Energy challenges: national policies, private ... - bioenergybaltic
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Energy challenges: national policies, private ... - bioenergybaltic

Energy challenges:national policies,private investmentstrategiesTallin, September 21 2007Patrick PostalFinance StrategieInternational----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---- ---C O N S E I L

Contents! Testing facts and landmarks / descriptionof the present crisis! The national policy conundrum! Private investment activity! Private investment strategies! Review of main fields of interest! Country profiles! Tentative lessons for EstoniaFSI Conseil - P Postal2

Testing facts - landmarks! Specific flavour of this energy crisis ascompared to previous ones! Energy and environment are more thanever intertwined, with geopolitics andeconomics bringing salt and pepper in themix! 2002-0303 marked a clear change in theperception of energy/environmentenvironmentproblemsFSI Conseil - P Postal3

Testing facts - landmarks! 2002-20032003 marked a clear change……! Surge of climatic change awareness andpolitical concern! In the wake of 9/11, symptoms of energy« wars »! Irak! Venezuela! Bolivia! Iran! RussiaFSI Conseil - P Postal4

Testing facts - landmarks! Peak oil looming – already behind in anumber of oil producing countries (USA1971, North Sea 2001…) – (andoil majors?)! Upsurge in nationalism on resources (oil,gas, , mines…)! Kyoto 1 entered into force! Regional logics vs national vs global: whatworks best?FSI Conseil - P Postal5

Testing facts - landmarks! Major environmental efforts fall short oftarget: : ETS, Kyoto 1! Coming of age of giant countries: China,India, , as emerging world advancesshowing ambition and muscleFSI Conseil - P Postal7

National policy conundrum! Parameters - dimensions! Criteria to evaluateFSI Conseil - P Postal8

Internationalobligations/contractsEnvironmentalConcernSecurity of SupplyPolicy designDearth ofenergy commoditiesPrice/competitivenessconcernFSI Conseil - P Postal9

National policy conundrum! « Political »! No real EU energy policy! No EU/Russiabroad agreement! A lot of uncertainty on « Kyoto 2 »! Liberal approach still prevailing! Economic/technical! Oil price x USD puzzle! What price on carbon?! R&D time frame :howlong does it take to have newtechnological options delivered?! Social / societal! What do citizens want / are ready to accept?! Acceptable changes for society at large?FSI Conseil - P Postal10

Source:IEAFSI Conseil - P Postal11

High pricesfor fossilenergies Oil,Gas, CoalRENEWABLEENERGIESStrong andstable govtsupport forrenewableenergies andenergyefficiencyStronginternationalcooperationon climateissuesFSI Conseil - P Postal12

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Private investment activity! With governments pondering many options,business seems to be moving faster! Industry consolidation (Eon(Eon,Enel+AccionaAcciona/Endesa, Suez/GDF, oil&gasgas…! Portfolio restructuring (US power)! R&D Investment (BP Solar, , Total Biofuels, oil&gasE&P,…! PE investment! Stock exchange equity financings! Energy conservation attitudes/technologies/productsFSI Conseil - P Postal15

Moving portfoliosFSI Conseil - P Postal16

PE/VC activityFSI Conseil - P Postal17

PE/VC activity (NA +Europe)! 2006/2005 investments : + 70%! 79% on energy = $3.1 bn! Biofuels : $ 840 m (overwhelmingly(NA)! Solar: : $ 450 m! Hydro/marine : mainly Europe! Wind! 53 IPOs (London, Nasdaq, Frankfurt…)! Cleantech 17% of VC activity in Europe,11% in NAFSI Conseil - P Postal18

PE/VC activity! 2007 is showing strong increase in NA buta small decline in Europe! 2006 : $ 4.1 bn PE investments in NA,Europe, China! Energy PE investment in Europe :! 2002-2006 2006 : 2 bn! 2007-20102010 forecast : 3.5 bn! Main areas: UK, Scandinavia, Germany, , FranceFSI Conseil - P Postal19

Cleantech VC, NA, by segmentFSI Conseil - P Postal20

VC investment by quarter, NAFSI Conseil - P Postal21

VC investment by quarter,Europe +Israel+FSI Conseil - P Postal22

PE/VC strategies! VC industry overcoming fears connectedwith energy and environment! Case for Cleantech seen as more compelling thanever! Government policies more consistent! Long term involvment mitigated by IPOs, andother exit opportunities! A large array of investors, investmentstrategies! Note NextGen Biofuels Fund, , a $ 500 m fund justlaunched (Sep 12) by the Canadian government toinvest on 2 nd generation biomass tenchnologies(witha view to industrial scale processFSI Conseil - P Postalvalidation)23

PE/VC strategies! Focussed funds : Conduit, Chrysalix…! Pure clean tech : Emerald TechnologiesVentures, Braemar, the Carbon Trust…! « US mix » : Nth Power, Enertech,Rockport…! Big fund managers diversified intocleantech/energyenergy: : Draper Fischer,Kleiner Perkins, , 3I, Advent…! Corporate fundsFSI Conseil - P Postal24

Review of main fields ofinterest! Wind! Solar! Hydro/tidal/ wave energy! H2, fuel cells! Carbon capture and sequestration(CCS)! District heating and cogenFSI Conseil - P Postal25

Review of (ctd)) : gasFSI Conseil - P Postal26

Review of main fields of! BiomassinterestFSI Conseil - P Postal27

Review of main fields of! Nuclearinterest! Price of yellow cake! National options pondered: : US, UK, China,India, smaller countries! Private involvement by electro-intensiveindustries : TVO, Exeltium, Belgium,Spain…! New conceptsFSI Conseil - P Postal28

Review of main fields ofinterest! Energy conservation! Clear top priority but hard to tackle andless glitzy! Industry relatively easy (?)! Construction and habitat (43% of energyconsumption in France) a huge, , hard totap, potential! TransportationFSI Conseil - P Postal29

Country profile : France! Energy a serious thing : history, energy leaders(Total, EDF, Suez-GDFGDF, Areva)! State role / centralized solutions! Traditional, trailing strategy! Secure access to oil! Go nuclear for power gen! Be wise on energy spending! New strategy: biofuels, nuclear, energy conservation,some renewables! Sarkozy govt: unexpected focus on environment! Public/privateissuesFSI Conseil - P Postal30

Guidelines for a « Factor 4 »! The « DONTs »strategy (1)" Use too much fossile energy for heatingpurposes" Use too much fossile energy for power genexcept if with environmentally acceptableCCS" Keep oil as the main fuel for transport" Defer development of adapted low-energyconsumption infrastructure forconstruction and transportFSI Conseil - P Postal31

Guidelines for a « Factor 4 »strategy (2)! The UNESCAPABLES (The(« DOs »)" Increase energy efficiency in all sectors,principally in the existing real estate" Spare power on peak demand" Modify infrastructure and behaviour intransportation" Change the energy supply mix, with agreater use of non GHG-emittingtechnologies: renewables, nuclearFSI Conseil - P Postal32

Guidelines for a « Factor 4 »strategy (3)! Most needed technologicalbreakthroughs" Energy storage and proper use ofhydrogen" CCS" Development of very-lowlow-emissiontechnologies in all aspects of energy useIf the DONTs and DOs are not enough,it may be necessary to tap opportunities based on these NewTechnologies yet to be developedFSI Conseil - P Postal33

Country profile : Brazil! Traditional, trailing strategy :! Gain self sufficiency in oil! Substitute national biofuels to oil-basedfuels! Rely on hydro for power gen! New strategy! Relaunch big hydro! Fully extract value from biomass! Unclear but probably critical role for gas, renewables! Some space for nuclear, coal?! Public/privateissues! Energy shortages/ outages again?! Price hikesFSI Conseil - P Postal34

Country profile : Brazil (3)BiomassBagasseBlackliquorWoodBiogasRice huskSectorSugar-alcoholPaper andcelluloseForestSanitationAgricultureNumber ofPlants221132422NominalPower2,822783204207%692461-TOTAL2623,296100Unit: MWFSI Conseil - P Postal36

Country profile : Brazil (4)Technical Potential (TWh/year) Crop (million ton)GenerationtechnologyHarvest system4007001,000Counterpressure cycle(present)Without recoveryWith recovery8.111.614.220.420.329.1Improvedcounterpressure cycleWithout recoveryWith recovery24.334.942.661.060.887.2Condensationand extractionWithout recoveryWith recovery46.477.481.3135.6116.1193.7Biomassgasificationand combinedcycleWithout recoveryWith recovery96.1142.2168.2248.8240.3355.5FSI Conseil - P Postal37

Country profile : Sweden! Traditional:! Power generation by hydro and nuclear (nearly50/50) but(1980) vow to phase nuclear out! Very low use of coal and gas! Gradually reducing dependence on oil! Residential heating mainly through district heating andshifting away from oil derivatives to biomass and other! New policy! Focus on reducing energy intensity, better energyconservation! Plan to « get free » from oil by 2020! No more schedule for nuclear phase out! Wind, , R&D, gas strategy under review! Green certificatesFSI Conseil - P Postal38

Country profile : Finland! Traditional! Diversified energy matrix (oil, nuclear, coal, gas,biomass )! Huge and increasing demand from industry! Eletrical heating! 30% power from nuclear gen! 23% renewable TPES : 20% biomass, , 3% hydro! New policy! Build one nuclear, private plant! Gas penetration increasing! Fine tuning of GHG curbing policiesFSI Conseil - P Postal39

Finland : total final consumption(2001)FSI Conseil - P Postal40

Country profile : Jordan! Starting point! A 5.5 M population country with very limitedenergy resources: no hydro potential, no fossilefuels! Traditional power generation from oil! Energy costs rising sharply as demand riserapidly (construction, immigration, GNP growth)! New issues and responses! Power plants are gas-based(problemswith longterm sourcing from Egypt)! Clear risks of shortage in energy, water! A nuclear power-plantplant consideredFSI Conseil - P Postal41

Tentative lessons for Estonia! State of things! Oil shale! Gas! Existing structure on the demand side:industry, housing…! Main options! Energy conservation! Energy efficiency! Renewables and nuclearFSI Conseil - P Postal42

Estonia: primary energy(2004)Source : IEAFSI Conseil - P Postal43

Estonia: power gen by fuel(2004)Source : IEAFSI Conseil - P Postal44

Tentative lessons for Estonia! Energy security comes with a price! Conservation, efficiency…! Focus on construction and buildings! Biomass! Study nuclear option! Any policy must be stable in the long termand consistent enough to deliver resultsFSI Conseil - P Postal45

The EndTänan !Patrick PostalFinance StrategieInternational----------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---- ---C O N S E I 1 42 57 07 61FSI Conseil - P Postal46

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