CONTEXT AROUND RGGI DISCUSSIONS RGGI STAKEHOLDER MEETING MICHEL DI CAPUA 19 SEPTEMBER 2011 PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 1
CONTENTS Market size Power and renewables in RGGI territory Energy efficiency PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 2
RGGI PRICES AND VOLUMES ON CCFE AND AUCTIONS $ / st Mst Note: st = short ton; the first control period is from 2009 11, second control period is from 2012 14 Source: Bloomberg New Energy Finance PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 3
RGGI AUCTION VOLUMES AND CUMULATIVE REVENUES Mst $ million Note: st = short ton Source: Bloomberg New Energy Finance, RGGI, Potomac Economics PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 4
QUARTERLY FIGURES FOR MAIN CARBON MARKETS Q1 2009-Q2 2011 VOLUMES (MT) VALUES ( BN) 2,500 2,000 1,500 1,866 1,987 1,661 1,559 1,518 2,184 1,465 1,545 1,800 1,746 30 25 20 19 24 19 19 17 29 18 20 24 25 1,000 15 500 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 2011 EUA scer pcer RGGI AAUs 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 2011 EUA scer pcer RGGI AAUs Note: Over-the-counter trades not traded on exchange are now excluded from this analysis. The figures for previous years have been reworked to compare like-for-like yearly changes. Source: Trading figures taken from ECX from Bloomberg, ECX, Bluenext, EEX, CCX, Nordpool, other sources include UNFCCC and our own Bloomberg New Energy Finance estimations. PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 5
PROJECTED GROWTH IN THE CARBON MARKET ( TRILLION) 0.7 0.66 0.6 0.58 Japan 0.5 0.42 0.49 New Zealand 0.4 0.3 0.31 0.34 Australia California 0.21 0.2 0.15 0.18 0.06 0.08 0.08 0.11 0.1 CER EUA 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Bloomberg New Energy Finance PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 6
CONTENTS Market size Power and renewables in RGGI territory Energy efficiency PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 7
NEW CAPACITY ADDITIONS (MW) NPCC REGION (NORTHEAST US) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 25,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Other Hydro Biomass Solar Coal Wind Gas TOTAL US 20,000 15,000 10,000 5,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Other Hydro Biomass Solar Coal Wind Gas Source: Bloomberg New Energy Finance, EIA PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 8
COAL RETIREMENTS BY STATE AS % OF TOTAL CAPACITY MN: 4.1% MD: 9.1% CT: 2.5% CO: 7.9% IA: 2.9% IL: 2.5% MI: 9.4% IN: 10.7% KY: 7.2% OH: 15.8% WV: 12.1% PA: 4.7% VA: 4.1% DE: 10.2% TN: 10.7% NC: 7.4% SC: 7.6% < 2% retired MS: 2.9% AL: 9.6% GA: 6.0% 2%-5% retired 5.01%-10% retired > 10% retired FL: 2,267 FL: MW 2.3% Source: Bloomberg New Energy Finance PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 9
NEW BUILD REQUIRED TO MEET RPS TARGETS, 2012-15, ASSUMING NET RPS IS MET EXCLUSIVELY WITH WIND (MW) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2015 2014 2013 2012 CA AZ NV ERCOT HI KS MRETS NEPOOL NY IL NC PJM WREGIS Note: (1) North Carolina (NC) does have significant RPS demand, but it is highly unlikely to meet this demand with wind given the poor in-state wind resources. (2) Regions represent California (CA), Arizona (AZ), Nevada (NV), Texas (TX), Hawaii (HI), Kansas (KS), Midwestern states with binding RPS programmes not otherwise included in other regions (MRETS), New England excluding Vermont (NEPOOL), New York (NY), Illinois (IL), North Carolina (NC), PJM region excluding Illinois and North Carolina (PJM), and western region excluding California, Arizona, and Nevada (WREGIS) Source: Bloomberg New Energy Finance PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 10
PRICES OF SELECTED NEPOOL RECS ($/MWH) 40 35 30 MA - Class 1-2011 25 20 15 CT - Class 1-2011 10 MA - Class 1-2010 5 0 Jan 10 Mar 10 May 10 Jul 10 Sep 10 Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep 1 Note: On the data labels, the year indicates vintage; class indicates portion of the state s RPS carve-out for which the REC qualifies Source: Bloomberg New Energy Finance, Spectron Group, Evolution Markets PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 11
AVERAGE WIND PROJECT CAPACITY FACTOR, 2010 CA 35% (16) >34% OR 27% (14) WA 27% (4) ID 23% (2) UT 23% (1) AZ 22% (1) MT 26% (2) WY 30% (5) NM 35% (5) CO 35% (8) ND 34% (10) SD 38% NE 28% (1) (7) KS 34% (6) OK 35% (7) MN 33% (13) IA 28% (12) MO 26% (3) WI 26% (3) IL 28% (12) MI 28% (1) IN 29% (6) TN 19% (1) WV 25% (2) NH 31% (1) NY 23% (12) PN 28% (12) ME 31% (3) 30-34% 25-29% <25% No data State Capacity factor (Reporting projects) TX 37% (7) Note: Sample sizes are small for some state and should not represent general wind resources. Capacity factors are averaged over the life of a project. Only includes projects operating for at least one year. Source: Bloomberg New Energy Finance, FERC PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 12
CONSEQUENCES FOR NORTHEAST POWER SECTOR EMISSIONS (MTCO2E) UNDER NEW ENGLAND RENEWABLE BUILD SCENARIOS 160 155 150 145 140 135 No wind build BAU High wind build 130 125 120 2010 2011 2012 2013 2014 2015 2016 2017 2018 Notes: (1) BAU assumes 1.7GW of wind build in New England between 2010-2018. (2) High wind build scenario assumes 500MW of annual wind build from 2012 onwards, broadly in line with what is needed for RPS. (3) All cases assume 378MW of offshore wind build through 2018. Source: Bloomberg New Energy Finance PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 13
CONTENTS Market size Power and renewables in RGGI territory Energy efficiency PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 14
2030 US MARGINAL ABATEMENT COST CURVE (MACC) ACCOUNTING FOR IMPROVING CARBON INTENSITY, KEY RECENT POLICIES, AND SECTOR-SPECIFIC DISCOUNT RATES $100 $50 $0 -$50 Landfill gas power generation Geothermal Building management systems 0 500 Forest 1,000 1,500 2,000 Smart grid AMI with visual display Smart grid automated residential systems Lighting Wind (low-cost) Hybrid vehicles Soil sequestration (mid- and high-cost) Crop rotations Efficiency for commercial and residential retrofits Afforestation (low-cost) Industrial improvements (retrofits, new builds) management (mid-cost) Afforestation (mid-cost) Wind (high-cost) Forest management (high-cost) Efficiency for residential new builds Solar PV (utility-scale) Plug-in vehicles Nuclear Ethanolfueled vehicles CCS (new build, postcombustion coal) Solar PV (residential) Afforestation (high-cost) Landfill projects (high-cost) Biomass Gas industry projects (low-cost) Electric vehicles CCS (retrofit, post-combustion coal) Annual abatement potential (MtCO2e) CCS (new build, oxyfuel, coal) Coal mine, oil industry, high GWP, wastewater projects Coal-gas fuel switch for installed fleet CCS (retrofit, oxyfuel, coal) ($107) CCS (new build, pre-combustion IGCC) Solar thermal ($140) Gas industry projects (high-cost) (>$1,000) 2% 10% 19% 27% 35% 40% % reduction on 2005 levels Source: Bloomberg New Energy Finance Note: Y-axis units are 2009 $/tco2e. % reduction on 2005 levels includes abatement achieved by key recent policies (RPS,CAFE) 15 PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 15
ELECTRIC UTILITY EFFICIENCY POLICY IN THE US EERS RPS/EERS Pending EERS Decoupling Pending decoupling Source; NRDC, DSIRE, regulatory filings, Bloomberg New Energy Finance PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 16
ELECTRIC PROGRAM BUDGETS, ENERGY EFFICIENCY & LOAD MANAGEMENT 2010, $/CAPITA 60 50 40 30 20 EERS & Decouple EERS no policy average average average 10 0 VT CA CT PNW NJ MN UT FL CO AZ AL PA ME KY IL WY MO MS TX IN SD MA IA NY RI NV MD WI OH HI NH NM NE TN NC OK MI SC KS GA AR VA Note: CEE s data is collected via voluntary survey. A few states that did not provide information (DE, LS, WV & AK). PNW represents the Pacific Northwest states of ID, OR, WA & MT. Source: Bloomberg New EnergyFinance, CEE PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 17
EERS ANNUAL REDUCTION TARGETS, % OF KWH SALES 2.5% 2.0% 1.5% 1.0% Performance incentive No performance incentive Electric decouple Pending decouple 0.5% 0.0% MA AR VT NY IA MD OH ME RI IL IN WI CA CO CT HI MN PA WA OR MI NM NV AR TX FL NC Note: Targets represent a weighted average over the lifetime of a policy Source: Bloomberg New Energy Finance, ACEEE PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 18
END-USE ENERGY EFFICIENCY POTENTIAL 2020, TWH 200 180 160 140 120 100 80 60 40 20 0 Northeast Midwest South West Source: EPRI, Bloomberg New Energy Finance PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 19
CONNECTICUT TIER III ESC MARKET ($/MWH) 35 30 25 20 15 10 5 0 Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10 Sep 10 Nov 10 Jan 11 Note: Dashed lines represent the floor and ceiling price of Connecticut s Tier III REC market. Source: Evolution Markets, Bloomberg New Energy Finance PRESENTATION TO RGGI STAKEHOLDERS 19 SEPTEMBER 2011 20
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