Canada

LNG Export Future?

What is the current and future compe22veness of LNG vs. eciency,

solar and wind power? (LNG 20 year contracts and transporta2on of LNG)

Compe22ve edge depends on several unknown variables:

Will 20-yr xed price contracts provide sucient revenue for posi2ve
ROI? If not, risk of stranded asset. If yes, opportunity costs (i.e., what
beMer ROI op2ons become lost opportuni2es)?

Are regulatory/ public policies nega2ve, neutral or favorable to eciency,

solar & wind in buyers markets?

Are solar &/or wind resources sucient in buyers markets?

Will carbon taxes become more widespread, as well as increasing over

2me? Carbon tax of $100US per ton CO2 adds ~2US per kWh

Will disrup2ve energy & transport technologies collapse fossil fuel

markets for coal, oil and natural gas? If within 20-yr contract, more
stranded asset risks.
 2008 TREEMAP

1968 TREEMAP
Canada

TOTAL EXPORTS USD 456 B / (11/2)

POPULATION 33 M / (34/2)
ELECTRONICS

30% exports oil/gas & 13% exports vehicles-related MACHINERY

EXPORT
2008
AIRCRAFT
EXPORT

EXPORT
TREEMAP TOTAL EXPORTS: 455.73 B / 15.56 EXPORTS:
2008 TREEMAP OF TOTAL T (2.93%) 455.73 B / 15.56 T (2.93%) BOILERS

TOTAL EXPORTS: 13.14 B / 228.33 B (5.75%)

SHIPS
3330 (20%) Crude petroleum 7810 (10%) Cars 7849 (3.3%) Other vehicles 7821 7924 METAL PRODUCTS
parts (1.1%)

TOTAL EXPORTS: 455.73 B / 15.56 T (2.93%)

CONSTR. MATL. & EQPT.

HOME & OFFICE

GDPPC USD 45,003 / (15/2)

GDP USD 1.5 T / (11/2)
PULP & PAPER

7923 7148 CHEMICALS & HEALTH

7132 7436 AGROCHEMICALS

7499 OTHER CHEMICALS

7239 7144
INOR. SALTS & ACIDS

PETROCHEMICALS
7832 7442 6783 6252
LEATHER

MILK & CHEESE

3414 (9.6%) petroleum gases 2482 (1.5%) 3510 8219 2517 (1.5%) Chemical 0412 (1.5%) Other 4239 0542

EXPORTS AS SHARE OF GDP 30 % (65/1)

EXPORTS PER CAPITA USD 13,689 / (19/1)
ANIMAL FIBERS
Worked wood of (1.1%) wood pulp, soda or wheat & meslin,
MEAT & EGGS

1988 TREEMAP
coniferous sulphate unmilled
0411 FISH & SEAFOOD

EXPORT
6411 (1.3%) 2226 (1.1%) TROPICAL AGRIC.

6842 6353 Newsprint CEREALS & VEG. OILS

COTTON/RICE/SOY & OTHERS

TOTAL EXPORTS: 112.98 B / 2.79 T (4.04%)

2872 6831 5241 6841 (2.2%) 6821 (0.86%) 6428 2519 6413 8931 0980 0113 (0.64%) 0111
8211 6911 TOBACCO
(1.1%) (0.59%) Unwrought
aluminium & 6343 6415 FRUIT
2741 2871 0011
aluminium alloys MISC. AGRICULTURE
(0.59%) (0.54%) 5623 (1.9%) 5839 8939 0484 0730

* Data are from 2008. Numbers indicate:

North America.
Value (World Ranking / Regional Ranking).
Potassic fertilizers (0.83%) (0.65%) 0360 NOT CLASSIFIED
9710 (2.6%) Gold, non-monetary 2816
(0.58%) TEXTILE & FABRICS
3222 (1.8%) Other coal 5831 0546
6861 6899 5112 (0.93%) 2820 GARMENTS

Polyethylene 5121 FOOD PROCESSING

BEER/SPIRITS & CIGS.

* Numbers indicate SITC-4 rev 2 codes. Parenthesis indicate percentage of total exports. Treemap Headers show: Total
* Numbers indicate SITC-4 rev 2 codes. Parenthesis indicate percentage of total exports. Treemap Headers show: Total Trade/Total World Trade (share of world trade represented by the country).

Trade/Total World Trade (share of world trade represented by the country).

PRECIOUS STONES

COAL

Ricardo Hausmann, Csar A. Hidalgo et al, The Atlas of Economic Complexity, MIT, 2014
OIL

MINING
 (44%) is electric sector gas demand. Much of the projected non-electric gas demand and its
increase over time are attributed to space heating.
Global Natural Gas Demand
Figure 2
Electric vs. Non-Electric (Direct Fuel) Sector
Global Natural Gas Demand
Electric Vs. Non-Electric Sector
Disrup've Technologies Threaten Collapse
Of Most of this Demand before 2040

(direct
fuel)

IEA World Energy Outlook 2015, Reference Case

Sources/Notes:
IEA World Energy Outlook 2015, Reference Case (New Policies Scenario).
Global CompeUUon just within LNG sector
 Global Estimated Landed LNG Prices
($/MMBTU)

Belgium
UK 8.49 / 5.58
Cove Point 8.67 / 5.86 Korea
2.94 / 6.66 Spain 14.55 / 8.77
Japan
10.24 / 6.76 14.55 / 8.77
Altamira Lake Charles China
3.17 / 7.94 2.66 / 3.34 India 14.15 / 8.62
14.15 / 8.64

Rio de Janeiro
13.90 / 7.99

Bahia Blanca
15.05 / 8.20 August 2012 / December 2016

Source: FERC
Source: Waterborne Energy / FERC

www.moyesco.com 7
 National Natural Gas Market Overview: World LNG Landed Prices

Federal Energy Regulatory Commission Market Oversight www.ferc.gov/oversight

World LNG Estimated Landed Prices: Jul-17

UKUK UK
UK
$8.75
$8.75
$8.75 Belgium
Belgium
Belgium
$ 4.63 $8.99
$8.84
$8.84
Canaport Belgium Korea
Cove
Cove
CovePoint
Point
Point
$4.50 Cove Point
$ 2.57 $13.10
$$4.50
2.70 $4.40
$ 4.87 KoreaKorea
Korea Japan
Spain
Spain
Spain Japan
Japan
Spain $ 5.35
$12.40
$12.40
Lake Charles
$9.05
$9.05 $Japan
5.35
Lake
LakeCharles
Charles
Lake Charles $9.15 $ 5.18 $12.40
$12.40
China
Altamira
Altamira
Altamira $ 2.76 India $13.10
$3.96
$3.96
$3.93
$4.57Altamira
$4.60
$4.60 India
India
India $ 5.20
$ 5.29 $$11.55
5.38
$11.55
$11.55

Rio de Janeiro
$ 5.33
Bahia Blanca
$ 5.47

Source: Waterborne Energy, Inc. Data in $US/MMBtu.

Note: Includes information and Data supplied by IHS Global Inc. and its affiliates (IHS); Copyright (publication year) all rights
reserved. Prices are the monthly average of the weekly landed prices for the listed month. Landed prices are based on a netback Updated: Aug-17
calculation.
 Expanded Export Markets OR Stranded Assets Risk?

Select Announced
Canadian and
Northern USA
LNG Export as of
early 2015
 Canadian natural gas produc2on, demand, exports 2005-2025
(billion cubic feet per day, bcf/d)

Source: U.S. Energy InformaUon AdministraUon, based on Canada's NaUonal Energy Board,
Canada's Energy Future 2016: Energy Supply and Demand ProjecUons to 2040
 Op2mis2c Asia versus
Europe Greeneld & Europe Tolling LNG Cost Comparison

Art Berman: I think the LNG trade is based on bogus economics parUcularly for Asian export. It only
makes sense if you believe that landed prices will be much higher in the future or that buyers are
willing to pay a premium for supply security. No one is paying a^enUon to the re-negoUated gas
deal between Russia and China that is underway to bring cheaper pipeline gas to East Asia. Iran has
the largest proven gas reserves in the world and will provide gas to South Asia before long.
Source: Art E Berman, Strong Natural Gas Prices And Tight Supply In 2017, Petroleum Truth Report, May 16, 2017,
h^p://www.artberman.com/strong-natural-gas-prices-Ught-supply-2017/
 Delivered LNG sales price lower than those shown for each individual project cost would
eecUvely mean the project would operate at a loss. Therefore, these delivered costs can
be considered the minimum LNG price for each project. [Assumed Henry Hub gas feedstock
price at US$4.2/MMBtu, and crude oil benchmark at US$100/Bbl. Actual 2017 Henry Hub
gas price is $3+/MMBtu and crude oil is $56/Bbl.]
Ganey, Cline Assoc.,LNG, Oct. 30, 2014, h^p://ganey-cline-focus.com/lng-the-key-to-unlocking-energy-diversicaUon
 Canada LNG Export
Unknowns

Solar and Wind with virtually zero dispatch cost do push

higher-opex fossil and nuclear thermal plants up the load-
dura2on curve so they run less. Customers then benet
from lower market-clearing prices. Owners suer from
correspondingly lower revenues (many becoming
uneconomical to con2nue opera2ng).

Amory B. Lovins , Do coal and nuclear generaUon deserve above-market prices? The Electricity Journal 30 (2017) 22-30
 Canada LNG Export
Unknowns
A major distor2on in wholesale power markets is their typical
failure to risk-adjust dierent resources. To compare vola2le-
price resources, notably gas-red power plants, fairly against
xed-price resources, like eciency, solar and wind, requires
risk-equaliza2on by adding to vola2le cost streams the market
value of their price vola2lity.

This can be approximated by the straddle in the op2ons
marketthe spread between the prices of simultaneous put
and call op2ons. For natural gas, that vola2lity value
approximates recent natural-gas prices, so plant and grid
operators that dont count the gas-price risk are imposing on
customers all the burdens of ac2ng as if gas cost only about
half as much as it actually does on a risk-adjusted basis.
Amory B. Lovins , Do coal and nuclear generaUon deserve above-market prices? The Electricity Journal 30 (2017) 22-30
 Canada LNG Export
Unknowns
A sophis2cated recent analysis using a dierent method found
that properly coun2ng gas-price vola2lity makes modern
renewables robustly cheaper than ecient combined-cycle gas
plants.

Source: Mark Bolinger, Using Probability of Exceedance to
Compare the Resource Risk of Renewable and Gas-Fired
GeneraUon, Lawrence Berkeley NaUonal Laboratory,
LBNL-1007269, March 2017,
h^p://energy.gov/downloads/2017-us-energy-and-
employment-report .

 Who bears resource risk?

Resource risk falls disproportionately on ratepayers (or customers more

broadly in a deregulated setting)
In general, higher-than-expected gas prices appear to be riskier (to
ratepayers) than lower-than-expected wind or solar output
As such, it is incumbent upon utilities, regulators, and policymakers to
ensure that resource riskand in particular natural gas price riskis taken
into consideration when making or approving resource decisions

3
 Wind and solars ability to hedge natural gas
price risk clearly motivates buyers
Utility offtakers:
This solar energy center adds diversity to WPPI Energys power supply portfolio in a way thats more cost-
effective than other opportunities currently available to us. WPPI Energy, 2017
When were buying wind at $25, its a hedge against natural gas. Xcel Energy, 2015
We like wind because its a hedge against fossil prices and wind, with no fuel costs associated, can keep those
rates stable. MidAmerican Energy, 2015
"The latest addition of 150 megawatts of low-cost wind energy provides AECC with a hedge against fluctuating
natural gas energy prices. Arkansas Electric Cooperative Corp, 2013
We think of this wind contract as an alternative fuel, with known contract pricing over 25 years that will displace
fuels where the pricing is not yet known. That is the essence of the fuel hedge PSCo, 2012
[Wind PPAs] decrease our exposure to natural gas, provide a hedge against any future global warming
legislation, and help us give our customers lower, more stable prices. Empire District Electric Company, 2008
Wind generation provides value simply for the insurance it furnishes in insulating customers from some of the
aspects of unexpectedly high and volatile fuel and wholesale energy prices. Westar Energy, 2007
Corporate offtakers:
Investing in large-scale renewable power helps Lockheed Martin hedge against the volatility of the electricity
market and lower our energy costs This is a nice addition to our current hedging strategy This gives us the
ability to hedge out in a different way, for a much longer term. Lockheed Martin, 2016
Electricity costs are one of the largest components of our operating expenses at our data centers, and having a
long-term stable cost of renewable power provides protection against price swings in energy." Google, 2016
Cost savings are the main driver, but price stability is a close second. General Motors, 2013
We see value in getting a long-term embedded hedge. We want to lock in the current electricity price for 20
years. We are making capital investment decisions on the order of 15 to 20 years. We would like to lock in our
costs over the same period. Google, 2011

4
 Other assumptions for wind, solar, and CCGT plants
starting operations on January 1, 2017

Only the green-shaded values change with each model run, depending on the P-level and time horizon
Wind and solar capacity factors at different P-levels and over different time horizons come from Slide 10
Levelized gas price projections at different P-levels and over different time horizons come from the lower graph on Slide 14
All other variables are held constant for all model runs in order to isolate the impact of resource risk
This is clearly a simplifying assumption
For example, if natural gas prices increase, the CCGT capacity factor may decline as gas-fired generation becomes less
competitive
For example, if a wind turbine regularly experiences a higher-than-expected capacity factor, its O&M costs may increase
due to increased wear and tear

15
 With the PTC, winds worst-case LCOE is below the
CCGTs best-case LCOE over all time horizons > 2 years
Wind P50-P1 LCOE range (range due solely to wind resource uncertainty)
$80
Gas P1-P99 LCOE range (range due solely to fuel price uncertainty) P1 gas Note: Worst-case
$70 Wind P50 LCOE (with PTC) (P1) wind LCOE
25-Year LCOE (Nominal $/MWh)

Gas P50 LCOE results from worst-

For example: 12-year P1 levelized gas
$60 case (P99) capacity
price and 12-year P99 wind capacity
factor from Slide 10,
factor used in 25-year LCOE calcs
P50 gas yet the lexicon of
$50
probability of
exceedance requires
$40 P99 gas that the higher-than-
P1 wind expected LCOE be
$30
re-labeled here as a
P1, rather than a
$20 P50 wind
P99, LCOE
$10 Note: wind numbers include the PTC

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
$0
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
Time Horizon for Wind Resource and Gas Price Projections
LCOEs on graph are all over 25 years, but time horizon of uncertain inputsi.e.,
wind capacity factors and levelized gas pricesvaries along x-axis (and by P-level)
For example, at year n on the x-axis:
Wind: n-year P50-P99 capacity factors are used in the 25-year LCOE calculation
Gas: n-year P1-P99 gas price forecasts are levelized (over n years) and used as the
fuel price inputs in the 25-year LCOE calculation
16
Without the PTC, wind and gas LCOEs are more comparable
But moving beyond P50 outcomes favors wind over gas
$80 Wind P50-P1 LCOE range (range due solely to wind resource uncertainty)
Gas P50-P1 LCOE range (range due solely to fuel price uncertainty)
$75
25-year LCOE (Nominal $/MWh)

Wind P50 LCOE (no PTC)

$70 Gas P50 LCOE Wind P1 = Gas P10

$65 Wind P1 = Gas P5

P1
$60
P5
$55 P10
P25
$50 P50
$45 Note: wind numbers do NOT include the PTC
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
$40
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
Time Horizon for Wind Resource and Gas Price Projections
In this comparison:
Wind (without the PTC) is more expensive than gas on a P50 basis for all time
horizons less than 24 years (i.e., the two P50 curves converge at 24 years)
But on a P25 basis, wind costs less than gas over all time horizons >16 years
This break-even point where the wind and gas LCOE curves for each P-level
cross drops to 10, 8 and 2 years for P10, P5 and P1 levels, respectively
17
 Visual representation of hedge value
(wind without the PTC vs. gas-fired LCOE)
$76
$74 Note: wind numbers do NOT include the PTC
$72
25-Year LCOE (Nominal $/MWh)

$70
$68
$66
$64 wind P1 < gas P1
wind P1 < gas P5
$62
$60
wind P5 < gas P5 wind P5 < gas P10
$58
$56
wind P10 < gas P10
$54 wind P25 < gas P25
$52
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
$50
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
Time Horizon for Wind Resource and Gas Price Projections

Each hedge wedge shows how much cheaper wind (without the PTC) is than gas
over a range of time horizons and based on that particular P-level comparison
The lower the P-level, the shorter the time horizon at which hedge value begins to
accrue, and the greater the hedge value that exists over the full 25-year horizon

20
 Solar (with the 30% ITC) LCOE versus CCGT LCOE
Pick your preferred level of risk aversion and time horizon
$80 Solar P50-P1 LCOE range (range due solely to solar resource uncertainty)
Gas P50-P1 LCOE range (range due solely to fuel price uncertainty)
$75 Solar P50 LCOE (with 30% ITC)
25-year LCOE (Nominal $/MWh)

$70 Gas P50 LCOE

Solar P1 = Gas P5
$65 P1

$60 P5
P10
$55 P25

$50

$45 Note: solar numbers include the 30% ITC

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
$40
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
Time Horizon for Solar Resource and Gas Price Projections
In this comparison:
P50 solar (with the 30% ITC) is always more expensive than P50 gas, regardless of time horizon
But on a P25 basis, both resources have the same LCOE over the full 25-year time horizon
And even-more-risk-averse comparisons at lower P-levels show that solar can provide
significant hedge value

19
 Consolidated results for 4 comparisons across 5
common P-levels and over 25-year time horizons
$45
All results reflect a 25-year time horizon for renewable resource and gas price projections
Gas minus Renewable (Nominal $/MWh)

$40
Positive numbers indicate that gas is more expensive
$35
$30
$25
$20
$15
$10
$5
P50
P25
P10

P50
P25
P10

P50
P25
P10

P25
P10
P50
P5
P1

P5
P1

P5
P1

P5
P1
$0
($5)
Wind (with PTC) LCOE Wind (with PTC) LCOE Wind (no PTC) LCOE Solar (with ITC) LCOE
vs. Gas LCOE vs. Gas OpEx vs. Gas LCOE vs. Gas LCOE

Graph shows cost difference between CCGT and wind or solar; positive/higher numbers means
that gas is more-expensive
Although there is good reason to look at shorter time horizons (e.g., utilities may have a short-
term need for energy, some investors are present for <10 years, ratepayers may have a short-
term focus), most resource decisions will be made with a long (20- to 25-year) time horizon
Moving beyond P50 favors wind and solar over gas-fired generation
21
 Parting Example: Southwestern Public Service (SPS)
March 2017 announcement of 1,230 MW of new wind
SPS is procuring wind solely as a cost-saving measure:
SPS is proposing the Wind Resources solely as economic energy resources that can
provide long-term low-cost energy that will offset more expensive existing generation and
market purchases and net savings to SPSs customers.
The low-cost/fixed-cost wind power will displace a significant amount of
natural gas at a low equivalent gas price:
the Wind Resources would lock-in approximately 22 billion cubic feet of natural gas each
year at a levelized gas price of approximately $2.40/MMBtu.
22 billion cubic feet of natural gas represents approximately 20% of SPSs annual gas
burn for electric production.
8 The locked-in equivalent gas
Base Gas Price Forecast ($4.90/MMBtu levelized)
7 price is well below even the
Low gas price forecast ($3.76/MMBtu levelized)
6 low gas price forecast:
Nominal $/MMBtu

5 the proposed Wind Resources

4 will provide wind generation to
3 the system that in essence locks
Wind equivalent gas price ($2.40/MMBtu levelized)
2 in an equivalent gas price [of
1
$2.40/MMBtu levelized]
significantly below the low gas
0
price forecast [of $3.76/MMBtu
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048

levelized].
24
 DISRUPTIVE TECHNOLOGIES OF THE
ENERGY & TRANSPORTATION MARKETS

Collapsing Coal & Oil Markets
Severely Shrinking Natural Gas Market
Within 10 to 15 years
Due to Super-Exponen2al Rates
Of Cost Reduc2ons in Solar PV, Wind
& On-Demand Autonomous EV Fleets
 Canada LNG Export
Unknowns

What is the compe22ve advantage of end-use eciency,

solar and wind power in terms of xed and marginal cost?
(given LNG 20-year contracts and transporta2on of LNG)

Jacobson et al.,
100% Clean and
Renewable Wind,
Water, and
Sunlight All-Sector
Energy Roadmaps
for 139 Countries
of the World,
Joule (2017),
h^p://dx.doi.org/
10.1016/j.joule.
2017.07.00 5

We develop energy roadmaps to significantly slow global warming and nearly

 Solar/Wind Electrica2on
Total World

Time-Dependent Changes in 139-Country-Summed, Annually Averaged End-Use Power Demand for All Purposes
Figure 2. Time-Dependent Changes in 139-Country-Summed, Annually Averaged End-Use Power Demand for All Purposes (Electricity,
(Electricity, Transporta2on, Hea2ng/Cooling, Industry, Agriculture/Fishing/Forestry, and Other) and Energy Supply
Transportation, Heating/Cooling, Industry, Agriculture/Fishing/Forestry, and Other) and Energy Supply in the BAU (Conventional Fuels) Case and as
in the BAU (Conven2onal Fuels) Case and as Proposed Here in the WWS Case.
Proposed Here in the WWS Case
For a Figure360 author presentation of Figure 2, see http//dx.doi.org/10.1016/j.joule.2017.07.005#mmc2
Total power demand decreases upon converting to WWS. The percentages next to each WWS source are the final (2050) estimated percent supply of
Jacobson et al., 100% Clean and Renewable Wind, Water, and Sunlight All-Sector Energy Roadmaps for 139 Countries of the World, Joule
end-use power by the source. The 100% demarcation in 2050 indicates that 100% of all-purpose power is provided by WWS technologies by 2050, and
(2017), h^p://dx.doi.org/10.1016/j.joule.2017.07.00 5
the power demand by that time has decreased. In the WWS scenario, 80% conversion occurs by 2030.

32
 End-Use Eciency Market Immense & Ultra-Compe22ve

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
Each Unit Eciency gain at End Use Saves 10X at Power Plant

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
End-Use Eciency in Buildings Hollowing Out Nat Gas Need

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
Super-ecient, Solar Power Microgrids Reducing Nat Gas

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
Eciency/Solar PV/Wind compete w/ Fossil fuel busbar costs

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
 Ecient Irriga2on Pumps & Solar PV Mega-$avings

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
 High-Performance, Ultra-Ecient Smart Buildings
Nanogrids powered with Solar & Geothermal

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
 Energy Disrup2on Coming from Numerous Direc2ons

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
 Neighbors selling Solar Power to Neighbors

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
Solar PV Global Capacity, by Country and Region, 2006-2016

IRENA, REN21 2017 Renewables Global Status Report, April 2017

 U.S. Solar PV and Wind Cheaper than Nat Gas Power

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
Solar PV Modular Mfg faster than Central Plant Construc2on
10-yr 2me frame 45 GW-yrs Solar vs 3 GW-yr Cathedral

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
 BoMom of Pyramid 3+ billion people Solar PV market

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
 Best resources far away, or adequate resources nearby?

Larger wind turbines perform in slower wind resources

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
Wind Power Global Capacity and Annual Addi2ons, 2006-2016

IRENA, REN21 2017 Renewables Global Status Report, April 2017

Many low-cost op2ons for Firming/Balancing Solar & Wind
Power Variability with High Penetra2on before BaMeries

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
 Figure ES-1:
Wind costs (in $/MMBtu) compared to the cost of New Gas-Fired Combined Cycle in China
Based on Forecast Delivered Cost of LNG from U.S. to China

Sources/Notes: World Energy Outlook 2013 for renewables cost assumptions

(NPS Scenario). Delivered LNG cost breakdown from Figure 7 in main report.

Figure ES-2:
The economics of a hybrid wind-solar plant and LNG-fueled power generation in Germany
with carbon emissions cost of $30/ton
Based on Forecast Delivered Cost of LNG from U.S. to Europe
 Figure 7
LNG Delivered Cost Breakdown
U.S. to China
($2013/MMBtu)

Sources/Notes:
2015 commodity cost based on 2015 Henry Hub price reported in EIA
December 8, 2015 STEO. 2020 2035 commodity costs based on Henry Hub
forecast from EIA AEO 2015. Data for other LNG costs components from the
NERA LNG Report. The LNG cost forecasts are converted to real 2013 dollars
using GDP deflator forecasts from EIA AEO 2015.
 Figure 8
LNG Delivered Cost Breakdown
U.S. to Europe
($2013/MMBtu)

Sources/Notes:
2015 commodity cost based on 2015 Henry Hub price reported in EIA December 8, 2015 STEO. 2020
2035 commodity costs based on Henry Hub forecast from EIA AEO 2015. Data for other LNG costs
components from the NERA LNG Report. The LNG costs forecasts are converted to real 2013 dollars using
GDP deflator forecasts from EIA AEO 2015.

The costs of LNG throughout the value chain are both highly location specific and subject to
 Total Disrup2on from Horses to Cars in 13 years

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
 Super-Exponen2al Growth Curves & Declining Costs

Amory Lovins, 'DisrupUve oil and electricity futures, Univ. of Oxford, June 06, 2017, h^p://www.oxfordmarUn.ox.ac.uk/event/2446
 Figure 2. Consumer Choices: cost-per-mile analysis9

Box 2: Cost of transport Sources: Authors calculations based on data from Edmunds, Kelley Blue Book, Your Mechanic, U.S. Department of
Energy, U.S. Department of Transportation, U.S. Bureau of Labor Statistics and uSwitch. See Appendix A for further
choices details on the methodology

Based on our model, these are the costs-per-mile of

the choices that individual consumers will face as the
TaaS disruption unfolds. Consumers will face these
choices on day one (the disruption point):

Buy a new car

ICE: 65 cents (2021), rising to 78 cents10 (2030)

EV: 62 cents, falling to 61 cents

Use paid-off existing ICE vehicles

Operating cost only of ICE: 34 cents, falling to 31

cents

Use TaaS

TaaS: 16 cents, falling to 10 cents

TaaS Pool: 5 cents,11 falling to 3 cents

Annual savings per vehicle in 2021:

TaaS vs. driving paid-off existing ICE: $2,000

TaaS vs. new ICE: $5,600

Transporta2on-as-a-Service

Why is TaaS so cheap?

40% TaaS vehicle utilization, 10 times higher than IO vehicle utilization. Individually owned cars are used only 4% of the time. While there will be fewer cars,
TaaS vehicles will be available on-demand 24 hours per day, providing door-to-door transport to passengers. As a result, TaaS vehicles will be utilized 10 times
more than IO vehicles.

RethinkTransportation RethinkX 17
TaaS vehicles will drive 500,000 miles over their lifetimes Box 3: A-ICE vs. A-EV for fleets
2.5 times more than ICEs. This dramatically lowers
depreciation costs-per-mile, the largest cost component. Each TaaS providers will choose A-EVs over A-ICEs
mile covered by a TaaS vehicle costs just 1/500,000th of the
upfront cost of the vehicle in depreciation. Because of the low The key initial choice facing TaaS fleet operators is either to use A-EVs or to seek to place
autonomous functionality into an ICE (A-ICE). It is likely that some ICE manufacturing
utilization rate of IO vehicles, even an IO EV that is technically companies will offer A-ICE in their fleets to preserve their existing ICE manufacturing
capable of driving 500,000 miles will rarely drive more than investments. The comparison of costs in Figure 3 shows that A-EVs are far cheaper to operate.
about 140,000 miles over its lifetime. Dividing upfront costs by Furthermore, they offer greater reliability, reducing down-time or outages. We therefore
predict that all TaaS vehicles will be A-EVs.
500,000 miles is the single biggest cost-saving item for TaaS
vehicles compared to the cost-per-mile of purchasing a new
individually owned ICE or EV (see Appendix A).
Figure 3. Relative costs-per-mile of A-ICEs vs. A-EVs12
TaaS vehicles significantly reduce other operating costs.
Sources: Authors calculations. For further details see Appendix A
A-EV vehicles are intrinsically more reliable and efficient
than ICE vehicles, which leads to major savings in operating
costs. These cost reductions include a 90% decrease in
finance costs, an 80% decrease in maintenance costs, a 90%
decrease in insurance costs and a 70% decrease in fuel costs.
Our extensive primary research, which included data gathering
and discussions with operators and manufacturers of EVs,
corroborates this finding (see Appendix A for detailed analysis).

These three points have largely been overlooked in most

mainstream analyses, which have failed to account for the
economic impact of the improved lifetimes of A-EVs and the
scale of the operating-cost reductions.

The assumptions behind this cost analysis are conservative,

and further potential reductions are possible. We have also
conducted a sensitivity analysis of our cost figures. This is
summarized in Box 4 below. This means that the cost-per-mile
of TaaS could be as low as 6.8 cents per mile on disruption day.
That would mean a 10-fold cost advantage over IO ICE the first
day that TaaS is introduced with further cost improvements
widening that gap over time.

RethinkTransportation RethinkX 18
Assembly (vehicle manufacture) capacity. EV Figure 5. The Speed of Adoption
manufacturing capacity is growing, and our forecast Sources: Authors analysis based on U.S. Department of Transportation data
is for capacity to far exceed the requirements that
we model for TaaS. However, if the growth rate of
Box 10: Value chain summary
new specialized EV manufacturing capacity drops
dramatically, any assembly shortfall in capacity can
Summary
be mitigated points:
by conversion of ICE assembly capacity,
which can easily be adjusted to produce EVs which
The TaaS disruption, as described in Part 1, will have
are far simpler to assemble. Companies such as Nissan
profound implications across the automotive and oil
manufacture
value EVs andThese
chains. ICE vehicles
include: in the same plants.
In fact, a significant portion of assembly happens on the
same lines.
The number of passenger miles will increase from 4
Battery manufacturing capacity.
trillion miles in 2015 to 6The ability
trillion to
in 2030.
manufacture
The cost of delivering these miles willis
the required number of batteries drop from
currently much debated. Factories to produce the
$1,481 billion in 2015 to $393 billion in 2030.
batteries are under construction in the U.S. and
The size of the U.S. vehicle fleet will drop from 247
elsewhere. These factories are relatively easy to scale,
million in 2020 to 44 million in 2030.
with most equipment available off the shelf, so this is
beAnnual
unlikely to manufacturing
a constraint. of newwith
Discussions cars multiple
will drop by 70%
during the same period.
experts suggest that it takes just 9-12 months to build
a new battery
manufacturing
Annual plant
manufacturing ofable
new to ICEproduce
mainstream cars
multiple gigawatt-hours of battery
sold to individuals capacity.
will drop to zero.36Car dealers will
cease to exist.
Mineral supply for batteries. This is often seen as
Huge opportunities will emerge in vehicle operating
the potential key supply constraint, as the processes
systems, computing platforms and TaaS fleet
involved in opening a new lithium or cobalt mine and
platforms.
developing the attendant battery-grade refining
capacity areGlobal
complexoil demand
and canwill drop
take fromthree
about 100 million
years. barrels
per day in 2020 to around 70 million barrels per
But our discussions with mineral experts suggest
day in 2030.
that the supply volumes required to meet the demand

curves shown Theinprice of oil willare
our models drop to around $25
achievable. per barrel.
Current
global lithium
Oilreserves exceed
prices might 30 million
collapse as soontons, 37
and
as 2021.
our estimates calculate that 1 million tons of lithium will Transporta2on-as-a-Service
High-cost oil fields will be completely stranded.
be required, per year, by 2030.38 For analysis of cobalt
supply for batteries,
Infrastructure dependent
see Part 3. on high-cost oil fields,
including the Keystone XL and Dakota Access
pipelines, will be stranded.

RethinkTransportation RethinkX 30
Figure 7. Revenue distribution along the car value chain
Sources: Authors calculations based on data from Auto Rental, Edmunds, Kelley Blue Book, Ibis World, Statista, U.S. Bureau of Labor Statistics, U.S. Department of Energy, U.S. Energy Information
Administration and the Wall Street Journal
ICE
TaaS
Vehicle fleet size will drop by over 80%, from 247 million vehicles in 2020
to 44 million in 2030. The major driver of a smaller total vehicle stock is
increased vehicle asset utilization (see Part I). Just 26 million vehicles will
deliver the 5.7 trillion passenger miles traveled via TaaS in the U.S. in 2030,
with the remaining 5% of miles attributed to 18 million legacy IO vehicles
(see Figure 8).
97 million ICE vehicles43 will be left stranded in 2030, representing the
surplus that will be in the vehicle stock as consumers move to TaaS. These
vehicles may eventually become entirely unsellable as used IO vehicle supply
soars and demand disappears (see Figure 8).
New vehicle annual unit sales drop 70% by 2030, from 18 million in
2020 to 5.6 million in 2030 (see Figure 9). While the number of vehicles
in the overall stock drops by 80% over our timeframe, new vehicle sales
suffer a slightly lower decline. This is because each vehicle under TaaS is
travelling 10 times farther, and hence reaches its end of life more quickly.
Vehicles in the TaaS fleet are therefore on a faster replacement cycle (in
years) even though they have longer lifetimes (in miles).
New ICE vehicle sales44 are finished by 2024, just three years after the
regulatory approval and commercial availability of A-EV technology. In
2024, the pre-existing vehicle stock can more than meet the passenger-
 VEHICLE FLEET SIZE WILL DROP BY
Figure 8. Personal vehicle fleet size and composition between 2015 and 2030
ar prices plungeOVER 80%, FROM 247 MILLION
to zero45 or even negative value. The rising
tenance, gasoline and insurance; the cost of storing or taxing Sources: Authors calculations based on U.S. Department of Transportation data
ehicles; and VEHICLES IN 2020 TO 44 MILLION
the lack of a used car market might mean that
zero or evenIN 2030. The major driver of a
below. That is to say, owners may need to pay to
heir cars. smaller total vehicle stock is

s eliminatedincreased vehicle asset u2liza2on.

from fleet by end of 2030s at the latest.46
he average age of a vehicle on the road is 11.5 years47, we
Just 26 million vehicles will deliver
hat ICE cars sold before 2023 must be replaced by the mid-
means thatthe 5.7 trillion passenger miles
the remaining ICE vehicles will be eliminated
et before 2040. traveled via TaaS in the U.S. in
cease to exist2030, with the remaining 5% of
by 2024, with no new IO car sales from 2024
miles aMributed to 18 million
d no direct consumer purchases given that TaaS vehicles will
ned. 48
legacy IO vehicles (see Figure right).

ce will be disrupted 49
by a 90% fall in the insurance costs
TaaS users (relative to IO), which is driven by the elimination
97 MILLION ICE VEHICLES WILL BE
sharp reductions in insurer costs for liability, injury and
age. LEFT STRANDED IN 2030,
represen2ng the surplus that will
billion in revenues from gasoline taxes will be lost in the
e shift from be in the vehicle stock as
an IO ICE to a shared A-EV fleet.50 However,
s whose budgetsconsumers move to TaaS. These
depend on this revenue could shift to
rather than gasoline or diesel.
vehicles may eventually become Transporta2on-as-a-Service

en2rely unsellable as used IO

vehicle supply soars and demand
pportunity disappears.
trigger an enormous disruption, different industries along the Vehicle operating systems
ain will be subject to disproportional losses and gains. While
ation of road passenger travel will drive down hardware The companies that develop A-EV operating systems stand to reap massive
umes, there will also be new opportunities, through the rewards, as has been the case for Microsoft, Apple, Google and Cisco
er-margin businesses in operating systems, TaaS platforms through their development of computing, internet and smartphone operating
 startups that are developing autonomous vehicle software. in that
Pre-Ta
evolve

NEW VEHICLE ANNUAL UNIT SALES Figure 9. Trends in vehicle sales

The m
that th
DROP 70% BY 2030, FROM 18 MILLION Sources: Authors calculations, U.S. Energy Information Administration (EIA) and U.S. Depart- leade
IN 2020 TO 5.6 MILLION IN 2030 (see ment of Transportation
Internal Combus2on Engine (ICE) versus
winnin
alread
Figure right). While the number of Transporta2on-as-a-Service (TaaS) in Chi
vehicles in the overall stock drops by Projected trends in annual sales provid
80% over our 2meframe, new vehicle It seem
sales suer a slightly lower decline. This as is a
where
is because each vehicle under TaaS is Toyota
travelling 10 2mes farther, and hence passe
leadin
reaches its end of life more quickly. exper
Vehicles in the TaaS eet are therefore relatio
netwo
on a faster replacement cycle (in years)
Tesla
even though they have longer life2mes sharin
(in miles). numb
in pro
sharin
NEW ICE VEHICLE SALES ARE FINISHED
A key
BY 2024, just three years aver the poten
regulatory approval and commercial still fu
value
availability of Autonomous-EV
technology. In 2024, the pre-exis2ng
vehicle stock can more than meet the RethinkTransportation

passenger- mile requirement for

transport under individual ownership.
 autonom
operate e
to exceed
asset util
U.S. oil demand from passenger road transport drops by 90% by 2030
the truck
for comm

Both incu
autonom
driving its
disruptio
company
driving ca

We do no
U.S. Depa
(by weigh
than 250
continue

Medium-
in the U.S
from the
to less th
dropping
RethinkTransportation
Figure 12. Cash cost of producing a barrel of oil in 2030 bpd in a co
Source: Rystad Energy UCube will be prod
expensive
globally wi
The implica
while the a
PRICE COLLAPSE. Low oil prices of ~$25 per barrel (bbl) by
2030 will aect the enUre supply chain, but most importantly
and the inf
will drive out expensive producers from the upstream sector. it will be st
Infrastructure built to service high-cost specic elds will also
bear the brunt of lower revenue from oil producUon.

Short term
While it is n
sector repo
transporta
term, prior
we will see
is great unc
but if TaaS
years, and
momentum
production
to dry up. T
markets th
price spike
potential s
decide to m
of the disru

RethinkTransportation
 Source: Rystad Energy UCube in
ha
wi
th
be
During the oil crisis of 2014 sh
and 2015, crude oil prices co
crashed from $115 a barrel co
in mid-2014 to less than $30
Ou
in the beginning of 2015. th
co
This happened when supply

outstripped demand by two
million bpd.

Our oil scenario predicts a
drop of 30 mbpd by 2030
(which is 40 mbpd below Re
the BAU es2mate). aro
U.

U.S. producers will be hit the hardest by the volume eect,

RethinkTransportation
as almost 15 million bpd of US oil or 58% will become
uncommercial to produce at ~$25 cash cost. Likewise, more
than half of oil produc2on in Canada, Brazil, Mexico, Angola
and the U.K. will be stranded.
S disruption would trigger a reduction of over Figure 19. A-EV as a share of total electricity demand in the U.S., kWh per year
ght-duty vehicle road transportation in 2030,
119
ELECTRICITY DEMAND IN THE Sources: Authors calculations based on U.S. Energy Information Administration data
U.S. WILL INCREASE BY 18%
COMPARED TO BAU IN 2030.
Charging A-EVs will increase
U.S. will increase by 18% compared to
electricity demand by 733
billion kWh of electricity per
electricity demand. Our estimates show that
year in 2030.
TaaS will use 733 billion kWh of electricity per

an 18% increase in total electricity demand
It is important to note that the
ed to the business-as-usual projections of
hile A-EVsincrease in demand (kWh)
will account for a relatively small
the U.S., three quarters of growth in electricity
does not imply a need to
panding A-EV fleet. It is important to note that
increase the capacity (kW) of
does not imply a need to increase the capacity
ure. This isthe exis2ng infrastructure.
because the existing power system
This is because the exis2ng
fficiency. By scheduling A-EV charging in
hat the existing infrastructure can absorb
power system is built for peak
ithout material investments in generation
demand, not eciency. By
scheduling A-EV charging in
o-peak periods, we believe
ortation that the exis2ng infrastructure
in the U.S. will decrease by
can absorb an 18% increase in
demand without material
quadrillion BTUs as opposed to 12.9
investments in genera2on
with an ICE fleet. That is, A-EVs will reduce Per-mile CO2 emissions from A-EV production are far lower than
mand by 80%.infrastructure.
It is important to note that ICEs
d increase by 18%, total energy demand
because A-EVs are far more energy efficient There is a widespread myth that A-EVs will emit more greenhouse gases
m ICE to A-EVs may represent the single during production than ICEs. This is not the case when production emissions
 Canada LNG Export
Unknowns

Inexible baseload generators are becoming an

impediment to further grid integra2on. The weight of
expert opinion clearly concurs. As Bloomberg New Energy
Finances founder wrote:

Super-low-cost renewable powerwhat we are now calling
base- cost renewablesis going to force a revolu2on in
the way power grids are designed, and the way they are
regulated.

Amory B. Lovins , Do coal and nuclear generaUon deserve above-market prices? The Electricity Journal 30 (2017) 22-30
 Canada LNG Export
Unknowns

The old rules were all about locking in cheap base-load

power, generally from coal or hydro plants, then
supplemen2ng it with more expensive capacity, generally
gas, to meet the peaks.

The new way of doing things will be about locking in as
much locally available base-cost renewable power as
possible, and then supplemen2ng it with more expensive
exible capacity from demand response, storage and gas,
and then impor2ng the remaining needs from neighboring
grids.

Amory B. Lovins , Do coal and nuclear generaUon deserve above-market prices? The Electricity Journal 30 (2017) 22-30
 Canada LNG Export
Unknowns

Variable solar and wind may need less backup (or storage)
than u2li2es have already bought to manage the
intermiMence of their big thermal plants.

For example: u2li2es have found that high wind frac2ons
can be rmed by fueled generators 5% of wind capacity
several-fold below classical 1520% reserve margins for
thermal-dominated systems. In Texas, Unbundled ERCOT
ancillary-services market price data conrm that winds
reserve costs per MWh are about half those of thermal
genera2on.

Amory B. Lovins , Do coal and nuclear generaUon deserve above-market prices? The Electricity Journal 30 (2017) 22-30
 Canada LNG Export
Unknowns

U.S. uUlity-scale capacity factors of Solar PV and wind power

average respecUvely, 2016 27.2% and (net of several points
curtailment) 34.7%.

Amory B. Lovins , Do coal and nuclear generaUon deserve above-market prices? The Electricity Journal 30 (2017) 22-30