Advanced Energy Conference, Hauppauge New York Nov 2008

1. Translating Climate Change and Advanced
Energy Investment into Competitive Advantage
© CH2M HILL 2007
Matthew A. Wilson Ph.D.
CH2M HILL, Climate Change Services
Advanced Energy Conference
20, November, 2008

2. Global Market Drivers
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3. Core Market Drivers
• 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
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4. 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
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• 1990s—Commercialization of hybrid drive train
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5. CO2 Emissions Since Industrial Revolution
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Source: Carbon Dioxide Information Analysis, Oak Ridge National Laboratory
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6. GHG Atmospheric Concentrations Rising
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Source: Deutche Bank Advisors 2008; D. Luthi 2008, Nature 15 May.
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7. Portfolio of U.S. Energy Consumption Today
45
40
40 2005
35 2006
2007
30
Quadrillion Btu
25
24
23
20
15
10
8
5
2.5 3.6 0.35 0.32 0.08
0
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Source data: US DOE 2008
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8. Majority of Oil Reserves are Concentrated in
OPEC Countries
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Source: BP Statistical Review; DB Global Markets Research; DeAM analysis, 2008.
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9. Finding Costs for Oil are Also Increasing
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Source: US DOE/EIA, DB Global Markets Research, 2008
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10. Crude Oil Price has Been Volatile
NYMEX Light Sweet Crude, Contract 1
$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
97 98 99 00 01 02 03 04 05 06 07 08
/ 19 / 19 / 19 / 20 / 20 / 20 / 20 / 20 / 20 / 20 / 20 / 20
2 2 2 2 2 2 2 2 2 2 2 2
1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/
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Source: U.S. Department of Energy
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11. 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
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– 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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12. Supply Side Alternatives
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13. The Opportunity: Renewable Global Exergy
Flows
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14. Total Land Area Required to Power 100% of
US Onroad Vehicles
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Source: Dr. Mark Jacobson (2008) www.stanford.edu/group/efmh
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15. 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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16. The Challenge: Cost of Electricity
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17. 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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18. 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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19. Demand Side Alternatives
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20. Conversion Efficiency of ‘Engines’ Still
Moderately Low
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21. Decreased Energy Use
Inefficient Energy Energy Efficiency
Saving Improvement
Increased
Economic
Efficiency
Economically Efficient
Waste Energy Intensification
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22. Putting It All Together: The Total Cost of
Optimizing Carbon and Energy
U.S. mid-range abatement cost curve – 2030 Residential
Abatement
Cost cost <$50/ton
Afforestation Commercial buildings –
Real 2005 dollars per ton CO2e buildings –
of cropland HVAC
HVAC equipment
90 Coal power plants–
Industrial Residential equipment efficiency
process buildings – CCS rebuilds with EOR
efficiency
Fuel economy improve- Coal mining – Shell Active forest Distributed
60 packages – Light ments Methane mgmt retrofits management Solar CSP
solar PV
Residential trucks
Commercial Commercial
electronics Residential
buildings – buildings –
water Nuclear
30 Combined Control
Residential heaters new-
buildings – heat and systems build
Lighting power
0
0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2
-30 Onshore wind –
Industry – Onshore wind – Industry –
Low penetration
Combined High penetration CCS new
heat and builds on
-60 Biomass power – carbon-
power
Cofiring intensive
Cellulosic
Manufacturing – processes
biofuels Existing power Car hybridi-
HFCs mgmt Coal power plants – CCS
-90 Residential plant zation
new builds with EOR
buildings – conversion
Onshore wind – Medium Coal-to-gas
New shell efficiency
Commercial penetration shift – dispatch of
improvements Conservation
improvements
-120 electronics Winter existing plants
tillage
Commercial cover crops Coal power plants –
buildings – CFL Reforestation CCS rebuilds
-230
-220 Commercial lighting
buildings – Commercial
buildings – Natural gas Afforestation of Coal power
LED lighting
pastureland
© CH2M HILL 2007
New shell and petroleum plants – CCS
Fuel economy packages
– Cars improvements systems new builds
Adapted From: McKinsey 2008 management
Negative or No Life-Cycle Costs Significant Life-Cycle Costs
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23. New Market Opportunities and Constraints
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24. 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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25. 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
397
$6,000 400
Europe
373
335
332 350
$5,000 North America
297
$1,230 300 Total number of
$4,000 deals
250
$658
$3,000 200
150
$2,000 $891
100
$559 $597
$1,000 $3,950
$1,577 $2,877 50
$973 $1,048
$US M
$0 0
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2003 2004 2005 2006 2007
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26. Amount of VC invested per Cleantech Segment,
North America and Europe 2003-2006
Source: Cleantech Venture Network
Water & Wastewater Agriculture
$406M $404M
Transportation Air & Environment
Recycling & Waste $285M $637M
$568 M
Energy Efficiency
Materials $782M
$849M
anufacturing/ Industrial
$456M
Energy Storage
$1,308M Energy Generation
$2,976M
Energy Infrastructure
$510M
© CH2M HILL 2007
Clean Energy is 58% of cleantech VC 26

27. 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.
© CH2M HILL 2007
Adapted from: Deutsche Bank Group 2008, Investing in Climate Change 2009
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28. “Green” Job Creation
2006
2018-2038
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Source: Global Insight, 2008, US metro Economies-Current and Potential ‘green’ jobs in the US Economy
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29. © CH2M HILL 2007
Conclusions

30. 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.
© CH2M HILL 2007
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31. Thank You!
Matthew A. Wilson Ph.D.
Business Development Leader
© CH2M HILL 2007
Climate Change Services
Direct: (720) 286-1811
Matthew.Wilson2@Ch2m.com