The Economic Opportunities Arising from the Challenge of Global Climate Change Green Investment and the Role of State Government Roger Ballentine Green Strategies, Inc.
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