©

Industry Trends inRenewable Energy

7 May 2008

Andrew McMahan

VP Technology, SkyFuel Inc.

7 May 2008 ©2

Industry Trends in Conventional Energy

Natural Gas: $2-3 $11/mmBtu (summer season)

Crude Oil: $20 $120/barrel

New Coal-Fired Generation: $1200 $2500/kW*

New Gas-Fired Generation (peaking): <$500 $1300/kW**

FutureGen (IGCC, CCS): $3000/kW $6500/kW***

New Nuclear Generation: ?

California Market Price Referent: 5¢/kWh 10¢/kWh (busbar)

*Duke Energy 800MW Coal Plant**budget for 45MW peaker plant in California: $60M***published bid of $1.8B for 275MW project

7 May 2008 ©3

Commodity Prices

7 May 2008 ©4

The Utility Reality

Source: Energy Information Administration, WECC Region

80,000

90,000

100,000

110,000

120,000

130,000

1992 1994 1996 1998 2000 2002 2004 2006

Year

Peak

Dem

and (

MW

)

50,000

60,000

70,000

80,000

90,000

100,000

Ave

rage

Dem

and (

MW

)

Peak Average

7 May 2008 ©5

The Utility Reality

New Generation Must be built to satisfy new demand

Renewable Portfolio Standard Pressure

State Amount YearArizona 15% (energy) 2025

California 20% 2010

Colorado 20% 2020

Nevada 20% 2015

New Mexico 20% 2020

7 May 2008 ©6

The Utility Response: 2008 RFPs

ANNOUNCED

EXPECTED

7 May 2008 ©7

The Utility Response

Natural Gas Gets Built

Wind Gets Built

І Biomass

І token PV projects

Solar Gets Hyped, Contracts Get Signed

7 May 2008 ©8

The Industrial Reality

High and volatile energy prices are bad for business

Future Regulation of Emissions (Carbon!) is an Ill-Defined, but Potentially Very Large, Liability

Customers and Investors Increasingly Conscious of Energy and Environmental Issues

7 May 2008 ©9

The Industry Response

Sustainability Initiatives and Targets

Internal & External Funding of Renewable Technology

7 May 2008 ©10

The Industry Response

Why?

І Hedge Operating Costs

І Reduce Future Emissions Liability

І Improve Public Image, Stakeholder Leverage

How?

І Dependent on Local Market - All are Evolving

І Energy Efficiency, On-Site Generation

І Renewable Energy Purchase Agreements with Utilities (or IPPs)

І REC Purchases from Voluntary Markets (Green-e)

− Vintage

− Future

− Geography Independent

7 May 2008 ©11

A Closer Look at Solar: A Grand Plan

Concentrating Solar Power (CSP)

І Solar-Thermal

7 May 2008 ©12

CSP Basics: The Parabola

A parabola focuses parallel rays of light.

Mirror

Receiver

7 May 2008 ©13

The TechnologiesDish Stirling (SES)

Linear Fresnel (Biotech Novasol) Power Tower (“Solar Two”, U.S. DOE)

Trough (SEGS)

7 May 2008 ©14

US Southwest

7 May 2008 ©15

CSP Thumbnail

Proven and Bankable TechnologyProven and Bankable Technology

Systems Operating in California Since 1984Systems Operating in California Since 1984

Ideally Suited to the American SouthwestIdeally Suited to the American Southwest

Utility Scale Projects, 50 to 500 Megawatts (MW)Utility Scale Projects, 50 to 500 Megawatts (MW)

7 May 2008 ©16

0:00 6:00 12:00 18:00 0:00

California Demand Solar Output (No Storage)

Source: SkyFuel, California ISO, Notes: 16th July 2007 Data

Solar Delivers Peak Power

7 May 2008 ©17

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

Huge Resource

Easy to Asses

Demand Correlated

Scalable

Dispatchable

Affordable. . .

CSP: The One Stop Shop

7 May 2008 ©18

Spain41%

Other16%

United States 43%

Parabolic Trough74%

Sterling Dish9%

Power Tower11%

Linear Fresnel

6%

54 Announced CSP Plants Worldwide

4,000 Megawatts

$8-$10 Billion

74% Parabolic Trough

43% in USA

Massive Development Efforts

Stirling Dish

7 May 2008 ©19

Solar-Thermal Projects (U.S.)

Operating

SEGS I-IX, 354 MW

Nevada Solar One, 64 MW

Announced

Abengoa Solana, 280 MW, 6 Hours Storage

Ausra Carrizo Planes, 177 MW

Stirling Energy, 1-1,750 MW

Solel, 550 MW

Bright Source Energy, 550 MW

…

7 May 2008 ©20

The Cost Discrepancy

Market Price Referent (MPR)

MPR with Time of Delivery

Advanced Parabolic Trough

Traditional Parabolic Trough

Signed Power Purchase Agreements

Actual Cost of New Systems• Power Tower• Linear Fresnel• Dish Engine

Cost

of

Ener

gy/M

arke

t Pr

ice

7 May 2008 ©21

Liar’s Poker

7 May 2008 ©22

CSP: A Maturing Market

Large Foreign and Domestic Development Efforts

Ambitious Companies Confusing Expectations

Regulators and Utilities Have yet to Fully Recognize the Impact of Renewables

І The value of dispatchability

І The cost of intermittency

2-3 Year Shake-Out In Progress, Exposing Bluffs

The Future is “Bright”

І Arizona Public Service Makes a Stand

7 May 2008 ©23

Summary

Conventional Energy is Getting More Expensive

The Cost Gap to Renewable Energy is Shrinking

RPS is Driving Compliance Green Energy Markets

Public Interest and Price Volatility Concerns are Driving Voluntary Green Energy Markets

Concentrating Solar Power Has Tremendous Potential in the American Southwest

Market Still Maturing

7 May 2008 ©24

Waiting for the Rising Tide…

xxxІ xxxx

7 May 2008 ©25

APPENDICES

7 May 2008 ©26

The Importance of (Thermal) Storage

Supply Side

Thermal Energy Storage with CSP

І Molten Salt

І Concrete, Ceramics

Demand Side

Ice/Chilled-Water Storage

7 May 2008 ©27

Renewable Energy 1-2-3

1. Geothermal

2. Solar Energy

І Wind

І Biomass

І Photovoltaic

І Solar Thermal CSP

І Ocean waves

3. Planetary Motion

І Tidal power

… uncertain resource, “dry holes”

… intermittent, poor correlation to demand

… limited resource, land and water use

… limited scale and intermittent

…

… harsh environment, access

… limited resource

7 May 2008 ©28

New versus Proven

Assumption

OpticalAbsorberPumpingPower CycleAvailabilityCapital CostO&M

BestEstimate

1111111

=100%

Reality

95%95%95%95%95%95%95%

Pro Forma

105%105%105%105%105%105%105%=141%

=70%

Difference 2×