*RES as a Growth Tool

*By George KofinakosCountry Advisor > StormHarbour UKCEO > Enolia Premium Capital

LuxemburgVice Chairman > Enolia Energy

* RES Globally

* RES in Greece

* Growth Barriers in Greece

* Overview of Policy Instruments for RES

* Action Plan & De-Risking

* Conclusion

*Contents

*RES Globally

*Global Warming

World Average

Source: World Resources Institute.; DB research

No data 0 93.9 tonnes CO2e per capita

Industrialised Nations Average

Concentration in 2008: 385 ppm

Global CO2 emissions map

* Climate change is one of the greatest environmental, social and economic challenges the planet is facing

* Global warming is evident from increases in global average air and ocean temperatures, widespread melting of snow and ice and rising global mean sea level

* Concentration of CO2 in the atmosphere has increased by 30% from pre-industrial levels

Today’s atmospheric CO2 concentrations are higher than they have been for at least 900,000 years

* The Fight Against Climate Change

*Who is Responsible for Global Warming?

*Why is an active RES Policy valid Globally?

This is a summary of some of the most important arguments for an active renewable energy promotion policy, valid for all countries, though to varying degrees:

* The current level of renewable energy in most countries is even lower than would be economically efficient at today's market prices. As newcomers, renewable energy technologies (RET) face a series of market barriers

* Many analysts are convinced that the long-term resource scarcity fossil energy faces is still not entirely priced-in. If current prices of fossil fuels reflected their scarcity correctly, RET would become more competitive

* The prices of fossil fuels are highly volatile due to short-term changes and incidences in the world's energy markets. Renewables are generally local energies and, as such, provide diversification of the energy mix with a security premium. It is widely agreed that renewables should have a higher share for energy security reasons in the energy portfolio, particularly in oil and gas importing countries

* The use of fossil fuels is, to varying degrees, damaging to the human health and the local environment. The reduction of these impacts by technical means increases the cost of fossil fuel use. Negative environmental effects (externalities) must be internalized, i.e. reflected in the energy price. All this improves the competitive position of renewable energy technologies

* Renewable energy technologies offer prospects for a dynamic industrial policy. In industrialized economies plagued by unemployment and reduced growth perspectives, as well as in some developing countries, RET have proven to be an option of developing industries with a future

* The deployment of RET in rural areas in developing countries offers opportunities for the use of local natural resources, employment, and ultimately institutional capacity.

* Sources of Emission Free Electricity

* Nuclear Power is expensive in the Long Run...

*….the Solution is Solar

* EU is developing a framework for the promotion of renewable energy sources for electricity generation; renewables are set to increase their contribution, reaching 20% of energy consumption by 2020

* Such an ambitious target requires firm political support with regulation being the strongest tool towards meeting the objective

* Each of the member-state governments has agreed to a target rate of renewable energy production and established feed-in tariffs or quota obligations as well as tradable certificates

* A feed-in tariff is a regulated purchase price of electricity passed through to the consumer. Electricity utilities are obliged to buy renewable electricity through Power Purchase Agreements (PPAs) of 10 to 25 years

* A Green Certificate is a tradable commodity proving that certain amount of electricity is generated from renewable sources and can be traded separately from the energy produced

Renewable energy > 30 %Renewable energy > 20 %Renewable energy > 10 %Renewable energy > 5 %Renewable energy < 5 %

*Overview of Renewables in Europe

*Sector Themes and Trends

* Energy security, fossil fuel prices and environmental issues are the critical challenges for the global energy industry.

* Demand for electricity is growing faster than total energy production, hence many countries are expected to run supply deficits over the next decade; the trend applies predominantly to developing countries where electricity consumption is growing at a higher rate.

* Electricity generation in Greece, Turkey, Romania and Bulgaria is expected to increase by c.40% over the next 10 years (from 380 TWh in 2008 to c.530 TWh in 2018):

- Such an increase will entail significant generation capacity to be added to the system; Renewable energy has strong political support and will contribute to this increase.

* Europe has traditionally been on the forefront of renewables with notable success stories, including:

- Germany- Denmark- Spain

* Europe has policies in place and is committed to continue leading the sector.

Annual worldwide clean technology investment is expected to reach $450bn by 2012 and

$600bn by 2020

Worldwide Energy Consumption

Worldwide Renewables Investment

*RES in Greece

*The Five Pillars of Greek Economy

Tourism

Shipping

Real Estate

Agriculture

Energy

*Global and Local Energy Mix

Nuclear

• 13%

Clean & Renew-able

• 23%

Natural Gas

• 17%C

oal

Uncate-gorized

• 27%

• 20%

Lignite & Solid Fuel

• 53.7%

Clean & Renew-able

• 18.5%

Natural Gas

• 17%

Crude Oil

Other

Global Energy Mix

• 10.6%

• 0.2%

Greece’s Energy Mix

*The Greek Electricity Chain

RESProducers

HTSO

Hellenic Transmission

System Operator

RetailElectric

Companies

ElectricConsumers

* Licencing Procedure for RES Projects

 

Investor

RAE(Techno-economic evaluation/

Compatibility with the National RES framework/

Capacity Availability)

Applications are submitted in the

1st 10 days of even months

HTSO (1)

Preliminary Connection

Terms

Forest Department

Investor

Application for final Connection terms

HTSO (2)

Application for

Installation License

Relevant Authorities

Central LevelMEECC

Regional LevelRegional DDP

Application for intervention in

forest area

InstallationLicense

issued byMEECC

orRegionalGeneral Secretary

FinalConnection

Terms

SEA / DRP

Submit EIA Study

ETA

Intervention approval

Investor

InstallationProtocol

&BuildingPermit

Production License

Authorities & County Council

MAA : Ministry of Agricultural Affairs

SEA : Special Environmental Authority

MEECC : Ministry of Environment, Energy and Climate Change

RAE : Regulatory Authority of Energy

HTSO : Hellenic Transmission System Operator

DDP : Direction of Development and Planning

DRP : Direction of Regional Planning

EIA : Environmental Impact Assessment

ETA : Environmental Terms Approval

MEECC Notification

*RES Licence Evolution in Greece

TechnologyPower (MW)

Application

for Production

Licence

With Production

Licence

WithConnectio

n Terms

With Installatio

nLicence

WithSigned

PPA

In Operatio

n

Wind MW 65874.41 20093.09 3584.45 1438.57 655.83 1503.21

Biomass MW 1532.06 401.83 62.55 24.40 4.50 44.53

Geothermal

MW 340.50 8 0.00 0.00 0.00 0.00

Small Hydro

MW 2268.70 949.02 142.49 66.75 25.70 205.63

PV MW 5556.14 2990.60 3219.65 370.56 1982.57 460.38

CSP MW 1067.21 379.60 9.20 0.00 0.00 0.00

Hybrid MW 1802.77 446.62 0.00 0.08 0.00 0.00

Total MW 78441.78 25268.75 7018.34 1900.36 2668.60 2213.75

(as of September 2011)

*Installed RES Capacity in Greece

*Growth Barriers in Greece

*Quick assessment of the Greek Energy market

The assessment of the current state of Greece's energy sector is rather devastating ("high energy consumption, low fuel effi ciency, low labor and capital productivity and an expensive energy mix characterize the Greek energy sector") . Consequently, the sector should be turned around to offer significant potential. Action should be taken in the form of the following steps:

* Improving energy efficiency - streamline energy consumption mainly in buildings and transportation (adjustment and increased specificity of relevant standards; effective incentive schemes; parametric and progressive electricity pricing)

* Boosting productivity - revisit regulatory framework; consider 'price and cap' system; fuel efficiency of plants; labour and capital productivity

* Optimizing energy mix - develop National Energy Strategy

* Increasing 'extroversion' and sector impact - leverage up on geographical position of Greece (hub for gas?); involvement of Greek players in regional infrastructure and power generation projects

*Growth barriers in Greece:the Usual Suspects

* Investments in scale discouraged

fragmentation and small scale of business across sectors - over regulation of markets and professions - complex and restrictive licensing and operating processes - lack of integrated and systemic zoning and real estate planning - highly complex and volatile tax framework

* Large and inefficient public sector

large, expensive public sector with low quality outputs - lack of mechanism to inject market -sourced management and technical talent

* Rigid and narrow use of human resources

low rates in youth and female employment - binding and inflexible collective agreements - disconnection between market and education

* Cumbersome legal and judicial system

overabundance of laws sometimes conflicting - heavy administrative burden in courts, resulting to long lead times

* Widespread informality

extensive tax evasion - substantial wealth from the black economy

*Overviewof Policy Instruments for

RES

Regulatory Policies

FiscalIncentives

Public

Financing

*Fiscal Incentives

* Focus on cost reductions and improvement of the relative competitiveness of RE Technologies in given markets

capital grants - third-party finance - investment tax credits - property tax exemptions - production tax credits - sales tax rebates - exercise tax exemptions

* Capital subsidy, grant or rebate

one-time payments by the government to cover a percentage of the capital cost of an investment

* Tax incentives

* Energy production payment

direct payment from the government per unit of renewable energy produced

annual income tax credit based on the amount invested

or the amount of electricity generated

reduction in taxes on the purchase (or production) of

renewable energy technologies

investment tax creditsproduction tax credits

reductions in sales,energy, carbon, excise, VAT

*Public Financing

Public Investment, Loans, Grants

Public Competitive Bidding

awards contracts for*construction*operation * fixed quantities of

renewable capacity

assists funding distribution for

* implementation* infrastructure

development

*Regulatory Policies

• Tradable RE Certificates

• Utility Quota Obligation

• Concessions• Obligation &

Mandate

Government mandates

• Feed-in Tarrif• Net Metering

Government mandates

Market share-

ensuring regulatory

policies

Price-guaranteeing

regulatory policies

Institutional

Development

Transportation FuelElectricity Generation

*Action Plan & De-Risking

*Corrective Action Plan (I)

* Launch awareness campaigns on energy efficiency benefits, costs of buildings and transportation

* Create a Stock-Exchange RIC for RES or establish a Local Fund specialized in RES with Government Guarantees

* Exploit Renewable Energy Hubs all over Greece with existent licenses and supportive framework ready to be constructed by Investors

* Revisit incentives for retrofits (e.g. tax rebates instead of subsidies)

* Accelerate the implementation of financially viable island interconnections to reduce costs and emissions

* Investigate the viability to locally manufacture renewable energy parts and equipment

* Create Supportive Policy and Institutional Frameworks

* Promote Private Sector Involvement

* Level the Playing Field

* Nurture Micro-Enterprise

* Build Projects Around Local Needs and Capacities

* Use structural funds and framework programmes better

* Increase use of funds from the European Investment Bank and other public finance institutions

* Improve access to Risk Capital

* Coordinate Community and National funding and other forms of support

* Upgrade Smart Grid

* Support Helios Project as a strategic investment

* Interconnect Universities with RES business to provide technical resources

* Prioritize high local renewable investors

*Corrective Action Plan (II)

Risk is a key parameter in explaining the difficulties of RES technology and projects when accessing capital due to the specific risk/return ratio for RES projects. To reduce financing risks, access to low-cost finance should be increased through an extended use of –sometime innovative- measures.

The mitigated risk scenarios in these cases indicate that the annual consumer expenditures can be reduced by 50%.

Most RES technologies have high risk and long-term return

*De-risking Renewable Energy

*Indicative Risk Mitigation Mechanism

*Reduction of cost of Capital

Reducing the cost of capital will result in lower consumer expenditures and an accelerated uptake of RES. The main approach is to reduce risk at all stages in the project lifecycle, via:

* Ensuring a long-term commitment towards renewable energy

* Removing deployment barriers

* Sharing risk via improved financial instruments

e.g. government loan guarantees and/or project participation

*Increasing public finance participation

in projects (PPP)

The benefits of a pro-active and participating government are manifold and have a significant impact on the access to capital and its costs:

* Government participation can provide a significant amount of capitalin either equity, (subordinated) debt, or mezzanine finance form

* Cost of capital would be significantly reducedby bringing down the regulatory risk

* Project financing would be achieved more easily and at a lower costthe percentage of project initiatives to be actually realized would increase - this would strengthen the confidence of the market

*Windfall profits would be avoided or reducedvia government participation, part of these profits flow back to the treasury

* Supporting policies could be developed through the better insight obtained of the challenges and barriers the market is facing, the government could develop a policy e.g. for mobilizing the industry supply chain

* A state-owned entity can be a safeguard for ensuring a stable renewable energy policy

*Increase the Accessto low-cost finance

*Stability, transparency and coordination The appropriateness of financial instruments is highly dependent on technology or the project’s development stage. Current perceptions indicate that access to finance can be enhanced by innovative public-private approaches for equity provision to technology developers, and on guarantee mechanisms for project developers

*Multiplier effectSome innovative instruments such as guarantees or mezzanine funds can have a significant multiplier effect as they contribute to cover technical and political risks (certainty for investors). From the perspective of debt and equity providers, there are no one-size-fits-all solutions, but rather a mix of instruments that will be appropriate to specific levels of maturity of technologies or projects, and to various country-specific contexts

*Conclusion

Greece clearly has the potential (Solar, Wind, Water)

of becoming the Saudi Arabia for Renewables in Europe.

To achieve this goal, it only needs

Political Commitment

and a

National Strategy

*Disclaimer

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