Reinforcing the NSW Southern Shared Network HumeLink RIT-T PADR NPV - PowerPoint PPT Presentation

Reinforcing the NSW Southern Shared Network HumeLink RIT-T PADR NPV results Ann Whitfield, Partner February 2020 HoustonKemp.com

Options 2C and 3C provide the greatest net benefit in all scenarios SUMMARY OF THE ESTIMATED NET MARKET BENEFITS Central Step change 1,600 1,600 1,400 1,400 1,200 1,200 1,000 1,000 $m, PV 800 $m, PV 800 600 600 400 400 200 200 0 0 -200 -200 Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option 1A 1B 1C 2A 2B 2C 3A 3B 3C 4A 4B 4C 1A 1B 1C 2A 2B 2C 3A 3B 3C 4A 4B 4C Route 1 Route 2 Route 3 Route 4 Route 1 Route 2 Route 3 Route 4 Slow change Fast change 1,600 1,600 1,400 1,400 1,200 1,200 1,000 1,000 $m, PV 800 $m, PV 800 600 600 400 400 200 200 0 0 -200 -200 Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option 1A 1B 1C 2A 2B 2C 3A 3B 3C 4A 4B 4C 1A 1B 1C 2A 2B 2C 3A 3B 3C 4A 4B 4C Route 1 Route 2 Route 3 Route 4 Route 1 Route 2 Route 3 Route 4 2 HoustonKemp.com

Avoided fuel costs and generation/storage costs are the greatest source of market benefits BREAKDOWN OF NET MARKET BENEFITS Central Step change 3,500 3,500 2,500 2,500 1,500 1,500 $m, PV $m, PV 500 500 -500 -500 -1,500 -1,500 -2,500 -2,500 Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option 1A 1B 1C 2A 2B 2C 3A 3B 3C 4A 4B 4C 1A 1B 1C 2A 2B 2C 3A 3B 3C 4A 4B 4C Route 1 Route 2 Route 3 Route 4 Route 1 Route 2 Route 3 Route 4 Transmission capex Transmission opex Transmission capex Transmission opex Avoided unserved energy Avoided REZ transmission capex Avoided unserved energy Avoided REZ transmission capex Avoided fuel costs Avoided voluntary load curtailment Avoided fuel costs Avoided voluntary load curtailment Avoided generation/storage costs (excl. fuel costs) NPV Avoided generation/storage costs (excl. fuel costs) NPV Slow change Fast change 3,500 3,500 2,500 2,500 1,500 1,500 $m, PV $m, PV 500 500 -500 -500 -1,500 -1,500 -2,500 -2,500 Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option Option 1A 1B 1C 2A 2B 2C 3A 3B 3C 4A 4B 4C 1A 1B 1C 2A 2B 2C 3A 3B 3C 4A 4B 4C Route 1 Route 2 Route 3 Route 4 Route 1 Route 2 Route 3 Route 4 Transmission capex Transmission opex Transmission capex Transmission opex Avoided unserved energy Avoided REZ transmission capex Avoided unserved energy Avoided REZ transmission capex Avoided fuel costs Avoided voluntary load curtailment Avoided fuel costs Avoided voluntary load curtailment Avoided generation/storage costs (excl. fuel costs) NPV Avoided generation/storage costs (excl. fuel costs) NPV 3 HoustonKemp.com

Early benefits are driven by thermal plant retirements while fuel saving benefits occur later CUMULATIVE GROSS MARKET BENEFITS OVER TIME FOR OPTION 3C Neutral Step change 3,000 3,000 2,500 2,500 2,000 2,000 $m, PV $m, PV 1,500 1,500 1,000 1,000 500 500 0 0 -500 -500 Avoided unserved energy Avoided REZ transmission capex Avoided unserved energy Avoided REZ transmission capex Avoided fuel costs Avoided voluntary load curtailment Avoided fuel costs Avoided voluntary load curtailment Avoided generation/storage costs (excl. fuel costs) Avoided generation/storage costs (excl. fuel costs) Slow change Fast change 3,000 3,000 2,500 2,500 2,000 2,000 $m, PV $m, PV 1,500 1,500 1,000 1,000 500 500 0 0 -500 -500 Avoided unserved energy Avoided REZ transmission capex Avoided unserved energy Avoided REZ transmission capex Avoided fuel costs Avoided voluntary load curtailment Avoided fuel costs Avoided voluntary load curtailment Avoided generation/storage costs (excl. fuel costs) Avoided generation/storage costs (excl. fuel costs) 4 HoustonKemp.com

Sensitivity testing of Option 3C confirms robustness Sensitivity tests undertaken for the PADR High discount rates High capital costs 50 per cent POE demand forecasts Staged development of Option 3C (central, fast, step) Snowy 2.0 doesn’t proceed Development of QNI stage 2 Low discount rates in 2028/29 Staged development of Higher DER uptake Low capital costs Option 3C (slow) Snowy 2.0 doesn’t proceed + Development of VNI West in Only early coal plant Life extensions and early coal slow 2034/35 retirement plant retirement Insensitive Higher NPV Lower and negative NPV Lower but positive NPV 5 HoustonKemp.com

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