Andrew AulisiAndrew AulisiWorld Resources InstituteWorld Resources Institute

DESC 2004 Worldwide Energy Conference DESC 2004 Worldwide Energy Conference

September 29, 2004September 29, 2004

Renewable Energy and Renewable Energy and Corporate MarketsCorporate Markets

AgendaAgenda

• Introduction to renewable energy and the GPMDGIntroduction to renewable energy and the GPMDG

• Business case for green powerBusiness case for green power

• New marketsNew markets

3535

World primary energy* supply, 2000World primary energy* supply, 2000Percent, 100%= 9,958 Mtoe**

* Primary energy = Reflects fuels used directly (e.g., for heat) and indirectly (e.g., to generate electricity)* Primary energy = Reflects fuels used directly (e.g., for heat) and indirectly (e.g., to generate electricity) ** Mtoe = Million metric tons of oil equivalent** Mtoe = Million metric tons of oil equivalent*** Includes wood, wood & crop residues, animal wastes, landfill gas, and other energy sources from organic materials*** Includes wood, wood & crop residues, animal wastes, landfill gas, and other energy sources from organic materialsSource: International Energy Agency, Source: International Energy Agency, Renewables in Global Energy Supply: An IEA Fact SheetRenewables in Global Energy Supply: An IEA Fact Sheet (2002) (2002)

Worldwide primary energy supply - 2000Worldwide primary energy supply - 2000

RenewablesRenewables1414

OilOil2323

2121

77

CoalCoal

Natural Natural gasgas

NuclearNuclear

Breakdown by renewable resource, 2000Breakdown by renewable resource, 2000Percent, 100%= 1,374 Mtoe**

Biomass***Biomass***

HydroHydro

GeothermalGeothermal

Wind, solar, & otherWind, solar, & other

7777

1717

33 33

3939

U.S. primary energy* supply, 2000U.S. primary energy* supply, 2000Percent, 100%= 2,300 Mtoe**

* Primary energy = Reflects energy used directly (e.g., for heat) and indirectly (e.g., to generate electricity)* Primary energy = Reflects energy used directly (e.g., for heat) and indirectly (e.g., to generate electricity) ** Mtoe = Million metric tons of oil equivalent** Mtoe = Million metric tons of oil equivalent*** Includes wood & crop residues, liquid biomass, animal wastes, landfill gas, and other energy sources from organic materials*** Includes wood & crop residues, liquid biomass, animal wastes, landfill gas, and other energy sources from organic materialsSource: International Energy Agency, Source: International Energy Agency, Energy Balances of OECD Countries 1999 - 2000Energy Balances of OECD Countries 1999 - 2000 (2002) (2002)

U.S. primary energy supply - 2000U.S. primary energy supply - 2000

RenewablesRenewables55

OilOil

Breakdown by renewable resource, 2000Breakdown by renewable resource, 2000Percent, 100%= 110 Mtoe**

Biomass***Biomass***

HydroHydro

GeothermalGeothermal

Wind, solar, & otherWind, solar, & other

6767

1919

121222

2323

2424

99

CoalCoal

Natural Natural gasgas

NuclearNuclear

U.S. primary renewable energy* U.S. primary renewable energy* supply, 2000supply, 2000Percent, 100%= 110 Mtoe**

* Primary energy = Reflects energy used directly (e.g., for heat) and indirectly (e.g., to generate electricity)* Primary energy = Reflects energy used directly (e.g., for heat) and indirectly (e.g., to generate electricity) ** Mtoe = Million metric tons of oil equivalent** Mtoe = Million metric tons of oil equivalent *** Includes wood & crop residues, liquid biomass, animal wastes, landfill gas, and other energy sources from organic materials*** Includes wood & crop residues, liquid biomass, animal wastes, landfill gas, and other energy sources from organic materials**** Gigawatt-hours. One gigawatt-hour = 1,000,000 kilowatt-hours**** Gigawatt-hours. One gigawatt-hour = 1,000,000 kilowatt-hoursSource: International Energy Agency, Source: International Energy Agency, Energy Balances of OECD Countries 1999 - 2000Energy Balances of OECD Countries 1999 - 2000 (2002) (2002)

U.S. primary renewable energy supply: Fuels U.S. primary renewable energy supply: Fuels for electricity generation - 2000for electricity generation - 2000

Electricity Electricity generationgeneration2626

7474

Heat & Heat & otherother

Breakdown by renewable resource, 2000Breakdown by renewable resource, 2000Percent, 100%= 332,000 GWh****

Biomass***Biomass***

HydroHydro

GeothermalGeothermal Wind, solar, & otherWind, solar, & other

7575

1919

44 22

Installed nameplate capacity Installed nameplate capacity (MW)(MW)

ResourceResource YE 2000YE 2000 YE 2003YE 2003 CAGR CAGR (’00-’03)(’00-’03)

WindWind 2,5782,578 6,3726,372 35%35%

Solar PVSolar PV 139139 278278 26% 26%

Biomass*Biomass* 7,4347,434 7,4787,478 0%0%

GeothermalGeothermal 2,7932,793 2,2522,252 -7%-7%

LFG-to-electricityLFG-to-electricity 797797 1,0501,050 10% 10%

TotalTotal 13,74113,741 17,43017,430 8.2%8.2%

Wind has been the fastest growing renewable power Wind has been the fastest growing renewable power resource since 2000resource since 2000

* Net summer peak capacity* Net summer peak capacitySource: American Wind Energy Association, Energy Information Administration, International Energy Agency, Landfill Methane Source: American Wind Energy Association, Energy Information Administration, International Energy Agency, Landfill Methane Outreach ProgramOutreach Program

The Green Power Market Development GroupThe Green Power Market Development Group

Developing corporate markets Developing corporate markets for for 1,000 MW1,000 MW of new, of new,

cost-competitive green power cost-competitive green power by 2010 in the USby 2010 in the US

Alcoa Inc.Alcoa Inc.Cargill Dow LLCCargill Dow LLC

Delphi CorporationDelphi Corporation

DuPontDuPontGeneral MotorsGeneral Motors

IBMIBMInterfaceInterface

Johnson & JohnsonJohnson & JohnsonKinko’sKinko’s

Pitney BowesPitney Bowes

StaplesStaples

The Dow Chemical CompanyThe Dow Chemical Company

The Group is pursuing several forms of green power . . . The Group is pursuing several forms of green power . . .

Green electricityGreen electricity • WindWind• SolarSolar• BiomassBiomass• Landfill gasLandfill gas• GeothermalGeothermal• Low-impact hydroLow-impact hydro

Green thermal Green thermal energyenergy

• Landfill gasLandfill gas• BiomassBiomass• SolarSolar

““Clean” energy Clean” energy technologiestechnologies

• Fuel cellsFuel cells

. . . that can be purchased in multiple ways. . . that can be purchased in multiple ways

On-site On-site systemssystems

• Install renewable energy Install renewable energy system on own premisessystem on own premises

Green Green electricityelectricity

• Purchase renewable-generated Purchase renewable-generated power from retail electricity power from retail electricity providerprovider

Renewable energy Renewable energy certificatescertificates

• Buy “environmental Buy “environmental attributes” separately from attributes” separately from commodity electricitycommodity electricity

A renewable energy certificate (REC) represents the A renewable energy certificate (REC) represents the positive attributes of green powerpositive attributes of green power

AgendaAgenda

• Introduction to renewable energy and the GPMDGIntroduction to renewable energy and the GPMDG

• Business case for green powerBusiness case for green power

• New marketsNew markets

Green power can provide several business benefitsGreen power can provide several business benefits

2. Strengthen stakeholder relations2. Strengthen stakeholder relations­ Customers / brandingCustomers / branding­ Employees and local communitiesEmployees and local communities­ ShareholdersShareholders

3. Improve costs3. Improve costs­ Cost savingsCost savings­ ““Peak-shaving”Peak-shaving”­ Cost stabilization: Fossil fuel price hedgeCost stabilization: Fossil fuel price hedge

1.1. Meet corporate targets and reduce emissions (e.g. COMeet corporate targets and reduce emissions (e.g. CO22))

Photo courtesy of Community Energy, Inc.Photo courtesy of Community Energy, Inc.

Switching from natural gas to landfill gas is saving GM Switching from natural gas to landfill gas is saving GM $500,000 per year at an assembly plant$500,000 per year at an assembly plant

• Fort Wayne, INFort Wayne, IN

• Truck Assembly PlantTruck Assembly Plant

• Landfill gas displaces natural gasLandfill gas displaces natural gas

• Fixed price contract provides insulation Fixed price contract provides insulation against NG market price fluctuationsagainst NG market price fluctuations

Photo courtesy of General MotorsPhoto courtesy of General Motors

Volatility in power prices can be driven by Volatility in power prices can be driven by natural gasnatural gas

Source: Electric Power Pool of Alberta (electricity prices), Natural Gas Exchange Inc. AECO Next Day Price Index Value (natural gas prices) Source: Electric Power Pool of Alberta (electricity prices), Natural Gas Exchange Inc. AECO Next Day Price Index Value (natural gas prices)

Alberta, CanadaAlberta, Canada

““GreenChoice” GreenChoice” ProgramProgram

• Replace fluctuating Replace fluctuating fossil fuel charge with fossil fuel charge with fixed renewable fuel fixed renewable fuel chargecharge

• Fixed until 2011Fixed until 2011

• Wind & landfill gasWind & landfill gas

Some green power products can serve as a hedge Some green power products can serve as a hedge against fluctuating energy costsagainst fluctuating energy costs

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04

cent

s / k

Wh 1.7¢/kWh

Green ChoiceBatch 1

fluctuating fossil fuel charge

Austin Energy Fuel Charge vs. Green Choice Charge

Selling the “hedge value” propelled Austin Energy’s Selling the “hedge value” propelled Austin Energy’s green power programgreen power program

0 50,000 100,000 150,000 200,000 250,000 300,000 350,000

Austin EnergyAustin Energy

Portland General ElectricPortland General Electric

SMUDSMUD

PacifiCorpPacifiCorp

Xcel EnergyXcel Energy

LA DPWLA DPW

TVATVA

We EnergiesWe Energies

Alliant EnergyAlliant Energy

Puget Sound EnergyPuget Sound Energy

Source: U.S. Department of Energy, National Renewable Energy Laboratory. As of December 2003Source: U.S. Department of Energy, National Renewable Energy Laboratory. As of December 2003..

MWh/yearMWh/year

(2002)

(2002)

Strategies used for buying green powerStrategies used for buying green power

• Competitively bidCompetitively bid• Aggregate demand when soliciting proposals (within, with others)Aggregate demand when soliciting proposals (within, with others)• Work with supplier to design new green power productWork with supplier to design new green power product

Squeeze costsSqueeze costs

• Rebates, accelerated depreciation, etc. for on-site systemsRebates, accelerated depreciation, etc. for on-site systemsLeverage government incentivesLeverage government incentives

• Use savings achieved by energy efficiencyUse savings achieved by energy efficiency• Use savings achieved by switching to new electricity supplierUse savings achieved by switching to new electricity supplier• Realize hedge value of green powerRealize hedge value of green power

Find creative ways to pay for premium (if any) Find creative ways to pay for premium (if any)

36 MW

The Group has completed 112 MW of green power projects The Group has completed 112 MW of green power projects and purchasesand purchases

RenewableRenewableenergyenergy

certificatescertificates

35

19

16

6

Hydrogen Hydrogen fuel cellsfuel cells

Wind powerWind power

Landfill Landfill gasgas

Other Other renewable renewable

powerpower

As of December 2003As of December 2003

AgendaAgenda

• Introduction to renewable energy and the GPMDGIntroduction to renewable energy and the GPMDG

• Business case for green powerBusiness case for green power

• New marketsNew markets

RECs markets are growing due to several RECs markets are growing due to several advantagesadvantages

• Lower costLower cost

Photo courtesy of National Renewable Energy LaboratoryPhoto courtesy of National Renewable Energy Laboratory

• Wider selection of suppliersWider selection of suppliers

• Greater variety of renewable Greater variety of renewable resource optionsresource options

• Simplified transactionsSimplified transactions­ Independent of electricity supplyIndependent of electricity supply­ Multiple locations at onceMultiple locations at once

By aggregating demand, 9 Group partners & WRI By aggregating demand, 9 Group partners & WRI completed the largest corporate RECs purchasecompleted the largest corporate RECs purchase

Over 265,000 MWh per yearOver 265,000 MWh per year

SEPTEMBER 2003SEPTEMBER 2003

HostHostProject Project

developerdeveloper(Sun Edison)(Sun Edison)

The “services model” using solar powerThe “services model” using solar power

- Receives solar power Receives solar power from on-site system from on-site system under long-term under long-term contractcontract

- Provides space & Provides space & access but access but does notdoes not own arrayown array

- No capital requiredNo capital required

- Receives income from Receives income from electricity saleselectricity sales

- Arranges financing, Arranges financing, design & constructiondesign & construction

InvestorInvestor(e.g., SRI Fund)(e.g., SRI Fund)

ManufacturerManufacturer/ Installer/ Installer

- Receives low-risk ROI Receives low-risk ROI from power sales & from from power sales & from government incentivesgovernment incentives

- Provides capital & owns Provides capital & owns systemsystem

- Receives revenue Receives revenue from equipment from equipment sales sales

- Provides warrantiesProvides warranties

Building markets for stationary fuel cellsBuilding markets for stationary fuel cells

• Use for by-product Use for by-product hydrogenhydrogen

• Reduced emissionsReduced emissions

• Cost-competitive electricityCost-competitive electricity

• Improved fuel cell design Improved fuel cell design and increased fuel cell and increased fuel cell production scaleproduction scale

Photo courtesy of The Dow Chemical CompanyPhoto courtesy of The Dow Chemical Company

By developing new products, the Group is making By developing new products, the Group is making green power more attractive to C&I customersgreen power more attractive to C&I customers

Off-the-shelf Off-the-shelf green powergreen power

LocalLocal LFG REC LFG REC + +

Local electricityLocal electricity

High premiumHigh premium

Case example: Case example: Pepco Energy Services & Tower Cos., March 2003Pepco Energy Services & Tower Cos., March 2003

New green New green power productpower product

NationalNational biomass REC biomass REC + +

Local electricityLocal electricity

Lower premiumLower premium

More optionsMore options