Global Challenges and Opportunities

1. Global Challenges and Opportunities Jonathan Johns (Partner) Ernst & Young Renewables Waste and Clean Energy Group Tel: +44 1392 284300 Fax: +44 1392 284302 jjohns@uk.ey.com www.ey.com/renewables ROLE OF REGULATORY DRIVERS IN WIND MARKETS 9 May 2007

2. Climate change: wind still requires support • Governments and business are dealing with climate change on a global basis • There are insufficient resources in the supply chain to satisfy demand. • Countries are competing for renewable energy resource, financial and corporate capital • Feed in tariffs build capacity: costs have been an issue • In liberalized markets, the market based green certificate mechanism tends to be preferred: distortions can occur • Cap and Trade carbon schemes curtail the activities of high carbon intensity industries rather than act as incentives for new renewable capacity: they are helpful in JI/CDM territories

3. Incentives are not enough • Energy production and supply chain can undermine otherwise effective mechanisms • Changes in policy direction produce uncertainty • Any renewable energy policy needs to be part of a coherent climate change strategy as a whole with complimentary measures focused on: • power production • transport fuel • heat and energy efficiency • European countries tend to be driven by national guidelines • However, non-European markets tend to be regionally driven.

4. United States of America (Regional) 1* Tariff Mechanism: US$0.019/kWh Production Tax Credit (expires 2008) • Debate about long term renewal vs cost to consumer/tax payer • Debate over Federal Renewable Portfolio Standard (RPS) • RPS obligation in 24 states & district of Columbia, eg: Texas: 5,880MW by 2015 • Oregon introduced RPS April 2007 * Q1 2007 Country Attractiveness Indices Long-term Wind Index position

5. India (Regional) 2* Tariff Mechanism: Regional Feed In Tariff • Individual states operate feed in tariffs and some renewable energy obligations, eg: Tamil Nadu: PPA fixed at INR 2,750/MWh (€46/MWh) with 10% renewable energy target, Rajasthan: 20 year PPA at INR 2,960/MWh (€50/MWh) • Accelerated tax depreciation of 80% per annum • 10 year tax holiday for generating power • Excise duty benefits renewable assets: * Q1 2007 Country Attractiveness Indices Long-term Wind Index position

6. Canada (Regional) 7* Tariff Mechanism: CAD$0.01/kWh Production Incentive • Federal Production Incentive available for up to 10 years for projects constructed within the next 4 years • Established provincial targets, eg, Quebec 3,500MW wind energy by 2013, Ontario target 2,700 MW by 2010 * Q1 2007 Country Attractiveness Indices Long-term Wind Index position

7. China (National) 5* Tariff Mechanism: Government Tender • National targets – 2010: 5GW, 2020: 30GW • Obligation on local grid operators to purchase any renewable energy produced within its locality • Competitive tender for projects, power tariffs allocated per project • Projects 100MW and over gain fixed price concession from National Government • Projects less than 100MW not guaranteed a fixed tariff • Concessions from US$46 – US$65/MWh * Q1 2007 Country Attractiveness Indices Long-term Wind Index position

8. In conclusion • Will carbon eventually become the common currency? • It’s early days yet • Investors need to be careful about market selection and future regulatory risk • Talk incorporates material from Jonathan Johns’ US Senate hearing, April 2007 • Link to testimony : www.senate.gov/~finance/sitepages/hearing041207a.htm

9. Knowledge leadership Q1 2007 Country Attractiveness Indices Webcast 22 May 2007 E-mail: mtoy@ey.uk.com

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