What’s next for clean tech?Wednesday, May 4, 2011; 2:30 – 3:45 AM

Moderator:

Betsy Zeidman, Senior Fellow, Milken Institute

Speakers:

Toby Coppel, Partner, Virgin Green Fund

Desmond King, President, Chevron Technology Ventures

Jeffrey McDermott, Managing Partner, Greentech Capital Advisors

Marianne Wu, Partner, Mohr Davidow Ventures

Sector share of U.S. energy consumption 2009

Sources: EIA.

Global PV supply

historical and projected from 2006-2012 (optimistic estimate)

Source: BNEF

Historical Projected

Venture capital and private equity financing

globally, 2010

How Americans demand energy

Sources: U.S. Energy Information Administration

Alternative energy accounts for

7% of energy used in the U.S.

Solar

1%

Biomass

53%

Geothermal

5%

Hydro

34%

Wind

7%

Renewable energy

7%

Petroleum37%

Coal22%

Natural gas

24%

Nuclear power8%

Source: Energy Information Administration.

2008

How Americans use Petroleum and Natural Gas

Sources: U.S. Energy Information Administration

Return on efficiency investment, by sectorPresent value of efficiency investments, $US billions

energy savings (2009-2020)

cost of upfront efficiency investment

Residential Commercial IndustrialSource: McKinsey & Company

World ethanol production estimates

2008, 2009, and 2010

Country Millions of Gallons

2008 2009 2010

USA 9,000 10,600 13,000

Brazil 6,472 6,578 6,922

European

Union

734 1,040 1,177

China 502 542 542

Canada 238 291 357

Other 128 247 347

Colombia 79 83 105

India 66 92 154

Australia 26 57 66

Total 17,245 19,530 22,670

Source: F.O. Lichts, Renewable Fuels Association.

With estimates for

23.4 billion gallons to be

produced in 2011

Renewable energy consumption vs. oil prices

Source: Chicago Climate Exchange

$/barrelTrillion Btu

Investment in clean energy might

be coming back

Source: New Energy Finance

Quarterly Financial Investment in Clean Energy 2004 to 2010

US government spending on clean energy

has risen but is likely to fall

Source: New Energy Finance

Government spending on green Energy US$ Billions (% of total)

Today’s grid: 164k miles of

wire, 3000 utilities

Elements of the Smart Grid

Higher functioning technology and infrastructure elements of the

electricity delivery system beyond primary production

• transmission,

• substation,

• distribution, and

• customer interface

· Investment required to meet load growth and to correct deficiencies – such

as power flow bottlenecks and high-fault currents that damage critical

equipment -- through equipment installation, upgrades and replacement.

· Investment needed to develop and deploy advanced technologies to

achieve “smart” functionality of power delivery systems, and interface with

distributed generation including renewable energy technologies.

What’s wrong with the grid?

• Majority of electricity capacity infrastructure 30 years old

or more, with transmission bottlenecks

• Since 1990, demand for electricity up 25%, construction

of transmission facilities down 30%

• Renewable energy inputs are limited due to the grid’s

age and distance from consumers

• Much of the new capacity will need to come from

renewable resources

• Lack of security leaves the grid vulnerable

Source: Department of Energy.

Costs of installing smart grid technologies

Source: EPRI.

The smart grid is an energy transmission system that can handle variable energy levels,

and can pull energy from homes and businesses as easily as it can send energy there.

How can United States build

the needed capacity by 2030?

0

200

400

600

800

1000

1200

1400

2007 2030Source: EIA.

EIA Estimate for additional capacity = 338 GW by 2030, costing 300 US$ billionsCapacity (GW)

Renewable incentives programs

in the United States

• New Solar Homes Partnership - California Energy Commission

– Provides incentives for solar production from PV installations applicable to custom

homes and small developments

• California Solar Initiative – California Public Utilities Commission

– Performance based incentives focused on reaching 3000 MW Solar capacity by 2016

applicable to non-residential buildings and existing homes

• Wisconsin

– Has four solar buy back programs offered by utilities to electricity consumers to

purchase renewable energy

• Green Tag Purchase - Northwest Solar Cooperative

– An agreement by the NWSC to purchase solar and wind power at $0.02/kWh through

December 31, 2009

• Alternative Energy Investment Tax Credit - Montana

– Alternative energy investments greater than $5000 receive a tax credit of 35% on

corporate income tax

Total cost of grid upgradeshigh and low estimates in three categories needing most upgrades

Source: EPRI

$338 billion to $476 billion

can result in benefits between

$1.3 trillion and $2 trillion.

EV Adoption

Sources: Chart: McKinsey and Co., Map: Ford Motor Co. http://gigaom.com/cleantech/fords-top-25-cities-paving-the-way-for-electric-cars/ Ltd.

EV market

penetration

(% of fleet)

Electricity load

increase (TWh)

1% 8

5% 41

10% 84

15% 126

20% 168

100% 840

Number of electric

customers 2007 2030

Load

growth

Residential 13,949,916 143,928,676 19,978,760

Commercial 17,377,219 20,178,151 2,800,932

Industrial 193,767 921,709 127,942

Transportation 750 750 0

Total 142,121,652 165,029,286 22,907,634

U.S. Electricity customersLoad growth without increased EV adoption estimates

Source: EPRI

Does not

consider EV

load growth

California emissions reduction goals

• California wishes to reduce emissions to 1990 levels by 2020 (426 MMt CO2e)

Business as usual levels in 2020 are projected to be approximately 600 MMt CO2e

Source: California Energy Commission

Potential energy efficiency gains by sector

and sector share of primary electricity production

Source: EIA

California emissions reduction goals

• California wishes to reduce emissions to 1990 levels by 2020 (426 MMt CO2e)

Business as usual levels in 2020 are projected to be approximately 600 MMt CO2e

Source: California Energy Commission

Potential impact of efficiency

on global energy demand

Source: WER/CERA

Approximately

300 quadrillion

Btu

California energy profile

2009

Source: California Energy Commission

Cost of delivered electricityby primary energy source

Source: EIA

Meeting Future World Energy Demand

11.8

16.4

2010 2030

39%

Source: BP Energy Outlook, 2011

Unproven

~65mb/d

Source: World Energy Outlook 2010

World Demand World Oil Production by Source

(Billion tonnes of oil equivalent)

(million barrels per

day)

Significant Supply Risk For Fossil Fuels

(thousands barrels per day)

Saudi Arabia 10,782 Kuwait 2,741

Russia 9,790 Venezuela 2,641

United States 8,514 Norway 2,466

Iran 4,174 Brazil 2,402

China 3,973 Iraq 2,385

Canada 3,350 Algeria 2,180

Mexico 3,186 Nigeria 2,169

United Arab Emirates 3,046

= supply

risk

Top Oil Producing Nations

Source: EIA, 2008

(000 barrels per day)

Increased Public Pressure For Low-Carbon Economy

269

348408

461

76113

151 180 187243

0

100

200

300

400

500

600

'05 '06 '07 '08 '09 '10 '15E '20E '25E '30E

Glo

bal I

nve

stm

ent

Stable CO2 Concentration

Requirement

CO2 Emissions Reduction

by 15% Requirement

Actuals

Source: IEA, IMF, NEF

Note: Includes corporate R&D, government spending and other

373

502548

590

Sector Capital Investment

(USD billions)

23%

46%

30%

1%

Asian & MiddleEastEurope & Russia

N. America

S. Amer. & Africa

Future of Nuclear Power ?

Source: Morgan Stanley 2011

(GWe)

Planned World Nuclear Capacity Growth 2010 Nuclear Capacity by Region

Source: Morgan Stanley 2011

375

569

2010 2030

52%(GWe)

Projected Growth

Robust Future Growth for Renewables

$188

$71$61$56

$349

$123 $114$113

$0

$50

$100

$150

$200

$250

$300

$350

$400

Biofuels Wind Solar TotalG

lob

al R

eve

nu

e

2010 2020

100%103%

60%

86%

Source: CleanEdge, 2011

2000 2010

Solar Wind Biofuels

Source: CleanEdge, 2011

Historical Growth

(USD billions)(USD billions)

$7

$188

Attractive Opportunities in the Water Sector

(USD billions)

Global Water Market Increasing Prices

$95

$46

$44

$29

$164

$22$5

$22

Global

water

market is

growing 5%

annually

Source: Goldman Sachs, 2008

Water and

wastewater

treatment

Industrial treatment

Infrastructure

Valves

Pumps

Other

Residential

Testing

$425bn

Source: Credit Suisse, 2010

Urbanization

Waste Management Challenge

Source: UN World Urbanization Prospects 2009

Dirtytech

Source: Eurostat, EPA

1

2

3

4

5

1970 1990 2010 2030

Wo

rld

Po

pu

latio

n (

billions)

Rural Urban

RECYCLING AND WASTE TO ENERGY (WTE) RATES

Recycling WTE Total

Germany 66% 33% 99%

Netherlands 66% 33% 99%

Austria 70% 27% 97%

Sweden 49% 49% 97%

France 33% 32% 64%

Italy 39% 12% 51%

USA 33% 13% 46%

UK 36% 10% 45%

Spain 34% 9% 43%

Portugal 17% 19% 36%

Greece 23% 0% 23%

613

13 1321

5335

472 478

150

250

350

450

550

650

2006

2020

Bas

e

Res

iden

tial

Com

mer

cial

Tran

spor

t

Indu

strial

Tran

sfor

mat

ion

2020

Qu

ad

rillio

n B

TU

Source: EIA, McKinsey

$170bn Annual

Opportunity

High ROI Opportunities in Energy Efficiency

Potential Demand Reduction Through Efficiency

What’s Next in Sustainable Infrastructure?Seven Key Trends

Shale gas is real1.

Solar PV is scaling2.

Spending on the grid will continue3.

Energy efficiency4.

Offshore wind5.

Next generation biofuels6.

Asian demand growth7.

Industry Dynamics Highlight the Opportunity

for Renewable Energy

Source: U.S. Energy Information Association.

$0.03

$0.06

$0.09

$0.12

00 01 02 03 04 05 06 07 08 09 10

Res

Com

Indust

All

(0.0%)(0.9%)

6.9%

0.4% 0.2%

13.5%

(3%)

0%

3%

6%

9%

12%

15%

Coal

Petrol

Nat Gas

Nuclear

Hydro

Renew Energy

U.S. Electricity Rates ($ / kWh) 2000 – 2009 CAGRs for Existing Capacity

3.5% - 4.0% CAGR

6.1 7.3

15.4 17.2

19.6 21.4

23.2 26.2

0

5

10

15

20

25

30

2008 2009 2010 2011 2012 2013 2014 2015

Europe ROW

China U.S.

The U.S. Has Become a Key PV Module MarketAnnual PV Demand by Region (GW), 2008 – 2015E

% U.S 5.6% 6.5% 6.4% 11.9% 14.8% 16.9% 18.0% 19.7%

Source: Bloomberg New Energy Finance, GTM Research, Wall Street Research, Greentech Capital Advisors analysis.

Distributed Generation Is Driving PV Demand Annual U.S. PV Demand by End-Market (GW), 2009 – 2012E

Source: Bloomberg New Energy Finance, GTM Research, Wall Street Research, Greentech Capital Advisors analysis.

0.5

1.0

2.1

2.9

0.0

0.7

1.4

2.1

2.8

3.5

2009 2010 2011 2012

Residential Commercial Utility

1.31.9

0.70.4

% DG 82% 73% 63% 63%

Smart Grid Continues to EvolveIncremental Spending & Value Capture in Smart Grid

Ex

pec

ted

Va

lue

Incremental Capital

Commitment

Advanced Grid

Management

Demand

Response

Extended

Utility Roles

Smart Grid

“Network”

There has been a recent push

by utilities (under pressure by

PUCs) to implement demand

response programs earlier in

smart grid deployments

Source: Greentech Capital Advisors.

Source: McKinsey & Company Report, July 2009.

Total: $11 billion Total: $47 billion

Today

2020

4x Growth

$6bn

$2bn

$3bn

$11bn

$13bn

$23bn

Industrial Commercial Residential

$11bn

$13bn

$23bn

Industrial Commercial Residential

$11bn

$13bn

$23bn

Industrial Commercial Residential

$11bn

$13bn

$23bn

Industrial Commercial Residential

Annual U.S. Capacity Spend on EfficiencyEfficiency Spend by End-Market ($ bn)

U.S. Renewable Fuel Standard 2 (RFS2)EPA Rules Are Driving the Adoption of Next-Gen Biofuels

Source: Environmental Protection Agency.

0.0%

10%

20%

30%

40%

50%

60%

70%

0

20

40

60

80

100

120

140

160

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Billio

n L

itre

s

Corn Ethanol Advanced Biofuels Advanced % Share

$73

$17 $12

$0

$25

$50

$75

$100

Fossil Fuels Corn Ethanol Traditional Renewables

$ in

billio

ns

Tax Breaks Direct Spending

U.S. Federal Energy SubsidiesDirect Expenditures and Tax Breaks (2002 – 2008)

Source: Environmental Law Institute, September 2009.

Renewable

Energy Total: $29 billion

2010 Investment ($bn) Y-o-Y 2009

Rank Country 2010 2009 Growth Rank

1 China $54.4 $39.1 39.1% 1

2 Germany $41.2 $20.6 100.0% 3

3 United States $34.0 $22.5 51.1% 2

4 Italy $13.9 $6.2 124.2% 8

5 Rest of Europe $13.4 $13.3 0.8% 4

Source: Bloomberg New Energy Finance, Pew Environment Group. Rest of Europe excludes France, Spain, and the United Kingdom.

China Has Emerged as a Cleantech Power Investments by Country, 2009 – 2010

Global M&A Transaction VolumeSustainable Infrastructure, Alternative Energy & Cleantech ($bn)

Source: Bloomberg New Energy Finance, Cleantech Group, Capital IQ. Geography represents target’s corporate headquarters.

$13.5 $16.6$9.5

$16.7

$9.5

$14.5

$1.1

$3.2

$3.9

$4.9

$1.1

$0.8

$2.6

$3.2

$0.7

$1.6

$29.5

$39.2

$12.3

$22.3

$0

$5

$10

$15

$20

$25

$30

$35

$40

2009 2010 1Q2010 1Q2011

EMEA North America APAC Central & South America

Building a cleantech start-up

Series A Series B Series C+ IPO or MergerSeed

Develop concept

Create IP

Lab Prove technical concept

PilotProve engineering feasibility

Demo

Prove commercial execution

Commercial

5-7 years

<$1m $5-10m$25-100m

Venture Financing

>$100m

Building a cleantech start-up

Series A Series B Series C+ IPO or MergerSeed

Prove technical concept

PilotProve engineering feasibility

Demo

Prove commercial execution

5-7 yearsVenture Financing

Technical Risk

Develop concept

Create IP

Lab Prove technical concept

PilotProve engineering feasibility

Demo

Commercial

<$1m $5-10m$25-100m

>$100m

Different types of capital fill different needs

Technology to the Rescue…

CORN YIELD

(BU/ACRE)

TRANSISTOR

PRICE ($)

Moore’s Law Crop Yield

• Cleantech leverages expertise in Information

Technology and Life Sciences

But we are getting close to “grid parity”

(Berlin)

(Dubai)

Specifically…

What’s next for Clean Tech?

Desmond King, President of Chevron Technology

Ventures

2011 Milken Institute Global Conference

Where will the supply come from?

200812,271 Mtoe

203016,941 Mtoe

IEA World Energy Outlook 2010 - Reference Case

Coal

29%

Oil

28%

Biomass &

Waste 9%Wind 2%

Gas

22%

Hydro 2%

Nuclear 6%

Coal

27%

Oil

33%

Gas

21%

Other <1%Biomass &

Waste 10%

Hydro 2%

Nuclear 6%

Biofuels 1%

Other <1%Biofuels <1%

Biomass &

Waste 10%

Hydro 2%

Nuclear 6%

200812,271 Mtoe

203014,584 Mtoe

Coal

19%

Oil

27%

Biomass &

Waste

12%

Wind 4%

Gas

21%

Hydro 3%

Nuclear

10%Coal

27%

Oil

33%

Gas

21%

Biofuels 2%

Solar 1%

Where will the supply come from in a

450 ppm CO2 future?

IEA World Energy Outlook 2010 – 450 ppm Case

Other <1%

Other <1%

Biofuels <1%

Key Challenges

•Intermittent - unreliable as base load power

•NIMBY concerns - visual and noise pollution

•Needs large footprint per MW

15x Growth with

450 ppm

scenario

2008

219 TWh 2030

IEA World Energy Outlook 2010

IEA wind power generation

forecast

1653 TWh Total

7x growth by 2030 with

“business as usual”

3197 TWh Total

Wind power projected to

grow 7x to 15x by 2030

Solar Power

Projected to Grow 15x to 40x by 2030

0

100

200

300

400

500

600

700

2008 2020 2030

Global Large-Scale Solar

Capacity (GW)

Reference

Case

237 GW

450 ppm Case

626 GW

Key Challenges

•Intermittency - unreliable as base load power

•Highest investment cost of all commercially deployed renewable energy resources

•Long-term dependency on government subsidies to compete

IEA World Energy Outlook 2010

Biofuels production

projected to grow 3x to 6x by 2030

Key Challenges

•Commercially viable scale up

•Advanced Biofuels

– Conversion technology

– Biomass generation at scale

IEA World Energy Outlook 2010

Biofuels Growth (MMBOED)

450 ppm Case

5.9 MMBOED

Reference

Case

3.0 MMBOED

Conclusions

Renewables

Rapid growth from small

base

Energy

We need it all

Oil & Gas

Majority of energy

supply

Energy Efficiency

Significant Opportunity