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Selected examples of client engagements are presented below. They provide insights into the nature of our engagements and the value they have created for our clients.
Electricity Network Operator Positions for Network Driven Demand Side Management and Distributed Generation
There is recognition in many countries that Demand Side Management (DSM) and Distributed Generation (DG) can play an important role in deferring or avoiding capital expenditure and improving network asset utilisation, and there are emerging requirements in many jurisdictions to consider these as alternatives to traditional network expansion. However, the issue has yet to be comprehensively addressed within regulatory frameworks.
Additionally, growing public concern over climate change, corporate commitments to reducing GHG emissions/carbon neutrality and regulatory policy to reduce greenhouse gas emissions are driving heightened interest in energy efficiency, DSM and DG in electricity markets across the world. All the signs point to an acceleration of this trend, supported by the concurrent and rapid, development of ‘smart’ communication, decision support and control technologies.
A leading Australian electricity network operator commissioned E3 to provide advice on:
- What changes to the current regulatory framework are required to facilitate DSM and DG for network purposes?
- What business model would enable the implementation of DSM and DG initiatives within that regulatory framework, taking into consideration the company’s strategic intent?
In response, E3 provided a detailed national and international assessment of regulatory mechanisms to support network driven DSM and DG, developed the basis for a changed regulatory framework and explored the implications of alternative business models.
The project played a key role in facilitating organisational consensus on how the company should move forward with implementing its DSM and DG strategy.
Diverse group of stakeholders led through an evaluation of a series of complex policy options
E3 set-up the Queensland Emissions Trading Forum (QETF) – a collection of eight Queensland-based businesses who wished at the time to explore a variety of emission trading schemes and assess their likely impact on their businesses. Members of the QETF included Stanwell Corporation, Tarong Energy, Intergen, Ergon Energy, Energex, Queensland Cement, Southern Pacific Petroleum and Anglo Coal.
The purpose of the project was to provide participants with a forum to discuss policy developments, to give them practical insights into how specific emission trading designs might impact on their respective businesses and provide a vehicle to communicate these lessons to policy makers. As part of this project, E3 prepared the documentation that described the design options available to policy makers, ran a series of workshops at which it discussed the various design options, deliberated those options to agree a framework for a ‘preferred’ emission trading scheme, developed an internet-based emissions trading simulation platform and then ran a series of emission trading simulations. In all, over a period of 4 years, the E3 team ran 12 separate simulations – each of which was characterised by different emissions trading rules. The simulations were so successful that they were subsequently extended to companies from all over Australia and internationally.
The project included a series of policy maker workshops after each simulation, which were attended by stakeholders from the Australian Greenhouse Office, Environment Victoria, the NSW Environmental Protection Authority and the Queensland Department of Environment and Heritage. It was the first time that such a wide and disparate group of stakeholders had been brought together to address what at the time was a very contentious issue. In doing so, E3 succeeded in raising awareness of these issues within all of the businesses concerned, provided those companies with valuable and practical insights into the possible operation of an emission trading scheme and the relative advantages and disadvantages of certain design options, and created a bridge that linked industry to policy makers at State and Federal level.
Communicating complex and controversial climate change policy issues in a high profile report
E3 was commissioned by a leading peak business body to prepare a report, the purpose of which was to present a concise and impartial discussion of the issues facing Australian companies as they responded to the challenges and opportunities posed by climate change policy. It was written at a time when there was considerable debate about the merits of the Government’s decision not to ratify the Kyoto Protocol, and at a time when there was some disagreement in the business sector on the best strategy for Australian companies.
The report was not intended to recommend a preferred policy position, nor to provide a definitive study of the advantages and disadvantages of ratifying the Kyoto Protocol. Rather it was intended to inform and engage a broad constituency of stakeholders who were faced with making decisions in an uncertain policy environment. To that end, the report took the form of a series of questions that companies at the time were asking, and our considered responses. E3 addressed a number of controversial questions, including: What is the current status of climate change science? How will existing and new investment be affected? Will the Kyoto Protocol enter into force? How is international climate change policy likely to evolve? Will technology solve climate change in the long-term? etc. In preparing it’s responses E3 reviewed an extensive literature and canvassed the views of a large number of stakeholders – many of whom held conflicting views on these subjects. The report was considered at the time to be an impartial and frank discussion of the issues that many Australian companies were facing.
European electricity generator manages carbon price risk
Understanding the fluctuation in prices in the EU Emissions Trading Scheme is important for developing intelligent power and carbon hedging strategies.
A European power company was seeking an understanding of the underlying market – which sectors are long, which short, which countries long and which short – to assist with their trading strategies. E3 with Global Energy Advisory (www.globalenergyadvisory.com) developed a comprehensive EU carbon market supply and demand model for the client, which provided:
- Carbon supply: from EU allowance allocation and CER market projections;
- Carbon demand: from projections of sector growth and improvements in carbon intensity by sector and by country;
- Carbon pricing expectations: from abatement options – primarily power sector fuel switching in the first phase.
The work provided the client with the knowledge to understand likely price discontinuities and market issues, such as that shown by the price collapse following the so-called “unexpected” length in the market in April/May 2006.
Renewable energy generator maximises value of carbon offering
Companies are in the process of evaluating the opportunities and risks associated with participating in early trades in tradeable instruments created under the Kyoto Protocol. Each of these tradeable instruments is characterised by very different rules governing their scope, eligibility, duration and future value.
A major renewable energy generator in an Annexe-I country was seeking an independent assessment of the future demand, supply and price of Kyoto instruments in order to inform their trading strategies and decisions. E3 developed a comprehensive model that built up the emissions profiles of the principal Annex I and Non-Annex I countries, an inventory of emission abatement projects by type and marginal cost and their emissions caps agreed under Kyoto. The model translated demand and supply constraints into price estimates of Kyoto instruments under a number of scenarios, relating to economic growth (therefore emissions growth), access to abatement projects and the eligibility of project types and tradeable instruments.
This work provided the company with valuable insights into those conditions that would lead to over-supply or under-supply of instruments and the factors affecting the value and price of different instrument types.
Steel Company positions for carbon constrained environment
Climate change policy presents a significant challenge to iron and steel manufacturers across the world – to reduce their environmental footprint while retaining their national and international competitiveness.
A major steel manufacturer was seeking to understand how climate change policy would impact on its business, and what strategies it should implement to position the company for the emerging carbon constrained environment. Over a period of several months E3 International worked closely with senior management to facilitate consensus on the issues facing the company, strategy options for the future, preferred policy positions and a corporate greenhouse strategy. As part of this work E3 International prepared a range of issues papers, developed an impacts analysis model which demonstrated the financial impact of different policy scenarios and conducted a series of workshops with key stakeholders.
As a result of this work, the company now has a shared understanding of how climate change policy impacts on its business, has established its policy preferences and is well into implementation of its corporate greenhouse strategy.
Coal based electricity generator pursues reduction in greenhouse emissions intensity
A key strategy to mitigate liabilities under climate change policy is to reduce physical greenhouse gas emissions through internal abatement. While the costs of such abatement might appear to be attractive, their practical implementation often presents significant logistical and commercial issues.
A major coal based electricity generator was seeking to understand the opportunities to improve the greenhouse gas intensity of an aging power station through the staged application of biomass co-firing. E3 developed a comprehensive situation analysis for the client, which included:
- Assessing the quantity and quality of biomass feedstock sources available and suitable for co-firing at the Station;
- Assessing the technological options for the transportation, storage, processing and co-firing of biomass feedstock;
- Examining the economic feasibility of co-firing biomass feedstock at the Station;
- Preparing a detailed regional feedstock inventory taking into consideration an economic transport distance; and
- Developing alternative procurement strategies including the development of dedicated energy crops.
The findings from this work were canvassed at a project workshop facilitated by E3 International, which enabled the client to make informed judgements on its options to apply biomass co-firing as a tool to reduce greenhouse gas emissions.
Global resource company prepares to enter carbon market
The emerging carbon market, characterised by a range of national and international carbon instruments eligible under a variety of mandatory and voluntary regulatory regimes, presents opportunities to mitigate current and future carbon liabilities. However, long term policy uncertainty and the continuing eligibility of these carbon instruments present risks to investors.
As part of its strategic planning, a major resource company was seeking to understand how the carbon market was likely to evolve and how it should engage in the market. The company posed the following questions to E3 International.
- How will emissions trading evolve and how will its character differ (liquidity, timing, breadth of participation, etc.)? Will regional differences hinder the development of effective trading regime(s)?
- What are the key policy development trends that the company should monitor up to 2010-2012 and beyond 2012?
- What options does the company have to participate in the emissions market – for example pooling, own purchase, carbon fund investment and developing projects? What are the benefits and drawbacks of each?
- What is the current range of carbon credit costs and what factors most influence those costs?
- What are the key risk management issues around purchasing carbon credits now?
- What actions might technology developers take to secure due credit for greenhouse emission reductions which will be afforded by new technology currently under development?
E3 International presented detailed responses to these questions drawing on its internal knowledge and experience. The responses were deliberated with key stakeholders and the findings were incorporated into the company’s strategic planning process.
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