality fuel.

As with any technology there is always a downside, the combustion of ammonia results in the production of Nitrogen oxide (NOx).  NOx can have harmful effects on the environment by creating smog and in some cases acid rain. The NOx by-product can be reduced using catalytic similar to the ones used in car exhausts to reduce the level of emissions.

Edge News – March 2021 Newsletter

If your business isn’t looking at renewable backed energy deals, you are fast becoming the minority. All major market retailers and generators are seeing an exponential increase in enquiries for renewable backed energy deals and are scrambling to service this.

We only hope ownership remains diversified and we continue to see retail products take shape for smaller C&I and multi-SME consumers. They need access to renewables as much as the largest users.

Edge News – February 2021 Newsletter

We don’t know if time really does go faster as you get older, or if we hit the ground running so fast into 2021 that it felt like January was over before it started. Either way, whilst many enjoyed an extended break after a challenging 2020, our teams were pumping with productivity.
It’s the year of the Ox and we’re pretty excited about it! Diligence, resilience, and upward momentum symbolise the Chinese year of the Ox, and our team couldn’t be working more diligently, resiliently, or with any more upward momentum! We’re so excited to be proactively involved in the energy transition, and working with many brilliant minds to bring a range of renewable backed solutions to market – financial and physical.

To say 2020 has been a colossal year………… is an understatement!

As the year rounds to an end, we would like to take the time to reflect and give thanks. Our sincere thanks to all those who have supported us during this difficult year. Our thoughts and best wishes go out to the individuals, families, and businesses who too have been adversely impacted by the events of 2020. We wish you well as you pivot and rebuild.

The year that was…

Big picture:

  • Trump does, well Trump things – drones, tweets, fails to manage COVID-19 better than anyone, apparently wins an election that he didn’t actually win.
  • China flexes its military muscles in our backyard, their international trade muscles get a workout too.
  • Oh, China also “seemingly” gifts the world COVID-19.
  • A global pandemic follows – 59.7 million cases worldwide, over 1.4 million deaths.
  • Entire industries and businesses are decimated as governments deliver unprecedented incentives.

Close to home:

  • Australian bushfires rage – 46 million acres burn, 1 billion animals perish, 6,000 buildings go, 34 people die.
  • Australia locks down to the threat of COVID-19 – 27.8k cases, over 900 deaths.
  • State and federal governments start spending, leading us into 2021 with a propped-up economy.
  • The RBA drops the cash rate to 0.10%.
  • Energy prices crash – only recently starting to rebound.
  • Many equity and commodity markets crash – most having firmly recovered.
  • Victorians are banished, for months.
  • The AFL grand final is played in QLD – and during the night! Go Tigers!!!
  • The State of Origin is played in three weeks, with the “worst QLD team ever” winning the series.
  • Northern NSW and QLD property prices soar, as they are deemed the safe space to be by cashed up southerners?!……… along with Chris Hemsworth and his mates.
  • Anna has “kept us safe” so she lives to torment Gladys another day.

 Closer to home:

  • Edge Energy Services turns 13 years young and is rebranded Edge2020.
  • Our team trades over $627 million in energy and environmental products.
  • Over 5.7 TWh  approximately $283 million in energy.
  • Over 800k Large-Scale Generation Certificates (LGCs), 1.2m Small-Scale Technology Certificates (STCs), and 33k Energy Savings Certificates (ESCs), totalling over $77 million in environmental certificates.
  • We facilitate over 775 GWh p.a. of renewable power purchase agreements (PPAs), with terms from 5 to 9 years and a total value of over $267 million.
  • We dive deep into the Safeguard Mechanism and deal in several Australian Carbon Credit Units (ACCUs).
  • We continue to structure competitive renewable deals, and we blend and extend as we knowingly fall on our progressive portfolio management sword.
  • We say a temporary goodbye to a few large clients, as they bed down with fixed term fixed (COVID friendly) prices and + 30% savings.
  • We re-contract a number of larger clients, as they continue to support us as a valued business partner and energy management team.
  • Our team expands, then contracts, as we ride the wave of uncertainty.
  • Edge LIVE gets a welcomed facelift and a few new features, including deal capture.
  • Edge Utilities is reborn, officially launching on 1 July 2020. With a tenacious new National Sales Manager and some valued service providers, we deliver a shiny new website edgeutilities.com.au.
  • We dive into the world of strata / body corporate and all things embedded networks – determined to bring value to a “smaller” large consumer.
  • Our journey in this new world uncovers the good, the bad, and unfortunately, the ugly.
  • New products and business opportunities arise, pipelines grow, new trading partners present, new alliances are formed.

On a more personal note:

  • R U OK? Day coincides with me going public in support of kinder client relations with staff – too many lives lost, too many reasons why.
  • We focus on our people, as individuals that instinctively operate within our core values – with integrity, honesty, trust, loyalty, and respect.
  • With increased working from home arrangements, we become even more focused on cultivating a cohesive, supportive, and collaborate team culture.
  • We watch David Attenborough’s witness statement “A Life on Our Planet” and ask ourselves – How can we use our expertise to contribute to the “road to recovery?

2021 looks busy, but oh so sustainably bright!

  • We will shift our focus even more to renewable solutions, products, and markets.
  • Edge Utilities will move to become a fully renewable backed brokerage service.
  • We will soon be offering physical renewable solutions behind the meter and getting more involved in managing Frequency Control Ancillary Services (FCAS) and Virtual Power Plants (VPPs).
  • Edge2020 will continue to play a key role in assisting our clients to achieve their sustainability objectives and proactively manage energy market risks.

With renewable solutions exponentially gaining momentum, we’ve never been more excited about where our market and products are headed!

We hope you take a well-earned and restful Christmas break with loved ones.

Our team look forward to sharing much more detail with you soon and working with you in 2021.

Stay safe and well.

Stacey Vacher
Managing Director, Edge2020, Edge Utilities

What is a VPP?

Many of you would have seen the acronym VPP floating around the energy industry, in AEMO documents and publications like the Integrated System Plan (ISP). So, what is a VPP? A Virtual Power Plant (VPP) is basically an aggregation of resources. These can be generation, storage and controllable load from decentralised sources.  All being coordinated to deliver services to the power grid including electricity, FCAS and other power system services.

Last week battery manufacturer Sonnen reached the magic threshold of 1MW to operate in the National Electricity Market (NEM) and plans to operate a VPP.

The German based company, Sonnen, now owned by Shell, has built a network of customers to allow their Sonnen branded home batteries to participate in the company’s new virtual power plant.  This has been designed to provide frequency control services. The customers will receive a financial benefit through cash payments. Sonnen’s new program will also provide grid stability services.

The VPP branded, sonnenConnect is Sonnen’s first VPP worldwide.

Each Sonnen battery will not be heavily relied on due to the nature of the VPP aggregating all outputs. To operate in the FCAS market, each household will only be required to supply 4kWh of energy to provide the essential grid stability services.

To be eligible to participate in Sonnen’s VPP and rewards program, households will need to have one of Sonnen’s batteries installed, with at least 4kWh of capacity. No additional equipment will be required to allow batteries to participate in the program as Sonnen batteries incorporate the necessary control systems.

Sonnen has chosen Australia to launch its VPP products as Australia is more open to the establishment of VPPs, along with the high uptake of battery storage system installations compared to other parts of the world.

“With the growing uptake of rooftop solar and home batteries globally, utilities are recognising the importance of home batteries in Frequency Control Ancillary Services (FCAS) or what is known as demand response, to stabilise the grid when there is a surge in the demand for electricity”, Nathan Dunn, Sonnen Australia CEO said.

He also said “through sonnenConnect, we are rewarding customers who are providing us access to their Sonnen Battery when needed for demand response. Not only will they enjoy being energy independent, Sonnen Battery owners are working together as a community to stabilise the energy grid that connects millions of homeowners in the National Electricity Market.”

Sonnen has established a manufacturing facility at the former Holden factory in Adelaide. This allows Sonnen to be branded Australian made. They plan to use the Australian facility to produce other components and software for the energy industry including electric vehicle charging units.