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Advanced Energy Conference, Hauppauge New York Nov 2008
Citation preview
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Translating Climate Change and Advanced Energy Investment into Competitive Advantage
Matthew A. Wilson Ph.D. CH2M HILL, Climate Change Services
Advanced Energy Conference20, November, 2008
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Global Market Drivers
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• Climate Change
• Energy Security• Oil supply vulnerability• Vulnerability of infrastructure to terrorism, natural disaster, or
human error
• Economics• Fossil fuel prices• Price volatility: oil, natural gas, wholesale electricity• Carbon Pricing
Core Market Drivers
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A Brief History of Energy Use
• 800,000 BCE? Fire domesticated.
• 2500 BCE Wind-driven sailing vessels
• Middle ages: wind mills used for grinding grain, pumping water.
• 1700s – steam engine, various versions
• 1864 – internal combustion engine • 1879 – invention of light bulb
• 1892 – diesel engine
• 1880s (DC), 1896 (AC) – central electricity generation and early electric grids
• 1930 – jet engine
• 1950 – photovoltaic cells
• 1990s—Commercialization of hybrid drive train
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CO2 Emissions Since Industrial Revolution
Source: Carbon Dioxide Information Analysis, Oak Ridge National Laboratory
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GHG Atmospheric Concentrations Rising
Source: Deutche Bank Advisors 2008; D. Luthi 2008, Nature 15 May.
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Portfolio of U.S. Energy Consumption Today
40
23 24
8
2.5 3.6 0.35 0.32 0.080
5
10
15
20
25
30
35
40
45Quadrillion Btu
2005
2006
2007
Source data: US DOE 2008
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Majority of Oil Reserves are Concentrated in OPEC Countries
Source: BP Statistical Review; DB Global Markets Research; DeAM analysis, 2008.
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Finding Costs for Oil are Also Increasing
Source: US DOE/EIA, DB Global Markets Research, 2008
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Crude Oil Price has Been Volatile
NYMEX Light Sweet Crude, Contract 1
$0.00$20.00$40.00$60.00$80.00
$100.00$120.00$140.00$160.00
1/2/1997
1/2/1998
1/2/1999
1/2/2000
1/2/2001
1/2/2002
1/2/2003
1/2/2004
1/2/2005
1/2/2006
1/2/2007
1/2/2008
Source: U.S. Department of Energy
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Carbon Pricing
• EU ETS EUA • US $37.00 tCO2e (2007 average)
• CCX CFI • US $3.15 tCO2e (2007average)
• Over the Counter (OTC)• US $6.10 tCO2e (2007 average)
• RGGI• US $3.07 tCO2e (Sept. 2008 Auction)• 12,565,387 tCO2e auctioned
• Looking forward:– Continuing strong growth in trading volumes
• From 2006 to 2007, the voluntary market experienced a volume growth rate of 165% with a total of 62 million tonnes of carbon dioxide equivalent (MtCO2e) trading hands between buyers and sellers
– Price Volatility – Significant consolidation and normalization of market standards.
Sources: State of the Voluntary Carbon Markets 2008,Ecosystem Market Place and New Carbon Finance; State and Trends of the Carbon Market 2008,The World Bank. RGGI.
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Supply Side Alternatives
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The Opportunity: Renewable Global Exergy Flows
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Total Land Area Required to Power 100% of US Onroad Vehicles
Source: Dr. Mark Jacobson (2008) www.stanford.edu/group/efmh
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Growth of Renewable Power Generation to meet GHG targets with an Investment of $45 Trillion
Source: OECD/IEA, 2008, Energy Technology Perspectives
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The Challenge: Cost of Electricity
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Commercial Breakeven
• For renewable technology to be commercially adopted at scale, it must be commercially viable—breakeven or better against competitive, less environmentally friendly options. Four factors will drive commercial breakeven:
– Traditional and innovation-based incentives (i.e., tax credits)
– Increases in fossil fuel prices
– Introduction of carbon prices (cap and trade or carbon tax)
– Cost declines from movement down the learning curve
– Increased supply capacity (economies of scale)
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Troubled Asset Relief Act (TARP) of 2008
• The Production Tax Credit (PTC)– reduces renewable energy producers tax burden by 1.5 to 2 cents
per Kwh; – Extended for one year for large-scale wind projects;
• The investment Tax Credit (ITC)– reduces capital expenses for solar electric and solar water heating
equipment by 30%; – extended for eight years for solar projects;
• 1.5 billion in tax credits, along with incentives for carbon capture, for Carbon Capture and Storage (CCS) projects.
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Demand Side Alternatives
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Conversion Efficiency of ‘Engines’ Still Moderately Low
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Economically Efficient Energy Intensification
Energy Efficiency Improvement
Inefficient Energy Saving
Waste
Increased Economic Efficiency
Decreased Energy Use
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Putting It All Together: The Total Cost of Optimizing Carbon and Energy
Abatement cost <$50/ton
U.S. mid-range abatement cost curve – 2030
Adapted From: McKinsey 2008
0
30
60
90
-120
-220
-30
-60
-90
3.20
CostReal 2005 dollars per ton CO2 e
1.0 1.2 1.4 1.8 2.00.2 2.2 2.4 2.6 2.8 3.01.60.4 0.6 0.8
-230
Residential electronics
Commercial electronics
Residential buildings – Lighting
Commercial buildings –LED lighting
Fuel economy packages – Cars
Commercial buildings – CFL lighting
Cellulosicbiofuels
Industry – Combined heat and power
Existing power plant conversion efficiency improvementsConservation
tillage
Fuel economy packages – Light trucks
Commercial buildings – Combined heat and power
Coal mining – Methane mgmt
Commercial buildings – Control systems
Distributed solar PV
Residential buildings – Shell retrofits
Nuclear new- build
Natural gas and petroleum systems management
Active forest management
Afforestation of pastureland
Reforestation
Winter cover crops
Onshore wind – Medium penetration
Coal power plants – CCS new builds with EOR
Biomass power – Cofiring
Onshore wind –High penetration
Industry – CCS new builds on carbon- intensive processes
Coal power plants – CCS new builds
Coal power plants – CCS rebuilds
Coal-to-gas shift – dispatch of existing plants
Car hybridi- zation
Commercial buildings – HVAC equipment efficiency
Solar CSP
Residential buildings – HVAC equipment efficiencyIndustrial
process improve- ments
Residential water heaters
Manufacturing – HFCs mgmt
Residential buildings – New shell improvements
Coal power plants– CCS rebuilds with EOR
Commercial buildings – New shell improvements
Afforestation of cropland
Onshore wind –Low penetration
Negative or No Life-Cycle Costs Significant Life-Cycle Costs
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New Market Opportunities and Constraints
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Clean Technology
“Cleantech is any knowledge-based product or service that improves operational performance, productivity or efficiency; while reducing costs, inputs, energy consumption, waste or pollution.”
Cleantech Group, 2005
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North American and European Venture Capital investments in cleantech Total yearly amount invested ($US M) and Number of deals
Source: Cleantech Group & SVB Alliant, 2007
$559 $597
$891
$658
$1,230
$3,950$973 $1,048 $2,877$1,577
373332
297
397
335
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
2003 2004 2005 2006 2007
$US M 0
50
100
150
200
250
300
350
400 Europe
North America
Total number ofdeals
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Amount of VC invested per Cleantech Segment, North America and Europe 2003-2006
Source: Cleantech Venture Network
Energy Generation$2,976M
Energy Efficiency$782M
Air & Environment$637M
Agriculture$404M
anufacturing/ Industrial$456M
Materials$849M
Energy Storage$1,308M
Energy Infrastructure$510M
Recycling & Waste$568 M
Water & Wastewater$406M
Transportation$285M
Clean Energy is 58% of cleantech VC
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What Next? The Financial Crisis and Green Investment
• Given stretched valuations late last year, the public-equity green tech universe has given back about 40% of its out-performance built up in 2006-2007.
• Clean tech private markets have maintained growth into 4Q, but are now being affected by the credit-squeeze- equity financing will require more attractive valuations in the absence of debt financing.
• As financial markets stabilize, many climate-related and green tech sectors should recover early in both public and private markets, as they have regulatory support and strong long-term growth prospects.
• In “green” oriented infrastructure, there are several Gov’t economic stimulus options that would have immediate impact on job creation.
Adapted from: Deutsche Bank Group 2008, Investing in Climate Change 2009
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“Green” Job Creation
2006
2018-2038
Source: Global Insight, 2008, US metro Economies-Current and Potential ‘green’ jobs in the US Economy
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Conclusions
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Take Away Messages
• Growth in global energy demand coupled with awareness of Climate Change, will require that innovative low carbon energy technologies be brought on line if GHG emissions are to be reduced at the same time.
• Opportunities for energy efficiency improvement exist at every turn – there is plenty of room for cost-effective efficiency improvement with technologies we have today
• The challenges go well beyond technical issues! We need behavioral changes, better economic policies to level the playing field for “green” energy, and coordinated local, national and international effort.
• The global financial crisis will likely have short term effects, but mid and long term investment in ‘green’ infrastructure/technology could lead to significant job growth and robust market opportunities.
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Thank You!
Matthew A. Wilson Ph.D.Business Development Leader
Climate Change Services
Direct: (720) 286-1811