March 2011

Green Energy Futures

Jeff Kenna

A changing world ....

The Greatest Market Failure?

Beware of group thinking

Don’t

Short Term

Group Think

Wrong Measures

Do Long Term

Independent

Sustainable

Seizing opportunities

A Tale of Two Strategies

Hummer – 346 gms C02/km General Motors in Liquidation

Leaf – 0 gms C02/km Nissan in profit

What needs to happen: 2 tonnes per person by 2050

2050 Target

How can we get there? Fuel mix in a transition to low carbon society

UK: The Energy Challenge Ahead

Decommissioning of nuclear power stations

Closure of coal power stations – Large Combustion Plan Directive

Rising oil and gas prices

Political instability in oil & gas rich countries

Lack of investment in energy infrastructure

Climate change and sustainability

Rising energy demand

Consequences

Need to decarbonise our energy system

Increasing electricity prices – Minimum 25% real increase by 2020

Massive investment - £200bn by 2020

Large scale energy efficiency improvements

12% of energy to be local by 2050

Large scale expansion in renewable energy

UK in Europe

European renewable energy targets – actual versus target

Policy and Legislation

Kyoto Protocol

European Union 20/20/20 Legislation

UK Climate Change Act

•80% cut in CO2 by 2050

•Feed in tariffs

•Renewables Heat Incentive

•Carbon Neutral Homes from 2016

•15% energy from renewables by 2020 (30% electricity; 12% hear; 10% transport)

Green Deal; Green Investment Bank

The Government has used powers in the Energy Act 2008 to introduce feed-in tariffs to incentivise low-carbon electricity generation (up to 5 MW)

Scheme went live on 1st April 2010

• Payments to generators will comprise two parts:• Generation tariff

− Payment made for every kWh generated & metered

• Export tariff

− Payment made for every kWh exported to the grid

• Payments will be made by electricity suppliers to generators.• Large suppliers are designated mandatory suppliers, and have to participate by law.

• Small suppliers may participate if they wish

• Maximum capacity for the scheme is 5 megawatts (5 MW)

• Eligible low-carbon electricity technologies are – solar PV, new Anaerobic Digestion, hydro, wind, micro Combined Heat & Power

• The scheme will result in higher costs, that will be passed through to electricity users in form of higher bills...

Feed in Tariff scheme overview

A new paradigm: timing is important

Solar Photovoltaics

Solar Energy – Some Facts

Solar energy falling on a household roof is 4x the energy it uses

PV costs have come down 35% in the past 4 years

Germany has 7.5 GW of pv – supplying 1.2% of national electricity

From 2016 new houses in UK will be zero carbon

Feed in tariff makes solar pv financially viable in the UK

Area needed to meet UK annual electricity from PV

Some German PV Facts

Industry turnover €10bn

No of businesses: 10,000

No of jobs: 53,000

Export Earnings: €6bn/yr

Installed Cost €4000/kW

Market growth 2001-2008: 80% per year

10 MW solar farm in Bavaria

Solar radiation in Germany and UK

The UK Opportunity

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Assume follow German growth rate at half capacity

Would meet 3.2% UK electricity by 2020

Market of £10bn/year

250,000 new houses per year = 1000 MW of pv/year

Market Factors

PV Performance

Costs and Finance

Planning

Grid Connection

Commercial

PV Performance

Output depends on:

Solar radiation

Temperature

1 kW array will give approx 850 kWh/year in UK

10% annual variations

Costs and Finance

Size Tariff p/kWh

<4 kW retrofit 41.3

< 4 kW new 36.1

4-10 kW 36.1

10-100 kW 31.4

100 kW to 5 MW 29.3

10 kW Small Business System

Cost: £32,000

FIT: £3,100

On site: £800

Export £5

Total £3,905 (12%)

100 kW Large Business System

Cost: £300,000

FIT: £27,000

On site: £4,500

Export £2,000

O&M £3,000

Total £30,500 (10%)

• 25 year contract• RPI linked• Tax advantages• Can be leased • Can be debt financed• Good pension investment

Planning

Household systems are permitted developments unless conservation zone or AONB or listed buildings

But still a grey area for planners

Commercial systems will need planning permission

Will need some pioneers to test the water

Grid Connection

Less than 3.6 kW no permission

Smaller than 100 kW should be no problem

MW size can connect to 11 kV network

Will need grid connection study

Commercial Issues

Different business models

Performance Guarantees

Raising Debt

Offsetting risk

Ownership and roof renting

Track record and skills of contractors

O&M

One vote per investor

Minimum £500; Maximum £20,000

Tax relief on investment (20%)

Elected Board of Directors

Invests in each spvOther investors

Community Energy Companies

Producing your own energy: The Benefits

An investment opportunity

8-10% inflation proof

Long term & better than banks

Positions your company

Value add to local community

Supports global and national targets

Secures low cost electricity; hedge against price rises

Ban Ki-Moon Speech to World Business Leaders

We meet at a critical moment in human history….

Climate change is the defining challenge of our time. I also believe it is the most potent game-changer for business over the next century. It is an opportunity we must seize.

I want to challenge you. I want to see you in the vanguard of an unprecedented effort to retool the global economy into one that is cleaner, greener and more sustainable.

This will not be easy. Fundamental change never is. But, if we get it right, we can reasonably look forward to sustained growth and prosperity.

If we get it wrong we face catastrophic damage

to people, to the planet

– and to the global marketplace.

Camco is an international leader in identifying opportunities and providing solutions to carbon risk.