# Presentation: 132536

## A Framework for theTotal Value Proposition of Clean Energy Technologies

- Presented by
- Jane Pater
- August 4, 2005

## Conventional Valuation

- Revenue enhancement
- Cost reduction
- + Brand Value
- ---------------------------
- Value

## Proposed Valuation Framework

- Risk Management

- Emission Reductions

- Policy incentives

- Reduced resource use

- Corporate social
- responsibility

- Societal Economic
- Benefits

- TVP for
- Clean Energy
- Technology

## Overview

- Key concepts
- Values examined
- Beneficiaries
- Next steps
- Challenges ahead

## Key Concepts: Power Technology

| Clean Power |  | Conventional Power |
| --- | --- | --- |
| Solar (PV)
Solar thermal
Wind
Geothermal
Biomass
CHP | Landfill methane
Operational efficiency
Building efficiency
Wave
Tidal | Coal
Natural Gas
Nuclear
Microturbines
Reciprocating engines
Small gas turbines |

## Key Concepts: Clean Fuels

| Clean Fuels | Conventional Fuels |
| --- | --- |
| Biofuels: bioethanol, methanol, biodiesel
Hydrogen fuel cells | Oil
Gasoline
Diesel
Natural Gas
Propane |

## Key Concepts: Value Accumulation

**          ****End **
**          ****user**

**             ****Distributor**

**               ****Generator**

**Utility-scale centralized electricity generation**

-          Consumer:
-           industrial,
-         commercial,
-          residential

-                 Electricity
-                supplier,
-               retailer, provider/
-                 T&D company

-                Merchant plant,
-                 Vertically
-                integrated utility

**Distributed electricity generation / **
**energy efficiency**

**Consumer: industrial, commercial, residential**

**     ****Retailer,**
**Contractor**

**Licensee**

**           ****Property**** **
**             ****owner**

**IP Owner/**
**Technology distributor**

-               Property
-               owner

- Licensee

**Society, Investors, Shareholders, Insurance companies**

**Biorefinery**

**         ****Consumer**

**            ****Distributor**

**           ****Refiner**

**      ****Property**
**       ****owner**

**Licensee**

## Values examined

| Risk Management | Benefits of Emissions
Reductions | Direct Policy Incentives | Reduced Resource Use | Corporate Social Responsibility | Societal Benefits |
| --- | --- | --- | --- | --- | --- |
| Hedge against fuel price volatility
Hedge against grid outages
Reduce uncertainty in futures markets
Prepare for regulatory change
Reduce insurance premiums
Reduce cost of adapting to climate change | Generate emissions reduction credits/ offsets
Reduce fees for emissions
Avoid remediation costs | Production Tax Credit (PTC)
Accelerated depreciation
Preferential loan treatment
Renewable Port-folio Standard 
Renewable Energy Certificates (RECs)
System Benefit Funds (SBFs)
Rebates
Feed-in tariffs
Net metering
Property tax break
Sales tax exemption
Qualification for local R&D incentives
Other financial incentives | Reduce water use and consumption 
Reduce energy use
Lower production costs  | Improve stakeholder relations
Satisfy socially responsible investment (SRI) portfolio criteria | Rural revitalization
Jobs
Economic development
Avoided environmental costs of fuel extraction / transportation
Avoided cost of transmission and distribution infrastructure expansion |

## Value Category: Risk Management

## Source: EIA http://tonto.eia.doe.gov/dnav/ng/xls/ng_pri_sum_dcu_nus_m.xls

## Cost of power outages for selected commercial customers

| Industry | Average cost of downtime |
| --- | --- |
| Cellular communications | $41,000 per hour |
| Telephone ticket sales | $72,000 per hour |
| Airline reservations | $90,000 per hour |
| Credit card operations | $2,580,000 per hour |
| Brokerage operations | $6,480,000 per hour |

**Source: Leiter, D. (10 May 2000) “Distributed Energy Resources.” Prepared by the U.S. Department of Energy for Fuel Cell Summit IV, Washington, D.C.**

## Value Category: Emissions Reductions

- Emissions
- Reductions

- Avoid
- remediation
- costs

- Reduce fees
- for emissions

- Generate
- emissions
- reduction credits

**Air**
**Water**
**Solid Waste**
**Greenhouse gases**

## Value Category: Direct Policy Incentives

**Value Category: Direct Policy Incentives**

- Sales tax
- Exemption

- Property tax
- break

- Production
- Tax Credit

- Preferential
- Loan Treatment

- Renewable
- Portfolio Std.

- Renewable Energy
- Certificates

- Rebates

- Net metering

- Local R&D
- Incentives

- Feed-in
- tariffs

- System benefit
- funds

- Accelerated
- Depreciation

## Estimated REC Market Size($ millions)

|  | 2004 REC market value | 2010 market value |
| --- | --- | --- |
| Compliance market | $140 | $600 |
| Voluntary market | $15-45 | $100-300 |
| Total | $155-185 | $700-900 |

- Source: Bird, L. and E. Holt. (January 2005) *Emerging Markets for Renewable Energy Certificates: Opportunities and Challenges.* NREL Document No. NREL/TP-620-37388

## Policy Incentives for End Users

- Property tax
- break

- Rebates

- Preferential
- Loan Treatment

- Net metering

- Feed-in
- tariffs

## Value Category: Reduced Resource Use

- Reduced
- resource
- use

- Water consumption
- and use

- Production costs

- Energy use

## Value Category: Corporate Social Responsibility

- Stakeholder Relations

- Satisfy SRI portfolio criteria

- CSR

## Growth of SRI Investments in U.S.($ Billions) 1997-2003

**Total: $2.2 trillion in 2003**

## Value Category: Societal Economic Benefits

- Societal Economic Benefits

## What’s in it for me?

## Benefit categories

- Reduce uncertainty in futures markets

- Reduce insurance premiums

- Prepare for regulatory change

- Emissions credits to trade

- Reduce emis. fees

- Avoided remediation costs

- PTC

- Sales tax exempt

- Prop. tax break

- Accel. depreciation

- RPS

- Feed-in tariffs

- RECs

- Local R&D incentives

- Reduce water use

- Reduce energy use

- Improved relations with stakeholders

- Lower prod. costs

**Risk Management**

**Emissions Reductions**

**Direct Policy Incentives**

**Reduced**
** ****Resource Use**

**CSR**

- Hedge against grid outages

- Help to pass through SRI investment filter

- Hedge against fuel price volatility

-      End
-      user

-         Distributor

-        Generator

-      Land
-      owner

- IP Owner/
- Technology distributor

- Reduce cost of adapting to climate change

- Reduce emis. fees

- RPS

- Beneficiaries

## Next Steps

- Solicit comments from industry
- Share final draft at NREL Industry Growth Forum in November
- Partner with industry to perform case study on specific technology
- Replicate the process
- Generalize as many values as possible based on the case studies

## Challenges ahead

- Acceptance of quantification methodology
- Requires a shift in the way we think about valuation

## Thank you to

- Project Team: Doug Arent, Dan Bilello, Walt Copan, Marty Murphy, Carol Tombari
- Bobi Garrett
- Interviewees: Lori Bird, Adam Chambers, Dave Christensen, Kelly Ibsen, Christy Herig, Michelle Kubik, Robert Margolis, Jason Matlof, Judy Oberg, Matt Ringer, Suzanne Tegen
- Energy Analysis Office

## “The world will not evolve past its current state of crisis by using the same thinking that created the situation.”

- Albert Einstein

- - Albert Einstein