Case Studies
Climate Change and Emissions Trading
- Global generation company: preparing for climate-change regulation
- Steel company: preparing for a carbon-constrained environment
- European electricity generator: managing carbon price risk
- Business group: exploring emissions trading scheme design
- Peak business body: understanding climate-change policy issues
- Business group: advancing low-emission technology policy
Renewable Energy
- Renewable energy generator: differentiating the product
- Coal-fired generator: biomass co-firing strategy
Demand Side Management and Distributed Generation
Water
Global generation company: preparing for climate-change regulation
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Background
Climate change will have a significant impact on the power generation sector. However, policy responses and market circumstances vary from country to country, making it difficult to develop and implement strategy in an integrated way.
The Client
A major global generation company owning over 5,000 MW of thermal generation capacity in Australasia, Europe and the Americas.
The Brief
Working with stakeholders in six countries and three continents, to help develop a strategic plan for climate change.
E3's Response
The scope of work included:
- consolidating corporate knowledge, experience, insights and perspectives about climate-change policy, regulations and developments, through structured collation of information
- reviewing policy and market developments relevant to the company's generation assets, identifying emerging risks, opportunities and implications for existing assets and future investments, and ways of responding to these
- facilitating three interactive web-based forums to bring stakeholders to a common understanding of the issues and their likely impacts, to gain consensus on the pros and cons of alternative strategies, and to achieve broad agreement on the way forward
- incorporating the outcomes from these sessions into a strategic plan.
Outcome
The project resulted in a step change in senior management awareness of the implications of climate-change policy and market developments on the business.
The company also gained a clear framework to guide their strategy response.
Steel company: preparing for a carbon-constrained environment
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Background
Climate-change policy poses a significant challenge to iron and steel manufacturers across the world - to reduce their environmental footprint while retaining their national and international competitiveness.
The Client
A major steel manufacturer
The Brief
To understand:
- how climate change policy would impact on their business
- which strategies would position them for the carbon-constrained environment.
E3's Response
Over several months E3 International worked with senior management to facilitate:
- consensus on the issues facing the company
- strategy options
- preferred policy positions
- a corporate greenhouse strategy.
We also:
- prepared a range of issues papers
- developed an impacts-analysis model for the financial impact of policy scenarios
- facilitated workshops with key stakeholders.
Outcome
The company achieved a shared understanding of how climate-change policy would impact on its business. It established its policy preferences and commenced implementation of its corporate greenhouse strategy.
European electricity generator: managing carbon price risk
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Background
Understanding the fluctuation in prices in the EU Emissions Trading Scheme is important for developing intelligent power and carbon-hedging strategies.
The Client
A European power company
The Brief
To gain an understanding of the underlying market - which sectors and countries were long or short. This would assist with their trading strategies.
E3's Response
With [Global Energy Advisory] we developed an EU carbon market supply-and-demand model, covering:
- 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 country
- carbon pricing expectations: from abatement options - primarily power sector fuel-switching in the first phase.
Outcome
The client gained the knowledge to understand likely price discontinuities and market issues, as shown by the price collapse after the ‘unexpected' length in the market in April-May 2006.
Business group: exploring emissions trading scheme design
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Background
The mechanics of emissions trading have been extensively analysed and debated in recent years. But in 2000, such policy was new to Australia, and indeed to many other countries.
The Clients
Eight Queensland-based businesses: Stanwell Corporation, Tarong Energy, Intergen, Ergon Energy, Energex, Queensland Cement, Southern Pacific Petroleum and Anglo Coal.
The Brief
To explore emission-trading schemes and assess the likely impact on their businesses.
E3's Response
E3 set-up the Queensland Emissions Trading Forum (QETF) for the eight members.
Aims
- To provide a forum to discuss policy developments
- To give practical insights into how emission trading designs might impact on their businesses
- To help communicate these lessons to policy makers.
E3's role included:
- documenting the design options available to policy makers
- running workshops on the design options
- devising an agreed framework for a ‘preferred' emission trading scheme.
Emission trading simulations and workshops
E3 also developed an internet-based emissions trading simulation platform. Over four years, the team ran 12 simulations - each with different emissions trading rules.
Policy-maker workshops were held after each simulation. Taking part were 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 range of stakeholders had been brought together to address what at the time was a very contentious issue.
Outcome
- The simulations were so successful that they were extended to companies from around Australia and internationally.
- E3 raised awareness of the issues within the eight businesses, giving them valuable and practical insights into the possible operation of an emission trading scheme, and the pros and cons of design options
- We also created a bridge between industry and policy makers at state and federal level.
Peak business body: understanding climate-change policy issues
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Background
At the time, there was debate about the merits of the government's decision not to ratify the Kyoto Protocol, and some disagreement in the business sector about the best strategy for Australian companies.
The Client
A leading peak business body
The Brief
To prepare an impartial report on the issues facing Australian companies as they responded to the challenges and opportunities of climate change policy.
E3's Response
The report was not intended to recommend a policy position, or to define the pros and cons of ratifying the Kyoto Protocol.
It was intended to inform and engage a broad constituency of stakeholders faced with decisions in an uncertain policy environment.
The report took the form of a series of questions that companies were asking, followed by our considered responses. We addressed 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?
- Will technology solve climate change in the long term?
E3 did an extensive literature review and canvassed a large number of stakeholders - many with conflicting views.
Outcome
The report was considered to be an impartial and frank discussion of the issues that many Australian companies were facing.
Business group: advancing low-emission technology policy
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Background
The group sought to stimulate debate in Australia between government, industry and the community. The aim was to determine appropriate policies and measures to trigger a transformation of the energy market towards low emission technologies, while leveraging national comparative advantage.
Given the importance of new technology in reversing greenhouse gas emissions, this is an area of lively debate. It poses some of the most difficult policy questions that government and business face.
The Client
The Australian Business and Climate Group: Anglo Coal, BP Australia, Deloitte, Mirvac, Rio Tinto, Santos, Swiss Re, VicSuper and Westpac.
E3's Response
E3 supported the group by:
- Examining the process of technology innovation and in particular the barriers and challenges that to relate specifically to zero and low emissions energy technology
- reviewing current approaches to the development and use of low-emissions energy technology
- preparing case studies that examined lessons from the use of new technology in certain markets and industry sectors. This included tracing the development of the technology, identifying the market mechanisms that enabled its use, and assessing how barriers were overcome
- identifying the implications for Australian technology policy.
Outcome
The research findings underpinned the Australian Business and Climate Group's report: Stepping Up: Accelerating the Deployment of Low Emission Technology in Australia. This called for a National Low Emission Technology Strategy to complement an Australian emissions trading scheme, to reduce Australia's greenhouse gas emissions.
Hydropower generator: entering the water sector
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Background
Water scarcity is a global phenomenon and is causing tension in how water is allocated to competing uses and users. It is particularly pressing for hydropower generators in many parts of the world, who face risks as well as opportunities.
The Client
A major international hydropower company with a background in managing engineering infrastructure asset and facilities
The Brief
To develop a strategic response to opportunities in the emerging water sector.
E3 was commissioned to:
- highlight international trends influencing the use and management of water
- identify what was affecting the use and management of water in the country in question
- evaluate the business opportunities for joining the water sector
- evaluate potential business models
- review case studies of private sector involvement in public infrastructure projects and services, and lessons for strategy development
- analyse longer-term strategic opportunities identify responses to capitalise on the opportunities.
E3's Response
E3 produced an extensive literature review, consulted with a wide range of internal and external stakeholders, analysed the findings and facilitated several workshops.
Outcome
The project played a key role in informing the company's water strategy.
Coal-fired generator: biomass co-firing strategy
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Background
Co-firing biomass in coal-fired power stations is an entry-level opportunity to reduce greenhouse gas emissions in the electricity sector. Its advantages include:
- creating renewable energy certificates (RECs) under the Commonwealth Renewable Energy Target Scheme
- avoiding greenhouse gas emissions liabilities under a future emissions trading scheme
- low incremental technology costs.
However, commercially viable co-firing requires an understanding of co-firing technology and economics, certification for creation of RECs, and the availability of acceptable biomass resources.
The Client
A major coal-fired generator
The Brief
To assist with developing and implementing a biomass co-firing strategy.
E3's Response
Our support included:
- a pre-feasibility study including technology options, modelling project economics and creating RECs
- involvement in preliminary biomass co-firing trials at the power station
- hands-on work to secure accreditation with the Office of the Renewable Energy Regulator
- assessing the quantity of feedstock material available, including the primary source of timber for waste materials
- an independent opinion of the environmental credentials of each feedstock material in the light of Forest Stewardship Council (FSC) accreditation conditions
- an up-to date assessment of feedstock prices and likely delivery prices
- assessing the potential of biomass sources within the catchment around the power station.
Outcome
Management was able to develop and advance the business case for biomass co-firing at the power station.
Electricity network operator: building a demand side management and distributed generation business
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Background
Demand side management (DSM) and distributed generation (DG) can play an important role in deferring or avoiding capital expenditure and improving the use of network assets. Many jurisdictions have requirements to consider these as alternatives to traditional network expansion. But so far, regulatory frameworks have not fully addressed the issue.
Interest in these approaches is further heightened by:
- growing public concern over climate change
- corporate commitments to reducing greenhouse gas emissions/carbon neutrality
- regulatory policy to reduce greenhouse gases.
The Client
A leading Australian electricity network operator
The Brief
To provide advice on:
- changes to the current regulatory framework that would facilitate DSM and DG for network purposes
- a business model for DSM and DG initiatives within that framework, relevant to the company's strategic intent.
E3's Response
E3 addressed a range of issues, including:
- a detailed assessment of national and international regulatory mechanisms to support network driven DSM and DG
- the basis for a changed regulatory framework
- the implications of alternative business models.
Outcome
The project played a key role in facilitating consensus on how the company should implement its DSM and DG strategy.
Hydropower generator: entering the water sector
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Background
Renewable energy certificates are emerging as a credible avenue for capturing the ‘green' value of renewable energy generation.
While the core value-drivers are clear, there has been debate on how retail products based on such certificates should be packaged, and what environmental claims (for example, reduction in greenhouse gas emissions) are justifiable.
The Client
A major renewable energy generator
The Brief
Explore strategies to unlock the value of its product.
E3's Response
E3 carried out a global study on current and expected regulatory mechanisms and market developments, key players (industry participants, regulators and major end users) and their perspectives and strategy options for creating value.
We canvassed a range of options including international cross-border trading, incorporating renewable energy within consumer products and developing a retail brand.
Outcome
The findings were studied at an internal stakeholder workshop, which facilitated consensus on the way forward.
