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Jerry Bloom | Winston & Strawn


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Jerry Bloom | Winston & Strawn

  1. 1. BEIJING CHARLOTTE CHICAGO GENEVA HONG KONG HOUSTON LONDON LOS ANGELES NEW YORK NEWARK MOSCOW PARIS SAN FRANCISCO SHANGHAI WASHINGTON, D.C. Taking Up the Clean Energy Challenge The George Washington University Solar Institute Solar Energy: A Critical Component of Meeting the Clean Energy Challenge Washington, D.C. April 26, 2011Jerry R. BloomChair, Energy PracticeWinston & Strawn, North America Europe Asia(213) 615-1756 © 2011 Winston & Strawn LLP
  2. 2. Global Energy Demand 2© 2011 Winston & Strawn LLP
  3. 3. Global Market: Net ElectricityGeneration Source: U.S. Energy Information Administration: International Energy Outlook 2010 3© 2011 Winston & Strawn LLP
  4. 4. Global Market: Energy Use by Fuel Type Source: U.S. Energy Information Administration: International Energy Outlook 2010 4© 2011 Winston & Strawn LLP
  5. 5. U.S. Electric Power Net Generation,2009 Source: U.S. Energy Information Administration, Electric Power Annual Coal, Natural Gas, Nuclear – 88 % 5© 2011 Winston & Strawn LLP
  6. 6. U.S. Energy Prices by Technology• Coal • 4.0 cents per kWh• Natural Gas • 4.0 cents per kWh• Nuclear • 11.0 - 15.5 cents per kWh (based on new 1 GW plant costs between $6 billion and $8 billion), probably low figure, now escalating given nuclear problems in Japan• Biomass • 7.0 - 9.0 cents per kWh• Geothermal • 3.0 - 5.0 cents per kWh• Solar • ~30 cents per kWh (CPV), 2007 • < 7 cents per kwh, projected 2015 • 13.0 - 17.0 cents per kWh (concentrating solar power technologies >10 MW in size)• Wind • 4.0 - 8.0 cents per kWh (depending on actual wind resource and project financing). 6© 2011 Winston & Strawn LLP
  7. 7. U.S. Generation Capacity Source: The Market Oracle, available at: 7© 2011 Winston & Strawn LLP
  8. 8. Projected New Generation Source: Energy Information Administration Annual Energy Outlook 2009 8© 2011 Winston & Strawn LLP
  9. 9. Projected New Generation• According to Energy Information Administrations Annual Energy Outlook 2009 for the period 2008 to 2030, capacity additions will be: • 53% Natural gas-fired plants • 22% Renewable plants • 18% Coal-fired plants • 5% Nuclear plants 9© 2011 Winston & Strawn LLP
  10. 10. Sustainability – What Is It?• The phrase “Sustainable Development” was coined in 1980 by the International Union for the Conservation of Nature with the publication of its World Conservation Strategy• There is no officially established or recognized singular definition of “sustainable development”• Most oft-quoted definition • Development that “meets the needs of the present generation without compromising the ability of future generations to meet their own needs.” Report of the World Commission on Environment and Development, General Assembly Resolution 42/187, December 11, 198 10© 2011 Winston & Strawn LLP
  11. 11. Sustainability – Components• In the corporate context, the concept of sustainable development is generally understood to embody three component parts • corporate governance • environment • social governance 11© 2011 Winston & Strawn LLP
  12. 12. Sustainability – Corporate GovernanceComponent• Corporate Governance aspects of sustainability include: • using open and transparent participatory processes that actively engage relevant stakeholders • a strong commitment to running one’s business ethically and in compliance with legal standards • corporate accountability and responsibility • actively working against corruption in the business community generally 12© 2011 Winston & Strawn LLP
  13. 13. Sustainability – EnvironmentalComponent• Environmental aspects of sustainability include: • conscientious and careful use of natural resources (resource management) • reducing greenhouse gas emissions • preserving biodiversity • managing human consumption • energy management/renewable energy • reduce, reuse, recycle 13© 2011 Winston & Strawn LLP
  14. 14. Sustainability – Social GovernanceComponent• Social Governance aspects of sustainability include: • respecting human rights and security • clearly establishing the rights and obligations of employees/laborers • ensuring fair and appropriate wages and safe and healthful working conditions • supporting the local community • recognizing and preserving cultural and spiritual values amongst the workforce and the surrounding community • efficient allocation of resources 14© 2011 Winston & Strawn LLP
  15. 15. Sustainability – Corporate Drivers• Investors • risk reduction • cost reduction • profitability improvement• Business customers• Consumer preference• Brand value/equity 15© 2011 Winston & Strawn LLP
  16. 16. Sustainability – Corporate Significance• 93% of Accenture-surveyed CEOs see sustainability as important to their company’s future success (A New Era of Sustainability, UN Global Compact-Accenture CEO Study 2010 (“Accenture Study”, at 10, 19)• 96 % of Accenture-surveyed CEOs believe sustainability should be fully integrated into the strategy and operations of a company (Accenture Study, at 32)• 88% of Accenture-surveyed CEOs believe that sustainability should be integrated through their supply chain (Accenture Study, at 35) 16© 2011 Winston & Strawn LLP
  17. 17. Sustainability: The TraditionalParadigm• Defensive, Involuntary, Regulatory Compliance• Laws and regulations requiring compliance• Driver, avoidance of civil and sometimes criminal penalties• Energy • Renewable Portfolio Standards (CA, 33%) • Energy Independence • Competition with fossil-fuel generation (Coal, Gas) • Purchaser Monopsony Utilities • Economic focus on comparative price of electron • Fossil-fuels win, externalities and commercial value ignored. 17© 2011 Winston & Strawn LLP
  18. 18. Sustainability: The TraditionalParadigm• Environmental • Clean Air and Water Acts (Federal and state) • Climate Change Initiatives (Federal, state, international (Kyoto)) • Greenhouse Gas Emission Reductions (AB 32, CA) • Federal and state Environmental Protection Agencies • State Regulators and lawmakers • Issues of penalty to competitiveness of business and jobs • Economic impact on states with high dependency on fossil-fuel generation and stakeholder interests (oil, coal, gas companies, utilities, and labor unions) • Recent barrage of federal legislation to block EPA and federal governments from regulating emission reductions 18© 2011 Winston & Strawn LLP
  19. 19. The Emerging Paradigm• Offensive, Voluntary, Commercial Strategic Plans• Economic Proposition, the “Green” Product• Voluntary spending by corporations for economic gain • Responding to demands by customers (wholesale) • Responding to demands by consumers (retail) • Responding to demands by Board Members and Shareholders • Sustainability evaluations in procurement• Value proposition no longer losing comparison with electron from traditional fossil-fuel generation• Value proposition is commercial value of “Green” products and services (Marketing “Green”) 19© 2011 Winston & Strawn LLP
  20. 20. The Emerging Paradigm• Economic, Commercial Value Proposition is significant game changer as compared to playbook of last three decades • Externalities and commercial values weigh in decision making • Cost of “Green” no longer solely electric ratepayer issue • Higher cost of electron absorbed in market and sales • Fritolay (SunChips) • Dow Chemical • The Proctor & Gamble Paper Products Co. • Walmart • Seen by leading companies as essential to their future • Compelling data from CEOs and Executive Managers 20© 2011 Winston & Strawn LLP
  21. 21. Complex and Complicated PathForward• The Metrics – What Qualifies as “Green”? • Standards for “Green” • Off-sets for “Green”• Cap and Trade of “Green Attributes” (Carbon Taxes) • Creation of markets and trading rules • Local direct Greenhouse Gas reductions verses remote, purchased or traded reductions• Branding, Marketing and Advertising – What can be said about being “Green”? (False and Misleading Claims)• Competition: National and International (a US advantage over China and India?) 21© 2011 Winston & Strawn LLP
  22. 22. Complex and Complicated PathForward• Uncertainties in Implementation Abound • How to determine commercial value (economic models)? • Will consumers pay the “Green” premiums, if premiums exist? • Is the desire for “Green” temporary, or indicative of a permanent change in behavior (generational distinctions) • Will competitors follow the leading companies? • Will global markets and countries follow leading nations? • If the US delays, will it find itself at advantage or disadvantage in global markets (Kyoto, “Green” markets)? • How competitive and accessible are markets for the electrons associated with “Green” energy production (energy issue)? • Will another Enron be averted (corporate responsibility)? 22© 2011 Winston & Strawn LLP
  23. 23. The Politics of “Green”• Social, economic, political circus (global issues)• Healthcare, a walk in the park in comparison• Strange Bedfellows • Leading companies become leading advocates • Different labor unions align with different stakeholders • Environmentalists align with Nuclear industry• Is “Green” a Democratic issue (environmental) or a Republican issue (business and jobs)?• Does “Green” create jobs and opportunity or hurt them?• Can we afford “Green”, do we have a choice? 23© 2011 Winston & Strawn LLP