The Economic Opportunities Arising from the Challenge of

Global Climate Change

Green Investment and the Role of State Government

Roger BallentineGreen Strategies, Inc.

2

Environment and Climate ChangeEnd of an Era … Beginning of an Era?

Source: IPCC Third Assessment Report (2001)

Atm

osph

eric

co

ncen

tratio

n C

O2

(ppm

)

360

340

320

300

280

260

1000 1200 1400 1600 1800 20001000 1200 1400 1600 1800 2000

Source: NREL

310

290

270

250

1000 1200 1400 1600 1800

Changes in Atmospheric Concentrations - 1000 Year History

3

World and US Oil DilemmaEnd of an Era … Beginning of an Era?

NATIONALSECURITY

4

World and US Oil DilemmaEnd of an Era … Beginning of an Era?

NATIONALSECURITY

Peak OilNational Security

“MEGA” TRENDS AND MARKETS

The Energy Marketplace will be Defined by Two “Mega”

Trends

5

Market Actors/Investors Responding to these Drivers --

• 1: Unprecedented Demand/Relative-ly Fixed Supply

• 2: Sustained Political Response to Climate Crisis/Security Concerns

6

Business-as-usual foreca

550 ppm-fast

550 ppm-slow

Stabilization at 550 ppm

8

Final Report Updated 9/21/20079

National End-Use Consumption for Electricity in Trillion Btu

Cooling793, 26%

Cooking65, 2%

Space Heating155, 5%

Water Heating37, 1%

Other288, 9%

Ventilation226, 7%

Refrigeration266, 9%

Office Equipment 555, 18%

Lighting716, 23%

10

Residential Sector End Use Savings as a % of Total Achievable Cost Effective Potential (80% Penetration Scenario)

Appliances8%

Space Heating & Cooling (Energy Efficient Equip.)

7%

Lighting30%

Standby Power3%

Space Heating & Cooling (Shell

Measures)32%

Water Heating15%

New Homes Construction

5%

11

The Challenge of Putting RE into Use- Regional Resources, Economics, and Politics -

Resource Potential

SOLAR ENERGY WIND POWER

GEOTHERMAL BIOMASS

12

Wind Power

0500

10001500200025003000350040004500500055006000

1990 1995 2000 2005 2010Sources: AWEA (actual) and ACORE (forecast)

US Wind Power Installations(MW/Year)

Key Issues: Government incentivesTransmission accessPerformance

13

Solar PV

0500

100015002000250030003500400045005000

1990 1995 2000 2005

WorldU.S.

Global Solar PV Production(MW/Year)

Key Issues:Government incentivesCost reductions

14

Concentrating Solar Power

Solar Trough:354 MW SEGS64 MW Solargenix1,000 + Under contract3,000+ MW Proposed:AusraIberdrolaLuz IISESSunEnergyOthers

Key Issues = Economics And Transmission

15

Geothermal Energy

Geothermal Power:

3,600 MW in operation

3,000 MW coming online

100,000 MW mid-term future

Vision: 500 GW potential, displacing coal’s baseload role

Key Issue = R&D Funding and Technology Transfer

16

Hydropower72,000 MW in place

+ 3,000 MW incremental hydro

+ 20,000 MW Small Hydro

+ 90,000 MW New:• Ocean power• Kinetic powerKey issue = siting and permitting

17

Biomass Energy

Outlook to 2025: Over 100 GW of additional potential:

Industrial CHP: 57 GW

Wholesale power: 37 GW

Solid Waste: 10 GW

Key Issue = economics and risk of fuel supply

18

Ethanol137 Biorefineries + 63 projects under Construction

+ 7 Under Expansion in 21 StatesEthanol

Number of Processing Plants

• Booming expansion 2003-2008• MTBE replacement done• Now blend up to 10%• Demand for ethanol? E85?• Flex fuel vehicles?

0

20

40

60

80

100

120

140

2000 2003 2006

Operating Annual Additions

19

EthanolThe 2007 Renewable Fuels Standard

• 2005: 7.5 BGY by 2012 RFS

• 2007: 36 BGY by 2022– 21 BGY by

“advanced” ethanol• 2008-2009: back-

track???

EthanolMillion Gallons / Year

0

5000

10000

15000

20000

25000

30000

35000

40000

1990 2000 2010 2020

2007 RFS

2006 Outlook

2005 RFS

Actual

20

US new build ethanol investmentand M&A 2003-2007: $m

2003 2004 2005 2006 2007

New build

$3,637m (29)

$4,954m (38)

$2,631m (28)

$705m (9)$950m (14)

Dry mill distillery cash margin, US,Jan 2000-Feb 2008: $c/gal

Source: New Energy FinanceGrossed-up estimate based on disclosed deals. New investment only.

0

100

200

300

Typical operational cost

Jan2000

Oct 2000

Jul2001

Apr2002

Jan2003

Oct2003

Jul2004

Apr 2005

Jan2006

Oct2006

Jul2007

2003 2004 2005 2006 2007

Acquisitions$869m (3)

$641m (6)$90m (2)

$11m (1)$0m (0)

US Bioethanol Margins, Investment and M&A

21

Revolutionary Opportunity at our Doorstep

Biofuels + Hybrid Engines

2003 Toyota Prius47 mpg

50 – 100 mpg of fuel by Hybrid Vehicles300–600 mpg of gasoline when running E85

10x to 20x improvement

2006 Toyota Prius51 mpg

22Source: New Energy Finance, IMF WEO Database, IEA WEO 2007,

Boeing 2006 Annual ReportAdjusted for reinvestment. Geared re-investment assumes a 1 year lag between VC/PE/Public Markets funds raised and re-investment in projects.

Total Global New Investment in Clean Energy2004 – 2007

1% of global fixed asset investment

19% of global energy industry infrastructure investment

250% of commercial aircraft investment

$148.4bn

$92.6bn

$58.7bn

$33.4bn

2004 2005 2006 2007

76% Growth

58% Growth

60% Growth

23

2004 2005 2006 2007$0.6bn $1.2bn $1.7bn $1.9bn

Services & other

2004 2005 2006 2007

$0.7bn $1.2bn $2.0bn $3.2bn

Efficiency

2004 2005 2006 2007

$1.0bn$5.2bn

$19.4bn$19.2bn

Biofuels

2004 2005 2006 2007

$0.6bn$3.2bn

$9.4bn

$28.6bn

Solar

New Investment by Sector, 2004 - 2007

2004 2005 2006 2007

$9.7bn

$17.8bn

$25.8bn

$50.2bn

2004 2005 2006 2007

Other renewables

$1.9bn$4.9bn

$9.9bn$14.6bn

73%pagrowth

254%pagrowth

97%pagrowth

169%pagrowth

65%pagrowth

52%pagrowth

Wind

VC/PE, Public Markets and Asset Finance only. Excludes re-investment adjustment Source: New Energy Finance

24

New Investment in Clean Energy by Region2004 - 2007

2004 2005 2006 2007

$15.8bn

$28.1bn

$37.9bn

$76.2bn

EMEA

2004 2005 2006 2007

$9.6bn

$17.8bn

$36.1bn

$42.9bn

AMER

2004 2005 2006 2007

$7.9bn$12.6bn

$18.5bn

$29.3bn

ASOC

69%pagrowth

55%pagrowth

Adjusted for reinvestment. Geared re-investment assumes a 1 year lag between VC/PE/Public Markets funds raised and re-investment in projects.

65%pagrowth

Source: New Energy Finance

25

New Investment in Clean Energy by Asset Class2004 - 2007

2004 2005 2006 2007

$1.6bn $3.0bn$7.3bn

$9.8bn

VC/PE

2004 2005 2006 2007

$0.7bn$4.1bn

$10.5bn

$23.4bn

Public Markets

2004 2005 2006 2007

$12.1bn

$26.5bn

$50.3bn

$84.5bn

Asset Investment

81%pagrowth

219%pagrowth

91%pagrowth

Source: New Energy FinanceExcludes re-investment adjustment

Totalknown funds

1,573

26

2004 2005 2006 2007

229% growth

261% growth

23% growth

Number of funds within brackets;Includes actively managed funds that have at least 50% of their investments in clean energy

Source: New Energy Finance; Bloomberg

$1.4bn (9) $1.7bn (10)

$6.2bn (14)

$20.4bn (29)

Public Equity FundsAssets Under Management 2004-2007

27

Carbon trading volume2005-2007: $bn

2002 2003 2004 2005 2006 2007

EU-ETS/CDM - Primary Others

0.1

30.0

67.0

0.30.6

1.1

27

1999 2000 2001 2002 2003 2004 2005 2006 2007

Public Private

67% pagrowth

Source: World Bank; UNFCCC; New Carbon FinanceSource: World Bank; UNFCCC; New Carbon Finance

0.2

Carbon fund assets under management 1999-2007: $bn

0.3 0.3 0.81.7

2.7

4.7

8.0

12.5390% pagrowth

Carbon Finance

Discussion

What can States do?

28