Renewable Energy

Renewable EnergyPolicy Framework

Darrel Thorson, Vice President, Thermal DevelopmentBP Alternative Energy

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Why is BP in Alternative Energy?

China built 100 GW of coal fired generation in 2007

China continues massive coal buildout.

•China installed 95 GW in 2006•US installed capacity is 1000 GW•By 2009, China will be the largest emitter of CO2 on the planet, surpassing the US (CERA, 2007)

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65% of power plants needed around the world in 2030 are yet to be built

Power Generation by Technology & Global Power CO2 Emissions

Renewables

Hydro

Nuclear

Oil

Coal

Natural Gas

06 Projected Global Power CO2 Emissions

2005 2010 2020 2030

20

0

20

0

10

BtpaCO2

000 TWh

As a result, CO2 emissions are expected to double by 2030

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Significant synergies between the climate change and energy security agenda

Three key takeaways;

• 50% of the climate opportunities support energy security.

• Further 45% is neutral when it comes to energy security

• Only 5% of climate initiatives do not benefit energy security.

Good

Bad

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Power plant carbon intensity by type

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Policies to stimulate investment

• Regulatory

• Transmission

• Fiscal Incentives

• Communication/Educational Initiatives

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Incentives can accelerate maturity

R&D

Demo.

Commercialisation

Capital-based

Production-based (MWh)

TRANSITIONAL INCENTIVES

CARBON PRICING (CO2 tonnes)

Time

+ trading

Grants, inv taxcredits

production tax credit

Cap-and-trade programs, carbon taxes

H2 power with CCS

Solar PV

Onshore wind

Gas power

Tech Cost

Offshore wind

Deployment

Solar nano

CST

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Regulatory Policy Priorities

• Enduring carbon pricing policies:

• Cap and trade in US

• State RPS targets with enforceability

• A federal RPS in the US

• Could result in 300 GW of wind by 2030

• Favorable siting policies for technologies with large land needs

• Wind (20 acres / MW – dual use)

• CST (5 acres / MW – single use)

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Coal reserves

Wind resources

Load centers

Transmission Policy Priorities

National Interest Corridors, State Transmission Incentives

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Fiscal/Transitional Policy Priorities• Grants/Tax Credits for Research and Development to both the private

and public sectors.

• Develop enduring carbon pricing policies:

• Cap and trade in US

• Stability and predictability in fiscal incentives

• Avoid “stop-go” syndrome

• Further tailoring of incentives to technologies

• Production-based where scaling up is the priority (eg. Wind)

• Performance-based where cost reduction, technological advance is priority (eg PV solar, Concentrated Solar, Biofuels)

• Early-mover demonstration programmes for hydrogen power / CCS

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Communication/Education Initiatives• Provide incentives to states to include renewable energy studies in the

educational curriculum at every level

• Promote private/public sector participation in renewable energy.

• Increase funding to the National Renewal Energy Laboratory (NREL).

• Increase public awareness of the benefits of renewable energy (and the hidden costs of conventional energy).

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• Encourage new conversion technologies and advanced molecules – by moving beyond feedstocks and vehicle emissions and avoiding fuel-specific targets and fixed per-gallon mandates

• Create incentives or obligations based on emission reduction or energy content rather than volume basis

• Encourage sustainable and responsible production routes

FeedstockFeedstock

ProductionProduction

ConversionConversion

PrimaryPrimary

TransportTransport

Storage Storage &&

BlendingBlending

SecondarySecondary

TransportTransport

RetailRetail End UseEnd Use

Bio-fuels Policy: Target ends, not means.Allow markets to pick winners. Encourage sustainable practice.

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Back-up slides

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WindExperiencing Explosive Growth

The world saw 32% growth in wind capacity in 2006 • US added 2500 MW in 2006; 3000 MW in 2007• US/Canada will triple capacity to 30,000 MW by 2010

Source: (GWEC, 2007)

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Photovoltaic Solar PowerCurrently• BP is a leading solar manufacturing and marketing company• We have manufacturing capacity of 200 MW with facilities in Bangalore, Madrid,

Frederick, Xian and Sydney• We have 30 year’s experience, 20 offices, over 2000 employees and installations in

160 countries

Our commitment• We are increasing our overall global manufacturing capacity to 700 MW • We are investing $97m to increase our casting and wafering capacity at our Frederick

plant in the USA

Silicon activities• Signed significant supply contract for 2007• Extensive investigation in alternative silicon sources:

– Provides opportunity for significant cost reduction over traditional sources– Scalable and in line with future growth requirements

• Continued development of our advanced Mono² and commercialization:– Mono² efficiencies with multi cost and processing advantages

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Concentrated Solar Thermal Power

Concentrated Solar Thermal (CST) power generation produces electricity by concentrating the sun’s energy to produce steam and drive a turbine.

Context - SW US has 6,800 GW of potential vs 1,000 GW in entire US

Policy – Positive climate in the US but need more sustained incentives.

Infrastructure – Need transmission!

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Gas-fired power

CurrentlyWe participate in 12GW of gas-fired power plants (the size of a mid-sized US utility).We have successfully developed five new power plants in the past five years in the US, UK, Vietnam, South Korea and Spain.Our 1075 megawatt K Power CCGT in South Korea is the most efficient gas power plant in Korea.We broke ground at a 250 MW Texas City Steam Turbine project in 2006 that will take our Texas City facility to 1000 MW when complete.

Our commitmentWe will continue to look for high value opportunities to monetize our equity gas positions and build cogeneration facilities at existing BP facilities.

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Next generation biofuels

woody crops

Ethanol / butanol / ? for gasoline

Oily crops eg jatropha for dieseloil crops

•Next-generation bio-components can provide higher energy content and GHG reductions •Energy content: • Corn yields 240 gallons an acre; sugarcane 440 gallons per acre• Sunflower yields 75 gallons per acre; jatropha 140-220 gallons per acre; palm oil 450 gallons per acre• Opportunities to explore woody crops – straw, residues etc • Ligno-cellulosic conversion offers prospect of using entire plant – up to 1200 gal/acre

•GHG benefits:• Biofuels can offer GHG emissions reductions of 20% to 90%, depending on feedstock and conversion

process• Goal should be in upper end of range through high energy feedstock, less intensive cultivation crops,

low carbon conversion processes

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Increasing suite of low carbon options are available and affordable

Combined Effect of Lower Cost of New Technologies and CO2 Emissions Price by 2030

Source: IEA Technology Perspectives 2006, IEA World Energy Outlook 2006, BAH analysisNote: All data from lower bound of sources’ reported ranges. Coal and gas power price varies due to fuel prices, predicted range shown on chart. No coal CCS plants currently in operation; earliest operational plant in 2010. All costs are for wholesale generation.

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Policies and investments - biofuels

US – BP Energy Biosciences Institute - $500m over 10 years

US – Renewables Fuels StandardsEU – biofuels penetration target of 10% for 2020BP blended 800m gallons of ethanol in 2006

UK – Bioethanol plant with ABF; Demonstration biobutanol plant with DuPont

Joint venture with D1 Oils to plant jatrophaIn Asia, Africa and India

Australia – plans to market 400m litres of biofuels per annumProject to make biofuels from tallow at Bulwer refinery

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Principles for transitional incentives

• Goal: “accelerate the deployment of low-carbon power technologies”

• Policy understood to be ‘transitional’ – eventually phased down and replaced with a carbon-based measure, however:

• policy is governed by long (i.e. 5-10 year) regulatory periods

• both the timescales and ‘ramping down mechanism’ are clearly understood upfront

• Policy based around a market mechanism, e.g. tradable certificate system – to seek out lowest-cost solutions and to allow business to optimise across a wider playing field

• Policy provides encouragement tailored to each technology without ‘picking winners’ for favored treatment