BLOOMBERG NEW ENERGY FINANCE SUMMIT

BLOOMBERG NEW ENERGY FINANCE SUMMIT NEW YORK 23 APRIL 2013 Michael Liebreich, Chief Executive Bloomberg New Energy Finance Twitter: @miebreich // / / / 1

AGENDA 1. Clean energy investment update 2. Four energy realities 3. New Energy ROI 2

GLOBAL TOTAL NEW INVESTMENT IN CLEAN ENERGY, 2004-2012 ($BN) +20% -11% +34% +16% -2% $54bn +48% $80bn +42% +45% $114bn $165bn $191bn $187bn $251bn $302bn $269bn 2004 2005 2006 2007 2008 2009 2010 2011 2012 Note: Includes corporate and government R&D, and small distributed capacity. Adjusted for reinvested equity. Does not include proceeds from acquisition transactions Source: Bloomberg New Energy Finance 3

GLOBAL RENEWABLE CAPACITY ADDITIONS (GW) 80 60 40 Other renewables Biomass & Waste Wind 20 Solar 2001 2003 2005 2007 2009 2011 Note: Other renewables includes marine and geothermal power only. Source: Bloomberg New Energy Finance 4

CLEAN VS FOSSIL-BASED GENERATING CAPACITY INVESTMENT, 2006 12 ($BN) 350 300 250 200 Fossil fuel 150 100 50 Clean energy 0 2006 2007 2008 2009 2010 2011 2012 Note: Clean energy total excludes large hydro. Fossil fuel is investment on coal and gas capacity. We assume capacity retirement of 3.3%/yr for coal and 4%/yr for gas. Source: Bloomberg New Energy Finance 5

EQUIPMENT SUPPLY AND DEMAND, 2006-2015 (GW) 80 70 60 50 40 30 20 10 Manufacturing capacity SOLAR Demand 2006 2008 2010 2012 2014 Optimistic Conservative 90 80 70 60 50 40 30 20 10 Manufacturing capacity Demand WIND 0 2008 2010 2012 2014 2016 Note: Supply scenarios based on continued 2012 utilisation rates. Source: Bloomberg New Energy Finance 6

NEX CLEAN ENERGY INDEX 2003 2013 YTD NEX NASDAQ S&P 500 700 700 600 600 500 500 400 400 300 200 100 - Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-1 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Note: Values as of 10 April 2013; NASDAQ and S&P 500 rebased to 100 on 01 Jan 2003 Source: Bloomberg New Energy Finance 7

NEW INVESTMENT IN CLEAN ENERGY BY REGION, 2004-2012 ($BN) North America & Caribbean Europe 97.8 108.0 63.1 40.8 41.8 39.0 40.3 28.9 27.1 14.2 7.1 2004 2005 2006 2007 2008 2009 2010 2011 2012 70.7 73.2 75.8 58.4 36.5 28.5 18.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Asia & Oceania 100.7 87.1 66.8 47.3 39.9 30.6 22.4 9.5 15.2 Central & South America Middle East & Africa 2004 2005 2006 2007 2008 2009 2010 2011 2012 14.5 11.1 10.3 12.9 9.9 10.0 5.4 3.5 0.8 2004 2005 2006 2007 2008 2009 2010 2011 2012 Note: Excludes corporate and government R&D 11.8 4.9 0.3 0.5 1.1 1.5 2.7 4.2 1.6 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Bloomberg New Energy Finance 8

US 2012 THE CLEAN ENERGY ELECTION Solyndra! Solyndra! Solyndra! I m going to renew the wind Production Tax Credit! Pictures: Bloomberg 9

US ANNUAL CLEAN ENERGY INVESTMENT AND CAPACITY ADDITIONS, 2004-2012 TOTAL INVESTMENT, $BN CAPACITY, GW 10.6 17.1 32.1 43.3 42.9 32.4 42.5 65.2-32% 44.2 0.6 2.0 3.1 5.7 9.6 11.3 17.4 +100% 8.7 5.6 Other renewables Biomass & waste Solar Wind 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Bloomberg New Energy Finance 10

HENRY HUB GAS PRICE ($/MMBTU) 20 15 10 Summit 2012 $2.21/MMBtu Summit 2013 $4.26/MMBtu (+130%) 5 Henry Hub 0 Oct-2005 Oct-2006 Oct-2007 Oct-2008 Oct-2009 Oct-2010 Oct-2011 Oct-2012 Source: Bloomberg Terminal 11

EUROPEAN CREDIT DEFAULT SWAP SPREADS, 2009-12 16 14 12 10 8 6 4 2 0 Dec 09 Dec 10 Dec 11 Dec 12 Portugal Italy Spain France Netherlands Germany UK Sweden Finland Norway Source: Bloomberg Terminal 12

EUROPE - POLICY UNCERTAINTY Retroactive changes Unplanned reduction Source: Bloomberg New Energy Finance 13

TOP 15 COUNTRIES FOR NEW INVESTMENT IN CLEAN ENERGY IN 2012 AND % CHANGE ON 2011 ($BN) China 65.13 20% United States 35.58-37% Germany 22.80-27% Japan 16.28 75% Italy 14.71-51% United Kingdom 8.34-17% India 6.85-45% Australia 6.19 40% South Africa 5.46 20563% Brazil 5.34-32% Canada 4.41-23% France 4.31-34% Belgium 4.05 11% Greece 3.42 179% Spain 2.95-68% Note: Excludes corporate and government R&D Source: Bloomberg New Energy Finance 14

SUPPLY CHAIN CONSOLIDATION 15

NEW ENERGY REALITIES 1. Unconventional oil and gas 2. Improving energy intensity 3. Cheap clean energy 4. Unpredictability 16

US SHALE GAS PRODUCTION (BCF PER DAY) 30 25 20 15 10 5 Qatar China UK Rest of US Eagle Ford Marcellus Haynesville Woodford Fayetteville Barnett 0 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Source: Bloomberg New Energy Finance, US EIA, UK DECC, China Customs, BP Statistical Review 17

US PROJECTED NET IMPORTS OF NATURAL GAS, 2008-20 TRILLION CUBIC FEET 5 4 3 2 1 Historical 0-1 -2-3 -4 1980 1990 2000 2010 2020 2030 2040 Note: 2013 figures show Early Release Source: US EIA Annual Energy Outlook, 2010-2013; Bloomberg New Energy Finance 2010 18

MAJOR GLOBAL SHALE FIELDS Canada Norway Poland Mexico USA Algeria Libya China Brazil Australia 200 trillion cubic feet Note: Technically recoverable shale gas resources shown Argentina South Africa Source: EIA Assessment of World Shale Gas Resources, April 2011 22

UK SHALE GAS The extraordinary windfall, which is completely God-given, that this country has got is shale gas. Owen Paterson UK Environment Secretary Picture: Getty Images 23

AUSTRALIA NATIONAL ELECTRICITY MARKET ACTUAL VS FORECAST ELECTRICITY DEMAND, 2005 2022 TWh 280 AUD trillion 1.5 260 240 220 200 GDP Historical Oct 2010 1.4 1.2 1.1 0.9 180 0.8 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Source: Australian Energy Market Operator, Reserve Bank of Australia, Bloomberg New Energy Finance 24

AUSTRALIA NATIONAL ELECTRICITY MARKET ACTUAL VS FORECAST ELECTRICITY DEMAND, 2005 2022 TWh 280 AUD trillion 1.5 260 240 220 200 GDP Historical Oct 2010 1.4 Sept 2011 1.2 1.1 0.9 180 0.8 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Source: Australian Energy Market Operator, Reserve Bank of Australia, Bloomberg New Energy Finance 26

AUSTRALIA NATIONAL ELECTRICITY MARKET ACTUAL VS FORECAST ELECTRICITY DEMAND, 2005 2022 TWh 280 AUD trillion 1.5 260 240 220 200 GDP Historical Oct 2010 1.4 Sept 2011 1.2 Jun 2012 1.1 0.9 180 0.8 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Source: Australian Energy Market Operator, Reserve Bank of Australia, Bloomberg New Energy Finance 28

US NATIONAL ELECTRICITY MARKET ACTUAL VS FORECAST ELECTRICITY DEMAND, 1990 2035 TWh 5,000 Feb 2005 USD trn 2.0 4,500 4,000 3,500 Historical 1.8 1.6 1.4 3,000 GDP 1.2 2,500 1990 1995 2000 2005 2010 2015 2020 2025 2030 Source: EIA, Bloomberg New Energy Finance 29 1.0

US NATIONAL ELECTRICITY MARKET ACTUAL VS FORECAST ELECTRICITY DEMAND, 1990 2035 TWh 5,000 Feb 2005 Feb 2007 USD trn 2.0 4,500 4,000 3,500 Historical 1.8 1.6 1.4 3,000 GDP 1.2 2,500 1990 1995 2000 2005 2010 2015 2020 2025 2030 Source: EIA, Bloomberg New Energy Finance 30 1.0

US NATIONAL ELECTRICITY MARKET ACTUAL VS FORECAST ELECTRICITY DEMAND, 1990 2035 TWh 5,000 Feb 2005 Feb 2007 USD trn 2.0 Dec 2009 4,500 4,000 3,500 Historical 1.8 1.6 1.4 3,000 GDP 1.2 2,500 1990 1995 2000 2005 2010 2015 2020 2025 2030 Source: EIA, Bloomberg New Energy Finance 32 1.0

US NATIONAL ELECTRICITY MARKET ACTUAL VS FORECAST ELECTRICITY DEMAND, 1990 2035 TWh 5,000 4,500 Feb 2005 Feb 2007 USD trn 2.0 1.8 Dec 2009 Apr 2011 4,000 3,500 Historical 1.6 1.4 3,000 GDP 1.2 2,500 1990 1995 2000 2005 2010 2015 2020 2025 2030 Source: EIA, Bloomberg New Energy Finance 33 1.0

US NATIONAL ELECTRICITY MARKET ACTUAL VS FORECAST ELECTRICITY DEMAND, 1990 2035 TWh 5,000 4,500 Feb 2005 Feb 2007 USD trn 2.0 1.8 Dec 2009 Apr 2011 Dec 2012 4,000 3,500 Historical 1.6 1.4 3,000 GDP 1.2 2,500 1990 1995 2000 2005 2010 2015 2020 2025 2030 Source: EIA, Bloomberg New Energy Finance 34 1.0

US CAR USE AND FUEL EFFICIENCY 3.5 Total vehicle miles travelled (tm/year) 25 Fuel efficiency of new cars (mpg, sales weighted average) 3.0 2.5 2.0 24 23 1.5 1.0-0.5% 0.5 CAGR since 2007 0.0 1971 1981 1991 2001 2011 Note: Total vehicle miles grew at 2.7% CAGR between 1971 and 2007 22 21 +3.7% CAGR since 2007 20 2007 2008 2009 2010 2011 2012 2013 Source: US Department of Transportation Federal Highway Administration; University of Michigan Transportation Research Institute; Bloomberg New Energy Finance 35

NET OIL AND GAS IMPORT DEPENDENCY, 2010-2035 (% of consumption) Gas 100% 80% 60% 40% European Union 2010 2035 Japan 20% China India United 0% States -20% 20% 40% 60% 80% 100% Oil Source: IEA 36

PV EXPERIENCE CURVE, 1976-2012 2012 ($/W) 100 10 1976 1985 Crystalline silicon 2000 PV MODULE PRICES HAVE FALLEN 80% SINCE 2008 20% IN 2012 1 2006 Thin-film 2012 2012 0.1 1 10 100 1,000 10,000 100,000 1,000,000 Cumulative capacity, MW Source: Paul Maycock, Bloomberg New Energy Finance Note: Prices inflation indexed to US PPI. 37

AVERAGE LEVELISED COST OF ONSHORE WIND, 1984-2012 ( /MWH) 1000 500 100 Denmark and Germany WIND TURBINE PRICES HAVE FALLEN 29% SINCE 2008 Global 50 14% 1984 1990 2000 2004 2011 10 100 1,000 10,000 100,000 1,000,000 Cumulative capacity, MW Note: Learning curve (blue line) is least square regression: R 2 = 0.88 and 14% learning rate. Source: Bloomberg New Energy Finance, ExTool 38

LITHIUM-ION BATTERY EXPERIENCE CURVE Battery cost ($/kwh) 10,000 EV BATTERY PRICES HAVE FALLEN 37% SINCE H1 2011 EV Li-ion battery cost forecast (BNEF) 1,000 100 1995 2000 Cost-competitiveness (on total ownership basis) H1 2012 - $689/kWh H2 2012 - $638/kWh 2015 2020 2005 2030 Consumer Li-ion battery experience curve EV Li-ion battery prices, historical Consumer Li-ion battery prices, historical 10 100 1,000 10,000 100,000 1,000,000 10,000,000 Cumulative production capacity (MWh) Source: Battery University, MIIT, IIT, Bloomberg New Energy Finance 39

POWER GENERATION CAPACITY ASSET FINANCE (GREMO NEW NORMAL) $bn (nominal) 800 700 600 500 400 300 200 100 0 2006 2010 2015 2020 2025 2030 Clean energy asset investment will be $630bn in 2030 73% of total Note: 1. All $bn figures are nominal assuming a 2% annual rate of inflation 2. EfW is energy from waste Small-scale PV includes commercial and residential scale rooftop PV. Marine Solar thermal Small-scale PV Solar PV Offshore wind Wind EfW Biomass Geothermal Hydro Nuclear Oil Gas Coal Source: Bloomberg New Energy Finance 40

TOTAL PRIMARY ENERGY DEMAND TWh 200,000 180,000 160,000 140,000 Mtoe 16,000 14,000 12,000 Renewable Energy (excl. hydro) Hydro 120,000 100,000 80,000 60,000 40,000 20,000 0 2005 2010 2015 2020 2025 2030 10,000 8,000 6,000 4,000 2,000 0 Nuclear Traditional biomass Fossil IEA WEO 2012 Source: Bloomberg New Energy Finance 41

PREDICTION If we look at things like renewable wind, solar, biofuels, we have those sources over the next 30 years growing 700 to 800 percent. But in the year 2040, they ll supply just 1 percent. Rex Tillerson CEO, ExxonMobil March 2013 42

UNCERTAINTY The world of energy is facing a period of unprecedented uncertainty Fatih Birol Chief Economist, IEA Picture: Mikhail Evstafiev, Wikimedia 43

NEW ENERGY ROI RESILIENCE OPTIONALITY INTELLIGENCE 44

NEW ENERGY ROI RESILIENCE Don t ask: What is the expected outcome? Ask: What is the worst that can happen? Source: Bloomberg New Energy Finance 45

TRADITIONAL THREATS ACCIDENTS NATURAL DISASTERS GEOPOLITICS SECURITY 46

NEW THREATS CYBERSECURITY 47

CHINA THERMAL POWER GENERATION VERSUS WATER SCARCITY BY PROVINCE, 2010 Freshwater scarcity rating: Water deficit Severe scarcity Moderate scarcity No scarcity 100TWh 48

CHINA THERMAL POWER GENERATION VERSUS WATER SCARCITY BY PROVINCE, 2030 Freshwater scarcity rating: Water deficit Severe scarcity Moderate scarcity No scarcity 100TWh 49

MAJOR GLOBAL SHALE FIELDS Canada Norway Poland Mexico USA Brazil Algeria Libya China Australia 200 trillion cubic feet Note: Technically recoverable shale gas resources shown Argentina South Africa Source: EIA Assessment of World Shale Gas Resources, April 2011 50

MAJOR GLOBAL SHALE FIELDS WATER STRESS Canada Norway Poland Mexico USA Brazil Algeria Libya China Australia 200 trillion cubic feet Note: Technically recoverable shale gas resources shown Argentina South Africa Source: Shale gas resources: EIA Assessment of World Shale Gas Resources, April 2011; Water Stress: UNEP, Bloomberg New Energy Finance 51

SOCIAL ACCEPTABILITY FRACKING, TAR SANDS Source: Wikimedia commons 52

STUDENT FOSSIL FUEL DIVESTMENT MOVEMENT Picture: gofossilfree.org, US Navy 53

CLIMATE CHANGE Image: Bloomberg Businessweek 54

NEW ENERGY ROI OPTIONALITY In times of volatility options have extraordinary value Source: Bloomberg New Energy Finance 55

OPTIONALITY SO WHERE ARE THESE OPTIONS? TECHNOLOGY OPTIONS OPERATIONAL OPTIONS FINANCIAL OPTIONS Energy efficiency Power storage Demand management Interconnection Fuel flexibility Mini-grids CCS readiness Natural hedges Dual sourcing Market diversification Sector diversification Value chain diversification R&D Coalitions Capital light Low leverage Structured finance Conditional commitments Hedging Guarantees Option pricing Source: Bloomberg New Energy Finance 56

OPTIONALITY INVESTOR EXAMPLE $48 billion $1.5 billion 57

NEW ENERGY ROI - INTELLIGENCE A tsunami of information Are you surfing or drowning? Source: Bloomberg New Energy Finance 58

INTELLIGENCE MACHINE INTELLIGENCE Smart grid Internet of things Pervasive sensors Automated optimisation Big data HUMAN INTELLIGENCE Consumer behaviour Market intelligence Talent management 59

NEW ENERGY ROI DINOSAUR HEURISTICS Scale Centralisation Baseload-plus-peak Dispatch management Vertical integration Confidentiality Defence budget MAMMAL HEURISTICS Efficiency Network Responsiveness Demand management Coalitions Data sharing R&D budget Photos: Wikimedia Commons 60

THANK YOU! RESILIENCE OPTIONALITY INTELLIGENCE 61