ENERGY OPPORTUNITIES RICHARD BIXLER MAY Quantitative Management work smart

Energy Summary – 1/3 ©2009 Richard M. Bixler. All rights reserved. 2 World Consumption US, China, EU are the big, industrial, users. Primary energy sources 99% of use. Industrialized Energy Use: 3 Main Paths Petroleum: 80% Transport. Chemical feedstock. Nat Gas: Ubiquitous heating. Chemical feedstock. Electrical: 90% of coal = 50% of electricity. Nuclear and Nat Gas follow distantly. Electricity and Transportation thermodynamic limits magnify fuel use. Reserves of Primary Energy Oil/NatGas: Middle East. Coal: North America, Asia Pac, EU. Declining oil discovery rate. Least expensive reserves used first.

Energy Summary – 2/3 ©2009 Richard M. Bixler. All rights reserved. 3 Energy use is correlated with GDP Population with low GDP is poverty Poplation with GDP takes energy and credit GDP contains trade, benefits all Comparison of similar GDPs US and EU similar size, construction China population 4x US, 3x EU China energy use high for GDP

Energy Summary – 3/3 ©2009 Richard M. Bixler. All rights reserved. 4 World Consumption Outlook Industrialized countries (US, EU) flat. China, India, ROW 5% growth. Coal growth even faster. Population growth drives economies increasing energy use. Energy Return: EROEI Carbon fuels have highest EROEI by far. Relentless decline in EROEI: Higher cost reserves, lower return from alternative energy sources.

©2009 Richard M. Bixler. All rights reserved. Expect energy usage to double by 2050 based on GDP and population growth. Oil is the international commodity. Coal, NG, Nuke, Hydro are all produced domestically. Oil price likely to be driven up by International competition (production + replenishment + growth). Increasing cost of reserves. 7 billion people now; going to 9 billion by 2050, all growth outside US+EU. Nationalized production and reserves will prioritize their national ends. Political instabilities and hostilities in oil-producing regions. Financial Trading. Market-anticipation, or actual, production peak. The major mitigating factor would be expectation of economic downturn Timeframe? TBD... Oil drives transport. Transport drives agriculture and trade. Economic Driver will be Oil 5

Opportunities Based On Thesis: Oil will be the economic driver Reduce dependence on oil for transport. Shift transport fuel to alternate carbon fuels and to electricity, increase grid. Numerous companies listed on softtoyssoftware.com for each area listedsofttoyssoftware.com Transport Fuel (mostly outside SV) Transport Biomass to liquid (particularly, syndiesel from coal) (Sasol) Nat Gas (CLNE, automakers, FSYS et al) Prove NPV and ensure EROI, EROEI Source-to-use: creation, distribution, vehicle use. Engine development Electric TransportTransport Companies working on EV, PHEV et al (automakers, battery companies) Battery capacity (range), charge management, cost, materials, standards for capacity, connectors, form factor (A123, ENER, Firefly, Imara, Johnson, Porous) Vehicles: Tesla, Better Place (Renault), Automakers, Smith Electric Vehicle, specialty vehicles Battery financial instruments Private charge facility, DC microgrid, battery charge, distribution from rural to urban, battery change equipment, battery change concession, battery change vehicles, finance.

Opportunities Based On Thesis: Oil will be the economic driver Reduce dependence on oil for transport. Shift transport fuel to alternate carbon fuels and to electricity, increase grid. Solar (grid and local electricity generation) PV cost reduction: multijunction, organic, thin film Module architecture, efficiency, management (SolarMagic) 23 companies listed on website: Thin film, Concentrated, Tower, Inverters, Cladding, Cylindrical, Plants, Panelswebsite Smart Grid (electricity distribution) Industrial power control: Echelon Residential management equipment and service Host software: See IBM table: call mgmt, load control, market analysis, billing, DMC, CIS, EMS, Outage, …IBM table 12 companies listed on website: meters, controls, networking, software Industrial charge storage (use of alternative sources on-grid) Industrial battery, Flywheel, compressed air Brayton, Deeya, ICE, Imara, Premium

Opportunities Based On Thesis: Oil will be the economic driver Reduce dependence on oil for transport. Shift transport fuel to alternate carbon fuels and to electricity, increase grid. Fuel Cell (grid and local electricity generation) Realize theoretical thermodynamic efficiency: Bloom Distribution of Nat Gas input vs. distribution of electric output may drive toward centralized generation Nuclear (grid and local(!) electricity generation) new plants by Design, construction, operation PHWR, multi-fuel: Thorium in particular. Westinghouse, GE, McDermott, Fluor, Shaw, Exelon (other utilities; Duke et al.) Mini-reactors: Hyperion, TerraPower. Coal Electric Plant (grid electricity generation) Coal IGCC (integrated gassification combined cycle) plant CCS (carbon capture and sequestration) Utilities, McDermott, Fluor, Shaw

Opportunities Based On Thesis: Oil will be the economic driver Reduce dependence on oil for transport. Shift transport fuel to alternate carbon fuels and to electricity, increase grid. Agriculture Electric/synfuel vehicles for utility, tilling, transport. Agricultural productivity increase (chemicals, pesticides?). Increased localization of common agricultural product production. Trade Alternate fuel transport: synfuel aircraft, increased train (electric and synfuel), ship use. Increased localization of high-value production.

10 Thank You ©2009 Richard M. Bixler. All rights reserved.

Search Tools I Provide 11 My website: Tutorials + links a steppingstone to direction + interviewing knowledge. Primary sources, economics, Renewables, Smart Grid, Storage, Transmission. Companies identified, located, linked Company website Yahoo! Finance LinkedIn widget ©2009 Richard M. Bixler. All rights reserved.

Consumption - World 12 China: 50% of Asia Pac total 70% Asia Pac coal China: 50% of Asia Pac total 70% Asia Pac coal US and Europe similar size, structure ©2009 Richard M. Bixler. All rights reserved. Renewables are About 1% of total. Renewables are About 1% of total.

Usage - US 13 Steam Turbine thermodynamics: Carnot: 27% efficiency Rankine: 60% w/CCG Steam Turbine thermodynamics: Carnot: 27% efficiency Rankine: 60% w/CCG AC Optimized grid: Transmission, step, and conversion losses AC Optimized grid: Transmission, step, and conversion losses McKinsey: Large efficiency potential, but diffuse, long time, and may not accrue to spender. Wind and PV Opportunities vs. Thermodynamics ©2009 Richard M. Bixler. All rights reserved. Petroleum Coal NG Nuclear Solar Hydro Wind Energy Sources Energy Sources Electricity Generation Electricity Generation Energy Use Energy Use 7% Refinery Gases 50% Gasoline 33% Distillates (Diesel, Jet, Heating) 10% Heavy Fuel Oil 7% Refinery Gases 50% Gasoline 33% Distillates (Diesel, Jet, Heating) 10% Heavy Fuel Oil Petroleum Natural Gas

Reserves 14 ANWR ~+30% of US oil reserves Proved: 90% recovery Unproved: 50% Proved: 90% recovery Unproved: 50% Proved Economic Least expensive proved reserves are recovered first. Proved Economic Least expensive proved reserves are recovered first. Deep GOM Tiber: 1 calendar qtr world usage Deep, 250°F, Pressure, $$ Deep GOM Tiber: 1 calendar qtr world usage Deep, 250°F, Pressure, $$ Government-controlled companies control 88% of proved oil reserves ©2009 Richard M. Bixler. All rights reserved. Declining discovery rate implies Peak Oil hypothesis. Shale Oil and NG well depletion much faster than conventional

Consumption and GDP 15 US uses 25% of world energy, has 5% of world population… US produces more carbon per capita than any other country… US uses 25% of world energy, has 5% of world population… US produces more carbon per capita than any other country… ©2009 Richard M. Bixler. All rights reserved.

Consumption and GDP 16 Consumption correlates to GDP r=86%, r 2 =74% to Population r=65%, r 2 =42% Consumption correlates to GDP r=86%, r 2 =74% to Population r=65%, r 2 =42% ©2009 Richard M. Bixler. All rights reserved. Primary energy has much higher leverage than human labor. Energy cost plus capital leverage fuel growth. Primary energy has much higher leverage than human labor. Energy cost plus capital leverage fuel growth. GDP drives trade. Trade benefits both partners. (Ricardian model underlies modern macroeconomics.) GDP drives trade. Trade benefits both partners. (Ricardian model underlies modern macroeconomics.) Economic energy efficiency (GDP per BTU) measures how well energy is spent.

Consumption 17 ©2009 Richard M. Bixler. All rights reserved. 27 Countries

©2009 Richard M. Bixler. All rights reserved. Going Forward: More Energy! 18 Economies depend on growing energy supply. Expect 2x energy use before 2050 Six new Saudi Arabias needed by 2030 Economies depend on growing energy supply. Expect 2x energy use before 2050 Six new Saudi Arabias needed by 2030

EROEI Cliff ©2009 Richard M. Bixler. All rights reserved. 19 For each unit of energy returned… spend this much energy… give this much energy to the public… Characterized by EROEI =1/prodcost

Transport Fuel Migration ©2009 Richard M. Bixler. All rights reserved M US people: 250M vehicles incl. 150M Autos. Must affect a significant number of these vehicles to affect petroleum usage. They use about 80% of 6.96 QBTU = 5.6 QBTU annually. Generation capacity US about 12.7 QBTU net (excluding thermodynamic and distribution losses) 330M US people: 250M vehicles incl. 150M Autos. Must affect a significant number of these vehicles to affect petroleum usage. They use about 80% of 6.96 QBTU = 5.6 QBTU annually. Generation capacity US about 12.7 QBTU net (excluding thermodynamic and distribution losses)

Smartgrid Domains ©2009 Richard M. Bixler. All rights reserved. 21