best opportunity analysis-renewable energy
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Best Opportunity Analysis-Renewable Energy
Sustainable Energy Conference, 1st December 2009
2
Global Energy Situation
HSBC: $470bn set aside for green-stimulus plansBanking giant HSBC says that 15% of global stimulus packages are being spent on environmental measures — which means about $470bn of government spending and $3.1trn of tax cuts — are being dedicated to ‘green’ areas.
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Projected Energy & Electricity Demand to 2030Projected Energy & Electricity Demand to 2030
Global Energy Situation, a look at the key figures…..
0%
20%
40%
60%
80%
100%
120%
140%
Energy Need Electricity Demand
0%
20%
40%
60%
80%
100%
120%
140%
Energy Need Electricity Demand
+76%
+126% Energy and electricity consumption significantly higher in the backdrop of:
Higher price of crude oil, gas, and coal
Lower reserves
Higher Co2 Emissions
4
Why Renewable Energy?
Politics (usually no1 reason..)
Energy Security (diversify from M.E.)
Energy Diversity (gaps in demand, legislation, ie. California 2010)
Displace Imports (esp. fuels)
Environment (air quality, GHG, carbon markets…)
Job Creation (strong potential)
Politics (usually no1 reason..)
Energy Security (diversify from M.E.)
Energy Diversity (gaps in demand, legislation, ie. California 2010)
Displace Imports (esp. fuels)
Environment (air quality, GHG, carbon markets…)
Job Creation (strong potential)
5
Clean Energy - Historical Growth, 2004 to 2006Clean Energy - Historical Growth, 2004 to 2006
Global Renewables Market : Historical Growth
0
20
40
60
80
100
120
140
2004 2005 2006 2007
0
20
40
60
80
100
120
140
2004 2005 2006 2007
USD $ bn
+81%
+43%
$27.5
$49.6
$70.9
Source : SEFI, Frost & Sullivan analysis
+67%
$117
These figures exclude M&A activity in existing businesses
In terms of Venture Capital money the Renewable Energy sector is number 3 in the US behind Technology and Healthcare
Sub-prime market does not seem to be holding back investments into the “Clean Tech” Sector, though share prices have taken a knock, especially solar which had very high PE Ratios.
6
Western Europe
North America
Central & Eastern Europe
Middle East
MaturityDevelopment Growth
Africa
Latin America
Market Lifecycle by Region – Renewables. Is Asia at a tipping point? Wind and solar already big of course…..
Asia
• Historical Investments in EU and US• Asia is where the growth will be – energy
demand driven, with constraints and potential gaps, and driven by high oil prices
• Will also be the highest GHG emitter (x3 by 2030)
• Historical Investments in EU and US• Asia is where the growth will be – energy
demand driven, with constraints and potential gaps, and driven by high oil prices
• Will also be the highest GHG emitter (x3 by 2030)
Current Money FlowFuture Money Flow
7
Global Energy Consumption Mtoe, 1973, 2005, 2030fGlobal Energy Consumption Mtoe, 1973, 2005, 2030f
Asian energy situation : becoming more and more important as a region, supply demand imbalance?
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
1973 2005 2030f
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
1973 2005 2030f
34%
26%
13%
Mtoe China (20%) and Rest of Asia (14%), combine to account for 34% of the world’s energy requirements in 2030, up from 26% in 2005.
Possible that there may be a gap in energy production that renewables could fill.
OECD FSU China Asia
Lat Am
Source : IEA World Energy Outlook 2006
M.E.
8
Million tonnes of Co2, 2005 and 2030 by Key CountryMillion tonnes of Co2, 2005 and 2030 by Key Country
Green House Gases in Asia set to increase significantly
Green House Gases are set to triple in the next 20-25 years at the currnent pace of development.
China, India, and Indonesia are the three main culprits.
Most of this will be from industry, but land use in Asia also accounts for a high portion of Co2 emissions.0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
China India Indonesia
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
China India Indonesia
Mt Co2
x3
x6 x2
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Cellulosic
Biofuels
Geothermal
Long TermImmediate Mid Term
Energy
Efficiency
Small Hydro
Market Opportunity by Area : Timing
Carbon Market
Wind Biomass
Biogas
Tidal
Hydrogen
Clean Coal
Solar
???????
10
Summary of best opportunities by selected countries
IndiaIndia
• Wind• Solar
• Biomass/ Biogas• Small Hydro
• Wind• Solar
• Biomass/ Biogas• Small Hydro
ChinaChina
• Wind• Solar
• Biomass/ Biogas• Small Hydro
• Wind• Solar
• Biomass/ Biogas• Small Hydro
AustraliaAustralia
• Wind• Solar
• Wind• Solar
IndonesiaIndonesia
• Geothermal• Biomass/Biogas
• Biofuels
• Geothermal• Biomass/Biogas
• Biofuels
KoreaKorea
• Solar• Biomass/ Biogas
• Wind• Tidal
• Solar• Biomass/ Biogas
• Wind• Tidal
ThailandThailand
• Biomass/ Biogas• Biofuels
• Biomass/ Biogas• Biofuels
11
Summary of barriers by renewable energy type
SolarSolar
• Which Technology?• Subsidies/ legislation
• Silicon supply• Cost?
• Which Technology?• Subsidies/ legislation
• Silicon supply• Cost?
BiomassBiomass
• Feedstock control/ cost• Size of project
• Legislation
• Feedstock control/ cost• Size of project
• Legislation
GeothermalGeothermal
• Cost• Well risk
• Transmission• Politics
• Cost• Well risk
• Transmission• Politics
BiogasBiogas
• Feedstock control/ cost• Size of project• Transmission
• Feedstock control/ cost• Size of project• Transmission
WindWind
• IRR• Value Capture
• Cash Flow• Cost
• IRR• Value Capture
• Cash Flow• Cost
HydroHydro
• Political• IRR’s
• Size of projects
• Political• IRR’s
• Size of projects
12
Opportunities By Area - Solar
• Pro’s• Pro’s
• Abundant Energy Source• Abundant Energy Source
• Con’s• Con’s
• Needs Feed In Tariffs• Silicon Constraints 2008
• Cloud Cover in Certain Areas• Cost & Efficiency
• Needs Feed In Tariffs• Silicon Constraints 2008
• Cloud Cover in Certain Areas• Cost & Efficiency
World Asia
Market Size, 2007
$8.0 Billion
$2.3 Billion
127 MWInstalled
127 MWInstalled
15 MW in 2007
15 MW in 2007
360 MW in 2007
360 MW in 2007
2027 MWInstalled
2027 MWInstalled
72.5 MWInstalled
72.5 MWInstalled
8 MW in 2007
8 MW in 2007
90 MWInstalled
90 MWInstalled
20 MW in 2007
20 MW in 2007
1.8 GW potential
1.8 GW potential
13
Opportunities By Area - Wind
• Pro’s• Pro’s
• Clean Energy Source• Clean Energy Source
• Con’s• Con’s
• Unsightly• Value in the Equipment
• IRR low-ish• Big Boys Play Here
• Unsightly• Value in the Equipment
• IRR low-ish• Big Boys Play Here
World Asia
Market Size, 2007
8000 MWInstalled
8000 MWInstalled
6050 MWInstalled
6050 MWInstalled
1730 MW in 2007
1730 MW in 2007
65 GW potential
65 GW potential
3449 MW in 2007
3449 MW in 2007
Potential:253 GW Onshore 750 GW Offshore
Potential:253 GW Onshore 750 GW Offshore
139 MW in 2007
139 MW in 2007
1538 MWInstalled
1538 MWInstalled
$17.2 Billion
$4.8 Billion
14
Opportunities By Area – Small Hydro
• Pro’s• Pro’s
• Clean Source of Energy• Small Hydro Interesting
• Clean Source of Energy• Small Hydro Interesting
• Con’s• Con’s
• Need Portfolio of Projects• Environmental Consideration
• Political
• Need Portfolio of Projects• Environmental Consideration
• Political
World Asia
Market Size, 2007
2045 MWInstalled
2045 MWInstalled
149 MW in 2007
149 MW in 2007
15 GW potential
15 GW potential
49 GWInstalled
49 GWInstalled
125 GW potential
125 GW potential
1500 MW in 2007
1500 MW in 2007
416 MWInstalled
416 MWInstalled
65 MW in 2007
65 MW in 2007
$4.4 Billion$3.7 Billion
15
Opportunities By Area - Biomass
• Pro’s• Pro’s
• Much Biomass Available• IRR’s Attractive
• Much Biomass Available• IRR’s Attractive
• Con’s• Con’s
• Cost of Collection• Size of Projects
• Competition
• Cost of Collection• Size of Projects
• Competition
World Asia
Market Size, 2007
1580 MWInstalled
1580 MWInstalled
228 MW in 2007
228 MW in 2007
16 GW potential
16 GW potential
3000 MWInstalled
3000 MWInstalled
400 MW in 2007
400 MW in 2007
$3.7 Billion
$1.5 Billion 30 GW potential
30 GW potential
2400 MWInstalled
2400 MWInstalled
400 MW in 2007
400 MW in 2007
16
Opportunities By Area - Biogas
• Pro’s• Pro’s
• A Lot Available (Agri, Ind. Municipal)
• Good for Carbon Credits
• A Lot Available (Agri, Ind. Municipal)
• Good for Carbon Credits
• Con’s• Con’s
• Underused Area• Can be Political
• Underused Area• Can be Political
World Asia
Market Size, 2007
62 MWInstalled
62 MWInstalled
4.2 MW in 2007
4.2 MW in 2007
> 700 MW potential
> 700 MW potential
3.9 million digestersinstalled
3.9 million digestersinstalled
24 million digestersinstalled
24 million digestersinstalled
96000 digesters In 2007
96000 digesters In 2007
4 million digesters in 2007
4 million digesters in 2007
$3.2 Billion
$0.6 Billion
17
Opportunities By Area - Geothermal
• Pro’s• Pro’s
• Can be Major Source of Energy
• Can be Major Source of Energy
• Con’s• Con’s
• Expensive• Transmission Issues
• Low Awareness• Political
• Expensive• Transmission Issues
• Low Awareness• Political
World Asia
Market Size, 2007
4000 MW potential
4000 MW potential
40 MW in 2007
40 MW in 2007
1978 MWInstalled
1978 MWInstalled
992 MWInstalled
992 MWInstalled
185 MW in 2007
185 MW in 2007
40 MWIn 2007
40 MWIn 2007
472 MW Installed
472 MW Installed
1000 MWpotential
1000 MWpotential
20 MWIn 2007
20 MWIn 2007
535 MW Installed
535 MW Installed
$1.0 Billion
$3.0 Billion
18
Cost per MW in s.e Asia by Source, 2007Cost per MW in s.e Asia by Source, 2007
Cost per MW of project compared to other power projects still remains high though…..
0 2 4 6 8 10
Coal
Solar
Geothermal
Small Hydro
Biomass
Wind
0 2 4 6 8 10
Coal
Solar
Geothermal
Small Hydro
Biomass
Wind
USD $mn/ MW
As attractive as renewable energy is their overall costs per MW still remain higher than conventional sources of energy.
This problem is further compounded by the fact that projects are typically of a smaller overall investment than conventional power plants.
Prices per MW are however continuing to come down as the cost of equipment comes down.
Source : Frost & Sullivan analysis
19
…….. and IRR’s typically around the 20% level for project developers. Is risk in Asia rewarded?
Wind Power
Geothermal
IRR Comments
Biogas
Small Hydro
Solar
Biomass
Area
Biofuels
Overall
~15%Depends on size of project location, and carbon credits. Needs CC’s to be viable.
+ or - 75%Heavily dependent on feedstock prices. Similar to a refining business.
~20%Will depend on size and location. Can be more or less than this depending on a variety of factors.
~20%
~20% Depends on size, project location and characteristics of geothermal reservoir.
~20%
~15%Depends on project size and availability of carbon credits.
Highly dependent on project location.
~20% Depends on feedstock, technology, costs involved on land and labor.
Will depend on feedstock prices. Needs attractive feed-in-tariff and tax rebates.
20
Conclusion
Renewable Energy will the best investment opportunity in the 21st century….
But
……will require time and time and massive Capex
21
chris.delavigne@frost.com
Global VP, Consulting
+65 9615 8293
chris.delavigne@frost.com
Global VP, Consulting
+65 9615 8293
22
AppendixAppendix
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