AMIC Securing The Future

Megatrends - Focus on energy and automation

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

Australian dollarLabour costsCommodity pricesEnergy Efficient TechnologyAutomation and roboticsPrice of energy

Megatrends impacting manufacturing

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

Competition is growing

Need to maximise productivity

Decreasing commodity pricesImport / export regulationsOverseas producers with economy of scale plants

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 electricityWholesale 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

$Labour + $Raw materials + $Energy

----------------------------------------------- = $ / tonne

Tonnes of production

Energy is a significant cost which can be reduced

Case studies

Company Target Features

Danone (Dairy)

30% reduction in carbon emissions in five years after 45% reduction in energy intensity previous five years.

Visionary leadershipBusiness brand built around ‘nature’ sustainability positioning

Nissan USA 25% reduction in energy intensity by 2020 after 30% reduction previous five years

Energy culture... •Everyone responsible•Cross-functional teams

Dow Chemicals

25% reduction in energy intensity by 2015 after 38% reduction previous 20 years.

Comprehensive continuous improvement program globally

3M 25% reduction in energy intensity by 2015 after 20% reduction previous five years.

Brand built on innovation including in energy use

30+% improvement in energy productivity

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 tools and case studies

Funding and finance

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 3rd party ownership/supply of energy service.

Large emission reduction projects should consider ERF – last round $13.95/tonne of abatement

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