Electric Power Industry Trends and the Role of Renewable Energy. Chuck Levey Vice President Pratt & Whitney Power Systems

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1 Electric Power Industry Trends and the Role of Renewable Energy Chuck Levey Vice President Pratt & Whitney Power Systems

2 Product Portfolio Large Engines ORC Heat to Power Power Systems After market Wind Power Mobile Power Marine

3 Global footprint Canada 3 Canada 1 AK 4 CA 14 HI 2 NM 2 NV 24 OR 4 OR 1 UT 50 WA 4 Red = ORC IL 14 IN 8 MI 2 MO 16 MN 2 MT 6 NE 4 OH 8 WI 4 WY 1 Offshore 30 Argentina 15 Brazil 8 Chile 9 Colombia 2 Guatemala 1 Venezuela 23 CT 1 CT 1 FL 20 KY 4 KY 2 MA 2 MA 2 NC 22 NY 6 NY 1 PA 10 VA 10 WV 12 Jamaica 1 Puerto Rico 8 Virgin Islands 1 Gas Turbine & ORC Fleet Summary Algeria 4 Austria 1 Finland 5 France 10 Germany 16 Ireland 12 Norway 13 Spain 14 Europe 178 Benin 1 Morocco 1 Togo 1 Iraq 3 Turkey 2 Turkey 7 UAE 2 Offshore 10 Georgia 4 Russia 21 China 18 Taiwan 1 Australia 4 Australia 1 New Zealand 6 Tasmania 6 Japan 15 Over 2000 Gas Turbines and 250 ORC s Sold World Wide

4 ENERGY SUPPLY Global energy mix (by fuel source) (GW installed) CAGR ($ trillions) Energy investments ( E) 100% = $26T 8, % E&P Generation / T&D 8.0% 6, % By type 1.8% Renewable 1 Nuclear Hydro 4,717 4,960 (2.1%) 2.3% Emerging Developed Oil Gas By region 2.7% Coal 1 Includes Wind, Solar, Biomass, Geothermal Source: International Energy Agency World Energy Outlook 2009,

5 US Electricity Generation Mix Trends Hydro 6.8% Other Renewables 3.6% Other 0.3% Coal: Prices increased 84% from Coal fired generation declined 11.6% in 2009 (lowest level since 1978) Natural Gas: Wellhead prices fell to lowest level in 7 years. NG based generation increased by 4.3% in 2009 to the highest level since 1970 Nuclear 20.2% Coal 44.5% Nuclear: Decreased by about 0.9% in 2009 (outages and derates) Other Gases 0.3% Natural Gas 23.3% Petroleum 1.0% * Energy Information Administration report, Nov Petroleum: Peaked in 1973 (17%), steadily decreasing since, 15.8% decrease in 2009 compared to 2008 Hydro: Increased 7.3% in 2009 compared to 2008 Renewables: Increased 14% increase in 2009 following a 20% increase in Wind power increased the fastest (34% increase), solar 3%.

6 ROW Electricity Generation Mix Trends 40 Nuclear trillion kilowatthours Coal: Remains steady at 42% ( ), annual increase of 2.3% Renewables Natural gas Coal Liquids Renewables: Highest rate of annual increase, 3% until Share of renewable generation is projected to increase from 18% (2007) to 23% (2035) Natural Gas: Increases at the annual rate of 2.1% * Derived from EIA, International Energy Statistics database (as of November 2009), web site Projections: EIA, World Energy Projection System Plus (2010). Nuclear: Increases at the annual rate of 2% but considerable public concerns may hinder plans for new installations

7 THE ELECTRIC POWER INDUSTRY AND ROLE OF GEOTHERMAL Renewable energy accounted for approximately 11% of the domestically produced electricity in the US in the first six months of Renewable Energy Capacity in the world and US has more than tripled between 2000 and Over the last three decades, US geothermal power-generation industry has grown to be the largest geothermal market in the world with over 3,100 MW of installed electrical capacity. (Sources: Electric Power Monthly June 2010, DOE/ NREL 2010, GEA report)

8 Global Demand for Wind Power

9 Global Perspective Wind Future IHS / EER Base Case Global Wind Market Projections

10 United States Philippines Indonesia Mexico Italy New Zealand Iceland Japan El Salvador Kenya Costa Rica Nicaragua Russia Turkey New Guinea Guatemala Portugal China France Ethiopia Germany Austria Australia Thailand MW's Global Geothermal Market Estimated 40% (~3000MW s) new capacity is ORC 9, Installed Capacity IGA 2015 Capacity Estimate 8,000 7,000 US Projects Under Development 6,000 5,000 4,000 3,000 2,000 1,000 0 Source: GEA May 2010

11 THE ELECTRIC POWER INDUSTRY AND ROLE OF GEOTHERMAL Nine States generate the majority of this power in the U.S.: Alaska, California, Hawaii, Idaho, Nevada, New Mexico, Oregon, Utah, Wyoming. (Source: GEA)

12 Snapshot of US Renewable Energy Portfolio Top States for Renewable Installed Nameplate Capacity 2009 (Excluding Hydropower) (Source: US DOE/ NREL 2010 Study)

13 Snapshot of US Renewable Energy Portfolio Top States for Renewable Installed Nameplate Capacity 2009 (Including Hydropower) (Source: US DOE/ NREL 2010 Study)

14 US Renewable Energy Profile - In the US, wind and Solar Photovaltaics (PV) are seeing large growth. - Wind capacity increased by nearly 40% in PV capacity grew nearly 52% from 2008 to Competitive pricing pressures are prevalent in both Wind and Solar PV markets (China influence) - Worldwide, wind is the fastest growing renewable energy technology. - Renewables are capturing a growing percentage of new capacity additions accounting for more than 55% of new electrical capacity installations in the US, up from 2% in Will this trend continue???

15 Top Countries with Installed Renewable Electricity Majority of China s renewable energy is from small hydropower. Source: DOE/NREL 2010)

16 Top Countries with Installed Renewable Electricity by Technology Geothermal Wind Solar PV CSP Biomass US US Germany US US Philippines China Spain Spain Brazil Indonesia Germany Japan Germany Mexico Spain US China Italy India Italy Sweden Source: DOE/NREL 2010

17 Federal Subsidies & Tax Relief/Incentives Incentives need to be longer than 1-2 years. The investment community needs clear picture of future incentives. Longer term incentives needed to support longer term investments.

18 Federal Subsidies & Tax Relief/Incentives Brief History of incentives Energy subsidies come in a variety of forms. Subsidies go to all forms of energy, including fossil fuels and alternatives. Oil and gas accounted for 60% of an estimated $725 billion in federal assistance between 1950 and Wind, solar, geothermal and biofuels combined to account for only 6%.

19 Federal Subsidies & Tax Relief/Incentives President Obama said in a speech to the United Nations following the G20 Summit in 2009: I am proud to say we will phase out fossil fuel subsidies so that we can better address our climate challenge.

20 Federal Subsidies & Tax Relief/Incentives The American Recovery Reinvestment Act of 2009 (ARRA) provided $1.64 billion for renewable projects, but many of those incentives have closed or close this year. (Source: DOE)

21 Geothermal Growth (Source: Bloomberg New Energy/Finance)

22 Geothermal Growth U.S. total investment in geothermal grew throughout the year Worldwide total investment also grew slightly in U.S. Venture Capital and Private Equity investments in geothermal technology companies have been minimal compared to other renewable, such as solar and wind.

23 Nuclear Shortfall Now What? Germany's Phaseout Puts a Spotlight on the Cost of Its Renewables Strategy June 10, 2011 Germany's decision to phase out nuclear energy by 2022 will transform Europe's largest economy into a multibillion-dollar laboratory experiment on the rapid deployment of renewable energy and smart grid technologies OR if these initiatives fall short, it could leave consumers exposed to higher power prices and make German industry less competitive and the nation more dependent on fossil fuel sources and imports from France's nuclear plants.

24 Renewable Energy Market Challenges Assistance for renewables has been debated in Congress and is often the subject of controversy, leveraging alternative tactics, and inconsistent policy. This leads to market uncertainty, compromising investment opportunities, and technology development inefficiencies. Renewable energy generation remote locations require electric power transmission grid infrastructure investments. Cyclic operating characteristics (non-geothermal) create electric power grid stability challenges. Ability for geothermal applications to attract investment/interest from the oil and gas sector, thus leveraging existing and characterized resources (coproduced fluids).

25 Questions?