 Good afternoon everyone welcome to this afternoon's briefing on clean energy financing. What works my name is Carol Werner I'm the executive director of the environmental and energy study Institute And I'm very pleased on behalf of our organization and the embassy of Germany to welcome you here this afternoon this briefing is One that will look will explore the whole role of clean energy financing. What are the different policies? What's the experience? As we all across the globe Struggle with issues of how to move to a cleaner economy and ensure that we are Doing everything possible to make that economy as strong as possible to develop robust jobs to be economically competitive in a very competitive global environment and To make sure that we are also reducing greenhouse gas emissions This briefing is also part of the transatlantic climate bridge initiative Which was launched by the German government in 2008 With the understanding that the common challenge of climate change and energy security is best tackled when we work together Building on the existing transatlantic Relationships between Germany and the United States the transatlantic climate bridge Initiative works to connect all of those who are seeking to make a difference Whether it's at the local the state or the federal levels because they are all important and they all need to be working in a very Cooperative arrangement the purpose of this is to support platforms and partnerships That will help Americans and Germans alike exchange Their know-how their expertise and pave the way for joint solutions because that is what we are all about Is finding joint solutions innovative solutions to address the challenges that face us This briefing is also held in cooperation with the Congressional Study Group of Germany and we greatly Appreciate their participation, and I would like right now to introduce Michael Cabell Who is with representative gingrich's staff or I'm sorry with representative gingrich's staff Representative Gringiri is the as one of the co-chairs of the Congressional Study Group of Germany Thank you Carol. I appreciate it and as syndicate my name is Michael Calvo. I'm The deputy chief of staff and legislative director for a congress from Phil gingrie from Georgia who is Currently the chair of the Congressional Study Group on Germany Want to thank both the the embassy and the environmental and energy study Institute for holding today's briefing Over the past year and a half, and I know his involvement has dated back further than that Dr. Gingrie has had the distinct honor and pleasure of now serving as the chair of the the study group on Germany Which is sponsored by the u.s. Association for members of Congress and what's unique about the study group is that it provides an ongoing bipartisan forum for dialogue and cooperation among colleagues both in Congress and and the boonestock And this relationship has now been going on for close to 30 years Personally I've had the opportunity to witness firsthand a number of positive interactions that members of Congress and members of the boonestock have had Through meetings in Washington. I know that the study group is sponsored a number of lunches as well as participating in the 29th annual Congress boonestock seminar that took place partially in Washington, but mostly In my boss's district down in Atlanta, Georgia It's really in those those interactions those Forums that we get a chance to see how strong the the relationship between our two countries is Particularly given the fact that it really is critically important to the overall transatlantic relationship at least as as we see it Now as part of my boss's sort of He will be transitioning off of being the chair of the study group, but first we'll be participating and leading the American delegation over to Germany in the spring for the 30th annual Seminar I know that he is looking forward to having that opportunity to to have another an ongoing dialogue and exchange with with his counterparts in In the Parliament You know, I don't want to take up too much your time today I know that the you guys aren't here to hear listen to me you guys are here to hear the experts on these investments in clean energy, so I will Wrap up my remarks, but I do want to say again that you know It how important is and we think that the study group facilitates a very strong relationship between our members of the House and the Senate particularly of the house and members of the Boondestock Particularly given the fact that we see how Washington now is characterized as being filled with such partisan ranker That the study group provides a very unique opportunity for members members of Congress to come together in a bipartisan way and use that as a chance and an opportunity to have very candid and open conversations with their counterparts and I'm sure that Well, I hope that the the members of the Boondestock feel the same way in their interactions and in their relationship that they have with Our with our members, so I want to thank again Carol Thank you again for the Institute and the embassy for putting this this briefing on I Like you are looking forward to the remarks of the panelists and getting their individual perspectives on where the next segment of Renewable energies Will be will be going and its economic impact, so Thank you again for attending. Thank you again for giving me a few moments to To speak and look forward to the panels. Thank you guys Thank you very much Michael And I think that your comments with regard to the value of groups like the study group are so important because it really does Provide an opportunity for people to come together from both sides of the aisle and indeed from both sides of the Atlantic to really work together To talk together to listen to each other to learn from each other All right, we will now turn to our first speaker this afternoon to really sort of start off our discussion to really look at how important this issue has been to Germany and and Why and a little bit in terms of how Germany embarked upon that this Germany with regard or this journey with regard to clean energy and what it has really meant and And how it is making such a huge difference both in their country and in terms of leadership Globally, so we will now turn to dr. Gay or Mao who is the first secretary with the embassy of Germany Thank You Carol It's a pleasure for me to say a few introducing words on the German energy energy policy particularly The transformation of the energy system, which we call the energy venom But first of all, I really would like to thank everybody who was involved in preparing this event and it looks like They were very successful so I would like particularly to thank my colleague Carmen Christen from the German embassy and The colleagues from the ESI Carol and Amory for this excellent work and preparing everything organizing and I'm happy to be here and Joining this issue with you and thank you everybody for coming and of course, thanks to our speakers Who will share their expertise with us today? What I would like to make is a few points three points actually And I would like to Introduce to you why Germany went this path to change their energy supply And you have to have in mind that this was done the decision to do so by a very conservative government and Germany is An exporting nation and it likes to remain an exporting nation. It's highly industrialized and It would like to remain its high living standards. So these are the basic conditions I want to talk more in detail about the points number two and three but nevertheless Why I show this is The energy when that the the energy concept is a huge program which is much more than only the phase out of nuclear energy It's about 180 different measures in different sectors and it's a huge program which will last probably for a generation to implement and I also left point number three which I won't explain more in detail, but only to Tell you that after one year of experience with this energy policy if you look back It looks like a mistbuster Because we didn't experience so far any blackouts or any grid collapses And we didn't import and the net balance in 2011 Electricity from neighboring countries. So in contrast our greenhouse gas Emissions even went down and so did the price for CO2 allowances And for the stock market price for electricity. This is this is a rather astonishing result of having one year of the energy transformation and I would like to just briefly Present to you three main reasons why Germany went this way the first good reason is a Successful economy will need a sustainable energy supply. Why is that so? Energy supply if you look around should be secure So everybody's looking for energy security particularly in this country in Germany We still import 70% of our total energy supply so our Energy supply is not secure at the moment the second important thing for an Sustainable energy supply is it has to be economic affordable At the moment Germany is still dependent on their high and rising oil price and Of course in sustainable energy supply should be environmentally friendly and sound This is of course not the case as we are in Germany still using 75% of traditional energy with the problems involved like high emissions of Greenhouse gathers and unsolved storage problems for a nuclear waste So we looked around what could be the solution in order to move towards and sustainable energy supply and we launched Different studies long-term studies and the results are quite clear There's only one energy source which meets all these criteria for Sustainable energy supply and these these are the renewable energy sources That's the first thing the second thing is in order to have a high share of renewables you need to Reduce your energy demand and you have to increase the energy efficiency So this is the second point and of course the third point is you need a steer You need a program in order to enhance this policy and of course you have not only to Increase renewables and energy efficiency. You also have to look for the frame and for the infrastructure in order to feed in all that renewable energy The second point I would like to make the first one you need and sustainable energy supply The second one is there is an abundance of renewables even in Germany Put together a few pictures, which some of you might know already. So the global Renewable potential is much much bigger than the demand You can see the big bullets compared to the very small bullet on the right one in the upper picture Then the second picture on the left shows you that your country the USA has a fabulous condition for solar Power so this this map shows the solar radiation and green and Orange and red are good colors much radiation blue is not so good blue is Germany Maybe compared to Alaska. Nevertheless, what you see on the last picture is Germany has installed half of the global PV capacity and now these Figures are already outdated again. Now. We are in the order of 30 gigavatt installed capacity for solar PV So what I would like to tell you in the second message is it is possible in Germany It is possible to turn to move over to renewable energies If you look at the historic dates, we already achieved in the electricity sector almost 26 percent. This is a quite Impressing development over the last 10 years So the second message is it is possible in Germany the third aspect and which is very important for the for today's discussion is The transformation of the German energy system the energy vendor Offers immense benefits Why is that so so it's quite clear that if you increase the efficiency This will reduce your costs for energy. The second is you have a lot of investments Initializing with that energy vendor and we have calculated that we gained already about 390,000 new jobs until 2011 only in the renewable sector So you enhance the innovation and the research and of course We can escape from the from the price increase of traditional for fossil fuels moving over to renewables which gets cheaper and cheaper so Last but not least we reduce the energy imports and we save a lot of money with that and of course We reduce the emissions of greenhouse gases So only in the last year only from the renewables. We reduce our Emission balance by 130 million tons of CO2. That's more or less one sixth of the German total emissions So if you look at the energy future All our projections and all our long-term studies tell us it will be beneficial After a few years of high investments It will be heavily Beneficial in terms of economy society and of course climate So this is a certain good reason to move over to that new energy system So these are a few more Figures Proving or showing how the world in 2020 looks like if we implement our existing Climate program in Germany. So we are talking about new jobs. We're talking about awarded fossil fuels so saved money we talk about Rise in GDP and in the year 2020 we even calculated that reducing CO2 will lead to insert plus So by 34 euro for each reduced ton of CO2 So this and all looks like a quite good story win-win situation and In summary, I just like to wrap it up my three main messages The energy turnaround is a good thing. It is needed to achieve energy supply It is beneficial and it is possible even in Germany It is a very complex task. It will take another 20 30 40 years. We have targets until the year 2050 and It needs a political will and the program We have started with a energy concept which gives us an orientation until 2050 it will need and heavy increase and renewable energies intelligent grits and energy efficiency and My last Motivation my last sentences if it can happen in Germany, it could happen everywhere. Thank you. Well, thank you very much for listening Thank you very much. Georg We will now turn to our second presenter Osha Gray Davidson who is the author of clean break the story of Germany's energy transformation and what Americans can learn from it and Osha is also the publisher of the Phoenix Sun and I must say listening to gay or Explanation story with regard to what Germany has been going through in the plans for the future It should be sobering to us as we look here and the United States as we are confronting huge policy issues yet before the end of this Congress this year with regard to our Renewable energy future and and as we look at the tremendous gains that countries like Germany are making Thank You Carol and Thank you also to the Institute and to the German Embassy For putting this panel on and for inviting me to be part of it You know the well the map isn't up there anymore But I noticed in the the map that you had up of the different Silver radiation throughout the United States compared to Germany. I I live in Phoenix, Arizona the bright red part and I was just crunching some numbers a couple days ago and Germany has four times as much PV capacity installed per capita as Arizona does so The good news for Arizona was a few years ago. We were far behind that so we're catching up just to let you know I want to speak briefly about my experience traveling through Germany for three weeks in April and May as the climate a climate media fellow sponsored by the Heinrich Bull Foundation and also by inside climate news who I'm reporting for and Funded partially by the Rockefeller brother funds It was an amazing experience it was truly an eye-opening experience I Spent three weeks traveling through most areas of Germany speaking with members of the ruling coalition government in Germany with members of the Bundestag who are not in the ruling coalition with people in the industry and electrical utility industry with small business people with ordinary people German citizens with NGOs and and It really was fascinating to be able to talk to people because I had some Conceptions and misconceptions about there in a give-and-a From reading about it in the press in the US Both positive and negative and being there and actually experiencing it. I can't tell you It's just a completely different thing and I heartily recommend it I Visited a whole variety of Projects in Germany including building integrated photovoltaics in Freiburg Wind turbines the off-sheet off-sea Offshore wind turbines in at Baltic one which are 10 miles off so I could barely see them But I read about them. I knew that they're there an amazing project Many more wind farm facilities on land which were everywhere Community community heating facilities in small towns rural villages like St. Peter in the Black Forest, which is truly amazing what they're doing there Biogas projects Co-generation facilities and everywhere energy efficiency Programs and Especially I just want to highlight Hamburg where I spent some time looking at that the built environment is such an important part of renewable energies and the whole idea of the energy then though it translates as energy transformation you can't do it without changes in the built environment and Hamburg where the first public transportation integrated public transportation system was created Is an amazing place and that system now has that was in the 60s and it's now taken root all over the world including Washington, DC The reason that I may be laboring this point is that the energy vendor isn't about one source of renewable energy and in fact the Landmark legislation the 2000 EEG legislation is often translated in the US or into English as renewable energy Act, but it's true translation as renewable energies act and I think it's important because What it says is it shows that there's a focus not on one source of renewable energy but a broad Look at renewable energies and a more holistic view that includes energy efficiency for example So it's all all part of the debate and all part of the solution in our own part because it's all part of the problem Looking at all of these things in an integrated and comprehensive holistic way is really vital to the success of the energy vendor there's another key that that I saw which Are the key to the success of the EEG which is Targeting the fastest cheapest and most sustainable measures to move to a renewable energy economy The centerpiece of that the main way of achieving that is the feed-in tariff or fit and the genius of the German fit and there the fit has been put into practice in many many countries and Had tremendous problems in some some countries and their obstacles in Germany as well But it's succeeding there and it has failed in some countries because it wasn't properly designed and I think a lot I think the fit gets a bad name in part because People look at all fits as being the same and if it doesn't work in Spain then well Okay, the fit is not working. It's it's not a good model and that's not true at all The the German fit focuses focuses on deployment Undeployment not on research If you're if you concentrate government monies as we've been I've heard talked about a lot lately Let's focus money in Renewable energies on more research if you do that Then you won't get the product that you're after You'll make great strides, but unfortunately great strides in research Great strides don't produce any electricity themselves. You don't want to produce great strides It's a means to an end. You want to produce deployed renewable energies that are PV on people's roofs wind turbines and farmers fields Geothermal and places everywhere and that's what the fit is designed to do another Misunderstanding that I think I had and I think others have is that the fit doesn't Mandate deployment. It's not a command and control system at all. In fact It unleashes entrepreneurial energies To get solar panels on roofs turbines, etc And it does that by driving a buy-in by ordinary citizens and groups of people It makes it attractive for German citizens to have skin in the game Because they make money on it. It's not altruism as much as there's great altruism in Germany on wanting to fight Climate change for all sorts of good reasons I believe that the EEG and the Fed in particular were designed to take advantage Not only of what's in people's hearts, but more importantly, what's that are what's in people's minds and which is I'm sorry in wallets, which is Why it translates to most other economies? And it has translated it does work 25% of electricity now generated in Germany comes from renewable energies and over half of that comes from individuals Individually owned power generating systems that are by individuals and groups of individuals and cooperatives Which is a whole nother area of the German program having cooperatives electricity cooperatives So people acting together. I see I only have a minute or two left so Let me just real quickly give three elements of the fit that I think are crucial one is payments are based on getting a Returnable a reasonable return on investment no matter what form of renewable energy you put up You're not going to get rich. It isn't designed to help people get rich It's designed so that you can get a reasonable return on Installing these different energy systems, which then you are paid for producing it turns everybody into a potential utility owner The second one is that the payments are guaranteed for 20 years whenever you put your system in is That you know the price that you're going to get per kilowatt hour for the next 20 years, which Gives businesses what they need most which is a sense of stability Knowing how much money they will be able to get over the next 20 years, and I think that's terribly important and the final one is on the fit It has degressive I don't know if that's actually translated into English exactly as degressive But the payments go down every year now once you sign in it at the very beginning You're assured that price for 20 years, but every year that price for new installations drops and What that does is a number of things but one thing it does is it drives deployment? It gets people to put things up there solar power wind power because they're going to make the most money the sooner they get these Generating systems up and running So it drives that and by driving deployment you have this huge amount that a secretary Mella pointed out of electricity being generated and By doing doing that you drive down the cost of production dramatically It makes it much easier To put these things up It costs half as much in Germany to install solar power the same amount of solar power as it does to install it in Arizona And that's all Because of soft costs permitting fees how much it costs companies to mount them on the roofs Because there's they've done it at such great deployment in Germany that they've found ways to make it cheaper, so Before the hook comes out and grabs me I am going to sign off. Thank you very much, and I hope you learn a lot from this panel And that we can learn a lot and catch up in surpassed Germany. Thank you Sure. Thanks. Thanks very much. Oh chef Well, I must say it would not be right to do a briefing on clean energy financing What works without hearing from some people who are real finance people? So we wanted to make sure that we Had folks who could talk directly from that financial business experience as part of this Exploration of What really does work what are the range of options that have been tried can be explored Etc. Because there's always more than one way to do things and so we will first hear from dr. Sabina Milner who is the group sustainability officer with the Deutsche Bank? Thank You Carol. Thank you for the organization of this event German Embassy the Institute Thanks very much Yes, I'm here as a group sustainability officer for for Deutsche Bank, which is a Global Universal Bank meaning we are engaged in Investment Banking commercial banking retail Asset management and therefore our activities obviously in all those spaces. I will come back to to that in just a second I just wanted to To say up front a few a few things that I truly believe and and we are trying to work along those those lines so Clean energy financing is really happening and I think Ethan will talk much more about that So I won't spend any time on it and it is you know for many look at it as a niche kind of an activity and You know sometimes that is also seen in a large organization like mine where they think It is still small and it is relatively small We need to to face it, but it's not it's not a niche it has come out of that and it is you know on its way It's a transformation that is Unstoppable and it is growing fast and it has been growing fast for some sometime one general point I also like to make which is oftentimes overlooked when we talk about this is the need for collaboration And cooperation among the private sector in different spaces sectors across The silos so to speak the economy, but also and more importantly We cannot get this done unless The policy side and the business side work together and there are lots of Things that we have been involved in we can perhaps come better in the Q&A if you're interested on you know Public-private partnerships and and how far down the track that that can that can get you so just coming back On on Deutsche what we what we what we do You know first of all, I think sustainability is something that is important to us in our strategy that has been confirmed several times by Our new CEO's our old CEO We have had significant financing experience in the renewable Sector and that means pretty much, you know as Osha was saying it's not just solar It's not just when it is like a whole spectrum of renewable energy and Projects that are being built around the globe and we have Assisted in the financing of something like 3 gigawatt of renewable installation in 2011 across Europe and the US In Germany a lot of the smaller medium enterprises are our clients Specifically in that sector in the renewable space. We have something like 50 medium-sized So-called mid cap the German famous mid cap, which is the the bedrock really of the economy And We are one of the largest as a financial institution not a specialist asset manager We are one of the largest Manager of sustainable funds, so not just climate but you know more generally focused on sustainability and not Not to ignore because it was already managed Mentioned by by OSHA the importance of energy efficiency and so a lot of what we have also been doing is Focus on how we can what can we do internally in our own buildings in our own? Facilities to increase a the share of renewables for example in the United States we we We use a tremendous amount of Renewable energy we buy certificates to offset the the brown power that we that we buy But we are 100% Renewable as we are in many in many markets in which we operate we are in 72 countries not everywhere are we Renewable only but in in in many in many we are So we are an energy efficiency manager And we are trying to deploy that that expertise that we have gained from our internal operations Into kinds of in products that we can that we can offer to to our clients so Let me just give you just for one second perhaps a Little bit of a broader Stepping back for a minute from the Germany in the US and and some of the individual countries You know there is a general risk management issue that we have To to handle and that's the you know the societal risk management really Because you know would you put your child in a car if it has a 15% chance of crash? Probably not and there are you know 90 plus percent of the scientists are Confirming the climate change is real and I know that this is a big Discussion in this country whether it is or is not but you know as I said 93 percent of climate science agree That there is this thing out there investing to reduce carbon emission. Therefore is societal risk management And broader than climate change there are billions of people who really want to have access to resources who want the lifestyle that we want So how can we kind of square that circle with people the world growing to 9 billion? People and at the same time we continue to use the resources that we have in the way we have and That's it's not sustainable So you know the world needs to transform itself You know for the benefit of the of the next generation. There's no question about it. Even if you don't believe in climate change So that I just wanted to make that You know upfront also just a word because it is very big in in the United States Obviously this notion of we have plenty of natural gas So you know why bother with renewables in some ways and you know in a way the the wave in in in a natural gas And the fact that prices are at historic lows You know two years ago or three years ago. I was worried that if the price of natural gas falls below four dollars You know renewables are dead and I think that was a pretty unfortunate but accurate Description so, you know, it's very hard for renewables at this price to be Competitive in an environment where there isn't a whole lot of policy Support and incentive so we'll come we'll come back to we'll come back to that So what's the purpose of policy the policy is really to create? We call it TLC It's not the fuzzy version. No, it's transparency longevity and certainty and That is really what we believe investors need to make these long-term commitments You know, we don't need to talk much about the fit the feed-in tariff as such I mean OSHA has described the basic the basic parameters, but it provides you exactly with that long-term Certainty and he was alluding to to Spain's as Spain was retroactively changing Basically these investment parameters on on investors. I mean, this is a market that will be burned, you know for a long long time So it is to provide this TLC environment where investors have a long-term horizon in which to to invest and to build up And that is what is really needed. This is why a feed-in tariff is one example of how you can create that You know, I know New energy finance sometimes has a somewhat different Perspective on how useful those those are for you know, lots of reasons because also what OSHA was saying That there is of course a possibility that people are, you know, building up very fast And that is the the the experience that Germany has made where You know, you will have over fulfilled actually your renewable electricity Target by 2020. I think the minister is now expecting something like 40 percent instead of the You know 30 or what that was that that was the the target because we are already where we are at 25 And so that there is somewhat of an a profit-taking That may that may take place that might be excessive to to some degree because people are then guaranteed A certain fit but the beauty of the German system is that it is that it has to digression and that You know, I think we have seen several evolutions of the of the German of the German energy system of the feed-in of the feed-in tariff that first was really focusing on Scaling up the domestic Generation which has clearly worked with now installed 29 gigawatt of solar PV for example And the phase two which is from 2009 to to 11 you have seen this rapid decline in Costs which again is you know because of the investment environment that was created it allows It allows people to to to put their money Into these kinds of products and now we have phase three Where we see the continued cost decline of making solar PV wind and biomass increasingly cost Competitive with market prices and in some some small PV installations are already actually below below parity One word I'd like to make because we are in in that market as well and it's a hard market to operate but China China has You know really? Embraced the energy revolution I am very convinced They have a tremendous share of the market already in the renewable space and You know, I just want to to say that in my observation I've lived in this country for a number of years and it's an amazingly competitive economy and what is Troubling me at times is to see that there is a real risk that the US is falling behind in something which is a real future future economic development and that is that entire Technology space that is associated with With the new with the new sources of of energy energy efficiency You name it because all your all the great people who are sitting in Silicon Valley. They come up with Stuff but in order for making that stuff Commercial the viable they need a market to sell into and again, you know the beauty of the of the fit is That it provides you with a market to sell into because there is an off-taker agreement There is no discussion you produce the thing and somebody is there to take it from you and so it is these markets that need to be created and and You know the to to really get the drop growth the economic growth all of these things that we all want Going I think there needs to be a little bit more than oil and gas Thank you Thank you so much Sabina We will now turn to Ethan Zindler who is the head of policy analysis with Bloomberg new energy finance and obviously Bloomberg new energy finance has been following investments in this technology space for quite Long period and in great depth and so we look forward to hearing from you, Ethan Thanks very much and hello everyone. I see some familiar faces. I've done a few of these briefings before on the hill So apologies if you've seen some of these slides before but And in the interest of time, I'm going to move relatively quickly, but I'm happy Afterwards discuss any slide that you feel like I may have zipped to quickly through Bloomberg new energy finance. That's us market research firm focused on clean energy investment About 200 people globally founded eight years ago in London bought by Bloomberg almost three years ago I had our research group in the Americas These are our clients Some of the players you might suspect, you know people with a sort of progressive outlook on things in terms of investing But a number that you wouldn't use may see some big large oil companies and integrated Utility players and others on that list along with some US federal government agencies and others all with an interest in the economics of clean energy and most with an interest in making money primarily in the industry not because they necessarily have a Sort of quote-unquote pro social aim They are looking to earn money by investing in clean energy or building clean energy projects or Fostering policies that allow investors to earn a return on clean energy So let me start off with the biggest of the big picture, which is the investment in clean energy globally You know, we've seen since our firm has been founded an extraordinary run-up in the amount of money That's gone into the industry. Let me see if this thing works so Back from about 50 billion in 2004 to about 190 billion even in the years of 2008 and 9 the financial crisis We only saw a leveling. We didn't see a drop and then we saw a rise to about $280 billion in new capital invested in clean energy last year. That's a lot of money. That's not an insignificant amount I wish I could report to you that the hockey stick and that is going to continue into next year And that more money is going to flow in but we actually are of the view that this will be the first year since we started Tracking the data that the amount of dollars into the clean energy industry is actually going to decline a little bit There are a number of reasons for that some of them actually kind of good news One of them is that the cost of installing clean energy has dropped so much that your dollar simply goes farther You don't need to deploy as many dollars to build a wind farm or a solar project So you get more bang for your buck But the other thing is we're seeing a slowdown in a number of markets around the world Including in the United States in terms of the amount of money that's being deployed here this year Again to emphasize that this is not small potatoes I just want to point out that the total amount of money invested in fossil fuel generation last year in the amount That was invested in clean energy power generation is not that different the gap is pretty pretty now about 300 billion for fossil in the neighborhood of about 125 For for clean power generation I I take I take issue with the term alternative energy For just this reason. I think that it's not alternative anymore when you're talking about this kind of ratio of money being deployed in this industry So that's mostly the good news The not so good news is that the industry is in a state of over capacity there is more Manufacturing capacity to make wind turbines more manufacturing capacity to make solar modules more Manufacturing capacity to make lithium-ion batteries that are used in electric vehicles then there is demand for those products right now And so when you have over supply you have prices come down when prices come down Those who make those those make that equipment see their margins shrink or even disappear and So this explains why when you look at a basket of 95 clean energy stocks this index known as the NEX that we run You saw this incredible run-up with the price of oil Enthusiasm in the sector and then you saw a huge crash 2008-09 and then you still seem difficult times So basically if you put a hundred bucks into this basket of clean energy companies back in 2003 It's more or less worth about a hundred bucks right now That's not a good return on investment and meanwhile you've had one heck of a ride if you got out here You were you were loving life, but you know not so great down here By comparison not too surprisingly we've seen other Indices that you know NASDAQ and S&P you know more stable performance over that time. This isn't shocking in a lot of these This is a new industry You know these are new companies. These are new technologies. There's a lot of risk. You're gonna see a lot of volatility It's inevitable But right now is a difficult time for the industry So like I said what we've seen is a real decline in costs and I'm gonna move kind of quickly through these next bunch Just to sort of articulate but in the really the most exciting area in my view in terms of cost decline has been infotable tags The cost of a solar module as was mentioned earlier is you know It's well less than half of what it was just a couple years ago It used to represent well over the half of the total cost of a new system that you'd put up on your roof Would be buying the panels. It's now well below that So the equipment costs have dropped very dramatically part of this is because of technology development But a big part of it is also just pure scaling up and I think this is where Germany actually is an important part of the story Germany thanks to its policies created so much demand for solar That a great deal of new capacity to manufacture those panels was built a lot of it was in China But other places as well other places in Asia Germany too And that surge of supply has really helped to bring the price down very dramatically And the benefit of that frankly is going to be felt by all of us including those in the developing world who For whom you know solar now starts to become much more economic than it was even a few years ago So to some degree this is the way it's supposed to work wealthy countries Investing in the clean energy future to reduce their emissions poor countries now starting to be able to receive some of the benefits that come along with that This is just a further another look we can see you know, you're looking from about three dollars and twenty cents Per watt system for a utility scale project. We're looking now probably below two dollars a watt Is the current cost for utility scale? Residentials a bit higher not surprisingly because they're smaller systems or higher labor costs You don't get the same kind of economies of scale But again, you see this big drop into this year and we're predicting further trapped drops going forward Just very quickly on wind similar Kinds of price reductions, but not at the same kind of scale and at a slower period of time I think it's important to note There's a big difference between the wind and the solar industry in terms of the commoditization that's going on in photovoltaics There are very good quality PV modules that are made in a number of different countries now in China included And to some large degree that means that the market has become commoditized where people simply buy the lowest price PV panel they can get their hands on not everybody but in a lot of cases in the case of wind turbines You're talking about putting a massive piece of equipment up that's supposed to spin basically flawlessly for 20 years these things need to be incredibly carefully designed and thus you do see just distinguishing or You know differentiation within the market between some of the countries like Germany and others Denmark and the US are designed turbines and those that come from China But the bottom line is we have seen this similar to cost decline I'm going to move quick just to touch on one subject that I know is always on people's minds on Capitol Hill Which is what's going to happen to the US wind industry with and without the production tax credit This is just our view and frankly we update this I think every two weeks because the market is moving very quickly But this is a view of how much Wind capacity we think will be installed in the US In 2012 if the PTCs extend we're looking at somewhere around 11 gigawatts of new capacity And then about 5 gigawatts next year and 8 and 3 That I should note is not the world's greatest picture You know the all-time high up to now is 10 we'll hit an all-time high this year of 11 But even with the PTC It's not like this industry is going to have smooth sailing the next couple of years And I think that's just an important thing to keep in mind in terms of Expectations for the wind industry and the big part of the reason for that has to do as was mentioned earlier with natural gas This is our view of what happens if the PTC does not get extended and you can see here You really are looking at a very sharp drop to about one and a half gigawatts only of new capacity installed next year Interestingly enough the amount that gets installed this year actually goes up because everybody scrambles to get everything done before the credit disappears and goes off the books Now just a few comments on Germany As was mentioned earlier well first of all how many people here know what a feed in tariff actually is Okay, so most people but not everybody basically a feed-in tariff is that The government or your utility essentially will pay you a fixed rate for any surplus energy That your solar system sells back into the grid So at the end of the month if you've supplied all your megawatt, sorry all your kilowatt hours of power But you had excess basically the grid is buying it from you at a certain fixed price Pretty simple idea And this is where the kind of financial motivation can come into it gives us all the opportunity to be sort of mini generators Selling our juice or at least maybe not making money, but certainly reducing our electricity price So it actually is can be in terms of actually making money So what we've seen in Germany though and one of the challenges as was mentioned is the feed in tariffs Essentially are set by policymakers at a certain level And it they represent an estimate as to what the right amount is in order to motivate consumers to put PV panels on their roofs or small businesses to put PV panels on their roofs and It's a it's an inexact science I think any policy maker will admit and one of the challenges is that every time you lower it You have the chance of essentially killing the market And so what you've seen in Germany is these incredible quarters of installations of photovoltaic So you see here for instance in Q2 2010 there was about three gigawatts installed They lower the feed in tariff and boom you drop down to 1.5 It starts to actually build back up again, and then again that gets lowered and boom it drops This is a lot like the slide you see of the production tax credit when the production tax credit expires boom You see a drop in and installations And so the challenge of course is to try and do this for a policy person is to try and do this in an organized way So that the market understands what you're up to what your rationale is But I would argue that even more importantly is to make sure that what you're doing is in sync with what's going on in the market So in other words if the cost of a photovoltaic system is dropping You want to be dropping it about the same rate that you're offering consumers if you're doing it too slowly Then you're frankly you're letting people make a killing on selling their power back to the grid That's inappropriate and it's a waste of taxpayer money if you do it too fast And you come in below it then you kill the market There's no financial incentive for people to do this So this is one of the ongoing challenges and you can see in Germany This line here represents the actual feed-in tariff and this represents what was our estimate of the underlying system costs And you can see basically policy makers did their best to try and keep up with what was a very rapidly declining market overall But it's not an easy thing to do it's a challenge going forward and of course it has a cost And I do think it's important to note that there's no such thing as a free lunch So if you're the one selling the juice off your from your roof back into the grid and you're getting paid a premium for it Well, someone's paying for that right? And in the case of Germany it is actually you know It's part of the public viewed as a public good and I believe it's the taxpayer that essentially picks up the tab So you can see here. This is our estimate of the annual liability by European governments to pay for this Year on year and you can see 2013 overall we're probably looking at about 20 billion euro Across the EU to cover these costs. It's not free but you know the reality of it also is that once you've paid once you've essentially Guaranteed that you're gonna pay this Then you know the price of the electricity. So in other words, this is our estimates probably relatively reliable Whereas if you were to ask me what's it gonna cost for somebody for a German homeowner to you know to continue by Electricity that perhaps comes from natural gas imported from Russia or other places or nuclear or other place We don't know the price. There is inherent price volatility in other forms of power generation So, you know, you're looking at eliminating essentially that volatility, but it doesn't come for free to do this So with that, I just want to say thanks very much and look forward to your questions Thanks. Thanks so much Ethan. I also just wanted to mention it. I believe it's my understanding that That with regard to the FIT that the cost is not borne by taxpayers, but instead by Rate payers so that one of the ways the system is different from our production tax credit is that it it actually Goes to rate payers. Is that correct? Okay. All right before we start our Q&A, I also just wanted to quickly mention that Because as Ethan was also talking about this kind of up-and-down very Erratic kind of journey that one has as policies end up being changed abruptly think that most people are therefore aware that as we look at the production tax credit Coming to an end the end of this year without the extension and you saw Ethan slides on that that I wanted to bring to your attention I think we have a copy of the letter out on our table that the investor network on climate risk Just sent a letter to the Congress yesterday Raising their concerns about this issue and their concern that why it was important for that particular tax credit to be Extended and that was signed. You might find it interesting in terms of looking at all of the financial houses and banks and Impension funds that Have invested are invested and are very concerned about clean energy And that there are hundreds of billions of dollars in their investment portfolios And they have really staked a claim to how important this issue is so I wanted to call that to your attention Let's open it up for your discussion your questions your comments and Okay, and if you could identify yourself, please Mike. Why did you start? Why you know there was so much hope That we would scale up relatively quickly perhaps on electric cars Because you know, they're they're there is sort of the synergies between I'm sorry Yeah, yeah, yeah, no, of course, I meant this as a global as a global as a global issue You know, I mean there are obviously Some technologies that are better suited to work even if you don't have Storage in in play and storage is clearly something that needs Perhaps more focus. I mean, that's why in you know, they're the problem with CSP for example, or it's not a problem. It's a benefit is that you know, it is It can fulfill your your base load in in in some ways But the the trouble is that the cost of the technology is unclear how quickly that can come down and you know We are involved in in in in CSP in In the MENA region because there is of course, you know great hope they have lots of land and lots of Sun Then that technology could could actually work quite well there But you know, you're right to pointing it out, but you know, it's not not sufficient attention perhaps so far Of course, we have looked on that in the German energy policy making Actually, it won't be so much of an issue within the next 10 years And we have different views on how to solve the problem It won't be a total physical storage as some people point out. This would be extraordinary costing We look to the grid which should be more efficient. So we look at smart grids and solutions Was better exchange between supply and demand and we are already making experiences with that and the second Thing is that we are making our grid more flexible. So we're extending our grids That's one thing and we making it more flexible in the rural areas. So this would be very important as well The third thing is we are looking at storage solutions, which are cheaper than building own ones In other countries who have big potentials like Norway or in the Alps The third thing is looking at gas solutions. So we could use extra wind production for Producing hydrogen for instance. So there are different technical solutions We haven't decided for one solution yet, but we look at those and we will need them in 10-20 years One quick point on that also just to see me Sabine's point about electric vehicles One of the interesting things that we've seen is clearly a disappointing number of sales of electric vehicles Compared to what the automakers were predicting and that is creating an oversupply situation and and and lithium-ion battery Manufacturing but interestingly enough some of the lithium-ion battery makers are now trying to get more into providing Grid storage because they need a new market because the vehicle market hasn't accelerated quite as quickly as they had hoped now I'm no technical expert I might some I've heard from some folks that lithium-ion isn't necessarily the best technology for grid storage But if it's going to be the cheapest technology, it may be the one that gets some traction relatively quickly Right, I'm really glad you raised that Ethan because I've been hearing that too And we hope to put together a briefing that will look at storage because it is a huge issue And I think there's a lot going on. Okay over here We have at the moment is an emission trading system and European white emission trading system Which as you might know is in with regard to the price isn't accurately working at the moment So the price is too low. So it doesn't stop anybody from using fossil fuels We have discussed that that issue and it's a very difficult as your country a very difficult thing to discuss and public Of course people don't like taxes. That's that's one thing but of course The emission trading scheme in general touches that issue and as soon as there is a scarcity of Alliances then the system would work at the moment. It does not Adding that in fact, you know, it's actually unfortunately just a reverse if you look I don't have the latest numbers, but you know like a year ago. I think the IEA put out some some data that that added up globally and The subsidies that are paid for renewables, which was something like in the order of 57 60 billion and The fossil subsidies around the globe are six times that amount, right? So, I mean instead of saying we are compensating for the externalities that the fossil fuel are Generating we are, you know, kind of just doing the reverse we are Benefiting them by providing, you know, 300 plus billion per annum globally in subsidies to Fossil fuels Except for that that that gap still does exist. It's a little narrower now I think the big part of that 300 billion interestingly enough was the fact that Iran was subsidizing its gasoline price when oil prices were really high And that's not because oil prices have come down But still that there's no question. It's it's you know, whatever it is three or four times as large in terms of the subsidy size But you know, just I mean on the on the issue of carbon taxes and in the the European trading scheme It is of course as Garik said, unfortunately at the moment very Sadly low prices for for CO2 Which of course has much to do with the fact the system is designed whereby, you know allocations are determined way in advance and there is no mechanism to kind of adjust to economic realities and the Economic reality is that Europe is in a pretty slow growth scenario. And so, you know, there are lots of talks about reforming the EU ETS in terms of how How these allowances are Generated in the in the first place and what that path should be and what kind of potential Interventions in the system might be necessary, you know, think of carbon like Money, you know, you have monetary policy. You could have a carbon central bank yet These are, you know theoretical at the at best at the moment But you know the discussion now in the US about a carbon tax as a potential savior for fiscal cliff type Scenarios is it's interesting for me to to see that it has reemerged this raises Your question raises something that I think is important about the the comprehensive nature of the energy vendor The taxes on gases Americans who go to Germany probably know you end up paying Twice as much about twice as much for gas when you fill up your your car Because of taxes, but that has nothing to do with renewable energy taxes or carbon taxes That's used for one of the main reasons it is for maintenance of highways and to discourage energy consumption, which makes more fuel efficient cars I think all of those things have to be taken into account and It helps to know that in the United States, we do not cover our Road maintenance with the highway taxes that go that come from fuel That ends up each year being paid from the by taxpayers covering the rest of it Which means that instead of internalizing the costs of roads to the people who use them Everybody ends up paying for them in Germany. I think you get something like the order of twice as much money from the taxes as you pay out for infrastructure and At the same time your infrastructure is far more developed and up to date than the US Roads bridges transportation infrastructure, so I just raised that as part of the the view that this is a holistic plan and we have all sorts of things that are suffering our Fatality rate per Driver per capita is far higher in the United States than Germany because Americans spend far more time driving because of the built environment of How roads are set up and we have poorer roads so There are costs to Not having a system set up very well And I think right now ours is not functioning terribly well by having such low taxes on gas because we're afraid to Publications are afraid to raise the money that goes that's supposed to be meeting the infrastructural cost for roads Okay They're about four hands up, so we'll start back here and then and then here Go ahead rather Delicate issue of course the reality looks like there is a lot of press and media reaction to the increasing price of the feet in tariff surcharge which was just raised and the the newspapers are full of Yeah, well news on that Nevertheless, if you look at the details how the price Is built up then you see a development over the last ten years that the electricity price went in the same speed up like it like you can observe it now and I Don't want to make an issue with somebody is interested in spreading those news but of course you could imagine there are some people who are interested in making this energy vendor not so successful and Our impression is so the the news are Exaggerated so they're a little bit overestimated if you look at the facts So an average household will have to spend like in the order of between 50 and $100 the year more This is what you spent, you know for one kid For the telephone bill in one month So I think people are making it a point Out of a debate just Exaggerated this is one thing the next thing is It was expected that we will have for the first ten years We will have a lot of investments particularly if we support today's expansive renewables But in the midterm and in the long term all our projections show us that this will Switch so in the long term we will have in the medium term We have a cheaper energy supply than we will have now it is rather difficult to explain So we are still in a you could say information war in Germany and It's it's rather difficult to explain the details and it's easy to write down It's too expensive and it doesn't work We are convinced it will work and it will be cheaper in the midterm if I could just add one quick thing which is In this is from abroad and we have folks in London who frankly supplied me with this information But basically I understand that the there's new taxes essentially or new rate hikes being imposed to help try and cover some of these Costs that have been created by solar But the interesting thing about it is if you actually raise the the final electricity price to consumers, right? You actually just give them more incentive to go solar, right? Because then the higher their electricity bill is every month then the more they want to put a system on their roof So they don't have to pay that bill. So it's going to have an interesting effect I think potentially have continued actually to drive to drive demand You know going forward And I'd like to add just one thing to that that the prices You again have to look at a lot of different things to see what the price and the cost How that all plays out? wholesale price of electricity in Germany now my understanding and somebody please correct me if I'm wrong is Hosell prices are now cheapest at the middle of the day in Germany When demand is greatest and most expensive at around 4 a.m When demand is very little and that's due to the nature of photovoltaics, which now supplies so much electricity that now On a few days this year PV actually provided more than 50% of electricity going into the German grid so That drives down the wholesale power prices and One last thing to remember on that is where does that money go well more than half of that money goes to German citizens who are the generous who are generating it, which is why there's not the kind of outrage that one would expect In the United States if everybody's bills were raised well half of them are getting that money back They're making money on that And also there's a broad consensus in Germany across all political parties that this is worth doing That the renewable energies path is the right one to be on unlike in the United States People I talked to in Three different political parties all support this and it's just a measure of a matter of how exactly you do it I Think a quick whack I mean not surprisingly, you know the more certainty the better and When you get a clear directive and a goal set at the federal level That's the kind of thing that investors like to hear and you're right There's a difference between the US where the most important well not all the most important But many of the most important clean energy policies have come at the state level I would argue actually that the stimulus bill was probably the most important piece of clean energy legislation ever passed in the United States That was at the federal level, but we still don't have a national goal and target One last comment though on China, which is I think China is incredibly fascinating And I don't think though I think the Western perception always is that it's very top-down at the central party decides everything We're going to see a very interesting period in Chinese solar in the next year or two where that Theory gets put to the test because there are a lot of Local photovoltaic equipment makers in a lot of provinces They're struggling right now and the central government wants that industry to consolidate to a small number of players But a lot of provincial government leaders are not so keen on having a big plant that employs five or ten thousand people in their Neighborhood go under in the name of a national plan So I don't think that the situation in China is as clear and top-down as we often think that It is Did you have a question? Okay And Dr. Milne, you mentioned the need for the public private partnerships, policies, partnerships I was wondering if you could explain on that, you know, what types of needs Again, coming back to the German experience and what the German government has been doing You know, you have different types of risks that are associated with building a renewable project Regulatory risk technology risk the risk of operating the asset and so on right. There are some risks that are more suitable to be taken by Public players and then there are some risks that are more suitable being taken by the business players and so it's to figure out what is that Allocation of risk and who can take them on so that's the basic the basic concept and in The German government for example has put in place a fund It's called the global climate partnership fund. Which is a public private fund Where the government has put in a first-last guarantee In case there is a disaster happening with that project and it doesn't perform Then you have a number of public Institutions German and and foreign who are putting in the next tranche of risk-taking so to speak and then on top of that You have private investors who provide The rest of the financing and all of this gets deployed in actually in emerging markets in in 1314 countries around the world in energy efficiency and Renewable and renewable projects and so that's these kinds of funds You know, they can also work of course at the local level or at the at the national level. So there could be a US There has been conversations around a green bank or you know things like that green bank becomes immediately a big apparatus in my opinion But you know a fund structure is something more flexible because it gets more easily dismantled when no longer needed Whereas if you build an institution, it will be around 50 years later, even though he may not need it anymore. So but it is really that kind of sharing of risks That that that is required and is working extremely well already in some in some examples that we have We'll just take a couple more questions right here first a big question and an important one just Generally, you know, I showed that chart of this incredible decline in the cost of equipment and now that's leading to a decline in the cost Of a system and how that's leading to a decline in the so-called levelized cost of energy or the the price at which a Generate can sell their power In the long story short when you build a wind project you basically have two kinds of cost You have the equipment that you need to buy and put in and put in there And then the cost of the money that you borrow, but there's no fuel cost, right? You're not buying any fuel So this is why the the cost of the financing is just absolutely critical to determining the long-term cost of a project And while we've seen this incredible progress in the technology We actually haven't seen what I would consider any particularly spectacular progress in the cost of financing So of that 280 billion bucks that I showed a total money that had gone into the industry You know about 220 is to actually build a project and of that I don't know 95% of that is basic Various kinds of project finance loans. They're not sophisticated bonds There in other words the clean energy industry right now is not being financed in the same way That the oil and gas industry is by floating bonds or by master limited partnerships or other things So there's some growing up that has to take place in the industry in terms of the way that it gets financed I think there's a lot of reasons that hasn't happened But I think it's going to start happening And so we saw Warren Buffett for instance buy a project and float a bond to finance it just this past year We've seen other similar kinds of projects come along like that and bonds really are going to be the wave of the future Especially as some of these projects start to perform for a few years They show they can kick off cash in a reliable manner then they can be refinanced potentially with a big bond offering in that kind of way So that's one kind of bond which which I think the industry really needs because the cost of capital has to come down And the kind of good news is that that's actually I would argue maybe an easier thing less painful thing to reduce the cost on then All the tumult that goes along with you know with an industry that's it's right now having its ups and downs On the pace bonds, that's a much more localized question And I know that one of the challenges there really has simply been that the the senior lenders for I'm trying to remember with I don't know my housing agencies well enough But I think whoever's backing Fannie and Freddie is not keen on being in any way in subordinate on any kind of a loan That's out there And so they're not really willing to show much flexibility on that and I don't know enough about the subject But I think that you know, perhaps if that could be changed I don't know what legislative change needs to take place But something has to happen for pace bonds to become viable again I just I mean one final Additional comment is just you know the general debt market has been Global debt market has been in not exactly excellent shape So, you know, I think the the financial crisis hasn't really helped to come up with with great innovations on the on the bedside in particular But I agree it's coming Okay, I might also mention that master limited partnership legislation for renewables has been introduced in the Senate and bipartisan legislation so that you know recognizing that that is another thing that's been available to the fossil fuel industry Has not been utilized by by renewables have not been allowed before. Okay back here first That's not sure I can answer that in two minutes You know, it depends. So for example, we have a private Equity fund that we that that we manage You know there, you know, you are you are basically trying to Find opportunities where within, you know, five to seven years the latest you can you know get your Money back so to speak and more When when we look at Financing opportunities for You know, I don't know a capital market kind of financing You know it we are acting mostly as an an underwriter of As an underwriter, so we are we are raising capital on behalf of a client So it's the investor who is who is looking to put their money into the bond or the equity offering of that of that of that of that client and Oftentimes they you know, this depends of course, which market the Borrower or the equity issuer is is operating. So, you know to say You can you can operate you cannot operate in isolation from the the political The political environment environment perhaps the best able in in private equity potentially Because technology is so much more important than most other things. I Think that we're past our our here and so I Would like to thank all of our speakers very very much and I also just wanted to mention too that I well these End up being quite complex issues one of the it's still my observation that there is a lot of interest at the national level At the federal level in moving policy forward There are differences of opinions to be sure but what we have to think about are how we can solve Multiple problems and achieve multiple benefits at the same time as we look at the challenges Facing our different countries and how we can truly learn from each other So I want to thank again our speakers very very much And if you've got questions or whatever please feel free to follow up with them or contact us at EESI And we will try and get you the answers and briefings will be posted the presentations will be posted on our website shortly So thank you all very very much appreciate it