1. Building Israel’s Cleantech Independence Glenn Yago Director, Milken Institute, USA Prepared for: Globes Conference 2009 Cleantech from Copenhagen to Jerusalem December 13, 2009

2. “Towards Energy Independence” over the years Source: EIA. Carter: “This nation will never use more foreign oil than we did in 1977… never.” First World oil crisis 1973 Obama: “Eliminate our current imports from the Middle East and Venezuela within 10 years.” Ford: “We must end vulnerability to economic disruption by foreign suppliers by 1985.” Nixon: “In the year 1980, the United States will not be dependent on any other country for the energy we need.”

3. 60% of all U.S. oil consumption came from foreign countries in 2008 Domestic production: 6736 barrels daily – 40.8% Source: British Petroleum Statistical Review 2009. Imports: 9756 barrels daily 59.2%

4. Oil reserves are concentrated in the Middle East Source: BP Statistical Review of World Energy, 2009. 1980 2008 Billions of barrels

5. Beta Sites: Building New Markets at Home for Abroad כיצד יוצרים שוק ראשוני וחדשני בישראל? הנהגה והובלה ממשלתית רגולציה ממשלתית –עידוד חדשנות (כגון הקלות במתן אישורים לחדשנים) מימון –Growth equity (late stage) – High risk project financing מינוף תעשיות הידע הקיימות והפוטנציאל היזמי המקומי

6. Partnerships שותפויות מיצוב לאומי ובינלאומי של ישראל כמוקד לשיתוף פעולה שיתוף פעולה עם ממשלות זרות: –מימון –פיתוח –הטמעה/ניסוי –הדגמה חדשנות בשיתופי הפעולה

7. ד מבנה המימון לתעשיות עתירות ידע Venture Capital Incubators Growth Equity Stock Exchange & Banks R&D Grants כלי מדען ראשי: Private Equity Mezzanine Angels Academia SeedEarly StageLate StageMaturity כלי שוק פרטי: Strategic Partners

8. התפלגות ההשקעה לפי שלבי הצמיחה בישראל וארה"ב Source: PricewaterhouseCoopers’ Money Tree Reports

9. חברות תעשייה עתירות ידע מספר חברותמספר חברות בוגרות הייטק (ICT) 2,900450 ביוטק Bio-Pharma Medical Devices 1,00075 קלינטק 40045 מקור: IVC

10.  Israel’s VCs focus on Hi-Tech only  In Israel the Software, communications, networking and semiconductors sectors receive 70% of VC investments Vs. 32% in the US  In Israel the Biotechnology & Healthcare sectors receive only 10% of investments, Vs. 30% in the US  Israel’s OCS support focuses on manufacturing R&D. Diversification & Specialization VC Investments by Industry – 2008, Israel Source: PricewaterhouseCoopers’ Money Tree Reports Israel Total VC Investments $1.4 Billion

11. Oil receives more subsidies than alternative energy Source: Environmental Law Institute.

12. Global investment in new clean energy Source: New Energy Finance. US$ billions

13. Funding challenges for Alternative EnergyTechnologyincumbentSeed/Start-up Early stage Expansion Late stage Venture capital Project financeAngel investor First generation - Scaling up - Further R&D - Upgrading pipeline - Increase market share - Mezzanine and bridge finance for IPO or M&A - Collapsing market/Falling prices Third generation - R&D - Initial investment in demonstration projects Second generation - Achieve commercial- scale operation - Bringing down costs - Further investment in facilities Funding challenges Public grants and tax incentives Valley of death Source: Milken Institute

14. The Water-Energy Nexus Source: Y. Cohen, UCLA Water Center, 2009

15. Encouraging Economic Growth by: – Absorptive Capacity –Job Creation (+high skilled) Developing a science-intense industry Improving current account balance (export) Lowering risks of private funding by financing high- risk/early stage projects Valley of Death The Cash Flow Valley of Death- as a function of development stage (Enhancing Commercial Outcomes from R&D,2007) Source: NREL, 2008 Market Failure I: Cleantech Water Finance

16. Market Failure 2: Water Project Finance International Private Investment in Infrastructure Sources: Ti Le-Huu, Sustainable Development and Water Resources Section, UNESCAP. US$ billion 1990-2009

17. A Shift in Water Resources & Management Paradigm Source: Y. Cohen, UCLA WaTeR Center, 2009.

18. Alternative Energy Issues Additional Information

19. A perfect day for biofuels… Energy Security Insufficient domestic supply Oil supply primarily in unstable regions Demand Trends Oil consumption outpacing discovery China & India Consumer awareness Supply Trends Nationalization of reserves High oil prices Peak production New technology improving efficiency of production Environmental Carbon emissions Offshore drilling Green legislation Pressure to create a significant, renewable, domestic source of liquid fuels Source: CERES.

20. The advances in biofuels technology is game changing Open-Pollinated Double Cross Biotechnology Single-Cross Hybrids Average U.S. Corn Yields Bushels/Acre Hybrid genetics & biotechnology have driven a five-fold increase in average U.S. corn yields since 1940. Source: USDA.

21. Oil and biofuels: Two different business models Cost per unit Units produced Oil - High entrance barrier - High initial investment (for lease and facilities) - Low (and stable) marginal cost once scalability is achieved Cost per unit Units produced Biofuel - Low entrance barrier - Higher marginal cost even after scalability is achieved - Profitability is subject to uncertainty in raw material price - Possibility to reduce cost with future technology breakthroughs Source: Milken Institute.

22. The American Recovery and Reinvestment Act of 2009 (ARRA) Total measures worth $787 billion Source: The American Recovery and Reinvestment Act of 2009.

23. Infrastructure and energy represent 15 % of ARRA Total measures worth $787 billion Other stimulus $646.4 Infrastructure $80.9B Energy $49.7B Source: The American Recovery and Reinvestment Act of 2009.

24. Energy expenditures within ARRA Energy efficient smart grid $4.5B Transmission lines $6.5B State and local energy Investment $6.3B Radioactive cleanup $6B Weatherizing medium income Homes $6B Federal building Efficiency $4.5B Carbon capture experiments $3.4B Energy efficiency research $2.5B Advanced car battery $2B Energy efficiency and conservation grants $3.2 B Other $3.7B Source: The American Recovery and Reinvestment Act of 2009.

25. $16.8 billion designated for the Office of Energy Efficiency and Renewable Energy Source: The U.S. Department of Energy. Energy Efficiency and Conservation Block Grants $3.2 billion Retrofit ramp - ups in energy efficiency - $454 million Weatherization Assistance Program $5 billion State Energy Program $3.1 billion Energy Efficiency Research $2.5 billion Others - $3 billion DOE Recovery Act Funding: $36.7 billion