BLOOMBERG NEW ENERGY FINANCE SUMMIT · 4/23/2013 · US NATIONAL ELECTRICITY MARKET ACTUAL VS FORECAST ELECTRICITY DEMAND, 1990–2035 TWh Source: EIA, Bloomberg New Energy Finance

1 MICHAEL LIEBREICH BNEF SUMMIT KEYNOTE, 23 APRIL 2013 TWITTER @MLiebreich / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /

BLOOMBERG NEW ENERGY

FINANCE SUMMIT

NEW YORK

23 APRIL 2013

Bloomberg New Energy Finance

Twitter: @miebreich

Michael Liebreich, Chief Executive

2 MICHAEL LIEBREICH BNEF SUMMIT KEYNOTE, 23 APRIL 2013 TWITTER @MLiebreich / / / /

AGENDA

3. New Energy ROI

2. Four energy realities

1. Clean energy investment update


$269bn

GLOBAL TOTAL NEW INVESTMENT IN CLEAN ENERGY,

2004-2012 ($BN)

Source: Bloomberg New Energy Finance

Note: Includes corporate and government R&D, and small distributed capacity. Adjusted for re-

invested equity. Does not include proceeds from acquisition transactions

$54bn$80bn

$114bn

$165bn$191bn $187bn

$251bn

$302bn

2004 2005 2006 2007 2008 2009 2010 2011 2012

+48%+42%

+45%

+16% -2%

+34%

+20%-11%


GLOBAL RENEWABLE CAPACITY ADDITIONS (GW)

Source: Bloomberg New Energy Finance Note: “Other renewables” includes marine and geothermal power only.

20

40

60

80

2001 2003 2005 2007 2009 2011

Otherrenewables

Biomass &Waste

Wind

Solar


CLEAN VS FOSSIL-BASED GENERATING CAPACITY

INVESTMENT, 2006–12 ($BN)


Note: Clean energy total excludes large hydro. Fossil fuel is investment on coal and gas

capacity. We assume capacity retirement of 3.3%/yr for coal and 4%/yr for gas.

Clean energy

Fossil fuel

0

50

100

150

200

250

300

350

2006 2007 2008 2009 2010 2011 2012


EQUIPMENT SUPPLY AND DEMAND, 2006-2015 (GW)

Source: Bloomberg New Energy Finance Note: Supply scenarios based on continued 2012 utilisation rates.

SOLAR WIND

10

20

30

40

50

60

70

80

2006 2008 2010 2012 2014

Demand

Conservative

Optimistic

Manufacturingcapacity

0

10

20

30

40

50

60

70

80

90

2008 2010 2012 2014 2016

Manufacturingcapacity

Demand


Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

-

100

200

300

400

500

600

700

Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

NEX CLEAN ENERGY INDEX 2003 – 2013 YTD

Source: Bloomberg New Energy Finance Note: Values as of 10 April 2013; NASDAQ and S&P 500 rebased to 100 on 01 Jan 2003

-

100

200

300

400

500

600

700

Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

S&P 500

NASDAQ

NEX


NEW INVESTMENT IN CLEAN ENERGY BY REGION, 2004-

2012 ($BN)

Source: Bloomberg New Energy Finance Note: Excludes corporate and government R&D

7.1

14.2

28.9

40.8 39.0

27.1

41.8

63.1

40.3

2004 2005 2006 2007 2008 2009 2010 2011 2012

North America & Caribbean

0.83.5

5.4

11.114.5

10.312.9

9.9 10.0

2004 2005 2006 2007 2008 2009 2010 2011 2012

Central & South America

18.0

28.5

36.5

58.4

70.7 73.2

97.8

108.0

75.8

2004 2005 2006 2007 2008 2009 2010 2011 2012

Europe

0.3 0.5 1.1 1.5 2.7 1.64.9 4.2

11.8

2004 2005 2006 2007 2008 2009 2010 2011 2012

Middle East & Africa

9.515.2

22.4

30.6

39.947.3

66.8

87.1

100.7

2004 2005 2006 2007 2008 2009 2010 2011 2012

Asia & Oceania


Pictures: Bloomberg

I’m going to renew the wind

Production Tax Credit!

Solyndra! Solyndra!

Solyndra!

US 2012 – THE CLEAN ENERGY ELECTION


US ANNUAL CLEAN ENERGY INVESTMENT AND CAPACITY

ADDITIONS, 2004-2012


TOTAL INVESTMENT, $BN CAPACITY, GW

10.6

17.1

32.1

43.3 42.9

32.4

42.5

65.2

44.2

2004 2005 2006 2007 2008 2009 2010 2011 2012

-32%

0.62.0

3.1

5.7

9.6

11.3

5.6

8.7

17.4

2004 2005 2006 2007 2008 2009 2010 2011 2012

Otherrenewables

Biomass &waste

Solar

Wind

+100%


0

5

10

15

20

Oct-2005 Oct-2006 Oct-2007 Oct-2008 Oct-2009 Oct-2010 Oct-2011 Oct-2012

Henry Hub

HENRY HUB GAS PRICE

($/MMBTU)

Source: Bloomberg Terminal

Summit 2012

$2.21/MMBtu

Summit 2013

$4.26/MMBtu

(+130%)


EUROPEAN CREDIT DEFAULT SWAP SPREADS, 2009-12

Source: Bloomberg Terminal

0

2

4

6

8

10

12

14

16

Dec 09 Dec 10 Dec 11 Dec 12

Portugal

Italy

Spain

France

Netherlands

Germany

UK

Sweden

Finland

Norway


EUROPE - POLICY UNCERTAINTY


Retroactive changes

Unplanned reduction


TOP 15 COUNTRIES FOR NEW INVESTMENT IN CLEAN

ENERGY IN 2012 AND % CHANGE ON 2011 ($BN)

Source: Bloomberg New Energy Finance Note: Excludes corporate and government R&D

2.95

3.42

4.05

4.31

4.41

5.34

5.46

6.19

6.85

8.34

14.71

16.28

22.80

35.58

65.13

-68%

179%

11%

-34%

-23%

-32%

20563%

40%

-45%

-17%

-51%

75%

-27%

-37%

20%

Spain

Greece

Belgium

France

Canada

Brazil

South Africa

Australia

India

United Kingdom

Italy

Japan

Germany

United States

China 65.13


SUPPLY CHAIN CONSOLIDATION


NEW ENERGY REALITIES

Unconventional oil and gas

Unpredictability

Improving energy intensity

Cheap clean energy

1.

2.

3.

4.


0

5

10

15

20

25

30

Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13

Rest of US

Eagle Ford

Marcellus

Haynesville

Woodford

Fayetteville

Barnett

US SHALE GAS PRODUCTION (BCF PER DAY)

Source: Bloomberg New Energy Finance, US EIA, UK DECC, China Customs, BP Statistical Review

Qatar

China

UK


US PROJECTED NET IMPORTS OF NATURAL GAS, 2008-20 TRILLION CUBIC FEET

Source: US EIA Annual Energy Outlook, 2010-2013;

Bloomberg New Energy Finance Note: 2013 figures show Early Release

-4

-3

-2

-1

0

1

2

3

4

5

1980 1990 2000 2010 2020 2030 2040

2010Historical





-4

-3

-2

-1

0

1

2

3

4

5

1980 1990 2000 2010 2020 2030 2040

2010

2011

Historical





-4

-3

-2

-1

0

1

2

3

4

5

1980 1990 2000 2010 2020 2030 2040

2010

2011

2012

Historical





-4

-3

-2

-1

0

1

2

3

4

5

1980 1990 2000 2010 2020 2030 2040

2010

2011

2012

2013

Historical


MAJOR GLOBAL SHALE FIELDS

Source: EIA Assessment of World Shale Gas Resources,

April 2011 Note: Technically recoverable shale gas resources shown

Canada

Brazil

Poland Norway

China

Australia

South Africa 200 trillion

cubic feet

USA Mexico

Libya Algeria

Argentina


The extraordinary

windfall, which is

completely God-given,

that this country has

got is shale gas.

UK SHALE GAS

Owen Paterson

UK Environment Secretary Picture: Getty Images


AUSTRALIA NATIONAL ELECTRICITY MARKET ACTUAL VS

FORECAST ELECTRICITY DEMAND, 2005–2022

Source: Australian Energy Market Operator, Reserve Bank of Australia, Bloomberg New Energy Finance

0.8

0.9

1.1

1.2

1.4

1.5

180

200

220

240

260

280

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

GDP

Historical

Oct 2010

TWh AUD trillion





0.8

0.9

1.1

1.2

1.4

1.5

180

200

220

240

260

280

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

GDP

Historical

Oct 2010

TWh AUD trillion





0.8

0.9

1.1

1.2

1.4

1.5

180

200

220

240

260

280

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

GDP

Historical

Oct 2010

Sept 2011

TWh AUD trillion





0.8

0.9

1.1

1.2

1.4

1.5

180

200

220

240

260

280

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

GDP

Historical

Oct 2010

Sept 2011

TWh AUD trillion


0.8

0.9

1.1

1.2

1.4

1.5

180

200

220

240

260

280

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022




TWh AUD trillion

GDP

Historical

Oct 2010

Sept 2011

Jun 2012


US NATIONAL ELECTRICITY MARKET ACTUAL VS


Source: EIA, Bloomberg New Energy Finance

TWh TWh USD trn Feb 2005

GDP

1.0

1.2

1.4

1.6

1.8

2.0

2,500

3,000

3,500

4,000

4,500

5,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Historical




TWh


TWh USD trn Feb 2005 Feb 2007

GDP

1.0

1.2

1.4

1.6

1.8

2.0

2,500

3,000

3,500

4,000

4,500

5,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Historical




TWh


TWh USD trn Feb 2005 Feb 2007

GDP

1.0

1.2

1.4

1.6

1.8

2.0

2,500

3,000

3,500

4,000

4,500

5,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Historical




TWh


TWh USD trn

Dec 2009

Feb 2005 Feb 2007

GDP

1.0

1.2

1.4

1.6

1.8

2.0

2,500

3,000

3,500

4,000

4,500

5,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Historical




TWh


TWh USD trn

Dec 2009 Apr 2011

Feb 2005 Feb 2007

GDP

1.0

1.2

1.4

1.6

1.8

2.0

2,500

3,000

3,500

4,000

4,500

5,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Historical




TWh


TWh USD trn

Dec 2009 Apr 2011 Dec 2012

Feb 2005 Feb 2007

GDP

1.0

1.2

1.4

1.6

1.8

2.0

2,500

3,000

3,500

4,000

4,500

5,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Historical


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1971 1981 1991 2001 2011

US CAR USE AND FUEL EFFICIENCY

Source: US Department of Transportation Federal Highway Administration; University

of Michigan Transportation Research Institute; Bloomberg New Energy Finance Note: Total vehicle miles grew at 2.7% CAGR between 1971 and 2007

Total vehicle miles travelled

(tm/year)

Fuel efficiency of new cars

(mpg, sales weighted average)

20

21

22

23

24

25

2007 2008 2009 2010 2011 2012 2013

+3.7%

CAGR since

2007

- 0.5%

CAGR since

2007


NET OIL AND GAS IMPORT DEPENDENCY, 2010 - 2035 (% of consumption)

Source: IEA

0%

20%

40%

60%

80%

100%

20% 40% 60% 80% 100% Oil

Gas

United

States

China India

European Union

Japan

2010 2035

-20%


0.1

1

10

100

1 10 100 1,000 10,000 100,000 1,000,000

1976

2000

2006

2012

2012

1985

Cumulative capacity, MW

Crystalline silicon

Thin-film

PV EXPERIENCE CURVE, 1976-2012

2012 ($/W)

Source: Paul Maycock, Bloomberg New Energy Finance Note: Prices inflation indexed to US PPI.

PV MODULE PRICES HAVE

FALLEN 80% SINCE 2008

20% IN 2012


14%

Global

Denmark and Germany

1984 1990 2000 2004 201110

50

100

500

1000

100 1,000 10,000 100,000 1,000,000

Cumulative capacity, MW

AVERAGE LEVELISED COST OF ONSHORE WIND, 1984-

2012 (€/MWH)

Source: Bloomberg New Energy Finance, ExTool Note: Learning curve (blue line) is least square regression: R2 = 0.88 and 14% learning rate.

WIND TURBINE PRICES

HAVE FALLEN 29% SINCE

2008


20152020

2030

H1 2012 - $689/kWhH2 2012 - $638/kWh1995

20002005

10

100

1,000

10,000

100 1,000 10,000 100,000 1,000,000 10,000,000

Battery cost ($/kWh)

Cumulative production capacity (MWh)

EV Li-ion batterycost forecast(BNEF)

Consumer Li-ionbatteryexperience curve

EV Li-ion batteryprices, historical

Consumer Li-ionbattery prices,historical

LITHIUM-ION BATTERY EXPERIENCE CURVE

Source: Battery University, MIIT, IIT, Bloomberg New Energy Finance

Cost-competitiveness (on total ownership basis)

EV BATTERY PRICES

HAVE FALLEN 37% SINCE

H1 2011


POWER GENERATION CAPACITY ASSET FINANCE (GREMO – NEW NORMAL)


0

100

200

300

400

500

600

700

800

2006 2010 2015 2020 2025 2030

Marine

Solar thermal

Small-scale PV

Solar PV

Offshore wind

Wind

EfW

Biomass

Geothermal

Hydro

Nuclear

Oil

Gas

Coal

Note:

1. All $bn figures are nominal assuming a 2% annual rate of inflation

2. EfW is energy from waste Small-scale PV includes commercial and residential scale rooftop PV.

$bn (nominal) Clean energy asset

investment will be $630bn in

2030 – 73% of total


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2005 2010 2015 2020 2025 2030

Renewable Energy(excl. hydro)

Hydro

Nuclear

Traditional biomass

Fossil

IEA WEO 2012

TOTAL PRIMARY ENERGY DEMAND


TWh Mtoe


If we look at things like

renewable wind, solar, biofuels,

we have those sources over

the next 30 years growing 700

to 800 percent. But in the year

2040, they’ll supply just 1

percent.” Rex Tillerson

CEO, ExxonMobil

March 2013

PREDICTION


The world of energy

is facing a period of

unprecedented

uncertainty

Fatih Birol

Chief Economist, IEA

UNCERTAINTY

Picture: Mikhail Evstafiev, Wikimedia


NEW ENERGY ROI

RESILIENCE OPTIONALITY

INTELLIGENCE


NEW ENERGY ROI – RESILIENCE


Ask:

“What is the worst that can happen?”

Don’t ask:

“What is the expected outcome?”


“TRADITIONAL” THREATS

ACCIDENTS NATURAL DISASTERS

GEOPOLITICS SECURITY


NEW THREATS – CYBERSECURITY


CHINA THERMAL POWER GENERATION VERSUS WATER

SCARCITY BY PROVINCE, 2010

Water deficit

Severe scarcity

Moderate scarcity

No scarcity

Freshwater scarcity rating:

100TWh


CHINA THERMAL POWER GENERATION VERSUS WATER

SCARCITY BY PROVINCE, 2030

Water deficit

Severe scarcity

Moderate scarcity

No scarcity

Freshwater scarcity rating:

100TWh


MAJOR GLOBAL SHALE FIELDS

Source: EIA Assessment of World Shale Gas Resources,

April 2011 Note: Technically recoverable shale gas resources shown

Canada

Brazil

Poland Norway

China

Australia


cubic feet

USA

Mexico

Libya Algeria

Argentina


MAJOR GLOBAL SHALE FIELDS – WATER STRESS

Source: Shale gas resources: EIA Assessment of World Shale Gas Resources,

April 2011; Water Stress: UNEP, Bloomberg New Energy Finance

Canada

Brazil

Poland

China

Australia


cubic feet

Libya Algeria

Argentina

USA

Note: Technically recoverable shale gas resources shown

Norway

Mexico


SOCIAL ACCEPTABILITY – FRACKING, TAR SANDS

Source: Wikimedia commons


STUDENT FOSSIL FUEL DIVESTMENT MOVEMENT

Picture: gofossilfree.org, US Navy


CLIMATE CHANGE

Image: Bloomberg Businessweek


NEW ENERGY ROI – OPTIONALITY


…options have extraordinary value

In times of volatility…


• Capital light

• Low leverage

• Structured finance

• Conditional commitments

• Hedging

• Guarantees

• Option pricing

OPTIONALITY – SO WHERE ARE THESE OPTIONS?

• Energy efficiency

• Power storage

• Demand management

• Interconnection

• Fuel flexibility

• Mini-grids

• CCS readiness

• Natural hedges

• Dual sourcing

• Market diversification

• Sector diversification

• Value chain diversification

• R&D

• Coalitions


TECHNOLOGY OPTIONS OPERATIONAL OPTIONS FINANCIAL OPTIONS


$48 billion $1.5 billion

OPTIONALITY – INVESTOR EXAMPLE


NEW ENERGY ROI - INTELLIGENCE


Are you surfing or drowning?

A tsunami of information –


INTELLIGENCE

•Smart grid

•Internet of things

•Pervasive sensors

•Automated optimisation

•Big data

•Consumer behaviour

•Market intelligence

•Talent management

MACHINE INTELLIGENCE HUMAN INTELLIGENCE


• Efficiency

• Network

• Responsiveness

• Demand management

• Coalitions

• Data sharing

• R&D budget

Photos: Wikimedia Commons

• Scale

• Centralisation

• Baseload-plus-peak

• Dispatch management

• Vertical integration

• Confidentiality

• Defence budget

DINOSAUR HEURISTICS MAMMAL HEURISTICS

NEW ENERGY ROI


THANK YOU!

RESILIENCE OPTIONALITY

INTELLIGENCE

Documents

BLOOMBERG NEW ENERGY FINANCE SUMMIT · 4/23/2013 · US NATIONAL ELECTRICITY MARKET ACTUAL VS FORECAST ELECTRICITY DEMAND, 1990–2035 TWh Source: EIA, Bloomberg New Energy Finance