Policy and Clean Energy Funding

1. Proprietary and Confidential GARTEN ROTHKOPF Policy and Clean Energy Funding Garten Rothkopf 11 June 2009

2. Policy is Single Largest Factor Shaping Clean Energy Investment Landscape • Markets:Complex regulatory change is establishing new markets, expanding nascent ones, and drastically changing existing ones • Finance: Public sector is serving as the primary source of access to capital for emerging, potentially game changing, technologies • Competitiveness: Public policy decisions are accelerating pathways for certain technologies, and influencing competition within individual sectors

3. Complex Regulatory Landscape Markets On top of major regulatory initiatives – cap-and-trade, RES, transport emissions, efficiency standards – another wave of regulation is complicating the clean energy market landscape: • Will power infrastructure reform include mandates to connect transmission lines to renewable energy? • How will the Interior Department resolve conflicts between environmentalists and renewable energy interests over land permits? • Will biofuels be subjected to assessments of land-use changes in lifecycle emissions calculations? • What standards will govern cyber security and interoperability for the smart grid? • How will water efficiency/intensity factor into future assessments of the attractiveness of competing energy options?

4. Federal Funding Represents a New Order of Magnitude for Emerging Technologies Finance Comparison of Private Sector Financing from Q1’08-Q2’09 vs. Stimulus Appropriation $4.5 billion Transportation Electrification Smart Grid CCS $3.0 billion $2.4 billion $449 million $338 million $54 million Private Stimulus Private Stimulus Private Stimulus Note: 70% of stimulus funds expected to be spent by end of 2010 Sources: New Energy Finance (Private Funding); ARRA (Stimulus Funding)

5. An Enormous Amount of Stimulus Funding in the Pipeline Finance $16.8 bn EERE $860m $6 bn (expected to translate to ~$60bn in loan guarantees) DOE Loans Guarantees $2m $4.5bn Electricity Delivery/ Energy Reliability Across DOE programs focused on clean tech development, over $31bn has yet to be awarded $15m $3.4bn Fossil Energy $0 $1.6bn Science $640m $400m Authorized ARPA-E Awarded $23K Source: DOE, 6/10/09

6. And Stimulus Generates Unprecedented Tax Opportunity Finance Incentives expected to total over $26 billion over next 10 years Renewables $19.9 billion Energy Efficiency $2.8 billion • Production Tax Credit (PTC) 3 Year Extension ($13bn) • Increased Clean Renewable Energy Bonds ($0.6bn) • Business Energy ITC Modifications ($0.9bn) • Special Depreciation for Renewables ($5bn) • Renewable Energy Grants ($0.05bn) • Residential Efficiency ITC ($2bn) • Energy Conservation Bonds ($0.8bn) Alternative Fuel Vehicles $2 billion Manufacturing$1.6 billion • Plug-in Vehicle Credits ($2bn) • AFV Refueling Property Credit ($0.05bn) • Advanced Energy Projects Credit ($1.6bn)

7. Future Funding Opportunities:DOE FY2010 Budget Proposal Finance Over $1.6 billion proposed for research, development, and deployment • Vehicle technologies $334m ($61m over 2009) • Solar energy $320m ($145m over 2009) • Building technologies $238m ($98m over 2009) • Biomass and biorefineries $235m ($5m over 2009) • Electricity delivery and energy reliability R&D $174m ($88m over 2009) • Industrial technologies $100m ($10m over 2009) • Wind energy $75m ($20m over 2009) • Hydrogen technology $68m ($101m under 2009) • Geothermal technology $50m ($44m over 2009) • Water power $30m ($10m under 2009)

8. Future Funding Opportunities:USDA Farm Bill and FY2010 Budget Finance At least $50m in expedited Farm Bill funds and upward of $400m proposed for 2010 Carryover from 2008 Farm Bill • Advanced biofuels production $30m • Biorefinery retrofitting $20m Proposed in FY 2010 Budget • Biorefinery Assistance Program $262m ($197m over 2009) • Rural Energy for America Program $128m ($68m over 2009) • Biomass Crop Assistance Program $15m (New program – annual funding could easily exceed $50-80m/yr)

9. Policy is Driving Competitiveness Among Technologies Competitiveness • Consider the numerous advanced vehicle options: flex-fuel, natural gas, electric, fuel cell, clean diesel, etc. • Policymakers don’t “pick winners,” but… • Stimulus provides $4.4 billion in dedicated funding and tax incentives for electric vehicles, while offering no dedicated support for other transport options • House climate bill promotes electric vehicle infrastructure exclusively; gives explicit preference to plug-in vehicles over other alternatives in its clean vehicle investment fund

10. Politics, not Policy, Often Drives Technology Preferences Competitiveness Energy and Natural Resources Committee chair Jeff Bingaman (D-NM) knows he needs support from Sam Brownback (R-KS), a key swing vote, in order to pass a renewable electricity standard Bingaman asks Brownback what he needs in exchange for his vote; Brownback wants more support for algae energy The RES is amended in markup to award energy generated from algae three times the credits awarded to other renewables Brownback’s district happens to be home to a large algae energy demonstration project, the Sunflower Integrated Bioenergy Center

11. Federal Support is Critical to Competitive Advantage within Sectors Competitiveness Federal support is increasingly synonymous with success for early-stage clean tech investments Boston Power applied for $100 million in federal stimulus funding to finance the construction of an advanced battery manufacturing plant “If we don’t get the federal funding, I think it’s going to be very difficult for Boston-Power to do this, in the short term.” -Christina Lampe-Onnerud Boston Power CEO

12. Policy Outlook: What to Watch • Energy Secretary Chu has pledged to award 70% of stimulus funds by end of 2010… but will program roll-out move more slowly than anticipated? • Design of standards and regulations will influence who wins and loses as much as the direction of public funding – esp. for emerging technologies like smart grid, electric vehicles, CCS, second-gen biofuels • The current wave of energy regulation is likely to be followed by another, focused on water

13. Garten Rothkopf Unique advisory services focusing on transformational trends in energy policy, markets, finance, and technology Research Products Grant Tracking Power Mapping Client-specific research and analytical support for business plan development and optimization In-depth review of state and federal funding solicitations and customized application assistance Comprehensive, up-to-date analysis of key players, policy developments, and energy policy news