US Renewable Energy Markets: Financial Perspective

1
US Renewable Energy Markets Financial Perspective

• By
• Michael D. Ware
• Advance Capital Markets, Inc.
• Washington Council of Governments
• Washington, DC
• June 22, 2005

2

• The way we produce and consume energy hasnt
  changed much in decades.
• Business Week
• October 11, 2004

3
Overview

• Financial Markets for RE are Driven by Key
  Factors
• Economic
• Financial
• Political
• Review of RE in the U.S.
• Potential Local Applications

4
U.S. Energy Consumption by Fuel 2003
Source AEO 2005 tables (released in December
2004) based on US energy consumption. Overall
breakdown Table A1 (Total Energy Supply and
Disposition), and Renewable breakdown Table A17
(Renewable Energy, Consumption by Section and
Source).
Source NREL
5
Economic Factors

• Rise in Crude Oil Prices
• 30.00 BBL to 54.00 BBL
• Tight US Natural Gas Supply
• Natural Gas Prices Remain High
• Cheap Coal Power Becoming More Expensive
• On and Off Peak

6
Financial Factors

• Overhang of Merchant Power Plant Debt
• Financial Condition of Electric Utilities
• Larger Players Entering the RE Market
• AES
• PPM
• Goldman Sachs
• New Financing Sources Available for RE

7
Political Factors

• Quest for Energy Independence Hides Practical
  Solutions
• On/Off PTC has Retarded Growth in the Wind
  Industry
• States are Taking the Lead
• Enacting Renewable Portfolio Standards (RPS)
• Western Governors Association 1,000 MW CSP
  Initiative

8
Significance of the Factors on RE Markets

• High Oil and Gas Prices Make RE Options More
  Economic
• Wind Power is Competitive with Gas Fired
  Generation
• Convergence of Costs for all Energy Technologies
• Growing Realization Among US Industry Leaders
  that RE must be a Significant Part of US Energy
  Policy
• Regional vs. National Markets

9
Review of RE in the US
10
Renewable Energy in America- Regional Resources,
Economics and Politics -
SOLAR ENERGY
WIND POWER
GEOTHERMAL
BIOMASS
11
U.S. Wind Energy
Source AWEA
12
Global PV Installations
Source IEA Photovoltaic Power Systems Programme
13
U.S. Geothermal Energy
Source Geothermal Energy Association
14
Biomass Installation by Fuel
PURPA Market
Source USDOE
15
Fuel Ethanol Production
Source Renewable Fuel Association
16
Key Trends in Financial Markets

• More VC Firms Investing in RE Technology
• Private Equity Investments in Solar and Wind
• Equity Investors Driven by Tax Credits for Wind
  and CSP
• New Investors in Renewable Fuels
• Increasing Interest in Hybrid and Off -Grid
  Applications
• States and Local Governments making Funds
  Available for RE
• E.g. Mass Renewable Energy Trust

17
ACORE Call for Phase II

• Phase II Utilization
• National Needs
• Solutions
• National energy supply
• National security
• Environment
• Climate change
• Economic growth
• Investment opportunities
• Jobs
• Market Adoption

• Phase I Development
• RDD
• Technologies
• Wind
• Solar
• Hydro
• Geothermal
• Ocean
• Biomass
• Biofuels
• Commercialization

18
Potential RE Options

• Solar PV Programs
• Residential
• Commercial
• Bus Shelter/Traffic/Signage
• Solar Thermal Programs
• Domestic Hot Water
• Wind Power (REC) Purchases
• Emergency Power Programs
• Solar PV/Hybrid
• Biogas/Fuel Cell Hybrids
• Hybrid Car Programs

19
Extra Slides
20
Petroleum Supply, Consumption, and Imports,
1970-2025
(million barrels per day)
30
History
Projections
25
20
70
Consumption
Net imports
15
54
10
Domestic supply
5
0
2025
1970
1980
1990
2000
2010
21
Primary Driver of Increased Consumption

• Power sector consumption of natural gas projected
  to increase significantly every year

Source Energy Ventures Group
22
National Security
Petroleum supply, consumption, and imports,
1970-2025 (million barrels per day)
Source DOE/EIA-0383(2003) Annual Energy Outlook