GEF - Clean Edge Report

A Global View of
Emerging Opportunities
In Renewable Energy
Prepared by Clean Edge, Inc.
Exclusively for the use of Global Environment Fund
September 2004
© 2004 Clean Edge, Inc. All rights reserved.
May not be reproduced without express consent of Clean Edge, Inc.

CONTENTS
About Global Environment Fund .....................................................................................3
Overview ..............................................................................................................................7
A Confluence of Forces......................................................................................................8
Key Clean Energy Technologies......................................................................................11
Wind Power ...................................................................................................................... 11
Biomass ............................................................................................................................. 12
Solar Photovoltaics.......................................................................................................... 12
Hydrogen Fuel Cells and Infrastructure........................................................................ 14
Grid Automation and Optimization .............................................................................. 14
Small-Scale Hydro ........................................................................................................... 15
Geothermal ....................................................................................................................... 16
Wave and Tidal Power .................................................................................................... 16
Emerging Capital Markets ...............................................................................................17
Select State Clean Energy Initiatives .............................................................................19
Select Key Clean Energy Trends .................................................................................... 20
Green Power: A Price Hedge and Market Accelerator................................................ 20
The Energy Web: Changing the Future of Energy Services....................................... 20
China and India: The Next Wave in Clean Energy Development ............................. 22
The Hydrogen Infrastructure: Big Bucks, Big Challenges .......................................... 23
Defense Spending Promotes Clean Energy Technologies........................................... 24
Rural Electrification: Large Markets from Small-Scale Power .................................. 25
Conclusion .........................................................................................................................27
©2004 Clean Edge, Inc. Page 2

ABOUT GLOBAL ENVIRONMENT FUND
Global Environment Fund (GEF) is an international private equity company,

established in 1990, and committed to investing in companies whose business
operations deliver measurable environmental improvements through deployment
of improved environmental infrastructure and “clean” technologies. GEF’s
investment objective is to provide superior returns by harnessing the power of
technological innovation to promote energy sources and means of production
that are cleaner, more efficient, cheaper, and more sustainable.
GEF currently manages a group of private equity investment funds including

several funds dedicated to basic environmental infrastructure and health care
delivery systems in emerging markets, as well as a fund focusing on clean
technologies in the United States. Through its own capital investment vehicle,
Global Environment Capital Company, LLC, GEF also develops, finances, and
takes controlling interests in principal investments for its own account. Total
capital available for investment through GEF’s equity investment programs
exceeds $300 million.
GEF is a registered investment advisor with the U.S. Securities and Exchange
commission, having maintained its registration continuously since 1992. Our
senior management team has worked together for nearly 10 years, and we have
an experienced group of investment and financial administration professionals,
including five who are CFA Charterholders through the Chartered Financial
Analyst Program and three Certified Public Accountants (CPA). In recent years,
the GEF investment team has completed more than 30 private equity or early-
stage technology investments in businesses operating in a broad array of
economic sectors and in all of the world’s major geographical regions. On a
firm-wide basis, the six-year audited internal rate of return on more than $165
million invested by GEF in private equity and early stage technology deals for
the period 1998 to 2003 stands at 29.5 percent.

GEF INTRODUCTION
From our inception in 1990, Global Environment Fund has invested in the
development and deployment of cleaner, more efficient energy sources around
the globe.
In fact, several of GEF’s founding investors participated in early private

investment activities in the United States in the late 1970s and 1980s designed
to promote commercial adaptation of renewable energy technologies. Their cause
We are proud of the was noble, but the financial results were mixed: they lost money in the original
Luz solar projects; they achieved modest equity returns in wind power projects at
fact, that from our
Altamont and Tehachapi; and they managed a solid dividend return from the
inception 15 years financing of solar hot water systems at the state prison in California on the basis
ago, we have found
of tolling arrangements that paid in accordance with the price of displaced
natural gas systems. Despite the satisfaction of promoting the greater good, the
exciting and profitable conclusion of these investors, and our conclusion when we founded GEF, was
renewable energy that most renewable energy technologies were still not economically viable. We
anticipated that they still needed a decade or more of experimentation and
investments around
research before they could be competitive with traditional energy sources in
the world most places.
Consequently, our investors were clear about the GEF mandate: promote clean
and renewable energy, for sure, but do not lose money, and do not invest in
technologies that are not mature enough to stand on their own without perpetual
subsidization. In 1990, of course, this was no small order. We are proud of the
fact that, from our inception 15 years ago, we have found exciting and
profitable renewable energy investments around the world. We were early
investors in 1991 in Compania Boliviana Electricidad, which within a very
unstable macro economic climate managed to provide nearly 40 percent of
Bolivia’s electricity from low-head, run-of-river hydroelectric facilities. Before
privatization of the energy sector in Brazil, we financed and helped create
Brazil’s only purely private electrical generating and distribution company in
1995, Companhia Forca e Luz Cataguazes, which still serves customers in Minas
Gerais and Rio de Janeiro with an expanding network of small-scale
hydrofacilities. We were investors in Magma Power, as that company grew in the
mid 1990s to become a leading developer of geothermal power in California, and
in The Philippines. In 1996, we participated in a private financing sponsored by
three Indian electricity companies managed by the Tata Group that provided
equity capital for the construction of a peak-load-shaving, pumped storage
facility that eliminated the need for a proposed coal-fired power plant to serve
Mumbai, India. In 1997, a company in which we were significant “venture
capital” investors, NEPC Micon, became, at least for one year, the largest
manufacturer of wind turbines in the world, driven by major government-backed
wind energy programs in India.

As we examine global investment prospects over the next 15 years, the energy
generation and transmission industry is in the spotlight of growing worldwide
concerns about the economic and environmental costs of traditional energy
technologies. These concerns include: environmental pollution, public health, the
high costs of fossil fuels, global greenhouse gas emissions, and the vulnerability
and capital costs associated with mass-grid energy systems.
Nevertheless, the world has a voracious appetite, and need, for new energy
supplies. Even today more than one-third of the people on the planet still do not
benefit from the basic modern amenities that are availed by the fossil fuel
economy—electricity supply, refrigerators, automobiles. The World Bank
We at GEF believe estimates that two billion people do not have access to an electricity grid. The
cost of extending power to remote areas is often prohibitively expensive and
that the forces of
difficult to finance for most developing nations. China and India, alone, will
technological change likely double or triple the amount of electricity they produce, and the amount of
will, in coming years, total energy they consume in the next 30 years. Car ownership per capita in
China, while growing by double digit percentages every year, has barely reached
transform the profile
the level that prevailed in the United States when the first Model T rolled off the
of energy use and assembly line! What will happen to the planet as China, India, Indonesia and
other developing countries drive up the demand for more of the world’s
electricity production
dwindling oil reserves and continue to fuel their still-nascent industrial
in the global economy revolution with their large domestic coal reserves?
We at GEF believe that the forces of technological change will, in coming years,
transform the profile of energy use and electricity production in the global
economy. This transformation will be facilitated by governments and
international finance agencies which, in addition to supporting traditional
energy production, have fostered policies to commercialize and financed new
technologies and cleaner ways of utilizing energy supplies around the world.
This climate of change in the global energy industry will create significant
opportunities for private sector investors interested in investing in cleaner, more
efficient and decentralized energy generation technologies that are rapidly
attaining commercial viability.
Technology is fast eroding the economies-of-scale-advantage that has favored

centralized generation and transmission systems for electricity. Distributed
generation, the application of relatively small power plants near or at load
centers, is gaining broad interest among competitive energy suppliers and
regulated power delivery service providers. Advances in small generation
systems (i.e. reciprocating gensets, turbines) and new technologies (i.e. micro-
turbines and fuel cells) are proving to be more efficient, cleaner and easier to site
than larger centralized power plants. Other emerging generation technologies—
small-scale hydro power, wind energy, solar power, ocean power, biomass—are
increasingly being employed to meet new electricity demand. GEF believes that
these trends set the stage in coming years for a significant deployment of

Small-scale hydro investment capital into the development and finance of projects that deliver
reliable, efficient and cleaner forms of energy.
power, wind energy,
solar power, ocean To assist us in scoping out new technological developments and the range of
new investment possibilities they may pose in the renewable energy industries,
power, and biomass
GEF commissioned this report from Clean Edge. We are grateful to Joel
are increasingly being Makower, Ron Pernick and Clint Wilder of Clean Edge, who took up the task of
preparing this report for GEF. In addition, Samrat Ganguly and Michael Leonard
employed to meet
of GEF made significant contributions. Their collective efforts provide a good
new electricity staging point for the GEF investment team, as we continue to scour the globe for
private financing opportunities that will, at once, enable us to stimulate greater
demand
utilization of renewable energy and achieve appropriate, risk-adjusted, private
equity returns.
Jeff Leonard
President
Global Environment Fund

OVERVIEW
Demand for cleaner energy sources is rising on a global basis. A confluence of

factors is compelling nations and companies to seek out clean energy solutions
for transportation fuels and electricity generation. The most significant drivers of
the trend include: rising global energy demands, particularly among rapidly
growing nations such as China and India, that are difficult to meet solely with
traditional energy sources; increasing awareness of the environmental
consequences resulting from continued dependence upon fossil-fuel energy
sources, especially coal and petroleum; and growing international security
threats posed by dependence upon energy supplies from politically volatile
regions.
Clean energy supplies—in the form of liquid fuels and electricity generated from
renewable, recycled, or other benign sources—are also more widely available,
and more cost-competitive as a result of technological improvements,
government incentives, and economies of scale. These trends—the growing
demand for clean energy sources, and the increased availability of clean energy
supplies—will likely continue and accelerate in coming decades
According to some analyst estimates, global markets for clean energy fuels and
electricity already exceed $50 billion annually, with the deployment of some
clean energy technologies in the electricity generation sector expanding by more
than 30 percent a year. The clean energy industry has also rapidly become a
competitive arena for big business. Global business giants such as ABB, BP,
Caterpillar, DuPont, FedEx, Fuji, General Electric, Kyocera, Sanyo, Sharp, Shell,
Toshiba, UPS, and most of the world’s leading automakers have made major
investments in developing and deploying clean energy technologies in recent
years.
The market size for the three fastest-

growing clean technologies for electricity
generation—wind, solar PV, and fuel
cells—will expand more than 20 percent
annually from $12.9 billion worldwide in
2003 to $92 billion in 2013, according to
Clean Edge’s projections, based on
analysis of past and future growth trends.

A CONFLUENCE OF FORCES
As noted above, clean energy’s growth is the result of a convergence of factors,

including environmental, technological, economic, security, and social.
According to some  Cost Competitiveness. A key driver of the clean energy industry is the
simple fact that the economic cost of most renewable energy technologies has
analyst estimates, fallen in recent years. In the next few decades, the cost of generation for most
global markets for renewable energy sources is expected to continue to fall—abetted by
technological advances, new investment, and governmental incentives around
clean energy fuels
the world. This trend is gradually making renewable energy technologies cost-
and electricity already competitive with traditional sources of energy. According to Navigant
Consulting, most renewable energy options should eventually be cost
exceed $50 billion
competitive with grid power in the U.S. without any tax incentives or
annually governmental subsidies. Already, in some areas, wind-generated electricity is the
cheapest energy source, at 4 cents per kWh, according to the U.S. Department of
Energy—an order of magnitude lower than it was in 1980. Electricity from solar
photovoltaic (PV) cells has dropped from approximately $1 per kilowatt-hour
(kWh) in 1980 to below 20 cents per kWh in some areas today.
 Energy security has become a topic of increasing importance, as

communities, regions, and nations come to understand the vital importance of
reliable fuel and electricity. Raw cost per kWh of energy is not the only indicator
of competitiveness. The true value of energy in today’s markets includes
measures of reliability—such as availability during grid disruptions and ability to
ease grid requirements during periods of peak demand, thereby reducing the
need to build costly “peaker” plants. Disruptions in recent years—whether due to
extreme weather, market manipulation, price perturbations, technical failures,
terrorism, or other causes—have underscored the vulnerabilities of having a vast
The Declining Cost of Renewables
As this chart shows, the cost of renewable energy

sources has been declining steadily in recent years,
and will continue to do so through the next few
decades. In some cases, such as photovoltaics,
costs are expected to plummet, due to improved
technology and economies of scale, equaling or beating
the 6¢ to 10¢ per kilowatt-hour price of conventional
electricity.

electric grid system with centralized, large-scale generation sources, or of
reliance on foreign sources of energy. The demand for energy reliability has
elevated the need for grid-optimization and back-up power technologies and
pushed up premiums for solutions that provide higher levels of energy security
and reliability.
Many view clean
 Technological advances have significantly improved the performance, while
energy and other dramatically reducing the prices, of renewable energy technologies. Consider
solar photovoltaics. A wide range of developments have helped push down the
clean technologies as
cost of PV modules by roughly an order of magnitude—from about $30 per peak
among the successors watt in 1975 to about $3 today, with lower prices on the horizon. The efficiency
to the digital
and reliability of the cells have improved to the point that some manufacturers
are offering 25-year warranties on their products. The combination of improving
revolution of PCs, the performance at steadily lower costs comes from advances in cell materials,
Internet, and wireless module packaging, manufacturing processes, and other innovations. Similar
advances have helped reduce the cost of wind, geothermal, biomass, and other
telephony
clean energy technologies in lockstep with the efficiency and reliability of these
technologies.
 Environmental concerns around the world, including air pollution, resource

scarcity, and climate change, have grown steadily among scientists and policy
makers, making clean energy an ever more attractive means of growing GDP
without a concomitant rise in emissions. In the developing world, polluted cities
have spurred calls for more efficient cars, buses, trucks, and scooters, opening
potentially vast markets for hybrid, fuel-cell, and other cleaner-running vehicles.
The rapid electrification of developing countries has accelerated concern about
the proliferation of large, coal-fired and nuclear power plants, as well as other
polluting and risky technologies, while making solar, wind, hydrogen, and
biomass increasingly attractive.
 Government policies are shifting as political leaders come together to

recognize that future economic competitiveness is directly linked to being more
resource-efficient and less reliant on older, polluting technologies. For example,
the U.S. Clean Energy Initiative’s Efficient Energy for Sustainable Development
Partnership has announced a collaborative project with the U.K.’s Renewable
Energy and Energy Efficiency Partnership. Additionally, the German Ministry for
Economic Cooperation and Development and the Inter-American Development
Bank have agreed to collaborate on clean energy projects in Latin America and
the Caribbean. Clean energy is seen in many regions as a potentially large source
of job creation and economic development because it tends to harness
underutilized domestic resources. This realization has led national and local
governments to seek to lure clean energy companies and facilities to locate
within their borders.
 Local economic development objectives can also be served by clean,

affordable, and resource-efficient technologies that can be deployed at the town

In the developing and village levels. Biomass, solar, and small-scale hydro, for example, are
among the technologies with the potential to provide new economic
world, polluted cities
opportunities and improved quality of life for the two billion people in the world
have spurred calls who lack access to electricity. At the same time, they are creating significant
for more efficient
business opportunities for companies that profitably tap those markets with
innovative products and services. These business opportunities often have the
cars, buses, trucks, added benefit of creating jobs. In fact, a UC Berkeley report argued that
and scooters, investment in clean energy technologies “would produce more American jobs
than a comparable investment in the fossil fuel energy sources in place today.”
opening potentially
vast markets for
hybrid, fuel-cell,
and other cleaner-
running vehicles

KEY CLEAN ENERGY TECHNOLOGIES
Following are sketches of seven principal clean energy technologies.
Wind Power
Wind-generated electricity is one of the fastest-growing clean energy
technologies—a $7.5 billion industry in 2003, expected to reach $47.6 billion by
2013, according to Clean Edge research. In fact, the European Wind Energy
Association has just released a blueprint demonstrating how wind power is
capable of supplying 12 percent of the world’s power by 2020. BTM Consulting
recently released a report showing that the wind industry has grown by an
average of 26.3 percent for the past five years.
More than 70 percent of wind-powered electricity is generated in Europe, with

more than 28,000 MW installed at the end of 2003 and many new, large wind
farms planned in the U.K., Spain, and other E.U. countries. The continent
receives 2 percent of its electricity from wind, and wind turbines in Denmark,
the wind power leader, produce fully one-fifth of the country’s electricity on
windy days.
New wind installations While wind’s growth rate in some leadership countries, such as Denmark and
grew an average of Germany, are slowing, Spain and especially the U.K. are picking up the slack. On
the drawing board in Britain is a mammoth 1,000 MW offshore wind farm, to be
28% annually from
operated by Shell WindEnergy, and at least 160 MW in new capacity being
1998 to 2003, developed by National Wind Power Ltd.—more than double its current output. In
China, the industry is growing as well. The initial stages of construction have
according to the
been completed on a $95 million dollar wind project that comprises the second
American Wind phase of the Changjiang’ao Wind Power Plant. This second phase will add
approximately 100,000 KW to the 6,000 KW that the plant currently generates.
Energy Association
In the U.S., the wind industry is poised to continue its healthy growth of the past
several years. New wind installations grew an average of 28 percent annually
from 1998 to 2003, according to the American Wind Energy Association,
including a record 1,700 new MW of capacity in 2003. Furthermore, the U.S.
Department of Energy is in the process of implementing a three-phase
technology development project for wind power. The first step, opening
negotiations for 21 public-private partnerships, has already begun. Assuming a
reduced annual growth rate of 18 percent, wind would still account for 6 percent
of all U.S. electricity by 2020.

Biomass
Energy produced from organic matter is the world’s oldest form of energy, and
currently the second-largest renewable energy sector behind hydroelectricity.
The biomass umbrella covers many very different energy sources, including:
solid biofuels (such as wood, straw, and organic waste); liquid biofuels, used
primarily for transportation (primarily ethanol and biodiesel); and biogas, mainly
methane and carbon dioxide, which can generate electricity or provide process
heat (landfill gas is a key source; some 330 landfills in the U.S. produce 1,000
MW of electricity from this source).
Combined, biogas and solid biomass generate some 14,000 MW of electricity

worldwide, with the largest facilities producing as much as 80 MW. Bioenergy
overall accounts for 15 percent of worldwide energy use, according to the United
Nations Food and Agriculture Organization—and up to 90 percent in some
developing nations. The U.S. accounts for about half of the world’s total but
developing countries will be the top growth markets as biomass energy roughly
doubles to 30,000 MW by 2020, the U.S. Energy Department projects.
Both environmental and economic imperatives are driving the growth of global
bioenergy, especially in the developing world. The Pew Center on Global Climate
Change calls biofuels like ethanol and biodiesel the most promising alternatives
for reducing greenhouse gas emissions over the next 15 years. Economically,
ethanol has been a boon to corn growers in North America; the same crops-into-
fuel strategy can have huge economic benefits in developing countries. The UN’s
FAO, for example, is working with agricultural agencies in China to produce new
strains of sorghum for ethanol production, and has comparable projects
underway in Brazil and Nepal. Ethanol can also be produced from other crops
grown widely throughout the developing world, such as sugar cane, cassava, and
rapeseed.
Solar Photovoltaics
Solar-powered electricity has been steadily bringing costs down while ramping
up production and installations. Solar PV is expected to reach cost parity for
many regions in the next decade, spurred by a host of technological
improvements in PV cell composition and manufacturing processes, in addition
to the market momentum. This will occur both at the local level in many U.S.
cities and states, and in large developing economies such as China and India.
Some large-scale commercial and industrial PV systems are producing electricity

at rates below 20 cents per kWh and as low as 10 cents per kWh, after
government buy-downs and incentives in places like California, making it
competitive with traditional grid-connected electricity. The worldwide market for
solar PV modules, components, and installations is expected to grow nearly

The worldwide market sevenfold from $4.7 billion in 2003 to $30.8 billion in 2013. Solarbuzz, Inc.
reports that last year, worldwide PV installations increased to 574 MW, which is
for solar PV modules,
34 percent more than in 2002.
components, and
Spurring that growth are dozens of publicly backed solar installations in the
installations is
U.S., Japan, Germany, and elsewhere. From San Francisco’s Moscone Convention
expected to grow Center to the Jacksonville, Fla. International Airport, PV panels are sprouting on
rooftops at consistent growth rates in many parts of the U.S. In 2004, the city of
nearly sevenfold from
Austin, Tex., approved a 100 MW solar initiative, which would generate 20
$4.7 billion in 2003 to percent of the city’s electricity by 2020. The California State Senate has even
recently passed a bill that would make it mandatory for a certain percentage of
$30.8 billion in 2013
new single-family homes to include a solar power system in their construction.
Germany, due to the success of its generous feed-in tariffs, which permits
customers to receive up to 45.7 eurocents/kWh for solar generated electricity,
has a number of much larger “solar farm” developments, some currently
reaching 4 MW in size. Japan, due to strong government and industry support,
has installed more than 100,000 residential solar PV systems, in the process
making Japan the current leader in global solar PV installations and production.
The U.K. Energy Savings Trust has offered to give homeowners grants worth up
to 50 percent of the total installation cost of a residential solar PV. In South
Africa, the government has begun accepting bids in accordance with its plan to
invest about $2.5 million to provide 40,000 homes with solar power systems.
China plans to invest $1.2 billion in solar technology and installations in the
next two years alone. Shell, which is already involved in the solar energy market
in China, has recently announced that it plans to increase its market share.

Hydrogen Fuel Cells and Infrastructure
Compared with wind and solar power, a small amount of energy (either
electricity or vehicular transport) is generated from hydrogen fuel cells today.
Nevertheless, billions of dollars of corporate and government research and
development funding have been deployed in recent years to commercialize new
fuel cell technologies. DOE’s $1.2 billion pledge to fund hydrogen fuel cell and
infrastructure research is nearly twice the size of the $700 million industry
While the today. The industry is expected to grow to $13.6 billion by 2013, according to
Clean Edge’s assessment of independent analyses.
technological and
financing challenges With well-publicized “hydrogen highway” proposals from California Gov. Arnold
Schwarzenegger and the organizers of the 2010 Winter Olympics in British
for the transition to a Columbia, hydrogen infrastructure development has received most of the public
true Hydrogen attention in this sector. Though the technological and financial challenges
remain, progress is being made in the transition to a true Hydrogen Economy.
Economy remain,
The number of hydrogen fueling stations increased by more than a third during
progress is being 2003 to nearly 90, still a small fraction of the number needed before hydrogen
reaches critical mass. Quietly stealing the early lead from cars in terms of actual
made
use are fuel cell-powered buses, now operating in Chicago, Tokyo, Perth, and 10
European cities.
Although hydrogen-powered vehicles get most of the mainstream attention,

stationary fuel cells, often used for backup power in hospitals, data centers,
factories, and hotels, are also a promising sector. Market estimates predict up to
16,000 MW installed (worth $2.9 billion) by 2012, up from just 45 MW in 2002.
The worldwide market for micro fuel cells, a lighter and longer-lasting
replacement for batteries in everything from cell phones and laptop computers to
military weapons and radios, could be worth more than $2 billion by 2013.
Grid Automation and Optimization

Sometimes overlooked among clean energy technologies are the software,
hardware, and services that improve the performance and efficiency of the
existing electric power grid. Brought into the public spotlight during blackouts
in 2000 and 2001 in California, and in 2003 in the Northeastern U.S., efforts to
improve transmission and distribution add up to a sizeable market.
Transmission has replaced generation as the most profitable sector of the electric
power business and will see the most investment in the next five years,
according to consultancy GF Energy LLC. After years of neglect, the North
American power industry plans to spend $4 billion to $7 billion annually on
grid improvements. The federal government has jumped on board as well: the
U.S. DOE’s new Office of Electric Transmission and Distribution will help fund
billions in R&D efforts in this sector.

The grid optimization sector comprises a wide swath of technologies, including:
 Smart Generation—more efficient, more controllable production of electricity

generated from both traditional and renewable energy sources.
 Smart Grid —automating, optimizing, and monitoring high-voltage

transmission and medium-voltage distribution, including intelligent switches,
digital relays and advanced meters.
 Smart End Use—increasing efficiency and reducing peak loads, including

energy management software and services, smart motors, intelligent load
shedding, and building automation.
Small-Scale Hydro
Large-scale hydroelectric power remains by far the largest source of clean
energy, accounting for 90 percent of renewable energy worldwide. However,
increasing attention is turning to more nascent small-scale hydro technology,
Due to its ability to generally defined as turbines powered by water flows already present in the
serve rural villages at environment—sometimes known as “run-of-river”—often aided by low, small-
impact dams for seasonal water storage. Small-scale hydro ranges from 30 MW
a fraction of the
at the high end down to “micro-scale” installations of 100 kW or less, enough to
investment cost of power one or two homes.
large power plants, Due to its ability to serve rural villages at a fraction of the investment cost of
small-scale hydro will
large, centralized power plants, small-scale hydro will see most of its growth in
the developing world. China, for example, expects to install at least 1,000 MW of
see most of its small hydro each year for the balance of the decade. Asia overall is expected to
growth in the account for nearly half of the world’s small-scale hydro by 2010, according to
British research firm Atlas. World capacity of small-scale hydro at that time will
developing world
be about 55,000 MW, or roughly 5 percent of the global hydroelectric total.

Geothermal
The tapping of heat from the earth to power steam turbines is a significant clean
energy source in several countries, as well as in the western United States. China,
Iceland, Indonesia, Italy, Japan, Mexico, New Zealand, and the Philippines are
the largest users of geothermal, collectively producing about 8,000 MW each
year. In fact, Indonesia has recently announced plans to offer 13 geothermal
sites for bid, with the goal of generating 2,000 MW of geothermal energy by
2008 and 6,000 MW by 2020. The U.S.’s 2,800 MW contribution includes the
world’s largest geothermal facility, The Geysers in northern California, much of
it (19 plants supplying 850 MW) operated by San Jose-based Calpine.
Geothermal steam plants are not 100 percent clean, emitting some amounts of
global-warming gas CO2 as well as sulfur and nitric oxides. But the amounts are
roughly 50 times less than emissions from traditional fossil fuel power plants,
according to the U.S. National Renewable Energy Laboratory. Costs are
competitive, with geothermal-powered electricity currently being produced at 4
cents to 8 cents per kWh.
Wave and Tidal Power

One of the more embryonic clean energy technologies harnesses tidal action or
wave motion to power turbines. The technology is only in the demonstration
stage worldwide, but it has the potential to play a growing role in the coming
decade.
One leading tidal power technology is based on the Venturi tube, a pre-World
War II invention that uses pressure differentials to create an energy flow through
Fully harnessing the an enclosed space. (It is actually air, not water, that drives the turbine blades.) In
currents of San a closely-watched project, U.K.-based HydroVenturi is working with the city of
San Francisco to exploit the tidal flows under the Golden Gate Bridge, which are
Francisco Bay could
among the world’s most powerful. Fully harnessing the currents of San Francisco
theoretically produce Bay could theoretically produce 2,000 MW of power—more than three times the
city’s current daily power load of 650 MW.
2,000 MW of power—
more than three

Another major emerging tidal-power technology is a system of buoys that utilize
the up-and-down motion of waves to power small generators linked to an
times the city’s undersea transmission cable. Its leading purveyor, Ocean Power Technologies, in
current daily power Pennington, N.J., is testing its PowerBuoy system in a U.S. Navy project off the
north shore of Oahu in Hawaii. The company claims it can produce power for 3
load
to 4 cents per kilowatt-hour at a 100 MW scale.

EMERGING CAPITAL MARKETS
In the private equity arena, clean energy investments in the U.S. have grown from
0.8 percent of total venture activity in 1998 to 2.4 percent in 2003. This threefold
increase represents a growing wave of clean energy activity.
In 2003, for example, total venture investments

in the U.S. totaled $18 billion, down from
2002’s $21 billion. Despite this drop, clean
energy investments remained roughly steady,
with $428 million in 2003 compared with $435
million in 2002, expanding from 2.1 percent to
2.4 percent of total venture activity. On a
global scale, venture investments in new
energy-technology companies in 2003 equaled
more than half a billion dollars, with
approximately $100 million raised for non-
U.S.-based firms.
Large corporations have been investing in

clean-energy R&D, project development, and
acquisitions at levels never before seen. Among
the current projects and investments underway:
 ABB expects its share of the alternative and renewable energy solutions market
to reach $1 billion by 2005.
 BP Solar committed $500 million over 5 years for clean energy development,
including the launch of BP Home Solutions.
 General Electric acquired Enron Wind for $350 million in 2002 and turned it
into a $1 billion business by 2003. In 2004 it entered the solar PV business
through its acquisition of U.S.-based AstroPower.
 Sharp doubled PV manufacturing output for each of the last three years,
exceeded 200 MW production capacity in 2003, more than a third of Japan’s
total solar PV output.
 Shell is investing $500 million in renewables. It operates a range of clean

energy businesses including solar PV manufacturing and wind development.
 Toyota, the leading manufacturer of hybrid EVs and at the forefront of fuel cell
vehicles, will manufacture as many Prius vehicles in 2004 as it did in 1997
through 2003 combined—approximately 130,000 units.

The influx of private and corporate capital demonstrates how rapidly clean
energy investing has moved from niche to mainstream. National and local
government initiatives around the world are playing a significant role in this
increased activity, totaling billions of collective dollars annually. These programs
range from investment funds and R&D efforts to procurement programs and tax
incentives.
South Korea, for instance, recently announced government support to the tune
of more than $500 million through 2010 for the development of fuel cell and
alternative fuel vehicles. The government of Japan invested more than $800
million for its hugely successful residential solar PV program. Germany recently
announced more than $600 million in low-interest loans to support renewable-
energy projects and energy efficiency in developing countries, in addition to the
hundreds of millions it is spending in country for solar, wind, and other clean
energy development activities.
In the U.S., twelve states operate funds whose objective is building markets for
renewable energy and clean energy resources. According to the Clean Energy
States Alliance, these state programs will make available approximately $3.5
billion to promote clean energy over the next decade.
In addition to these direct government investments, several countries and U.S.

states have set clean energy targets (sometimes referred to as Renewable
Portfolio Standards). A growing rank of countries and states are now mandating
that at least 10 percent of their electricity comes from renewable energy sources
within the next decade, with the State of New York contemplating a leading
commitment of 25 percent from renewable energy sources by 2013.
Select Targets and Renewable Portfolio Standards

China 10 percent of total energy consumption from
renewables by 2010
Denmark 13 percent of primary energy from wind, solar, and
biomass by 2005; 35 percent by 2030
European Union 22 percent of all electricity from renewable sources by
2010
Iceland 99 percent of all energy from hydrogen by 2030

Select State Clean Energy Initiatives
STATE TOP FINANCIAL PUBLIC-SECTOR PUBLIC STATE RPS

INCENTIVES GREEN POWER CLEAN ENERGY GOAL
PURCHASE FUNDS
COMMITMENTS
California Low-interest loans for 14% in Los Angeles, Renewable Resources 20% by 2017
development, up to 100% in Santa Monica, Trust Fund:
$10M per applicant 100% in Chula Vista, $135M/yr.
and $40M per 90% in Santa Barbara
company (all now)
Connecticut RECs State: 20% by 2010, Connecticut Clean 10% by 2010
$4M in fuel cell grants 50% by 2020, Energy Fund:
$3M in solar PV grants 100% by 2050 $118M over 5 yrs.
Hawaii RECs N/A N/A 9% by 2010
Illinois RECs State: 5% by 2010, Renewable Energy 15% by 2020
15% by 2020 Resources Trust Fund:
Chicago: 20% $50M over 10 yrs.
by 2005
Massachusetts N/A CCA for 21 towns on Mass. Renewable 4% by 2009
Cape Cod includes Energy Trust:
Green Power $150M over 5 yrs.
Nevada RECs N/A N/A 15% by 2013
New Jersey RECs State: New Jersey Clean 6.5% by 2012
24 MW of wind power Energy Program:
over 3 yrs. $358M over 3 yrs.
New York $2.5M in wind power State: 10% by 2005, NYSERDA Public N/A
incentives 20% by 2010 Benefit Fund:
Up to 70% rebate $210M over 8 yrs.
for grid-connected
solar PV
Ohio RECs Northeast Ohio Public Ohio Energy Loan N/A
$100M, 3-yr. program Energy Council (112 Fund: $100M over 10
for fuel cell financing, cities & towns, largest yrs.
R&D, and training CCA in US): 6-yr. green
power contract w/
Green Mountain Energy
Pennsylvania RECs State: 5% over 2 yrs. $76M through state’s N/A
Solar PV Buy-Downs 4 largest utilities
Texas RECs N/A N/A State:
Corporate tax 2,000 MW in
exemption for solar new renewables
manufacturers by 2009
Austin:
20% by 2020
Wisconsin RECs 25% in Madison (now) Wisconsin Focus on 2.2% by 2011
Energy: $2.85M per
yr.
Notes:
 CCA: Community Choice Aggregation: consortium of communities to buy power from supplier of their choice
 RECs: Renewable Energy Credits; clean energy producers can sell credits to utilities to meet RPS goals
 RPS: Renewable Portfolio Standard; mandated goal of percent of power from renewables by target year
 State and city commitments for Green Power purchases are for energy used in municipal buildings and
operations

SELECT KEY CLEAN ENERGY TRENDS
Following are six significant and influential trends shaping the future of clean
energy.
Green Power: A Price Hedge and Market Accelerator

Electricity produced from clean sources, primarily wind, is increasingly price-
competitive in some regions. More and more utilities are offering residential and
business customers the option to purchase clean energy through “green power”
pricing programs. Instead of purchasing distributed clean energy generated on-
site from, say, solar PV panels, buyers of green power purchase electricity
directly from a central utility that has added renewable power into its energy
Clean energy’s price mix. A consumer or business simply signs up for the green power program and
stability and declining pays a small premium.
overall costs, and Although the initial green-power premium is nominally higher than the utility’s
conventional price per kilowatt-hour, the rate is usually locked in for several
continued spikes in oil
years. That gives customers a hedge against increasingly likely fuel charge hikes
prices, combine to due to fuel price volatility. That is especially important to business customers
spell great growth
trying to forecast costs over the mid to long term.
potential for green Austin Energy, one of the leaders in green power pricing programs, offers the
longest lock-in period for its green power premium: a full ten years. That
power
premium is also the lowest charged to green power customers in the U.S.,
according to NREL. The current GreenChoice premium is 3.3 cents per kWh,
about half a cent more than Austin’s current fuel charge of 2.79 cents per kWh.
Austin’s green power is generated at Cielo Wind Power’s 61-turbine wind farm
in west Texas, with smaller amounts of solar and landfill gas generation
contributing to the mix.
Clean energy’s price stability and declining overall costs, and continued spikes in
oil prices, combine to spell great growth potential for green power—and, as a
result, for the clean energy technologies that produce it. Nearly 400 utilities in
35 states offer some form of green-power options. Two states, Colorado and
Minnesota, have declared wind the least-cost alternative for future power plants.
In Canada, the federal government released a study in early 2004 noting that its
wind power purchases from energy producers in three provinces from 1997 to
2002 cost less than conventional power at retail prices.
The Energy Web: Changing the Future of Energy Services

Much clean energy technology has focused on distributed generation
technologies, like fuel cells and solar PV, that produce power near where it’s

needed instead of generating it in large centralized power plants and delivering
it over a costly infrastructure. Some of the impetus for this comes from the
stresses and bottlenecks experienced by the electricity grid in developed
economies. It’s far from a perfect system, as millions of people learned during
the great Northeast-Midwest blackout of 2003 in the U.S. and Canada.
But what if technology could make the existing grid work so efficiently and
reliably that it reduced the need for additional power plants? Growing numbers
of researchers and companies are working on grid optimization, an umbrella
term for a wide range of networking and information technologies that monitor
and analyze what’s going on in a complex energy system, then making real-time
changes to optimize the system for maximum efficiency.
A marriage of the energy, telecom, and software sectors is working to create a

new breed of “smart” appliances, buildings, and vehicles that, in turn, will be
connected to a disparate energy web powered by a wide range of energy sources,
including renewables and other distributed-generation technologies.
In the new “Energy Web,” as it has been dubbed, appliances will be integrated
with energy-management software that will automatically communicate with its
electricity provider. If the "grid" (though it may no longer be called that) gets
A marriage of the stressed, it may seamlessly power down select appliances—refrigerators, air-
conditioning systems, and others—that don't require always-on power. Rather
energy, telecom, and
than turning off an entire neighborhood or business district at a time—á la
software sectors is California's infamous rolling blackouts—the individual appliances will be turned
working to create a off and on again individually, causing less stress on the entire electric system—
and on its customers.
new breed of “smart”
Grid optimization can defer construction of new generation, transmission, and
appliances, buildings,
distribution capacity, better use of existing plants and grids, reduce financial risk
and vehicles for electric system investments, lower the risk of outages, and increase security
of the grid. The financial implications are staggering. Consider the savings grid
optimization can bring by reducing or deferring the need to increase the U.S.
electricity grid’s capacity. In 2003, the Pacific Northwest National Laboratory, a
federal research agency in Richland, Wash., estimated that just a 5 percent
deferral (55 gigawatts) of the forecasted necessary increase in grid capacity by
2020 could save the power industry and its customers a whopping $45 billion.
And a 25 percent reduction in outages would add another $15 billion in savings.
Power optimization and energy-related information technology were two of the

fastest-growing sectors for venture capital investments in 2003, by some
estimates increasing 42 percent and 27 percent respectively. And companies see
the opportunity, too. IT giants like Cisco Systems and Lucent Technologies have
formed the Consortium for Electric Infrastructure to Support a Digital Society, a
collaborative effort to develop technologies that improve the energy web.

With the potential for huge savings in financial, environmental, and fuel
consumption costs, grid-efficiency optimization will be a key growth area.
Whether ecologically-minded or not, all electric utilities know that the cleanest
(and cheapest) energy plant is the one that you don’t have to build at all.
China and India: The Next Wave in Clean Energy Development

It’s tempting to view the world’s largest energy consumer, the U.S., as the most
influential force in clean energy. But in the larger global picture it is the rapidly
growing economies of China and India, the world’s two most populous nations,
that could be even bigger drivers of clean energy growth.
With a burgeoning middle class spurring unprecedented demand for

automobiles, appliances, and other energy-intensive products, both countries are
rapidly outpacing their ability to meet their energy needs with traditional
domestic sources. China has already surpassed Japan as the world’s number-two
oil consumer, according to the International Energy Agency, and China’s
government predicts that the nation’s number of private cars will triple by 2015.
In 2004, China
China’s increase in oil imports is already considered a key factor behind today’s
pledged a goal of high oil prices worldwide. Meanwhile, India’s energy demand is projected to
10% of its power grow 4.6 percent annually through 2010, the highest rate of any major country,
according to the U.S. Energy Information Administration. Both nations are
generation by 2010
adding vast amounts of energy capacity, with coal and nuclear power looming
from clean energy as key resources.
sources, including It’s not just a resource issue—it’s also a critical environmental and public health
solar PV, wind,
issue. Power generation takes a severe toll on China’s and India’s public health
and the environment. Seven of the world’s ten most polluted cities are in China
biomass, and small- and air pollution in some cities is more than ten times the standard proposed by
scale hydro the World Health Organization.
The good news is that to meet a portion of those demands, and to stave off
environmental calamity, both countries are aggressively developing clean energy
sources. In June 2004, China pledged a goal of 10 percent of its power
generation by 2010 from clean energy sources, including solar PV, wind,
biomass, and small-scale hydro. In China, that 10 percent translates to a
staggering 60,000 MW—the equivalent of 60 giant fossil-fuel power plants. This
goal creates huge potential for companies outside China to provide clean energy
technology. In 2002 and 2003, China’s Township Electrification Program
invested more than $240 million to provide electricity for a million residents in
remote villages by installing solar photovoltaic, small hydropower and wind
generating systems. With the next phase targeting 20,000 new villages, China’s
rural electrification program is stimulating a huge new home-grown renewable
energy industry.

India already is the world’s fifth-largest wind power provider, with 2,000 MW of
installed capacity. The nation expects to beat its target of 1,500 MW of new
capacity by 2007. Danish turbine maker NEG Micon opened a factory in India in
2003 and the world’s other large manufacturers have a strong presence,
including GE Wind and Germany’s Enercon, Nordex, and Vestas. India is also
the fourth-largest manufacturer of solar PV, with established energy players like
BP Solar producing some of their highest efficiency and lowest cost solar PV
cells on the Indian subcontinent.
With a combined 2.36 billion people—more than a third of humanity—China and

India will have a major say in the global energy future. Both countries clearly
recognize the importance of renewable energy to their economic and
environmental outlook, making both markets ripe for clean energy development
and investment.
The Hydrogen Infrastructure: Big Bucks, Big Challenges

The only problem with hydrogen, goes a current industry joke, is that we don’t
have any. This highly-touted, emissions-free energy source is highly efficient in
combustion, but it does not occur freely in nature. So it must be extracted from
non-renewable substances (currently the leading source of hydrogen for
industrial and agricultural applications) or from water through the energy-
intensive process of electrolysis.
In April 2004, U.S. DOE committed $353 million to three areas of R&D research:
hydrogen storage ($150 million over five years), vehicle and infrastructure
demonstration systems ($190 million over five years), and fuel cell research ($13
million over three years). The goal of on-board hydrogen storage—the hydrogen
equivalent of a tank of gas—is 300 miles between refueling; the demonstration
systems goal is to see commercialized hydrogen-powered vehicles by 2015.
As the industry embarks on this rapid period of R&D activity, two key
technology trends are emerging, according to a 2004 report by industry Web
portal Fuel Cell Today. One trend is that fueling stations are becoming smaller
and more akin to traditional gasoline stations. Fueling equipment manufacturers
like Air Products, Plug Power, and Stuart Energy are building smaller and
cheaper units, capable of fueling just five cars a day or less. But the lower
capital costs will enable more demonstration locations, perhaps enabling
California Gov. Schwarzenegger’s goal of 200 hydrogen fueling stations in
California in the next five years. There are currently fewer than 90 such stations
worldwide.
Another key trend is the emergence of compressed gaseous hydrogen, rather

than liquid, as the preferred fuel format. More than 90 percent of hydrogen fuel
presently comes in the form of compressed gas, which is cheaper and easier to

store. As the infrastructure slowly moves to widespread commercial use, all
More than 2,500
trends toward lower costs are positive steps.
stationary fuel cells
Although the U.S. and Canada are leading in hydrogen infrastructure
have been installed development, they are not alone. The European Union has pledged 2.8 billion
worldwide, cutting
euros to fund hydrogen production and usage projects by 2014 in an initiative
called QuickStart, and an 18.5 million-euro project running fuel cell buses in
energy costs in office nine European cities is well underway. Japan will spend $260 million on
buildings, hotels, hydrogen infrastructure research and development during 2004, and is the first
market to offer commercial-ready fuel cell vehicles from Honda and Toyota.
schools, hospitals,
While operational “hydrogen highways” are at least several years away, the
and other facilities markets for stationary fuel cells and micro fuel cells in electronic, radio, and
military equipment already are established and growing. More than 2,500
stationary fuel cells have been installed worldwide, cutting energy costs in office
buildings, hotels, schools, hospitals, and other facilities (including remote
telecommunications outposts) by 20 percent to 40 percent. One leading
manufacturer, Fuel Cell Energy in Danbury, Conn., more than doubled its
product revenues to $16 million in 2003. In fact, it plans to install a 250 KW
direct fuel cell power plant at the Sheraton New York Hotel and Towers.
Additionally, Japanese manufacturer Sanyo plans to offer a residential fuel cell
power unit starting next April.
Micro fuel cells, most of which run on liquid methanol, have significant—and
very near-term—applications in portable consumer electronics. A fuel cell can
potentially power a cell phone for a month without recharging. Like many other
technologies, this one is being powered by the military. The U.S, Defense
Department is investing millions in micro fuel cells that can make military
radios, infrared scanners, and other battlefield devices lighter, longer-lasting,
and less detectable in combat operations.
Defense Spending Promotes Clean Energy Technologies

For nearly half a century, defense spending has been a boon to furthering the
development of technologies, from transistors to the Internet, that have also
improved the lives of those in the civilian world. With schemes like the Next-
Generation Manufacturing Technology Initiative, the U.S. Department of Defense
looks to “reestablish U.S. leadership in manufacturing science and technology by
delivering a plan to double the nation’s manufacturing technology investments
and increase the return on those investments by a factor of ten.” Now that same
type of Department of Defense effort is being brought to bear on clean energy,
especially fuel cells. In 2003, the DoD spent about $130 million on clean energy-
related research and development, and is sure to be a major purchaser of fuel
cells as the technology advances. The market for military fuel cells is poised to
take off in 5 to 10 years, according to a March 2004 research report on military
batteries and fuel cells from Electronics.ca publications. The U.S. Army Corps of

Engineers’ Construction Engineering Research Laboratory granted a contract to
The military’s
the fuel cell company ReliOn to install and test fuel cell systems in critical
greatest interest may military applications. Additionally, Case Western Reserve University has a
research agreement with The Ashlawn Group, LLC to develop fuel cells for the
be in micro fuel cells,
DoD.
which have huge
The Pentagon’s interest in fuel cells is multifold. An estimated 70 percent of
potential to replace DoD’s fuel budget is spent transporting fuel to where it’s needed, so stationary
heavy batteries in fuel-cell units for power supply on military bases around the world hold great
promise. (The Pentagon estimates it costs $40 to transport one gallon of diesel
portable
fuel from Kuwait to Baghdad). Thirty bases around the world, for example, have
communications, been chosen to test an $80,000 hydrogen fuel cell for base power needs.
electronic gear, and Transportation in mobile military operations clearly places a high premium on
new high-tech light weight, nimbleness, and flexibility, so fuel cell-powered vehicles and
hybrids can reduce the need for hauling large amounts of gasoline, diesel, and
weaponry other fuels. But the military’s greatest interest may be in micro fuel cells, which
have huge potential to replace heavy batteries in portable communications and
electronic gear carried by soldiers in the field, as well as in new high-tech
weaponry. Soldiers typically carry up to 20 pounds of spare batteries to power
their gear.
Central to this effort is the Army’s $500 million Objective Force Warrior
Program, aimed at providing a panoply of high-tech improvements that would
reduce the weight load of 95-102 pounds per soldier in Afghanistan today to 45-
50 pounds by 2008-2010. In one example currently in the demonstration stage,
a 1.5-pound fuel cell recharger from MTI Microfuel Cells would be used in Harris
Corp’s widely-used Falcon II handheld tactical radio to replace the standard
three-pound BA 5590 military battery, which requires several spares because it is
not rechargeable.
Rural Electrification: Large Markets from Small-Scale Power

The worldwide distributed and cogeneration power market is estimated to grow
at a compounded annual growth rate of 8 percent during 2003 to 2008, or from
53 GW to 78 GW, establishing a $30 billion market by 2008. But, one of the
greatest potential growth areas for distributed power generation, especially from
clean energy sources, is in supplying electricity to often-remote rural areas in
developing nations. In the past, this required hefty investments in generators,
transmission lines, and distribution networks, and more importantly, high
continuing maintenance costs. Diesel generators, in particular, have proven to be
polluting, inefficient, and expensive.
Now, small-scale solar PV, wind, hydroelectric (known as microhydro for

powering one or two homes), and biomass have changed the economic and
environmental equations, making clean rural energy increasingly affordable in

The World Bank, the world’s poorest regions, including remote areas of developed countries like
the U.S. and Canada, such as the Navajo Tribal Utility Authority’s installation of
International Finance
200 solar PV systems bringing power to remote parts of the Navajo reservation
Corp. (IFC), and the in the southwest. In developing countries, larger-scale systems of 100KW or
Asian Development
more that tie together local villages are another growing option. The Indian
island of Lakshadweep, for example, is now set to have the largest solar
Bank are starting to electrification project in the Asia Pacific region. By 2005, grid-interactive solar
place large sums PV plants will contribute more than 1 MW, or 20 percent, of the island group’s
total power needs.
behind small-scale
Global development finance agencies like the World Bank, International Finance
rural electrification
Corp. (IFC), and the Asian Development Bank are starting to place large sums
projects, especially behind small-scale rural electrification projects, especially with solar PV. The
with solar PV World Bank announced in mid 2004 a target of 20 percent annual growth in its
renewable energy and energy-efficiency investments over the next five years,
essentially doubling its current outlay of $200 million per year by 2010.

CONCLUSION
Markets for clean energy technologies are increasingly generating big business
A confluence of forces
opportunities. While not without technical, financial and policy hurdles, a
appears to have confluence of forces appears to have created a “tipping point” for significant
created a “tipping private sector capital flows into the clean energy sector. Multinational
companies, governments, venture funds, and others are investing billions of
point” for significant
dollars in the sector to reap both profits and potential—working to build
private sector capital increasingly global and robust clean energy markets.
flows into the clean An interesting and telling sign is the degree to which major oil companies and
energy sector
large public and private utilities have begun to view renewable energy
technologies as providing a secure hedge against energy cost and supply
volatility in the form of stable, lower-operational-cost solutions. Clean energy is
also capturing the imaginations of the public and the news media—moving from
marginalized to mainstream. Indeed, with historical and projected growth rates
for some clean energy technologies exceeding 30 percent per year, clean energy
offers an increasingly bright future for investors, governments, communities,
and businesses alike.

1225 Eye Street, NW
Suite 900
Washington, DC 20005
Telephone: 202-789-4500
Facsimile: 202-789-4508
www.globalenvironmentfund.com

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A Global View of

Prepared by Clean Edge, Inc.

Exclusively for the use of Global Environment Fund

May not be reproduced without express consent of Clean Edge, Inc.

About Global Environment Fund .....................................................................................3

©2004 Clean Edge, Inc. Page 2

Global Environment Fund (GEF) is an international private equity company,

GEF currently manages a group of private equity investment funds including

©2004 Clean Edge, Inc. Page 3

In fact, several of GEF’s founding investors participated in early private

©2004 Clean Edge, Inc. Page 4

Technology is fast eroding the economies-of-scale-advantage that has favored

©2004 Clean Edge, Inc. Page 5

©2004 Clean Edge, Inc. Page 6

Demand for cleaner energy sources is rising on a global basis. A confluence of

The market size for the three fastest-

©2004 Clean Edge, Inc. Page 7

As noted above, clean energy’s growth is the result of a convergence of factors,

 Energy security has become a topic of increasing importance, as

The Declining Cost of Renewables

As this chart shows, the cost of renewable energy

©2004 Clean Edge, Inc. Page 8

 Environmental concerns around the world, including air pollution, resource

 Government policies are shifting as political leaders come together to

 Local economic development objectives can also be served by clean,

©2004 Clean Edge, Inc. Page 9

vast markets for

and other cleaner-

©2004 Clean Edge, Inc. Page 10

Following are sketches of seven principal clean energy technologies.

More than 70 percent of wind-powered electricity is generated in Europe, with

©2004 Clean Edge, Inc. Page 11

Combined, biogas and solid biomass generate some 14,000 MW of electricity

Some large-scale commercial and industrial PV systems are producing electricity

©2004 Clean Edge, Inc. Page 12

©2004 Clean Edge, Inc. Page 13

Although hydrogen-powered vehicles get most of the mainstream attention,

Grid Automation and Optimization

©2004 Clean Edge, Inc. Page 14

 Smart Generation—more efficient, more controllable production of electricity

 Smart Grid —automating, optimizing, and monitoring high-voltage

 Smart End Use—increasing efficiency and reducing peak loads, including

©2004 Clean Edge, Inc. Page 15

Wave and Tidal Power

more than three

©2004 Clean Edge, Inc. Page 16

In 2003, for example, total venture investments

Large corporations have been investing in

 Shell is investing $500 million in renewables. It operates a range of clean

©2004 Clean Edge, Inc. Page 17

In addition to these direct government investments, several countries and U.S.

Select Targets and Renewable Portfolio Standards

©2004 Clean Edge, Inc. Page 18

STATE TOP FINANCIAL PUBLIC-SECTOR PUBLIC STATE RPS

©2004 Clean Edge, Inc. Page 19

Green Power: A Price Hedge and Market Accelerator

The Energy Web: Changing the Future of Energy Services

©2004 Clean Edge, Inc. Page 20

A marriage of the energy, telecom, and software sectors is working to create a

Power optimization and energy-related information technology were two of the

©2004 Clean Edge, Inc. Page 21

China and India: The Next Wave in Clean Energy Development

With a burgeoning middle class spurring unprecedented demand for