4. / / / / / /
PV INDUSTRY: BOOMING IN CRISIS
Falls in price are not purely due to margin compression – they are
also due to gains in efficiency and cost
The entire PV value chain has been remarkably adept at reducing
prices as incentives come down, and installation volumes continue
to grow strongly
We expect installation growth to continue and prices to stabilise in
2013, although consolidation will continue
5. / / / / / /
EBIT MARGINS OF PV MANUFACTURERS, Q4 2012
Source: Bloomberg New Energy Finance
The largest 17 quoted
pureplay PV
manufacturers made a
total net loss of at least
$8.9bn in 2011 and 2012
6. / / / / / /
THE PV MODULE EXPERIENCE CURVE, 1976–2012 ($/W)
Source: Paul Maycock,
Bloomberg New Energy
Finance
0.1
1
10
100
1 10 100 1,000 10,000 100,000 1,000,000
experience curve
1976
2006
2012
1985
2003
2012
experience curve
historic prices (Maycock)
Chinese c-Si module prices (BNEF)
Thin-film experience curve
First Solar thin-film module cost
Cost
per W
(2012$)
Cumulative capacity (MW)
7. / / / / / /
AVERAGE EFFICIENCY OF PV CELLS, 2010-2012 (%)
Source: Bloomberg New
Energy Finance
17.5 17.7 17.2
16.2 16.3 16.1
18.2 18.1 18.2
16.8 16.7 16.8
18.6 18.5 18.6
17.0 17.0 17.0
Mono cell
Average all
mono
China mono International
mono
Average all
multi
China multi International
multi
2010 2011 2012
10. / / / / / /
PV BUILD 2007-2012, CENTRAL FORECAST (MW/YEAR)
Source: Grid operations,
incentive programme
operators, industry
associations, Bloomberg
New Energy Finance
2.8GW
6.6GW 7.7GW
18.2GW
28.7GW 30.6GW
35.7GW
46.6GW
54.5GW
2007 2008 2009 2010 2011 2012 2013 2014 2015
Western Europe Eastern Europe Japan USA
China India Rest of World
Historical Forecast
13. / / / / / /
THE WIND INDUSTRY IN 2013
Margin
pressure
Manufacturing
overcapacity – 2
times demand
Pricing pressure –
27% drop since
2008
Market uncertainty
– 17% drop in
demand in 2013
14. / / / / / /
TRANSFORMATION OF WIND TURBINE MANUFACTURERS?
Equipment
manufacturer
Energy service
company
GearboxesBlades
Design Siting
O&M
Monitoring
Design
Gearboxes
Blades
15. / / / / / /
TRANSFORMATION OF WIND TURBINE MANUFACTURERS?
Equipment
manufacturer
Energy service
company
MW MWh
16. / / / / / /
TRANSFORMATION OF WIND TURBINE MANUFACTURERS?
Equipment
manufacturer
Energy service
company
Low margins
High competition
Less product
differentiation
One off revenue
Higher margins
More product
differentiation
Longer term
revenue stream
17. / / / / / /
HOW TO BECOME AN ENERGY SERVICES COMPANY?
Product differentiation – turbines designed for specific markets
Increase service revenue – bundle O&M contracts with turbines
sales
Flexible manufacturing – quality instead of quantity
21. / / / / / /
FLEXIBLE MANUFACTURING
Cut costs Expand into
new markets
Reduce
presence in
heavily
oversupplied
markets
Meet local
needs in new
markets
(servicing,
local content
requirement)
22. / / / / / /
THE WIND INDUSTRY’S NEW ROI
Resilience: ability to survive pricing pressure and overcapacity in
supply chain by rethinking business model
Optionality: selling more than one product, selling an energy
service
Intelligence: specific products targeted to specific customers in
specific markets
26. / / / / / /
ONLINE GEOTHERMAL POWER ASSETS
Just 11.4GW online
globally
196GW estimated
potential
27. / / / / / /
ESTIMATED GEOTHERMAL RESOURCE POTENTIAL (MW)
113GW (est.) in 39
developing countries
Seen as economic
development tool
28. / / / / / /
ANNOUNCED GEOTHERMAL PROJECTS
10.3GW (224 projects)
stuck in pre-drilling
29. / / / / / /
PROJECTS STUCK BECAUSE OF DRILLING RISK
Sticking point
$m
Source: Bloomberg New Energy Finance
30. / / / / / /
A GLOBAL EXPLORATION DRILLING FUND
LOANS
COMMERCIAL
BANK
LOANS
LOANS
DEVELOPMENT
FINANCE ORG
GEOTHERMAL EXPLORATION
DRILLING FUND
PORTFOLIO
31. / / / / / /
PROJECT SUCCESS PROBABILITY
DRILLING SUCCESS FACTORS FUND COSTS ($M)
44%
73%
62%
55%
75%
69%
0.34%
11% 13%
27%
30%
18%
100-
150C
150-
190C
190-
230C
230-
300C
300C+ Steam
field
Field success rate Field prevalence
1%
5%
34%
60%
549
Set-up Admin Debt service Write-offs Total costs
Source: Bloomberg New Energy Finance, Rinova International, IFC
32. / / / / / /
INTEREST RATES CHARGED TO SUCCESSFUL PROJECTS
SENSITIVITY TO DRILLING SUCCESS SENSITIVITY TO COST OF CAPITAL
Historical
weighted
average
success
0%
10%
20%
30%
40%
50%
60%
70%
40% 50% 60% 70% 80% 90%
Drilling success rate
Multilateral
3.5%
Private
7%
0%
10%
20%
30%
40%
50%
60%
70%
0% 5% 10% 15%
WACC
Source: Bloomberg New Energy Finance, Rinova International
33. / / / / / /
KEY TAKEAWAYS
Fund is feasible – provide access to capital
Leverage investment 1:18
Catalyse capacity expansion
37. / / / / / /
RESILIENCE: IMPACT OF SANDY ON THE POWER GRID
806
630
450
300
156 14
LIPA JCP&L ConEd PSE&G CL&P Pepco
Total customers that
lost power: 8.6m
SANDY STORM DAMAGE ESTIMATES
OF SELECTED UTILITIES ($M)
38. / / / / / /
RESILIENCE: CAN SMART TECHNOLOGY HELP?
PEPCO (DC) – SANDY 2012
• 425,000 smart meters installed and
activated at time of storm
• ‘Last-gasp’ functionality for outages
• Meters ‘pinged’ to locate faults
• Power restored to 130,000 homes
in two days
VERMONT ELECTRIC COOP:
OUTAGE FREQUENCY, 2005-2010
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Jul-07
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
System average interruption frequency index (SAIFI)
39. / / / / / /
RESILIENCE: UTILITY RECONSTRUCTION PLANS ($M)
PUBLIC SERVICE ELECTRIC & GAS (NJ)CONSOLIDATED EDISON (NY)
240
200
165
106
105
100
60Upgrading selected ovehead lines
Network reconfiguration
Floodproof 460/208/120 volt equip
Gas system flood protection
Electric/steam flood barriers
Moving selected line underground
Substation flood barriers
976
1,700
1,040
454
215
200
140
60
Move 20 miles of lines undground
Protection of gas metering stations
Improve redundancies
Improve distribution lines
Smart grid deployment
Modernize gas mains
Upgrade switching/substations
3,809
Network reconfiguration
Smart grid deployment
40. / / / / / /
OPTIONALITY: MICROGRIDS
15
9
9
4.8
2.41
1
0.5
Princeton distributed
energy resources (MW)
Back pressure steam turbine
Demand response
Diesel generation
CHP
PV
Chilled water storage
Steam-driven cooling
Gas turbine / HRSG
Total: 43MW
PRINCETON UNIVERSITY MICROGRID CASE STUDY
• Resilience:
• Can provide power, cooling and heat to entire
campus in island mode, when utility is down
• Optionality:
• Can use DERs to participate in wholesale and
ancillary service markets
• Can purchase power in wholesale markets –
arbitrage and hedging
• ‘Safe haven in the storm’ during Sandy
• Key enablers:
• Smart microgrid technology
• Renewable energy policy
• Restructured market
41. / / / / / /
INTELLIGENCE: SMART ENERGY DATA APPLICATIONS
Geospatial visualisation tools for situational intelligence
Space-Time
Insight
BuildingIQ
DataRaker/Oracle
Using near real-
time data feeds to:
• Predict
renewable
generation
• Track outages
• Monitor asset
health
• Coordinate
emergency
response
42. / / / / / /
INTELLIGENCE: SMART ENERGY DATA APPLICATIONS
Predictive optimisation of building energy use using building data,
weather forecasts and demand response programme information
Utility DR
programs,
pricing data
BMS system
-HVAC
-Lighting
-Occupancy
Weather
data
Building
optimisation
engine
Improved DR
capacity and
overall building
efficiency
Space-Time
Insight
BuildingIQ
DataRaker/Oracle
43. / / / / / /
INTELLIGENCE: SMART ENERGY DATA APPLICATIONS
Cloud-based, big data tools to mine smart meter data
Using smart meter
data analytics to:
• Pinpoint energy
theft
• Identify faulty
metering
conditions
• Build asset
utilisation
profiles
Space-Time
Insight
BuildingIQ
DataRaker/Oracle
44.
45. / / / / / /
BNEF UNIVERSITY
HARRY BOYLE
Head of Research, Bioenergy
Bloomberg New Energy Finance
49. / / / / / /
OLD SCHOOL VERSUS NEW SCHOOL BIO-INNOVATION
SURPLUS BIOMASS INCINERATION POWER
SOFT COMMODITIES
FERMENTATIO
N
ESTERIFICATI
ON
ETHANOL
BIODIESEL
Limited innovation; uses well known processes
UPSTREAM MIDSTREAM DOWNSTREAM
40 FEEDSTOCKS x 50 TECHNOLOGIES x 20 PRODUCTS
= 40,000 THEORETICAL PATHWAYS
ALL BIOMASS
MULTIPLE
PATHWAYS
TAILORED
PRODUCTS
54. / / / / / /
CONCLUSIONS
Do investors understand the dynamics of niche and bulk
agricultural commodity markets well enough? Fingers burnt during
1-gen roll out
Bioenergy industry already shown its ability to innovate: now going
through a natural shake-out stage, where some technologies pass
and some fail
Steel going in ground for a dozen semi-commercial scale cellulosic
ethanol plants, with well-capitalised players heavily involved:
industry inflection point almost there