Geothermal s Value in a Changing Energy Market

Transcription

1 Geothermal s Value in a Changing Energy Market March 12-14, 2014 Puna Geothermal Venture, Hawaii Green energy you can rely on

2 Disclaimer Information provided during this presentation may contain statements relating to current expectations, estimates, forecasts and projections about future events that are forward-looking statements as defined in the Private Securities Litigation Reform Act of These forward-looking statements generally relate to the company s plans, objectives and expectations for future operations, and are based on management s current estimates and projections of future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please see risk factors as described in the Annual Report on Form 10-K filed with the securities and exchange commission on February 28, In addition, during this presentation, statements may be made that include a financial measure defined as non-gaap financial measures by the Securities and Exchange Commission, such as EBITDA and adjusted EBITDA. These measures may be different from non-gaap financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Management of Ormat Technologies believes that EBITDA and adjusted EBITDA may provide meaningful supplemental information regarding liquidity measurement that both management and investors benefit from referring to this non-gaap financial measures in assessing Ormat Technologies liquidity, and when planning and forecasting future periods. This non- GAAP financial measures may also facilitate management s internal comparison to the company s historical liquidity. All Rights Reserved. This document contains information proprietary to Ormat Technologies, Inc. Reproduction in any form without prior written permission is strictly prohibited 2

3 Introduction to Ormat Market leader with proven track record: Over four decades of experience Established renewable pure-play Technology leader with over 77 U.S. patents 626 MW of installed capacity in 18 complexes and power plants Power plants fully contracted with base load generation, yielding strong cash flow Vertically integrated 480 employees in the United States and over 600 overseas Share data: Yahoo finance as Feb. 26,

4 Changing Energy Landscape California's once-through cooling policy (OTC) SONGS retirement AB32 COAL New EPA regulations CEC is working with southern Californian utilities on their timeline for divesting from coal resources that they own Multiple entities are committed to weaning themselves from coal 4

5 Changing Energy Landscape Market Design CAISO, CEC and CPUC looking at the costs of integrating intermittent/variable resources into the California grid Time of Use will be revised which will benefit geothermal Flexibility and other ancillary benefits are becoming more important Dispatch options were in last two CA IOU Renewable RFP s 5

6 Geothermal in the Mix Reliable, economical and clean option Smallest carbon footprint among energy sources suitable for base-load Aligns with U.S. climate goals Makes good economic sense Produces energy for decades at stable, affordable prices Positive impact on local economies Firm and flexible 6

7 Firm and Flexible Firm (base-load) provides Capacity Voltage regulation Inertia (frequency regulation) Flexible Can be dispatched High ramp rates Ramped up and down multiple times per day Ramp rates of 15% to 30% of nominal power per minute 7

8 Firm and Flexible Why are Flexibility and Base Load so important? Geothermal is having a difficult time in the very competitive CA renewable market CA Appetite is currently low Utilities have additional needs in order to meet their RPS CP III requirements (33%), though in general there is oversupply, primarily of solar PV resources IOUs are issuing RFPs now for COD 2018 and later Several initiatives are underway at CAISO, CEC and CPUC looking at the costs of integrating intermittent/variable resources into the California grid This may result in a greater incentive to procure Base load renewables and Flexible renewables in future solicitations 8

9 CA IOUs Renewable Resource Mix Massive Growth of Wind and Solar PV Source: CPUC Quarterly RPS Report for Q3 & Q

10 VERs: Renewable Intermittency Challenge MW Each day is a different color Day Day Day 5 Day 26 Average Source: CAISO Smooth average, but significant day-to-day variability Hour 10

11 Elephant and Camel 11

12 Geothermal in the Mix 38 MW Puna Geothermal Venture, Big Island, Hawaii 12

13 Geothermal in the Mix 8 MW expansion Dispatchable energy, Automatic Generator Control (AGC) remotely and automatically controlled by HELCO System Operator Optimizes geothermal resource First fully dispatchable geothermal project in the world Allows increase of renewables in the HELCO portfolio while providing a balanced and responsive grid 13

14 Recent News: Heber l PPA 10-year PPA with SCPPA 46 MW LADWP & IID In our effort to replace all coal generation by 2025, LADWP sees the value in geothermal as an ideal coal replacer as a renewable, baseload solution with no integration costs, explained Aram Binyamin, senior assistant general manager power at LADWP. 14

15 Procurement Valuation Considerations The CPUC in its RPS procurement proceeding( ) continuously mandates that a zero adder for integration costs be used in evaluating bids in RPS Solicitations Failing to include integration costs, gas system costs, transmission costs and the value of ancillary service attributes leads to an inaccurate price per MWh comparison between technologies As regulators consider the need to add flexible resources to support the increased use of VERs and seek ways to minimize the costs, they must consider the total integration cost of each resource which in turn will shine a light on the vital role geothermal resources can play 15

16 Procurement Valuation Considerations: Costs of Integration The Value of Geothermal Energy Generation Attributes Aspen Environmental Group, February 2013 Integration Studies Company/ Organization Type of Study Penetration Level Integration Cost Study Date ($/MWh) PGE Wind 850 MW PacifiCorp Wind 1372 MW PacifiCorp Wind 1833 MW APS Wind 10% NV Energy Solar PV 150 MW NV Energy Solar PV Excel Wind PG&E Wind PG&E Wind

17 Recent CAISO Report Recommendations CAISO Renewable Energy + Flexibility Reporting December 9, 2013 There is value in procuring a diverse portfolio of renewables Reduces overgeneration and need for flexible resources Flexible loads Shifting loads from one time period to another, sometimes on short notice Flexible generation Need generation that is fast ramping, starts quickly, and has more generation flexibility 17

18 Take Aways Establish valuation mechanism for geothermal s ancillary and flexibility attributes Value of resource diversity Geothermal is firmly flexible and a valuable piece of the puzzle 18

19 End of History Illusion 19

20 Procurement Valuation Considerations: End of History Illusion 20

21 For More Information Contact Bob Sullivan (775)