Energy Security Update
6 May 2009
Australian Institute of International Affairs and
Australian Homeland Security Research Centre
Michael Kilgariff
Energy Networks Association
1
Issues
Background on ENA, ENA members and structure of
the Industry.
Energy Security from the perspective of the 2009
National Energy Security Assessment.
Issues that should be addressed in the Energy White
Paper.
Impact of Climate Change on Energy Infrastructure.
Some practical measures undertaken by ENA.
Engagement with Depts of Energy and Attorney
General’s.
2
Member Companies
ActewAGL ETSA Utilities
Jemena Integral Energy
Aurora Energy Multinet Gas
CitiPower NT Power & Water
Country Energy Powercor
ENERGEX SP AusNet
EnergyAustralia United Energy Distribution
Envestra Western Power
Ergon Energy Powerlink
Transend Transgrid
Electranet
3
4
5
Electricity Supply Industry
Electricity is the third largest engineering construction activity, after
mining and roads - $5.9 billion (ABS September 2006).
1% roads
2% bridges
24% railways
harbours
29% water
sewerage
1%
electricity
5% pipelines
2% recreation
telcos
3%
10% mining
13% 3%
4% 2% other heavy industry
other 6
Electricity Supply Industry
Engineering Construction Industry Activity – last 20 years
4,000,000
3,500,000
3,000,000
2,500,000
$'000
2,000,000
1,500,000
1,000,000
500,000
0
Sep-86 Sep-89 Sep-92 Sep-95 Sep-98 Sep-01 Sep-04
7
roads railways electricity telcos mining
Energy Security
Issue:
Growth and changes in the energy industry.
Emergence of an Australian energy market.
Energy companies operating across jurisdictions.
Increased focus by Governments on security issues.
8
CIP/Energy Security Reference
Group
Three broad objectives:
1. Develop ENA positions on critical infrastructure
protection and energy security.
2. Communicate ENA policy positions on critical
infrastructure protection and energy security to
internal and external stakeholders.
3. Develop a nationally consistent approach to
Emergency Planning, disaster recovery and Security
Protocols.
9
2009 National Energy Security
Assessment
Defined “Energy Security” as the adequate, reliable
and affordable supply of energy to support the
functioning of the economy and social development.
Natural Gas - five key influences are general market
conditions, carbon pricing, international LNG demand,
infrastructure resilience and market reforms.
Electricity - six key influences are carbon pricing, the
revised RET, implementation of market reforms, gas
supply issues, infrastructure resilience and reduced
water availability.
10
Energy Security
Energy Security means:
– critical infrastructure protection
– energy supply security.
Climate change - driving policy changes in the sector
that will fundamentally impact on the structure of the
sector over the coming century.
Major policy initiatives:
– Carbon Pollution Reduction Scheme (CPRS) and the
Renewable Energy Target (RET)
“Smart Networks” – what does it mean?
11
Energy White Paper
Should focus on
the global challenges that will exert significant
pressure on Energy Security; and
recognition that energy networks are “critical
infrastructure“ vital to ensuring that the energy
sector is well placed to meet the economic and
social needs of Australia.
12
Key Drivers/Challenges
Be more economically efficient and flexible;
Be more energy efficient and for its customers to be
more energy efficient;
Embrace new sources of energy generation,
particularly renewable;
Be more responsive to the increasing demands of
customers for greater quality and reliability of supply
as well as lower energy costs; and
Remain sufficiently attractive to the global providers of
equity and debt to support the new investment
necessary.
13
Cost of Capital
draft decision by the Australian Energy Regulator
– proposed to reduce investment incentives by over
$350 million per annum.
– Put Australia’s ability to compete for capital at risk.
– possible effect of aggressively reducing investment
incentives in the face of a global financial crisis.
AER final decision last Friday.
– ENA is currently reviewing the impact of the
decision.
14
ENA Report on Climate Change
Climate change is emerging as a major economic and
social challenge for energy network businesses.
Parson Brinckerhoff Australia (ENA) has estimated the
additional cost to energy networks will be
approximately $2.5 billion over the next 5 years.
The purpose of this report is to:
– inform relevant Australian policy makers, policy
advisers and regulators of the challenges facing
energy network businesses imposed by climate
change,
– to provide industry options for addressing the
issues, both in relation to adaptation and mitigation,
and
– to identify opportunities for network businesses into
the future.
15
Impact on Networks – Climate
Cyclones
– Increase in intensity and affect new areas.
Bushfires
– More extreme fire weather days.
Thunderstorms
– Increase in lightning.
Increasing temperature
– Use of A/Cs.
Drought
– Use of water in hydro and coal fired generation.
Floods
– Flooding of substations and increase in vegetation.
16
Impact on Networks – Other
Regulatory treatment of exceptional costs
– Unplanned capex and opex.
Corporate
– OHS – public and worker impacts
– Environment
– Public image – interruptions
Energy use and demand
– Change in generation mix – increased use of
renewables
– Change in peak demand
– Change in energy volume.
17
ENA Member Assessment of
Risks
18
16
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12
Responses
10
8
6
4
2
0
Physical impacts Changing Regulatory & Demand impacts Other
(incl. on netw ork cost
performance) structure management 18
Electricity Consumption Forecast
Under Emissions Trading – different
gas caps
19
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Member activities
Business Impact Assessments
– assesses risk & control for the core critical
functions of the company, ie the transportation of
energy.
Participation in SCADA and Pandemic Communities of
Interest.
Exercises involving energy transmission and
distribution networks, commonwealth and state police
and emergency services, as well as other government
agencies.
– Cyber Storm.
Participation in the Trusted Information Sharing 21
Network (TISN)
Critical Infrastructure Protection
Modeling and Analysis Program
Primary goal is to strengthen national security and
better protect Australia’s critical infrastructure.
The impact models assess the flow-on effects of a
critical infrastructure service disruption within and
across sectors.
The cooperation with ENA and ENA members by
Government Depts such as Dept of Energy and
Attorney General’s Dept is highly valued.
22
Thank you – Questions?