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e8-GEF-UNDESA-UNESCAP Financing Sustainable Electrification

South-East Asia Dialogues Bangkok, Thailand, September 8-10, 2009

Risks of Clean Tech Investments in South-East Asia

Peter Greenwood Executive Director- Strategy

CLP Holdings

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Technical Risks

• Limited level of clean tech deployment in Southeast Asia (other than hydro)

• Emerging and evolving clean tech lack track record

• Energy infrastructure not equipped for high penetration of clean technologies

• Adaptation of clean tech to local conditions for Southeast Asia

• Intellectual Property (IP) risks - technology companies may be selective in term of markets

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Economic Risks: Clean Tech is Expensive

Clean Energy is seriously out of the money – and seriously out of the market

> $400 / MWh

*Notes:NGCC = Natural Gas Combined-Cycle

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…and the Major Costs are Upfront

There are no small (worthwhile) bets in advanced clean technology

200MW CO2 mineralisation ~USD 580M

CO2 storage tenement ~USD 200M – 370M

500MW IGCC ~USD 1.5B

99MW windfarm ~USD 120M

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Economic Risks: CER Revenue Uncertainty

Source: Point Carbon website, Secondary CER OTC Assessment, 14-August-2009

Secondary CER Prices (€)

• Volatility of CER prices

• Uncertainty in CERs generated due to resource and energy production variability (e.g. wind power)

Average, Maximum and Minimum Values of Monthly Capacity Factors, Germany, 1990-2003, Showing the Long-Term

Pattern of Wind Power Variability

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Regulatory Risks

NB: - The target for Vietnam is an aspirational target, i.e. one which has not yet been passed into law.

- Philippines does not have a % renewable energy target, but has installed capacity targets for different types of renewable energy.

- Hong Kong, Indonesia, Vietnam, and Philippines do not offer feed-in tariffs for renewable generation at present

• Stable and consistent clean tech policies and incentives are yet to be developed in some countries

• Uncertainty and volatility of regulations hinder investment and deployment

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Regulatory RisksEven within national markets, state or provincial regulation

can become the major driver (or risk) to growth

-

100

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1,000

Upto Mar’01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Tamil Nadu 807 47 133 355 688 861 565 392

Maharasthra 198 197 2 6 49 545 484 276

Gujarat 165 9 7 29 51 85 329 580

Karnataka 51 23 52 81 200 171 265 187

Rajasthan 9 8 44 130 94 75 112 70

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Environmental Risks• Long-term environmental impacts of unproven

technologies are not clear– E.g: Potential CO2 leakage from geological storage (CCS)

• Renewable energy resources are vulnerable to climate change impact

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Project Risks

• New, start-up technology vendors may not be able to honour commitments until product life (e.g. out of business before end of performance guarantee)

• Small markets may only afford or accept projects below critical mass, rendering less competitive cost structures (e.g. high overheads, limited choice of supplier/partner)

• Off-taker may have financial difficulties to pay dues

• Small clean tech projects in small markets are price takers and vulnerable to changes in major markets

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Advanced Technology Deployment Risk Hurdles

Project

Economic

Technical

Environmental

Regulatory

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Contact Information:Email: pwgreenwood@clp.com.hk

priscillalee@clp.com.hk

Tel: +852-2678-8182Fax: +852-2678-8333

Website: www.clpgroup.com