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The Economic Opportunities Arising from the Challenge of
Global Climate Change
Green Investment and the Role of State Government
Roger BallentineGreen Strategies, Inc.
2
Environment and Climate ChangeEnd of an Era … Beginning of an Era?
Source: IPCC Third Assessment Report (2001)
Atm
osph
eric
co
ncen
tratio
n C
O2
(ppm
)
360
340
320
300
280
260
1000 1200 1400 1600 1800 20001000 1200 1400 1600 1800 2000
Source: NREL
310
290
270
250
1000 1200 1400 1600 1800
Changes in Atmospheric Concentrations - 1000 Year History
3
World and US Oil DilemmaEnd of an Era … Beginning of an Era?
NATIONALSECURITY
4
World and US Oil DilemmaEnd of an Era … Beginning of an Era?
NATIONALSECURITY
Peak OilNational Security
“MEGA” TRENDS AND MARKETS
The Energy Marketplace will be Defined by Two “Mega”
Trends
5
Market Actors/Investors Responding to these Drivers --
• 1: Unprecedented Demand/Relative-ly Fixed Supply
• 2: Sustained Political Response to Climate Crisis/Security Concerns
6
Business-as-usual foreca
550 ppm-fast
550 ppm-slow
Stabilization at 550 ppm
8
Final Report Updated 9/21/20079
National End-Use Consumption for Electricity in Trillion Btu
Cooling793, 26%
Cooking65, 2%
Space Heating155, 5%
Water Heating37, 1%
Other288, 9%
Ventilation226, 7%
Refrigeration266, 9%
Office Equipment 555, 18%
Lighting716, 23%
10
Residential Sector End Use Savings as a % of Total Achievable Cost Effective Potential (80% Penetration Scenario)
Appliances8%
Space Heating & Cooling (Energy Efficient Equip.)
7%
Lighting30%
Standby Power3%
Space Heating & Cooling (Shell
Measures)32%
Water Heating15%
New Homes Construction
5%
11
The Challenge of Putting RE into Use- Regional Resources, Economics, and Politics -
Resource Potential
SOLAR ENERGY WIND POWER
GEOTHERMAL BIOMASS
12
Wind Power
0500
10001500200025003000350040004500500055006000
1990 1995 2000 2005 2010Sources: AWEA (actual) and ACORE (forecast)
US Wind Power Installations(MW/Year)
Key Issues: Government incentivesTransmission accessPerformance
13
Solar PV
0500
100015002000250030003500400045005000
1990 1995 2000 2005
WorldU.S.
Global Solar PV Production(MW/Year)
Key Issues:Government incentivesCost reductions
14
Concentrating Solar Power
Solar Trough:354 MW SEGS64 MW Solargenix1,000 + Under contract3,000+ MW Proposed:AusraIberdrolaLuz IISESSunEnergyOthers
Key Issues = Economics And Transmission
15
Geothermal Energy
Geothermal Power:
3,600 MW in operation
3,000 MW coming online
100,000 MW mid-term future
Vision: 500 GW potential, displacing coal’s baseload role
Key Issue = R&D Funding and Technology Transfer
16
Hydropower72,000 MW in place
+ 3,000 MW incremental hydro
+ 20,000 MW Small Hydro
+ 90,000 MW New:• Ocean power• Kinetic powerKey issue = siting and permitting
17
Biomass Energy
Outlook to 2025: Over 100 GW of additional potential:
Industrial CHP: 57 GW
Wholesale power: 37 GW
Solid Waste: 10 GW
Key Issue = economics and risk of fuel supply
18
Ethanol137 Biorefineries + 63 projects under Construction
+ 7 Under Expansion in 21 StatesEthanol
Number of Processing Plants
• Booming expansion 2003-2008• MTBE replacement done• Now blend up to 10%• Demand for ethanol? E85?• Flex fuel vehicles?
0
20
40
60
80
100
120
140
2000 2003 2006
Operating Annual Additions
19
EthanolThe 2007 Renewable Fuels Standard
• 2005: 7.5 BGY by 2012 RFS
• 2007: 36 BGY by 2022– 21 BGY by
“advanced” ethanol• 2008-2009: back-
track???
EthanolMillion Gallons / Year
0
5000
10000
15000
20000
25000
30000
35000
40000
1990 2000 2010 2020
2007 RFS
2006 Outlook
2005 RFS
Actual
20
US new build ethanol investmentand M&A 2003-2007: $m
2003 2004 2005 2006 2007
New build
$3,637m (29)
$4,954m (38)
$2,631m (28)
$705m (9)$950m (14)
Dry mill distillery cash margin, US,Jan 2000-Feb 2008: $c/gal
Source: New Energy FinanceGrossed-up estimate based on disclosed deals. New investment only.
0
100
200
300
Typical operational cost
Jan2000
Oct 2000
Jul2001
Apr2002
Jan2003
Oct2003
Jul2004
Apr 2005
Jan2006
Oct2006
Jul2007
2003 2004 2005 2006 2007
Acquisitions$869m (3)
$641m (6)$90m (2)
$11m (1)$0m (0)
US Bioethanol Margins, Investment and M&A
21
Revolutionary Opportunity at our Doorstep
Biofuels + Hybrid Engines
2003 Toyota Prius47 mpg
50 – 100 mpg of fuel by Hybrid Vehicles300–600 mpg of gasoline when running E85
10x to 20x improvement
2006 Toyota Prius51 mpg
22Source: New Energy Finance, IMF WEO Database, IEA WEO 2007,
Boeing 2006 Annual ReportAdjusted for reinvestment. Geared re-investment assumes a 1 year lag between VC/PE/Public Markets funds raised and re-investment in projects.
Total Global New Investment in Clean Energy2004 – 2007
1% of global fixed asset investment
19% of global energy industry infrastructure investment
250% of commercial aircraft investment
$148.4bn
$92.6bn
$58.7bn
$33.4bn
2004 2005 2006 2007
76% Growth
58% Growth
60% Growth
23
2004 2005 2006 2007$0.6bn $1.2bn $1.7bn $1.9bn
Services & other
2004 2005 2006 2007
$0.7bn $1.2bn $2.0bn $3.2bn
Efficiency
2004 2005 2006 2007
$1.0bn$5.2bn
$19.4bn$19.2bn
Biofuels
2004 2005 2006 2007
$0.6bn$3.2bn
$9.4bn
$28.6bn
Solar
New Investment by Sector, 2004 - 2007
2004 2005 2006 2007
$9.7bn
$17.8bn
$25.8bn
$50.2bn
2004 2005 2006 2007
Other renewables
$1.9bn$4.9bn
$9.9bn$14.6bn
73%pagrowth
254%pagrowth
97%pagrowth
169%pagrowth
65%pagrowth
52%pagrowth
Wind
VC/PE, Public Markets and Asset Finance only. Excludes re-investment adjustment Source: New Energy Finance
24
New Investment in Clean Energy by Region2004 - 2007
2004 2005 2006 2007
$15.8bn
$28.1bn
$37.9bn
$76.2bn
EMEA
2004 2005 2006 2007
$9.6bn
$17.8bn
$36.1bn
$42.9bn
AMER
2004 2005 2006 2007
$7.9bn$12.6bn
$18.5bn
$29.3bn
ASOC
69%pagrowth
55%pagrowth
Adjusted for reinvestment. Geared re-investment assumes a 1 year lag between VC/PE/Public Markets funds raised and re-investment in projects.
65%pagrowth
Source: New Energy Finance
25
New Investment in Clean Energy by Asset Class2004 - 2007
2004 2005 2006 2007
$1.6bn $3.0bn$7.3bn
$9.8bn
VC/PE
2004 2005 2006 2007
$0.7bn$4.1bn
$10.5bn
$23.4bn
Public Markets
2004 2005 2006 2007
$12.1bn
$26.5bn
$50.3bn
$84.5bn
Asset Investment
81%pagrowth
219%pagrowth
91%pagrowth
Source: New Energy FinanceExcludes re-investment adjustment
Totalknown funds
1,573
26
2004 2005 2006 2007
229% growth
261% growth
23% growth
Number of funds within brackets;Includes actively managed funds that have at least 50% of their investments in clean energy
Source: New Energy Finance; Bloomberg
$1.4bn (9) $1.7bn (10)
$6.2bn (14)
$20.4bn (29)
Public Equity FundsAssets Under Management 2004-2007
27
Carbon trading volume2005-2007: $bn
2002 2003 2004 2005 2006 2007
EU-ETS/CDM - Primary Others
0.1
30.0
67.0
0.30.6
1.1
27
1999 2000 2001 2002 2003 2004 2005 2006 2007
Public Private
67% pagrowth
Source: World Bank; UNFCCC; New Carbon FinanceSource: World Bank; UNFCCC; New Carbon Finance
0.2
Carbon fund assets under management 1999-2007: $bn
0.3 0.3 0.81.7
2.7
4.7
8.0
12.5390% pagrowth
Carbon Finance
Discussion
What can States do?
28