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BEIJING CHARLOTTE CHICAGO GENEVA HONG KONG HOUSTON LONDON LOS ANGELES NEW YORK NEWARK MOSCOW PARIS SAN FRANCISCO SHANGHAI WASHINGTON, D.C.
North America Europe Asia
www.winston.com © 2011 Winston & Strawn LLP
BEIJING CHARLOTTE CHICAGO GENEVA HONG KONG HOUSTON LONDON LOS ANGELES NEW YORK NEWARK MOSCOW PARIS SAN FRANCISCO SHANGHAI WASHINGTON, D.C.
North America Europe Asia
www.winston.com © 2011 Winston & Strawn LLP
Jerry R. Bloom Chair, Energy Practice Winston & Strawn, LLP [email protected] (213) 615-1756
SOLAR ENERGY: A Path to Energy Significance
The George Washington University Solar Institute Solar – The Private Sector is the Driver
Washington, D.C. April 12, 2012
© 2011 Winston & Strawn LLP 2
Global Energy Demand
© 2011 Winston & Strawn LLP 3
Global Market: Net Electricity Generation
Source: U.S. Energy Information Administration: International Energy Outlook 2011
Trillion kilowatthours
© 2011 Winston & Strawn LLP 4
Global Market: Energy Use by Fuel Type
Source: U.S. Energy Information Administration: International Energy Outlook 2011
Quadrillion Btu
© 2011 Winston & Strawn LLP 5
U.S. Electric Power Net Generation, 1990-2035
Source: U.S. Energy Information Administration, Electric Power Annual
Source: U.S. Energy Information Administration: Annual Energy Outlook 2012 (early release)
© 2011 Winston & Strawn LLP 6
Selected Average Prices of Natural Gas in the U.S., 2006-2010
Source: U.S. Energy Information Administration: Natural Gas Annual (release date December 29, 2011)
© 2011 Winston & Strawn LLP 7
Projected New Generation
• According to Energy Information Administration's Annual Energy Outlook 2011 for the period 2010 to 2035, 223 gigawatts of new generating capacity will be needed:
• 60% Natural gas-fired plants • 25% Renewable plants • 11% Coal-fired plants • 3% Nuclear plants
© 2011 Winston & Strawn LLP 8
Sustainability – The New Driver
• Climate and health as global issues • Investors
• risk reduction • cost reduction • profitability improvement
• Business customers • Consumer demand/preference • Brand value/equity • Empower end user to take action on climate and
health issues
© 2011 Winston & Strawn LLP 9
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)
© 2011 Winston & Strawn LLP 10
Sustainability: The Traditional Paradigm • 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.
© 2011 Winston & Strawn LLP 11
Sustainability: The Traditional Paradigm • 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
© 2011 Winston & Strawn LLP 12
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”)
© 2011 Winston & Strawn LLP 13
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
© 2011 Winston & Strawn LLP 14
Sale/Procurement of Renewable Energy by Utilities • Current paradigm mandates sale of bundled Product
to the utility purchaser, all know and unknown products
• Competition with fossil-fuels has resulted in race to the bottom and negligible value for green attributes
• Ratepayers should not have to bear the costs associated with improving health and environmental quality
• Utilities and regulators are interested in electrons, not environmental quality
© 2011 Winston & Strawn LLP 15
Sale/Procurement of Renewable Energy to End Users, Private Sector • New paradigm, separate the electron from the Green
Attributes • Electrons get sold to utilities at fossil-fuel, mark to
market price • Green electrons get priority in dispatch order • Green Attributes get sold to end users who need or
want such attributes and are willing to provide value • Both electric ratepayers and end users get the product
they want • Market value for Green Attributes can emerge
© 2011 Winston & Strawn LLP 16
Solar the Preferred Renewable Resource • Economies of scale allow small and utility sized
projects (distributed generation) • Solar availability peaks with system demand bringing
significant value to the resource • Significant diversity in available solar products, PV,
thermal, CSP, CPV • Storage potential addresses intermittency issues • Pricing curves on radical decline • Consumer buy in and support is high