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Renewables 101


Renewables 101 Jennifer Zajac Senior Editor, SNL Energy Renewable Energy Week 434.951.7496 Three things to remember: If you remember nothing else – PowerPoint PPT presentation

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Title: Renewables 101

Renewables 101
  • Jennifer Zajac
  • Senior Editor, SNL Energy Renewable Energy Week
  • 434.951.7496

Three things to remember
  • If you remember nothing else
  • Wind is the leading renewable resource and offers
    the most financing opportunities
  • Money is to be made in the wind project phase
    more wind farms will likely go on the sales block
    and financing opportunities are there
  • Renewables are here to stay growth outlook is

Whats fueling renewable growth
  • Rising fossil fuel prices
  • Environmental concerns (U.S./Global)
  • State renewable portfolio standards (RPSs)
  • Federal incentives (production tax credit, solar
    investment tax credit, etc.)
  • National security concerns

Along with the PTC, state-level RPS programs will
be a primary driver of renewables growth going
  • 29 states and DC have adopted mandatory state RPS
    requirements, while 4 others have adopted state
  • RPS other renewables measures continue to
    advance in other states as well
  • MI 10 by 2015
  • IN 10 by 2018
  • FL
  • Etc.

Sector leaders
  • Renewables are not all alike in terms of scale,
    capacity, economy, financing and
  • Wind dominates
  • Solar distant second
  • Also-rans biomass, geothermal, ethanol/biodiesel

Cost comparisons
  • Market estimates typically put the cost of an
    Integrated Gasification Combined Cycle (IGCC)
    plant between 3,500 and 4,000 per kW for
    conventional coal, 2,500 to 3,000 per kW
  • New nuclear ranges from 3,100 to 8,000 per kW
  • Natural gas is about 600 per kW
  • Wind is approximately 1,000 per kW

Historically, wind generation has been directly
related to federal incentivesprimarily the
production tax credit (PTC)
Overview / Regulatory
  • Since its enactment with the Energy Policy Act of
    1992, the PTC has until recently been the single
    most significant driver of wind capacity
  • Uncertainty over the extension has hindered new
    build in the year of expiration
  • PTC set to expire in 12/31/08
  • More than 116,000 U.S. jobs and nearly 19
    billion in U.S. investment could be lost in just
    one year if renewable energy tax credits are not
    renewed by Congress Source American Wind Energy

Federal PTC and ITC
  • The production tax credit provides a 1.9-cent per
    kilowatt-hour (kWh) benefit for the first 10
    years of a renewable energy facility's operation.
  • Solar, geothermal, and "closed-loop" bioenergy
    (ex animal waste) facilities receive
    1.5-cent/kWh credit for wind. Open-loop" biomass
    (ex switchgrass), incremental hydropower, small
    irrigation systems, landfill gas, and municipal
    solid waste, receive a lesser value tax credit.
  • The solar energy investment tax credit is a 30
    tax credit for the purchase of residential solar
    water heating, photovoltaic equipment, and fuel
    cell property.
  • ITC and PTC set to expires after December 31,

Where Congress is at
  • The House on Feb. 27 by a wide margin passed the
    Renewable Energy and Energy Conservation Tax Act
    of 2008, which extends until the end of 2011 the
    in-service date for renewable energy facilities
    eligible for tax credits.
  • Now push is on for Senate to act consensus says
    renewable tax credits will be passed and/or

Ongoing activity will likely remain focused on
development assets due to higher value creation
potential and relative size of installed base
  • Based on Thorndike Landing LLC analysis, this
    value is estimated at approximately 400-700/kW
    (includes both value creation and recent
    historical value escalation)
  • By acquiring fully operational wind farms, value
    creation activities are much more limited
  • Such investments are based more on long-term
    point-of-view plays (e.g., new build costs,
    legislative/regulatory impacts, etc.)

Policies fueling renewable growth
  • At least 29 states and DC have some form of a
    renewable portfolio standard (RPS)
  • Federal level Production tax credit
    (PTC)/Investment tax credit (ITC) likely to be
    renewed and/or extended national RPS bills have
    failed but may eventually pass
  • Carbon pricing will push investments toward clean
  • Renewable energy credit markets voluntary and

Challenges facing renewables
  • Inconsistent/unreliable policies
  • Transmission
  • Intermittency of power generation
  • Costs associated with renewable power relative to
    conventional fuel resources

Big Takeaways
  • When it comes to renewables, wind is where the
    money is solars up and coming
  • Get in on wind projects, though there are
    financing opportunities for completed wind farms
  • Despite challenges, wind and the renewable sector
    are expected to continue strong growth pace due
    to policies, demand, and carbon pricing