U.S. energy consumption

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1 U.S. energy consumption 2007 Coal 22.0% 2030 Coal 26.0% Nuclear 8.0% Nuclear 6.0% Gas 23.0% Renewables 7.0% Gas 21.0% Renewables 7.0% Oil 40.0% Oil 40.0% Sources: Energy Information Administration, Department of Energy. Sources: Energy Information Administration, Department of Energy. Source: Energy Information Administration, U.S. Department of Energy.

2 U.S. energy breakdown 2007 Coal 22.0% Nuclear 8.0% Renewables sector Biomass 53.0% Gas 23.0% Renewables 7.0% Wind energy 5.0% Oil 40.0% Source: Energy Information Administration, U.S. Department of Energy. Geothermal energy 5.0% quadrillion BTU 6.8 quadrillion BTU Solar energy 1.0% Hydroelectric 36.0%

3 Global investment in energy technology US$ billions $148.4 B 60% increase Source: New Energy Finance. $92.6 B

4 Capital investment in renewable energy sector United States $60 B US$ billions % increase $48 B 46 Source: New Energy Finance

5 Global investment by technology 2007 Wind 43.0% Solar 24.0% Source: New Energy Finance. Other low carbon 2.0% Efficiency 2.0% Other renew 3.0% Biomass and waste 9.0% Biofuel 17.0%

6 Global VC/PE investment by technology 2007 Other low carbon 14.0% Wind 8.0% Solar 30.0% Source: New Energy Finance. Efficiency 18.0% Other renew 6.0% Biofuel 16.0% Biomass and waste 8.0%

7 California s Long-Term Energy Efficiency plan All new residential construction will be zero net energy by All new commercial construction will be zero net energy by Sources: California Public Utilities Commission. The heating, venting and air conditioning industry will be re-shaped. 25% increase All eligible low-income customers will be provided with residential energy efficiency measures by 2020.

8 Gas prices Weekly regular reformulated retail gas prices Cent per gallon 500 United States California Source: Energy Information Administration, U.S. Department of Energy

9 Net electricity generation By source, May 2008 Net electricity generation California Share of U.S. (thousand MWh) (percent) Petroleum-fired 25% increase Natural gas-fired 7, Coal-fired Nuclear 2, Hydroelectric 4, Total 17, Source: Energy Information Administration, U.S. Department of Energy.

10 Estimated solar energy industry 2007 Region Establishments 25% Employment increase Total wages (US$ millions) United States 35, ,187 53,343 California 4, ,521 11,291 Source: Bureau of Labor Statistics.

11 Share of renewable energy in primary energy consumption, 2005 Region Percent Region Percent Iceland 73.0 California 10.9 Norway 40.4 Slovenia 10.6 Latvia 36.3 Lithuania 8.8 Sweden 29.8 Italy 6.5 Finland 23.2 United States 6.4 Austria 20.5 Spain 6.1 Denmark 16.2 France 6.0 Portugal 13.4 Bulgaria 5.6 Romania 12.8 Greece 5.2 Turkey 11.9 Germany 4.8 Estonia 11.2 Poland 4.8 Sources: European Environment Agency, Eurostat, Energy Information Administration, Department of Energy.

12 Sources of heating for California s homes 2000 Electricit 22.0% Propane 4.0% None/other 3.0% 71% of California households use 25% increase natural gas to heat homes, compared to their the U.S. average of 51%. Natural gas 71.0% Source: 2000 U.S. Census.

13 State emissions of total organic gases By source, Tons/day Electric utilities Cogeneration Oil and Gas production (combustion) 25% increase Source: Air Resources Board, California Environmental Protection Agency

14 Comparing electricity consumption per capita California vs. Texas KWh per capita California Texas 25% increase Source: Office of Energy Efficiency and Renewable Energy, U.S. Department of Energy

15 California s Alternative energy plan Legislation State actions Description SB 1078 (2002) RPS Portfolio 1% annual growth in renewable supply from until reaching 20% of electricity from renewables AB 32 (2006) 1990 emissions level by 2020 Source: California Energy Commission.

16 California s alternative energy plan Tax credits Energy type Solar incentives Million Solar Roofs Initiative (2004- ) Description $2.9 billion incentive plan for home and building owners who install solar electric systems Wind incentives Emerging Renewables Program (1998- ) Cash incentives to promote the installation of grid-connected small wind and fuel cell renewable energy electric-generating systems Self-Generation Incentive Program (SGIP) Sources: Database of State Incentives for Renewables & Efficiency, U.S. Department of Energy.

17 Texas s alternative energy plan Legislation State actions SB 7 (1999) Description Generate 2,000 MW of additional renewable energy by (Goal reached in early 2005.) SB 20 (2005) Extension of SB 7: increase RPS goal to 5,880 MW by Mandates 500 MW must come from non-wind resources. 10,000 MW goal by 2025 Transmission infrastructure plan for remote regions Source: State Energy Conservation Office.

18 Texas s alternative energy plan Tax credits Energy type Solar incentives Description 30% of cost, up to $2,000 cap for residential, no cap on commercial Wind incentives Corporate tax credit; 1.9 cents/kwh for first 10 years of operation Ethanol incentives 21.6 billion gallons of renewable fuel by 2022 Biodiesel incentives State diesel fuel tax exemption; $0.20/gal grant subsidy (biofuel producers) for first 18 mil gallons annually for 10 years Source: State Energy Conservation Office.

19 Clean technology investment Top 10 states by total investment, 2007 Company state No. of deals Avg. per deal Total investment (US$ millions) (US$ millions) California Massachusetts Texas 9 25% 9.6 increase 77.1 New York Georgia Washington Colora do Iowa Wisconsin New Mexico Source: Thomson Reuters.

20 Top EERE total grants to state energy offices 2006 US$ millions % increase NY OH MI NV PA IL MS MN CA MA Sources: Energy Information Administration and Office of Energy Efficiency and Renewable Energy (EERE), U.S. Department of Energy.

21 Solar module price index 125 watts and higher Retail price per watt peak U.S. (Dollar per watt) Europe (Euro per watt) 25% increase 4.50 Source: Solarbuzz

22 National Renewable Portfolio Standards (RPS) landscape 25% increase Mandatory RPS RPS via voluntary utility commitments No RPS Source: Pew Center on Global Climate Change.

23 Acquisition activity in clean energy companies By region, US$ millions Region Africa 92 25% increase 57 6 Brazil 103 1,030 2,178 China , EU Europe 4,617 13,823 21,623 2,443 India Other Non-OECD ,726 Other OECD 623 3,194 1,359 6,133 United States 3,998 10,138 11,687 21,027 Source: New Energy Finance; Global Trends in Sustainable Energy Investment 2008.

24 California s alternative energy plants 100 MW project size Solar Wind Construction cost ($/KW) $4,862 $1,400 Annual operational and administrative cost ($/KW) $72.68 $15.50 Annual personnel cost $3,268,357 $379,763 Taxable value $486,225,444 $39,666,667 Source: National Renewable Energy Laboratory, U.S. Department of Energy.

25 Transportation: Leading user of U.S. crude oil supplies U.S. reliance on energy sources Energy demand by sector Renewable energy 6% Nuclear 8% Transportation 69% Natural gas 23% Crude oil 40% Industrial 24% Coal 23% Source: Energy Information Administration, 2006 Commercial and residential 6% Electric power 1%

26 Trade-offs for transportation fuel alternatives Oil Environmental impact (high) Costs in 2007 $ (low) Costs in 2007 $ (high) Financial innovations and opportunities to address gaps Hydrogen GOAL: Could be a combination of different technologies and fuels Impact (low)

27 Wind, solar real estate, and electricity grid Wind belt High-capacity transmission lines Solar belt High-capacity transmission lines Source: National Renewable Energy Laboratory, U.S. Department of Energy.

28 Fungibility factor: Fuels don t equal energy

29 Renewables R&D budget for IEA countries Sources: OECD/IEA.

30 Avg. annual renewables R&D per capita budget Sources: OECD/IEA.

31 Avg. annual renewables R&D per capita budget Sources: OECD/IEA.

32 Avg. annual renewables R&D budget Sources: OECD/IEA.

33 U.S. energy consumption 2007 Coal 22.0% 2030 Coal 26.0% Nuclear 8.0% Nuclear 6.0% Gas 23.0% Renewables 7.0% Gas 21.0% Renewables 7.0% Oil 40.0% Oil 40.0% Sources: Energy Information Administration, Department of Energy. Sources: Energy Information Administration, Department of Energy. Source: Energy Information Administration, U.S. Department of Energy.

34 PG&E s Climate Change Journey

35 Committed to Energy Efficiency

36 Investing in Renewables and Emerging Technologies

37 Emerging Renewable Resources

38 ClimateSmart TM Climate Neutral Energy

39 Why SmartMeter?

40 Next-generation energy: Chevron s approach Starting point: We need all the energy we can produce Begin with efficiency, inside and outside the enterprise R&D/investment strategies focus on current solutions, long-term potential and best bets Geothermal Hydrogen Biofuels

41 What Will It Take? For a transportation fuel to be adopted by the marketplace, it must: Provide equal or improved driving performance, safety, reliability, and comfort Be competitively priced Be convenient, readily available Be economical at large scale

42 Fundamentals of the Energy System Very long-lived assets World s largest supply chain Capital- and technologyintensive Highly integrated infrastructures Business is a complex blend of economics, politics, technology, and the environment Integration 1 Explore/ Develop 2 Produce 3 Transport 4 Refine 5 Store/Dist 6 Deliver 7 Market Add Value at Each Step

43 Research to Markets: Scale, Time, and Capital 10+ years Laboratory Bench Pilot Plant Field Demonstration at Scale Full-scale Production Infrastructure $ Millions $10 s Millions $100 s Millions $Billions R&D Validate Systems Integration Validate scale-up and continuous operations

44 Chevron and Biofuels Biofuels complement traditional transportation fuels and will play an increasingly important role in meeting energy needs Chevron is well-positioned to make significant contributions Advanced biofuels hold the greatest promise for scale Chevron is actively working and investing to accelerate the necessary scientific, technical, and commercial breakthroughs Bringing biofuels to large-scale commercial production is an enormous challenge that will be achieved only through collaboration

45 Biofuels Business Unit Catchlight Energy: Formed in 1Q 2008 as a 50/50 JV with Weyerhaeuser to research, develop, and commercialize the conversion of lignocellulose into biofuels Weyerhaeuser Feedstocks at scale Advanced Biofuel Collaborations Georgia Tech Colorado Center for UC Davis Biorefining & Biofuels Texas A&M Several others within National Renewable the value chain Energy Laboratory Catchlight Energy Conversion technology Chevron High-quality fuels to customers Portfolio R&D Feedstock supply and optimization Conversion Technology: Bioconversion; Thermochemical; Chemical catalytic Fuel and combustion technology

46 Enabling the Winners Finding and Encouraging the Best Options There is no single solution Issues of dependency, reliability of supply, environmental footprint and cost apply to all fuels to some degree All economic fuels, plus conservation, will be needed to meet demand Market-based competition amongst technologies should be maximized Consumers have the means to conserve and are beginning to respond Allow time for technology to advance New technologies must offer tangible benefits to consumers and realworld wells-to-wheels benefits to the environment

47 Chevron and Hydrogen Chevron operates five demonstration refueling stations across the U.S.; three in California Multi-year cost sharing programs with federal and state agencies and industry partners Objectives are to demonstrate safe, practical hydrogen technologies in real-world settings; identify and overcome key technical challenges What we ve learned: 1) Distributed production works. 2) H 2 is relatively expensive to produce compared with gasoline. 3) Storage is a challenge.

48 Sustained Renewable Energy Growth California Renewable Portfolio Standard (RPS) Support California s goal to increase mandate to 33% by 2020 Streamlined Permitting - Need for cooperation between state agencies and local government to accelerate, not slow down, permitting process Transmission Infrastructure Improve coordination between state agencies to add needed renewable transmission Favorable Tax Policies California should continue to offer tax incentives for alternative energy manufacturing and renewable projects

49 Polling Question 1: What primary energy source would allow California to maintain its leadership in efficiency of energy consumption? 1. Wind 2. Petroleum 3. Solar/PV 4. Natural gas 5. Hydroelectric

50 Polling Question 2: What is the major barrier to entry for alternative energy firms? 1. Underdeveloped technology 2. Lack of public/private R&D investment 3. Lack of access to power grid 4. Lack of public awareness

51 Polling Question 3: Excluding hydroelectric, California's largest source of renewable energy is: 1. Biomass 2. Geothermal 3. Solar/PV 4. Wind