Carnegie Clean Energy : Achieves CETO Commercial Target

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commercialisation pathway is comparable to the historical progression of solar PV and offshore wind, whose learning rates and cost reduction curves look similar to the trajectory in Figure 1.

Figure 1- Cost of energy vs deployment relationship for wave industry (as per 2015 EC trajectory) and CETO (using outputs from models). This demonstrates the Digital Development Pathway delivered significant value by unlocking a path to greater commercial opportunities.

Carnegie utilised its in-house cost model to evaluate the impact of the Digital Development Pathway innovations and track progress towards its commercial target. The model draws upon a variety of sub models that simulate power capture and analyse CAPEX and OPEX together with uncertain but reasonable assumptions around learning rates, discount rates and the market support to drive growing deployment. Given the importance of this modelling, Carnegie engaged advisory services firm, BDO Corporate Finance (WA) Pty Ltd to provide a third-party review. The results of the modelling reinforce the business plan of the Company to further advance the CETO technology.

Carnegie's CEO, Mr Jonathan Fiévez, commented: "We are extremely pleased to have met our internal cost and performance target, delivering a step change reduction in the projected CETO cost of energy since the introduction of our Digital Development Pathway two years ago.

"In addition to capital cost reductions, the team at Carnegie has been able to deliver up to a 30% increase in simulated energy capture performance, alongside projected improvements in reliability and

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21 North Mole Drive, North Fremantle WA 6159 | PO Box 39, North Fremantle WA 6159

Phone: +61 8 6168 8400 | www.carnegiece.com | ABN 69 009 237 736

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operational efficiency. Joining forces with industry partners such as HPE has been mutually beneficial and helped to deliver beyond our expectations.

"This achievement is a key milestone to showcase how wave energy can become a commercially competitive and widely adopted technology and follow a similar trajectory to other comparable marine renewables, such as offshore wind. As we continue to progress on our commercialisation pathway, and now with multiple complementary product offerings in MoorPower and Wave Predictor, our addressable market will progressively expand to make wave energy attractive in an increasing number of global markets. We are also aware that providing a commercially attractive CETO offering is not just about cost but is also driven by the growing recognition of the additional value and services provided by wave energy.

"The improvements made in CETO's performance are reflected in our success in entering the EuropeWave PCP Programme which aligns with our plans to validate the technology and its commercial viability."

DIGITAL DEVELOPMENT PATHWAY ACHIEVEMENTS

Over the past 2 years, Carnegie has been laser focused on driving key cost centres down and making design choices to achieve commercial competitiveness. The combination of system optimisation, incorporation of industrially proven components and leveraging advances in Artificial Intelligence (AI) to deliver intelligent control have been instrumental in these improvements.

To realise substantial performance improvements, Carnegie has applied advances in control theory and AI that optimise power generation in a broad array of sea states to dramatically increase the amount of energy extracted from each wave. The Company's suite of proprietary software and codes has grown considerably in the past 18 months to include a machine learning based Wave Predictor technology and a variety of controllers based on model predictive control and reinforcement learning. These tools have delivered up to a 30% rise in energy capture performance over previous iterations. Additionally, the new controllers are providing low cost or no cost solutions to extreme wave scenarios by ensuring smart responses that avoid damaging forces, typically a major cost driver for wave energy converters. Carnegie's partnerships in this space with leaders such as Hewlett Packard Enterprise (HPE), Pawsey Supercomputing Centre and the University of Adelaide are delivering significant gains while also being very economical and mutually beneficial.

Step-change reductions in cost have been achieved through the adoption of a direct electrical conversion architecture for the power take-off (PTO) which also avoids conversion losses seen in previous hydraulic designs. The number of components or 'part count' is reduced, contributing to lower costs and higher reliability. The electrical hardware is also similar to what is used in electric vehicles and industrial process electrification and therefore benefits from the existing economies of scale and growing supply chain competition. This is also the case for other components such as foundations, mooring connectors and dynamic cables. Other ocean technologies such as offshore wind, tidal energy and those supporting oil and gas developments are driving innovation and cost reduction for these common components and services.

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21 North Mole Drive, North Fremantle WA 6159 | PO Box 39, North Fremantle WA 6159

Phone: +61 8 6168 8400 | www.carnegiece.com | ABN 69 009 237 736

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Lastly, the operation and maintenance methodologies have been tuned to minimise cost and maximise speed to return the system to full capacity. The philosophy behind the design has been built on Carnegie's unique experience in the sector of deploying, operating and maintaining an array of devices in the open ocean. This includes a design for operations perspective which is considered in all design decisions and optimisations.

INDEPENDENT THIRD-PARTY REVIEW

Carnegie's economic modelling of its CETO technology, as part of the Digital Development Pathway, has been subjected to an independent review by Advisory Services firm, BDO Corporate Finance (WA) Pty Ltd.

BDO has considered the mathematical integrity of the model and the logic of the calculations, and as a result of the work conducted nothing came to BDO's attention which would lead them to believe the model was materially incorrect. BDO has not undertaken procedures on the underlying data sources obtained by the Company that support the model or the sub models that calculate inputs into the economic model.

The results of the economic modelling reinforce Carnegie's business plan in further advancing the CETO technology and demonstrate the value delivered by the Digital Development Pathway.

RECENT INDUSTRY TRENDS DEMONSTRATE A ROBUST PATHWAY AND GROWING SUPPORT

Carnegie's team have determined that the CETO wave energy technology is poised for commercialisation following the example of offshore wind, solar and other emerging technologies. Over the last 20 years, the investment in wave energy technologies has increased markedly but still sits well behind other forms of renewables at comparable stages of development. With recent industry trends this looks set to change.

Advancing from a few small projects in the early days, offshore wind today is experiencing exponential uptake around the world, with 6 GW installed each year in recent years, to reach a total of more than 35 GW today (see Figure 2)2.

The state of Victoria also recently announced the plan to accelerate the rollout of offshore wind energy generation projects in the state, setting rolling targets of 2GW installed by 2030, 4GW by 2035, and 9GW by 2040. The state has legislated a target for a 50% renewable energy powered electricity grid by 2030 and is the first state in Australia to have an offshore wind project proposed off its coast. Studies have shown Victoria has the potential to support 13GW of capacity from coastal regions by 2050 - five times the state's current renewable energy generation3.

1. GWEC (Global Wind Energy Council), 'Global Offshore Wind Report 2021', https://gwec.net/wp- content/uploads/2021/09/GWEC-offshore-wind-2021-updated-1.pdf
2. Renew Economy 'Victoria sets "game changing" offshore wind target of 9GW to replace coal', March 2022

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21 North Mole Drive, North Fremantle WA 6159 | PO Box 39, North Fremantle WA 6159

Phone: +61 8 6168 8400 | www.carnegiece.com | ABN 69 009 237 736

4 BP Statistical Review of World Energy, 2021

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21 North Mole Drive, North Fremantle WA 6159 | PO Box 39, North Fremantle WA 6159

Phone: +61 8 6168 8400 | www.carnegiece.com | ABN 69 009 237 736