Transcript Slide 1

The Promise of Renewable Energy Sources
& their Impact on Security of Supply
Manthos Kallios
Director, Corporate Strategy & Business Development
“Energy Without Frontiers” Conference
Athens, 22 May 2008
©
PPC RENEWABLES S.A.
1
 Global Market Overview
 Greek RES Market
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2
International organizations predict drastic growth of RES in order to
combat climate change…
Global Energy Production1 [EJ2]
KEY GROWTH DRIVERS
 Global decisions to
promote a cleaner
environment
 Environmental
conscience and
acknowledgment of
need to tackle climate
change
 Oil independence
policies
 Reduction in initial
investment cost
1
2
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Source: WGBU
1 EJ = 278.000 GWh
 More productive
technology
…however dominance by RES is still far in the future
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The total costs of electricity production from RES exceed those from
conventional sources…
Initial Investment Cost per MW
Production Cost* per MWh
€ MM
€
4,5
140
4,0
120
3,5
100
3,0
2,5
80
2,0
60
1,5
40
1,0
20
0,5
0
0,0
Nuclear
Natural Gas
Coal
Wind
PV
Hydro
Geothermy
Nuclear
Natural
Gas
Coal
Wind
PV
Hydro
Geothermy
… but the evolution of technology and economies of scale are progressively reducing
the cost differences between methods
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* Includes levelized CapEx and OpEx
Sources: OECD/IEA
4
Demand for solar is accelerating although forecasts differ
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5
This has resulted in a dramatic market capitalization of the solar
sector
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6
The RES sector is evolving with utilities entering the sector
aggressively…
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7
…leveraging also M&A initiatives
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8
M&A Map for Wind
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9
IPO Analysis – Recent Transactions
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10
Financial performance differs across RES sectors
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11
Solar sector stock performance is strong, despite the recent
correction
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12
Currently, offshore plays a minor role in wind energy production; however
revamped interests indicates that substantial growth will take place
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Key Uncertainties
 Continuous
 Tightness
 The
growth for the solar industry or boom-bust cycles?
or abundance of supply from wind turbine manufacturers?
government dilemma: What incentives, how much and when?
 How
can Network absorption impede or facilitate RES expansion?
 Will
RES expansion be used actively by governments as a lever to secure
supply?
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 Global Market Overview
 Greek RES Market
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15
Greece has significant natural wealth for RES…
• Some of the highest solar irradiation
rates in Europe
• Wind potential for some 14.000 MW
• Geothermal fields with production
potential of ~350 MW (equivalent to
1.500 MW of wind power)
• Many springs and rivers for
hydroelectric power
©
…but exploiting it fully will involve overcoming serious obstacles
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The EU has set environmental improvement targets based on RES use
which as a rule are not yet being met
2001: All EU member states adopt national targets for the proportion of electricity consumption that should come from RES
(Directive 2001/77/ΕU)
Electricity produced from RES in Europe, by country
[% consumption]
90
78,1
80
[%] 70

Status 2005
60,0
—
Gap to 2010 target
60
For 2020, the European
Commission proposed the
binding targets known as «20-2020»
49,3
—
50
39,0
40
30
EU Target 20
10
31,5
33,6
29,0
—
—
31,0 29,4
25,0
21,0
21,0
20,1
12,5

13,2
9,0 8,0 10,0 7,0
5,7 7,5
3,6
6,0 5,1 5,0 6,0
Ε.
Ε.
Αυ
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Σο ρία
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Βέ
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Εσ ιο
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Κύ τα
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0
20% of the European energy
production portfolio to be RES
20% reduction in Greenhouse
Gas emissions, compared to
1990
20% energy savings
10% of fuel used in transport to
be biofuel
Greece’s target for total energy
consumed to come from RES
has been set at 18%; hence RES
have to account for 30-35% of
electricity generation (this means
some 10,000 MW of RES
production by 2020)
Source: State of renewable energies in Europe, EurObserv’ER 2006
2007: EU member states decide to increase total energy produced from RES to 20% by 2020
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Implementation of RES projects must be accelerated in order to
achieve the 20,1 % target following the 77/2001/EC directive
Target
(20,1%)
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Production [ΤWh]
RES
12
25%
20%
% RES
10
15%
8
10%
6
4
% RES
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Amount & Proportion of RES Electricity
Production in Greece
5%
2
0
1999
©
0%
Sources: DOE/EIA, ΥΠ.ΑΝ.
2001
2003
2005
2007
2010
Wind will be the main driver for Greece to meet her RES targets
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We hope that the 20,1% target will be achieved by 2012
GREEK RES MARKET [MW]
5.000
Installed Capacity [MW]
4.500
4.000
4.700
OTHER RES
GEOTHERMY
PHOTOVOLTAIC
SMALL HYDRO
WIND
The 20,1%
target will
not be
achieved
by 2010
3.500
Drivers
4.350
3.970

Financially attractive
environment for
investments

Annulment of production
permits that show no
progress after 2 years

Passage of a Land Use
Plan for RES
3.340
3.000
2.686
2.500
2.140
2.000
1.522
1.500
963
1.000
500
0
TOTAL DEMAND [TWh]
RES PRODUCTION* [TWh]
% RES PRODUCTION
2007
2008
2009
2010
2011
2012
2013
2014
2007
60,8
7,2
12%
2008
62,8
8,6
14%
2009
64,8
10,2
16%
2010
67,0
11,6
17%
2011
68,7
13,1
19%
2012
70,5
14,5
21%
2013
72,3
15,7
22%
2014
74,2
16,6
22%
* Includes 4,5 TWh from large HPP
Sources: Dept. of Energy/EIA, MinDev, RΑΕ, PPCR estimates
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The interest for RES projects in Greece is significant…
Technology
Wind
Biomass
Geothermic
Small Hydroelectric
Solar P/V
Total Capacity [MW]
With Operation
Licenses (1)
[MW]
With Installation
Permits
[MW]
With Production
Permits (2)
[MW]
Applications for
Production Permits (3)
[MW]
773,8
916,4
6.492,4
35.495,5
32,1
23,5
94,8
451,6
0,0
0,0
8,0
335,5
101,9
103,9
514,3
1.864,5
0,8
2,2
80,4
3.061,9
908,6
1.046,0
7.189,9
41.209,0
1) The above mentioned Operation Licenses include RES projects from the Combined Production Permits of PPC
2) These include the projects with Operation Licenses, Installation Permits and do not include Revoked Licenses
3) These include the projects with Production Permits as well as Revoked Licenses
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Source: RAE
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…driven, in part, by attractive Feed-in Tariffs
Feed-in Tariff* (€/MWh)
Renewable Energy Source
Onshore Wind
Mainland Grid &
Connected Islands
Non-Connected Islands
75,82
87,42
Offshore Wind
92,82
Small Hydro <15 MWe
75,82
87,42
Photovoltaic <100 kWp
452,82
502,82
Photovoltaic >100 kWp
402,82
452,82
Other Solar Technologies <5MW
252,82
272,42
Other Solar Technologies >5MW
232,82
252,42
Geothermy
75,82
87,42
Other RES
75,82
87,42
* According to RES Law 3468/06, increased by €2,82 in July 2007
©
These prices may be altered by the Ministry of Development
following a proposal from RAE
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Some key steps to accelerate RES expansion in Greece

Review of Installation and Production Permits (and Grid connection terms) for
wind parks that haven’t yet begun construction

Different regulatory regime for PV installations <150 kWp

Broader scope for subsidizing RES projects, without allowing excess profits

Further improvement of the Permit Issuance process and the Land Use Plan
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In Conclusion

There is already potential for RES to play a role in electricity supply both globally and
in Greece in the short term

However, dominance of RES to the extent that we can talk about a real contribution to
security of energy supply is still a distant prospect and should only be viewed in the
medium to long term
—
—
—

©
In the short term, RES can only have limited role in security of supply
In the medium term RES should be able to play a more significant role in the security of supply of the
electricity supply market if national targets are met (e.g. 29% by 2020 for Greece)
In the long term and as RES’ share in the electricity supply market increases with the development of new
RES technologies and the efficient operation of a fast growing RES market, RES can play an even greater
role in the security of supply of the electricity supply market;
In the even longer term, with the greater development of new RES technologies and
the efficient operation of the RES market, RES could play the role of the catalyst that
will drive the development of new consumer and industrial products that until today
traditionally are “fueled” on petroleum or natural gas. This effective transition from
petroleum “fueled” products would also have to be supported by the necessary State
incentives both for industry and consumers in order to drive for this new technology
and thus decrease even further countries’ dependence on these two fuels.
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Thank you for your attention!
Manthos Kallios
+30-211-211 8000
[email protected]
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