Best Opportunity Analysis-Renewable Energy

Best Opportunity Analysis-Renewable Energy

Sustainable Energy Conference, 1st December 2009

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Global Energy Situation

HSBC: $470bn set aside for green-stimulus plansBanking giant HSBC says that 15% of global stimulus packages are being spent on environmental measures — which means about $470bn of government spending and $3.1trn of tax cuts — are being dedicated to ‘green’ areas.

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Projected Energy & Electricity Demand to 2030Projected Energy & Electricity Demand to 2030

Global Energy Situation, a look at the key figures…..

0%

20%

40%

60%

80%

100%

120%

140%

Energy Need Electricity Demand

0%

20%

40%

60%

80%

100%

120%

140%

Energy Need Electricity Demand

+76%

+126% Energy and electricity consumption significantly higher in the backdrop of:

Higher price of crude oil, gas, and coal

Lower reserves

Higher Co2 Emissions

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Why Renewable Energy?

Politics (usually no1 reason..)

Energy Security (diversify from M.E.)

Energy Diversity (gaps in demand, legislation, ie. California 2010)

Displace Imports (esp. fuels)

Environment (air quality, GHG, carbon markets…)

Job Creation (strong potential)

Politics (usually no1 reason..)

Energy Security (diversify from M.E.)

Energy Diversity (gaps in demand, legislation, ie. California 2010)

Displace Imports (esp. fuels)

Environment (air quality, GHG, carbon markets…)

Job Creation (strong potential)

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Clean Energy - Historical Growth, 2004 to 2006Clean Energy - Historical Growth, 2004 to 2006

Global Renewables Market : Historical Growth

0

20

40

60

80

100

120

140

2004 2005 2006 2007

0

20

40

60

80

100

120

140

2004 2005 2006 2007

USD $ bn

+81%

+43%

$27.5

$49.6

$70.9

Source : SEFI, Frost & Sullivan analysis

+67%

$117

These figures exclude M&A activity in existing businesses

In terms of Venture Capital money the Renewable Energy sector is number 3 in the US behind Technology and Healthcare

Sub-prime market does not seem to be holding back investments into the “Clean Tech” Sector, though share prices have taken a knock, especially solar which had very high PE Ratios.

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Western Europe

North America

Central & Eastern Europe

Middle East

MaturityDevelopment Growth

Africa

Latin America

Market Lifecycle by Region – Renewables. Is Asia at a tipping point? Wind and solar already big of course…..

Asia

• Historical Investments in EU and US• Asia is where the growth will be – energy

demand driven, with constraints and potential gaps, and driven by high oil prices

• Will also be the highest GHG emitter (x3 by 2030)

• Historical Investments in EU and US• Asia is where the growth will be – energy

demand driven, with constraints and potential gaps, and driven by high oil prices

• Will also be the highest GHG emitter (x3 by 2030)

Current Money FlowFuture Money Flow

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Global Energy Consumption Mtoe, 1973, 2005, 2030fGlobal Energy Consumption Mtoe, 1973, 2005, 2030f

Asian energy situation : becoming more and more important as a region, supply demand imbalance?

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1973 2005 2030f

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1973 2005 2030f

34%

26%

13%

Mtoe China (20%) and Rest of Asia (14%), combine to account for 34% of the world’s energy requirements in 2030, up from 26% in 2005.

Possible that there may be a gap in energy production that renewables could fill.

OECD FSU China Asia

Lat Am

Source : IEA World Energy Outlook 2006

M.E.

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Million tonnes of Co2, 2005 and 2030 by Key CountryMillion tonnes of Co2, 2005 and 2030 by Key Country

Green House Gases in Asia set to increase significantly

Green House Gases are set to triple in the next 20-25 years at the currnent pace of development.

China, India, and Indonesia are the three main culprits.

Most of this will be from industry, but land use in Asia also accounts for a high portion of Co2 emissions.0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

China India Indonesia

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

China India Indonesia

Mt Co2

x3

x6 x2

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Cellulosic

Biofuels

Geothermal

Long TermImmediate Mid Term

Energy

Efficiency

Small Hydro

Market Opportunity by Area : Timing

Carbon Market

Wind Biomass

Biogas

Tidal

Hydrogen

Clean Coal

Solar

???????

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Summary of best opportunities by selected countries

IndiaIndia

• Wind• Solar

• Biomass/ Biogas• Small Hydro

• Wind• Solar


ChinaChina

• Wind• Solar


• Wind• Solar


AustraliaAustralia

• Wind• Solar

• Wind• Solar

IndonesiaIndonesia

• Geothermal• Biomass/Biogas

• Biofuels

• Geothermal• Biomass/Biogas

• Biofuels

KoreaKorea

• Solar• Biomass/ Biogas

• Wind• Tidal

• Solar• Biomass/ Biogas

• Wind• Tidal

ThailandThailand

• Biomass/ Biogas• Biofuels

• Biomass/ Biogas• Biofuels

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Summary of barriers by renewable energy type

SolarSolar

• Which Technology?• Subsidies/ legislation

• Silicon supply• Cost?

• Which Technology?• Subsidies/ legislation

• Silicon supply• Cost?

BiomassBiomass

• Feedstock control/ cost• Size of project

• Legislation

• Feedstock control/ cost• Size of project

• Legislation

GeothermalGeothermal

• Cost• Well risk

• Transmission• Politics

• Cost• Well risk

• Transmission• Politics

BiogasBiogas

• Feedstock control/ cost• Size of project• Transmission

• Feedstock control/ cost• Size of project• Transmission

WindWind

• IRR• Value Capture

• Cash Flow• Cost

• IRR• Value Capture

• Cash Flow• Cost

HydroHydro

• Political• IRR’s

• Size of projects

• Political• IRR’s

• Size of projects

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Opportunities By Area - Solar

• Pro’s• Pro’s

• Abundant Energy Source• Abundant Energy Source

• Con’s• Con’s

• Needs Feed In Tariffs• Silicon Constraints 2008

• Cloud Cover in Certain Areas• Cost & Efficiency

• Needs Feed In Tariffs• Silicon Constraints 2008

• Cloud Cover in Certain Areas• Cost & Efficiency

World Asia

Market Size, 2007

$8.0 Billion

$2.3 Billion

127 MWInstalled

127 MWInstalled

15 MW in 2007

15 MW in 2007

360 MW in 2007

360 MW in 2007

2027 MWInstalled

2027 MWInstalled

72.5 MWInstalled

72.5 MWInstalled

8 MW in 2007

8 MW in 2007

90 MWInstalled

90 MWInstalled

20 MW in 2007

20 MW in 2007

1.8 GW potential

1.8 GW potential

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Opportunities By Area - Wind


• Clean Energy Source• Clean Energy Source


• Unsightly• Value in the Equipment

• IRR low-ish• Big Boys Play Here

• Unsightly• Value in the Equipment

• IRR low-ish• Big Boys Play Here

World Asia

Market Size, 2007

8000 MWInstalled

8000 MWInstalled

6050 MWInstalled

6050 MWInstalled

1730 MW in 2007

1730 MW in 2007

65 GW potential

65 GW potential

3449 MW in 2007

3449 MW in 2007

Potential:253 GW Onshore 750 GW Offshore

Potential:253 GW Onshore 750 GW Offshore

139 MW in 2007

139 MW in 2007

1538 MWInstalled

1538 MWInstalled

$17.2 Billion

$4.8 Billion

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Opportunities By Area – Small Hydro


• Clean Source of Energy• Small Hydro Interesting

• Clean Source of Energy• Small Hydro Interesting


• Need Portfolio of Projects• Environmental Consideration

• Political

• Need Portfolio of Projects• Environmental Consideration

• Political

World Asia

Market Size, 2007

2045 MWInstalled

2045 MWInstalled

149 MW in 2007

149 MW in 2007

15 GW potential

15 GW potential

49 GWInstalled

49 GWInstalled

125 GW potential

125 GW potential

1500 MW in 2007

1500 MW in 2007

416 MWInstalled

416 MWInstalled

65 MW in 2007

65 MW in 2007

$4.4 Billion$3.7 Billion

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Opportunities By Area - Biomass


• Much Biomass Available• IRR’s Attractive

• Much Biomass Available• IRR’s Attractive


• Cost of Collection• Size of Projects

• Competition

• Cost of Collection• Size of Projects

• Competition

World Asia

Market Size, 2007

1580 MWInstalled

1580 MWInstalled

228 MW in 2007

228 MW in 2007

16 GW potential

16 GW potential

3000 MWInstalled

3000 MWInstalled

400 MW in 2007

400 MW in 2007

$3.7 Billion

$1.5 Billion 30 GW potential

30 GW potential

2400 MWInstalled

2400 MWInstalled

400 MW in 2007

400 MW in 2007

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Opportunities By Area - Biogas


• A Lot Available (Agri, Ind. Municipal)

• Good for Carbon Credits

• A Lot Available (Agri, Ind. Municipal)

• Good for Carbon Credits


• Underused Area• Can be Political

• Underused Area• Can be Political

World Asia

Market Size, 2007

62 MWInstalled

62 MWInstalled

4.2 MW in 2007

4.2 MW in 2007

> 700 MW potential

> 700 MW potential

3.9 million digestersinstalled

3.9 million digestersinstalled

24 million digestersinstalled

24 million digestersinstalled

96000 digesters In 2007

96000 digesters In 2007

4 million digesters in 2007

4 million digesters in 2007

$3.2 Billion

$0.6 Billion

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Opportunities By Area - Geothermal


• Can be Major Source of Energy

• Can be Major Source of Energy


• Expensive• Transmission Issues

• Low Awareness• Political

• Expensive• Transmission Issues

• Low Awareness• Political

World Asia

Market Size, 2007

4000 MW potential

4000 MW potential

40 MW in 2007

40 MW in 2007

1978 MWInstalled

1978 MWInstalled

992 MWInstalled

992 MWInstalled

185 MW in 2007

185 MW in 2007

40 MWIn 2007

40 MWIn 2007

472 MW Installed

472 MW Installed

1000 MWpotential

1000 MWpotential

20 MWIn 2007

20 MWIn 2007

535 MW Installed

535 MW Installed

$1.0 Billion

$3.0 Billion

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Cost per MW in s.e Asia by Source, 2007Cost per MW in s.e Asia by Source, 2007

Cost per MW of project compared to other power projects still remains high though…..

0 2 4 6 8 10

Coal

Solar

Geothermal

Small Hydro

Biomass

Wind

0 2 4 6 8 10

Coal

Solar

Geothermal

Small Hydro

Biomass

Wind

USD $mn/ MW

As attractive as renewable energy is their overall costs per MW still remain higher than conventional sources of energy.

This problem is further compounded by the fact that projects are typically of a smaller overall investment than conventional power plants.

Prices per MW are however continuing to come down as the cost of equipment comes down.

Source : Frost & Sullivan analysis

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…….. and IRR’s typically around the 20% level for project developers. Is risk in Asia rewarded?

Wind Power

Geothermal

IRR Comments

Biogas

Small Hydro

Solar

Biomass

Area

Biofuels

Overall

~15%Depends on size of project location, and carbon credits. Needs CC’s to be viable.

+ or - 75%Heavily dependent on feedstock prices. Similar to a refining business.

~20%Will depend on size and location. Can be more or less than this depending on a variety of factors.

~20%

~20% Depends on size, project location and characteristics of geothermal reservoir.

~20%

~15%Depends on project size and availability of carbon credits.

Highly dependent on project location.

~20% Depends on feedstock, technology, costs involved on land and labor.

Will depend on feedstock prices. Needs attractive feed-in-tariff and tax rebates.

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Conclusion

Renewable Energy will the best investment opportunity in the 21st century….

But

……will require time and time and massive Capex

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[email protected]

Global VP, Consulting

+65 9615 8293

[email protected]

Global VP, Consulting

+65 9615 8293

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AppendixAppendix

Best Opportunity Analysis-Renewable Energy

Business

Transcript of Best Opportunity Analysis-Renewable Energy