1. IBERDROLA RENEWABLE ENERGIES Carlos Gascó Head of the Prospective Unit Uitilities’ stronger bet for renewables An analysis from the renewable power generator

2. IBERDROLA RENEWABLE ENERGIES2 Reasonable cost of electricity Essential for the social lifestile and the competitiveness Dependence growing, and so are doing geopolitical clashes Global Warming (Kioto commitments) Sustainable use of Natural Resources Key drivers for a new energy model ECONOMIC EFFICIENCY ENVIRONMENT ENERGETY SECURITY

3. IBERDROLA RENEWABLE ENERGIES3 What would be the effects in an 100 $/barrel scenario and 25 €/Tn CO 2 emissions? Average generation costs (€/MWh) Coal 60-70 CCGT 75-85 Wind 50-60 Biomass 60-80 Solar 0 50 100 150 200 250 300 350 Hydro 40-60 Fuel 100-110 200-300 Fuel effect: increase barrel price to 100$ MDL effect: CO 2 at 25€ Tn 50-60 60-65 70-80 80-100 30-40 190-280 A short term analysis: Renewables are today more expensive. They need to receive finantial support from consumers However, those costs are the result of a simple and static analysis: Prices include energy dependence? These figures internalyze all environmental costs? How fuel price will evolve? What effects would produce a sharp CO 2 cost increase?

4. IBERDROLA RENEWABLE ENERGIES4 Strong need for investment IEA believes it is necessary to invest some 20 trillion dolars in the 2005-2030 period in order to satisfy future energy demand Source: IEA

5. IBERDROLA RENEWABLE ENERGIES5 The crossroads: What is the path to follow? HYDROCARBONS: - Limited reserves - High political risks - Large environmental impact HYDROCARBONS: - Limited reserves - High political risks - Large environmental impact COAL: -Large reserves. Low political risk -High enviromental impact -“Bridge technology” -CO 2 Capture & -“Clean coal” COAL: -Large reserves. Low political risk -High enviromental impact -“Bridge technology” -CO 2 Capture & -“Clean coal” RENEWABLE ENERGY: -Higher investment costs -Wide social dialogue -International collaboration -Enhanced interconnections -Need for R&D -EU Target: 20% by 2020 RENEWABLE ENERGY: -Higher investment costs -Wide social dialogue -International collaboration -Enhanced interconnections -Need for R&D -EU Target: 20% by 2020 NUCLEAR ENERGY: - Risky. Only “safe countries” -High specific investment -Treatment of radioactive waste -Social unrest NUCLEAR ENERGY: - Risky. Only “safe countries” -High specific investment -Treatment of radioactive waste -Social unrest Population and economic output increase energy demand Energy at a reasonable cost is a must Enviroment restrictions Fossil fuel reserves and economic implications NATURAL GAS: - Large reserves - Geographically diversified sources - Growing political risks - Lower environmental impact NATURAL GAS: - Large reserves - Geographically diversified sources - Growing political risks - Lower environmental impact Renewables deliver energy and environmental advantages but also economic