US Renewable Energy Markets: Financial Perspective By Michael D. Ware Advance Capital Markets, Inc. Washington Council of Governments Washington, DC June 22, 2005

2 “The way we produce and consume energy hasn’t changed much in decades.” Business Week October 11, 2004

3 Overview Financial Markets for RE are Driven by Key Factors Economic Financial Political Review of RE in the U.S. Potential Local Applications

4 U.S. Energy Consumption by Fuel 2003 Source: NREL Wind 2% Biomass 45.5% Hydroelectric 47% Geothermal 4.5% Solar <1% Source: AEO 2005 tables (released in December 2004) based on US energy consumption. Overall breakdown Table A1 (Total Energy Supply and Disposition), and Renewable breakdown Table A17 (Renewable Energy, Consumption by Section and Source).

5 Economic Factors Rise in Crude Oil Prices $30.00 BBL to $54.00 BBL Tight US Natural Gas Supply Natural Gas Prices Remain High Cheap Coal Power Becoming More Expensive On and Off Peak

6 Financial Factors Overhang of Merchant Power Plant Debt Financial Condition of Electric Utilities Larger Players Entering the RE Market AES PPM Goldman Sachs “New” Financing Sources Available for RE

7 Quest for “Energy Independence” Hides Practical Solutions On/Off PTC has Retarded Growth in the Wind Industry States are Taking the Lead Enacting Renewable Portfolio Standards (RPS) Western Governor’s Association: 1,000 MW CSP Initiative Political Factors

8 Significance of the Factors on RE Markets High Oil and Gas Prices Make RE Options More Economic Wind Power is Competitive with Gas Fired Generation Convergence of Costs for all Energy Technologies Growing Realization Among US Industry Leaders that RE must be a Significant Part of US Energy Policy Regional vs. National Markets

9 Review of RE in the US

10 Renewable Energy in America - Regional Resources, Economics and Politics - Resource Potential SOLAR ENERGY WIND POWER GEOTHERMAL BIOMASS

11 U.S. Wind Energy Source: AWEA

12 Global PV Installations Source: IEA Photovoltaic Power Systems Programme

13 U.S. Geothermal Energy Source: Geothermal Energy Association

14 Biomass Installation by Fuel Source: USDOE “PURPA Market”

15 Fuel Ethanol Production Source: Renewable Fuel Association

16 Key Trends in Financial Markets More VC Firms Investing in RE Technology Private Equity Investments in Solar and Wind Equity Investors Driven by Tax Credits for Wind and CSP New Investors in Renewable Fuels Increasing Interest in Hybrid and Off -Grid Applications States and Local Governments making Funds Available for RE E.g. Mass Renewable Energy Trust

17 ACORE Call for “Phase II” Phase I: “Development” –RD&D –Technologies: Wind Solar Hydro Geothermal Ocean Biomass Biofuels –Commercialization Phase II: “Utilization” –National Needs –Solutions: National energy supply National security Environment Climate change Economic growth Investment opportunities Jobs –Market Adoption

18 Potential RE Options Solar PV Programs Residential Commercial Bus Shelter/Traffic/Signage Solar Thermal Programs Domestic Hot Water Wind Power (REC) Purchases Emergency Power Programs Solar PV/Hybrid Biogas/Fuel Cell Hybrids Hybrid Car Programs

Extra Slides

20 54% 70% Domestic supply Consumption History Projections Net imports Petroleum Supply, Consumption, and Imports, (million barrels per day)

Primary Driver of Increased Consumption Power sector consumption of natural gas projected to increase significantly every year: Source: Energy Ventures Group

Petroleum supply, consumption, and imports, (million barrels per day) Source: DOE/EIA-0383(2003) Annual Energy Outlook National Security