IBERDROLA RENEWABLE ENERGIES

Carlos GascóHead of the Prospective Unit

Uitilities’ stronger bet for renewables

An analysis from the renewable power generator

IBERDROLA RENEWABLE ENERGIES 2

• Reasonable cost of electricity

• Essential for the social lifestile and the competitiveness

• Dependence growing, and so are doing geopolitical clashes

• Global Warming (Kioto commitments)

• Sustainable use of Natural Resources

Key drivers for a new energy model

ECONOMIC

EFFICIENCY

ENVIRONMENT

ENERGETY

SECURITY

IBERDROLA RENEWABLE ENERGIES 3

What would be the effects in an 100 $/barrel scenario and 25 €/Tn CO2 emissions?

Average generation costs (€/MWh)

Coal

60-70

CCGT

75-85

Wind

50-60

Biomass

60-80

Solar0

50

100

150

200

250

300

350

Hydro

40-60

Fuel

100-110

200-300

Fuel effect: increase barrel price to 100$

MDL effect: CO2 at 25€ Tn

50-60 60-6570-80 70-80

80-10030-40

190-280

• A short term analysis:

• Renewables are today more expensive. They need to receive finantial support from consumers

• However, those costs are the result of a simple and static analysis:

• Prices include energy dependence?

• These figures internalyze all environmental costs?

• How fuel price will evolve?• What effects would produce a

sharp CO2 cost increase?

IBERDROLA RENEWABLE ENERGIES 4

Strong need for investment

• IEA believes it is necessary to invest some 20 trillion dolars in the 2005-2030 period in order to satisfy future energy demand

Source: IEA

IBERDROLA RENEWABLE ENERGIES 5

The crossroads: What is the path to follow?

HYDROCARBONS:

- Limited reserves

- High political risks

- Large environmental impact

HYDROCARBONS:

- Limited reserves

- High political risks

- Large environmental impact

COAL:

- Large reserves. Low political risk

- High enviromental impact

- “Bridge technology”

- CO2 Capture &

- “Clean coal”

COAL:

- Large reserves. Low political risk

- High enviromental impact

- “Bridge technology”

- CO2 Capture &

- “Clean coal”

RENEWABLE ENERGY:

- Higher investment costs

- Wide social dialogue

- International collaboration

- Enhanced interconnections

- Need for R&D

- EU Target: 20% by 2020

RENEWABLE ENERGY:

- Higher investment costs

- Wide social dialogue

- International collaboration

- Enhanced interconnections

- Need for R&D

- EU Target: 20% by 2020

NUCLEAR ENERGY:

- Risky. Only “safe countries”

- High specific investment

- Treatment of radioactive waste

- Social unrest

NUCLEAR ENERGY:

- Risky. Only “safe countries”

- High specific investment

- Treatment of radioactive waste

- Social unrest

Population and economic output increase energy

demand

Energy at a reasonable cost is a must

Enviroment restrictions

Fossil fuel reserves and economic implications

NATURAL GAS:

- Large reserves

- Geographically diversified sources

- Growing political risks

- Lower environmental impact

NATURAL GAS:

- Large reserves

- Geographically diversified sources

- Growing political risks

- Lower environmental impact

Renewables deliver energy and environmental advantages but also economic