Investing in Green Energy
Will new capacity meet
renewable targets set by states?
State RE Goal (5/50)
PA: 18%**
by 2020NJ: 22.5% by 2021
CT: 23% by 2020
WI: requirement varies by utility; 10% by 2015 goal
IA: 105 MW
MN: 25% by 2025(Xcel: 30% by 2020)
TX: 5,880 MW by 2015
AZ: 15% by 2025
CA: 20% by 2010
NV: 20% by 2015
ME: 30% by 200010% by 2017 -
new RE
State RPS (28/50)
HI: 20% by 2020
RI: 16% by 2020
CO: 20% by 2020 (IOUs)10% by 2020 (co-ops & large munis)
DC: 20% by 2020
NY: 24% by 2013
MT: 15% by 2015
IL: 25% by 2025
VT: (1) RE meets any increase in retail sales by
2012;
(2) 20% RE & CHP by 2017
MD: 20% by 2022
NH: 23.8% in 2025
OR: 25% by 2025 (large utilities)5% -
10% by 2025 (smaller utilities)
VA: 12% by 2022
DE: 20% by 2019NM: 20% by 2020 (IOUs)
10% by 2020 (co-ops)
NC: 12.5% by 2021 (IOUs)10% by 2018 (co-ops & munis)
ND: 10% by 2015
SD: 10% by 2015
UT: 20% by 2025OH: 25% by 2025
MI: 10% + 1,100 MW by 2015
MA: 15% by 2020
+ 1% annual increase
(Class I Renewables)
MO: 15% by 2021
WA: 15% by 2020
Source:
DSIRE, Interstate Renewable Energy Council.
State Renewable Portfolio Standards and State Renewable Energy Goals
Will the U.S. reach its renewable energy consumption goals?
Solar1%
Biomass47%
Geothermal6%
Hydro45%
Wind2%
Renewable energy
6%
Petroleum40%
Coal23%Natural gas
23%
Nuclear power8%
Total energy consumption
Source:
EIA 2006.
Global clean-tech revenues growing
0
20
40
60
80
100
120
140
160
Biofuel Wind Solar
2007
2008
2018 Projection
Source:
Clean Edge 2009
US$ billions
Will renewable power overcome its additional hurdles?•
Low margins and high capital costs (nature of the investment means that costs must be amortized over a long period of time, increasing all other risks)
•
Low operating costs (creating tax disadvantages vs. fossil fuel generation)•
Technology risk premiums (unproven technologies such as biomass gasification, cellulosic ethanol and new advanced wind turbines)
•
Market risk premiums (uncertainty of resource availability and continued policy support)
•
Reduced capacity payments ability to sell into the spot market (due to intermittency of resource or unreliability of plant operation)
•
Inconsistent regulation in the form of subsidies and tax credits
make renewable power a risky investment
Source:
Booz Allen Hamilton.
Global quarterly clean-tech investment
slowing down
05
1015202530354045
2004
Q1
2004
Q2
2004
Q3
2004
Q4
2005
Q1
2005
Q2
2005
Q3
2005
Q4
2006
Q1
2006
Q2
2006
Q3
2006
Q4
2007
Q1
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
Source: New Energy Finance.
US$ billions
Infrastructure and energy represents 15% of Recovery and Reinvestment Act
Source: The American Recovery and Reinvestment Act of 2009
Other stimulus US$ 646.4 Billion
Infrastructure US$ 80.9 Billion
Energy US$ 49.7 Billion
The American Recovery and Reinvestment Act of 2009: Energy Expenditures
Source: The American Recovery and Reinvestment Act of 2009
Energy-efficient smart grid $4.5B
Transmission lines $6.5B
State and local energy investment $6.3B
Radioactive cleanup $6B
Weatherizing medium income homes $6B
Federal building efficiency $4.5B
Carbon capture experiments $3.4B
Energy efficiency research $2.5B
Advanced car battery $2B
Energy efficiency and conservation grants $3.2 B
Other $3.7B
How to bridge the gap between VC, PF
and projected investment needs?Venture Capital
•Total invested in Clean-Tech industry in 2008: US$ 4.1 billion
•Size of average deal: US$ 15 million
Project Financing
•Total invested in Energy/Infrastructure industry in 2008: US$ 262 billion
•Size of average deal: US$ 400 million (up to US$ 10 billion)
Sources: PricewaterhouseCoopers/National Venture Capital Association, Thomson Reuters, Brattle Group.
Total investment needed to update the US electric system:
•Smart Transmission and Distribution grids: US$ 900 billion
•New and cleaner generation capacity: US$ 600 billion to US$ 1.1 trillion
? ?
The Funding Gap
Lynde
H. Coit, Executive VP, Corporate DevelopmentPlasco
Energy Group, Inc.
Plasco
Energy Group
Robert Kleine, TreasurerState of Michigan
Green Investing in Michigan
Green Investing Poised for Golden Age Allianz
Global Investors Survey of Investors
Obama Adm. will produce more policy promoting green investment in first year than Bush Adm. produced in eight years
% Agree
78%
Congress more strongly support policies promoting green investment
74%
Exploring alternative fuel sources remains important, despite declining gas prices
97%
Resolving environmental problems will be a major issue for years 91%
Green Investing Poised for Golden Age Allianz
Global Investors Survey of Investors% Agree
Important to look at investing in companies that capitalize on
addressing problems Environmental technology has potential to be “next great American industry”
69%
78%
Plunging stock prices (70% for Green Index) have had no effect on desire to invest in environmental stocks
72%
“At least somewhat likely”
to invest in environmental companies this year
48%
Made investments in 2008 in firms capitalizing on environmental trends
22%
Renewable electricity as percentage of U.S. electricity
Source: American Wind Energy Association
Coal 48.5%
Petroleum & Petroleum Coke 1.1%
Natural Gas 21.6%
Other 0.3%
Nuclear 19.7%
Hydro 6.1%
Other Renewables
3.0%
Wind 42.0%
Other Biomass
13.8%
Geothermal 12.1%
Wood 31.4%
Solar 0.7%
Coal 48.5%
Petroleum & Petroleum Coke 1.1%
Natural Gas 21.6%
Other 0.3%
Nuclear 19.7%
Hydro 6.1%
Other Renewables
3.0%
Wind 42.0%
Other Biomass
13.8%
Geothermal 12.1%
Wood 31.4%
Solar 0.7%
Recent Legislation
•
Clean, Renewable, and Efficient Energy Act (PA 295 of 2008) –
10% of electric provider’s energy must come from renewable sources by 2015–
Requires electric and natural gas providers to file energy optimization plans–
Prescribe maximum retail rate impacts resulting from compliance of with renewable energy standards
–
Numerous additional provisions designed to encourage the use of renewable energy in electricity generation.
•
Qualified Home Improvement Credit and Renewable Energy Standard Credit (PA 287 of 2008)
–
10% income tax credit up to $200 for qualified home improvements
including insulation, furnaces, water heaters, windows, dishwashers, clothes washer and refrigerators that meet energy start guidelines; (AGI less than $37,500 single, $75,000 joint)
–
Income tax credit equal to 25% tax year 2009 and 20% in 2010 and
2011 of the increase in the residential utility rate resulting from the renewable energy source requirements. (The utility rate increase cannot exceed $3 per month).
Motor Vehicle Battery Activity
•
Tax credits enacted designed to make Michigan the center for advanced automotive battery manufacturing.
•
Provide credits for–
Battery pack assembly–
Expenses for vehicle engineering to support battery use–
Expenses for engineering for advanced automotive battery technologies–
Capital investment expenses for construction of battery manufacturing facilities
•
$520 million in credits will lead to $2 billion in investments and 7,700 new jobs
Battery Investment in Michigan
•
Johnson Controls-Saft
Advanced Power Solutions
--
$220 million investment for advanced batteries for plug-in hybrid vehicles. JCS has partnered with Ford Motor. Project expected to create 498 new jobs.
•
LG Chem-Compact Power
–
Korean based LG Chem, in partnership with GM, investing $200 million to manufacture lithium ion batteries in Michigan.
•
KD Advanced Battery Group
–
Joint venture of Dow Chemical, Kokam
America, and Townsend Ventures LLC, plans to invest $665 million
in a new 800,000 square foot battery manufacturing facility. Expected to
create 885 new jobs.
•
A123 Systems Inc.
–
Plans to invest $600 million in Michigan in initial coating, cell manufacturing, and pack assembly. Has entered into an agreement with Chrysler LLC to provide battery systems for the company’s ENVI product line.
Solar Energy Investment
•
Dow Chemical and Hemlock Semiconductor
–
will invest up to $1 billion to expand its manufacturing facility in Hemlock Michigan. HSC is the world’s leading producer of polycrystalline silicon, a component of photovoltaic cells. State provided a tax credit totaling $8.4 million over 20 years.
Project expected to create 576 jobs.
•
United solar
–
expanding plant manufacturing solar panels in Greenville Michigan. Expansion will add 400 workers. Tax credits totaling
$5.7 million over 20 years.
•
Evergreen solar
–
new facility that will create inputs for the solar power manufacturers low cost String Ribbon wafer technology. Expansion includes $55 million in investment and 596 new jobs. State tax credits totaling $1.8 million over 10 years.
Wind Energy
•
Danotek
Motion Technologies
–
a technology developer and manufacturer of permanent magnet generators, power control electronics and brushless motor for power generation industries and advanced-automotive applications expanding operations and relocating Plymouth Michigan. The facility will produce generators for use with wind turbines. Project received a $2.5 million tax
credit and will create 353 new jobs.
Alternative Investments -
Wind
•
Noble Environmental Power
–
Alternative Energy (wind farms)•
Modular Wind Energy
–
Produces blades for wind turbine.•
Svendborg
Brakes
–
Hydraulic brake solutions for wind turbine industry.
•
LM Glasfiber
–
Produces blades for wind turbine.•
Power Wind Holding
–
Manufactures wind turbine.
Alternative Investments -
Solar
•
Advent Solar
–
Unique design to increase solar cell efficiency.•
SmartSpark
Energy Systems
–
Alternating current photovoltaic.•
CaliSolar
–
Photovoltaic company patents and manufactures solar cells.
•
Solar Power Partners
–
Solar energy facilities.
Alternative Investments -
BioFuels
•
Qteros
(SunEthanol) –
Develop cellulosic ethanol processing solution.
•
Coskata
–
Biology-based renewable energy for liquid fuels.•
ZeaChem
–
Biorefinery
platform producing ethanol or a broad portfolio of other chemicals.
•
EcoSynthetix
–
Develops bio-based materials with performance capabilities equal to or greater than petroleum-based products.
Alternative Investments -
Other
•
Imara
–
Rechargeable batteries for cordless power tools and hybrid electric vehicle markets.
•
Redwood Systems
–
Power control technologies to save energy costs for lighting.
Steve Westly, Managing Partner The Westly
Group
Clean Tech: This is Not a Bubble
China + 50 Other Emerging Market Countries
Clean Tech: This is Not a Bubble
PARTICULATE MATTER OVER LOS ANGELES THAT CAME FROM CHINA: 25%25%
Then vs. Now, eBay vs. Tesla
Internet BoomInternet Boom
1.1.
Viral GrowthViral Growth
2.2.
Tech DrivenTech Driven
3.3.
Silicon Valley DrivenSilicon Valley Driven
Clean TechClean Tech
1.1.
Steady Growth, Heavy M&ASteady Growth, Heavy M&A
2.2.
Tech & GovernmentTech & Government
3.3.
Silicon Valley & AsiaSilicon Valley & Asia
The Obama Stimulus:
Clean Tech is a Smart Investment
$19 billion for energy efficiency & green building:–
Smart Grid & Utility Enhancements
$11 billion to modernize the electric grid–
Green Building Materials
$2 billion in grant funding for energy storage and vehicle batteries–
Zero Emission Vehicles
Speakers:Jonathan Bloch, Senior Managing Director and Managing Partner, GKM Newport; Managing Partner, GKM VenturesLynde
Coit, Executive Vice President, Corporate Development, Plasco
Energy Group Inc.Robert Kleine, Treasurer, State of MichiganJim McDermott, Managing Director, US Renewables
GroupSteve Westly, Managing Partner, The Westly
Group
Moderator:Paul Deninger, Vice Chairman, Jefferies & Company Inc.
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