Frost & Sullivan Energy And The Election Analyst Briefing


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Frost & Sullivan’s analyst briefing on energy and the 2008 U.S. Election.

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Frost & Sullivan Energy And The Election Analyst Briefing

  1. 1. Energy and the Election: Obama vs. McCain Energy Policy October 2008
  2. 2. This Presentation Energy Today Overview of the Candidates’ Plans Comparison of Plans: Oil & Gas Carbon and clean coal Renewable Energy Q&A 2
  3. 3. Energy Today • Oil use in the US has consistently risen since for decades: we now use over double per day what we did in the early 1960s • Oil imports have also risen – 60% is now imported, compared to just over 35% in 1975 3
  4. 4. Energy Today • Oil prices have continued to rise as well overall • Despite recent decrease, Frost & Sullivan estimates oil prices will remain high and will increase in the long-term 4
  5. 5. Energy Today • Electric Power Usage continues to rise as well • While capacity has risen to outpace demand overall, some regions, such as SPP and ERCOT have capacity margins below 10%, and are estimated to grow tighter in the next few years • “Congestion costs” in 2005 for the top 5 RTOs in the country topped $3.6 Billion • This could be alleviated by more investment in T&D, distributed generation M W D em an d vs C ap acity 1000 25.0% 900 800 20.0% 700 Percentage 600 15.0% N e t In te rn a l D e m a n d MW 500 C a p a city R e s o u rce s 400 10.0% C a p a city Ma rg in (p e rce n t) 300 200 5.0% 100 0 0.0% 1995 1999 2003 Source: DOE Ye a r 5
  6. 6. Energy Today • Improving the grid is necessary, though new Transmission lines cost up to $260k per mile to install, depending on voltage rating • One issue with Wind is the cost of long-distance transmission • Though the DOE estimates that by 2030, 20% of energy could come from wind – that could reduce GHG Net Electricity Consumption Forecast (US) by 25% 6000 Billion Kilowatt-hour • It would also reduce natural gas 5000 usage in electricity by 50% 4000 3000 • However DOE also estimates that 2000 90% of new plants in the next 10 1000 years will be powered by natural gas 0 1990 2000 2005 2010 2015 2020 2025 Year Source: DOE 6
  7. 7. Overview of The Plans Both candidates support: • Off shore drilling • Clean coal; Carbon reduction, including Cap & Trade • Increasing renewable energy 7
  8. 8. Overview of The Plans • McCain: • States his plan is more market-driven • Uses incentives to help fuel renewable power, better battery technology for vehicles • Wants leverage domestic supplies of fossil fuels, such as expanded oil drilling and (clean) carbon, expand nuclear • Obama: • Says his plan has a more long-term view that includes moving away from oil and carbon dependency • RPS of 10% by 2012, and more mandates to improve environmental profile of US energy in the long term • But recognizes coal, oil, and nuclear energy will remain part of the US energy profile for many years to come 8
  9. 9. Comparison of Plans: Oil & Gas McCain: • Offshore drilling has been underutilized • Should be up to the states to determine drilling • However has stated he is opposed to drilling in ANWR • Believes in suspending purchases of foreign oil for the SPR during critical times, though not necessarily tapping into SPR Obama • Stated he will accept limited off-shore drilling • Believes oil companies are underutilizing current lands, “use it or lose it” lease plans • Has outlined a plan to continue building oil pipeline from Alaska • Would take some light oil out of the SPR, replace w/ heavy oil Frost & Sullivan Analysis: Heavy oil will probably be easier and less expensive to refine in the future, due to better economies of scale. Nonetheless taking out of the SPR with this assumption may be a gamble. Off-shore drilling is also risky – some estimates show off-shore resources in the US have limited supplies Investing in and encouraging heavy oil upgrading could help lower costs of oil sands/shale oil and open up more domestic or international but friendly (i.e. Canada) sources 9
  10. 10. Comparison of Plans: Carbon and Clean Coal Both support clean coal though McCain to a greater extent • McCain would commit $2 billion annually for 15 years to advance clean coal technology. • Obama would create five state-of-the-art coal plants that would have near-total carbon capture Both support carbon restrictions, Obama’s plans would be more stringent • McCain has said he would work to reduce carbon emissions 60 percent below 1990 levels by 2050. Supports a market-based approach with caps but has not as specific as Obama • Obama would push for 80% below 1990 levels by 2050; cap and trade would be a 100% auction World Gasification Capacity and Planned Growth by Region: Frost & Sullivan analysis: 50000 O perating (2007) P lanned (2010) To achieve cleaner coal 45000 tough mandates are needed, 40000 but gov’t funding would help 35000 S yng as (MWth) 34,547 R&D. First try of cap & trade 23,486 30000 in EU did not work but 25000 15,340 revised version seems to be 20000 more effective. Coal is a 15000 plentiful natural resource in 10000 18,864 15,173 13,763 the US and can be used to 5000 7,722 lower energy costs. 0 716 A s ia / A us tralia A fric a / Middle E urope North A meric a C entral / S outh E as t A meric a R e g ion 10
  11. 11. Comparison of Plans: Green Issues Both candidates seem to embrace wind, solar, other renewable technologies as ways to: • Reduce emissions • Stabilize power grid • Create jobs • McCain: • Wants to encourage hydro, solar, wind • Would like to make PTC permanent • Obama • Wants to dedicate $150 Bil to create 5 mil green jobs • 10% RPS by 2012; extend PTC 5 years; Frost & Sullivan assessment: PTC has been a huge driver of wind power – Historically no PTC, no Wind RPS has been a big driver of both wind and other solutions –would not be difficult to implement as about 30 states already have RPS For true growth of all renewable technologies both should be enacted 11
  12. 12. Does Green Matter? Response to Green The Frost & Sullivan CEO Survey Drivers of Going Green (N=400) Potential competitive advantage 69% Growth opportunity for company 67% Corporate social responsibility 62% Meeting customer expectations/requirements 61% New technology opportunities 59% Ability to enter new markets 54% Greener Image 50% Product development 46% Potential cost savings 38% Leverage existing markets 33% 0% 20% 40% 60% 80% 12
  13. 13. Does Green Matter? Response to Green The Frost & Sullivan CEO Survey Rate of Green Investment (N=593) Increase 67% Remain Unchanged 33% Decrease 0% 0% 20% 40% 60% 80% 13
  14. 14. Major Companies Benefiting from Green • GE: 15% growth 2007 over 2006 to $14 Billion through Ecomagination. Goal in 2005 was $20 billion revenue by 2010; on track to surpass that in 2009 • BP Solar saw 23% increase in sales 2007 over 2006, one of the world’s largest solar users • Major service companies and equipment manufacturers seeing opportunities with upgrading power plants, industrial facilities due to upcoming global emission legislation • Steel, semicon manufacturers finding growing market to sell materials 14
  15. 15. Comparison of Plans: Green Issues Frost & Sullivan Assessment overall: McCain’s plans in fully leveraging domestic capabilities and resources would likely decrease energy costs and increase security concerns, at least in the short to medium term It is unclear how much of McCain’s proposed environmental regulations would be government vs. market driven. Also, is a 60% reduction in carbon enough to mitigate further environmental damage? Obama’s plans for more aggressive carbon legislation and greater emphasis on renewable power is likely to create a more long-term solution for both electricity concerns and environmental issues However in the short term this may be a more expensive proposition, which may delay or even reduce the ability to enact this longer-term vision. And, is an 80% reduction in carbon more than is needed (and more costly) to stabilize the environment? Overall Frost & Sullivan research points to government incentives and restrictions as being among the biggest drivers for renewable energy growth and development. Conventional sources of electricity generation will not fade away from the US energy mix and therefore should be made cleaner if the US wants to reduce carbon emissions, though that is not an inexpensive proposition. What the American people will have to decide is how much of this investment they will they want to spend – now and in the future - to reduce some of the country’s electricity, security, and environmental uncertainties. 15
  16. 16. For Additional Information • To leave a comment, ask the analyst a question, or receive the free audio segment that accompanies this presentation, please contact Stephanie Ochoa, Social Media Manager at (210) 247-2421, via email,, or on Twitter at 16