1. National Program for Sustainable Use of Energy Executive Summary Buildings Approach

2. | 1 The National Program identifies opportunities to achieve optimal energy efficiency and obtain substantial savings for the country in the medium and long term ▪The Law for Sustainable Use of Energy (Published in November of 2008) mandated the elaboration of the National Program for Sustainable Use of Energy (Published in November of 2009). ▪The National Program defines a comprehensive strategy to address and capture the impact through actions identified in the final energy consumption, giving priority to sectors that represent most of the potential impact. ▪The National Program focuses on strategies for sustainable use of energy in the final consumption. ▪In 2008, the final consumption of energy accounted for 56% of the overall national energy consumption. Over 90% of this consumption was concentrated in the transport, industrial, residential and commercial sectors. ▪By 2030, it is estimated that end use of energy consumption will be: 50% Transport Sector 30% Industry Sector 15% Residential, Commercial and public Sectors

3. | In 2008, 56% of domestic consumption of energy was focused on final consumption Source: Balance Nacional de Energía 2008 ▪ Final energy consumption represented 56% of national energy consumption ▪ Final consumption presented a CAGR of 2.6% during the period (1998-2008), however, growth was faster in recent years ▪ The focus of the effort is centered on final consumption by complementing the National Energy Strategy 19981999200020012002200320042005200620072008 Energy Sector Recycling and other Final Non Energy Consumption Final Energy Consumption 3.34.9 -2.1 2.6 National energy consumption, historical TWh CAGR 1 1 Compound annual growth rate 56%

4. | Agriculture Residential, Commercial & Public Industrial Transport 19980002040608101214161820222426282030 In 2008, over 90% of final energy consumption was concentrated in the transport, industrial, residential and commercial sectors Source: Balance Nacional de Energía, CFE, SENER, IMP, análisis de CONUEE 4.1 1.8 3.0 2.6 ▪ It is estimated that by 2030 the most representative sectors will be: – Transport (50%) – Industrial (30%) – Residential, commercial & public (15%) ▪ The sectors with the higher growth rate are industrial, agricultural and transport ▪ It is expected that total consumption continues to grow at a similar rate to the GDP (2.8%) Final Energy Consumption by sector TWh CAGR 1 2008-2030 3.1 0.4 0.9 4.7 CAGR 1 1998-2008 Planned Historic 1 Compound annual growth rate

5. | By 2030, final consumption of energy will be mainly driven by gasoline, electricity and diesel 1 Fuels for each sector are grouped into the "other" parameter are: Transportation: jet fuel (99%), fuel (1%) Industrial: coal (51%), fuel (8%), petroleum coke (37%), wood (4%) Residential: wood (100%) Services: wood (100%) Text 92.3 7.7 Services 94 (4%) 67.5 Agriculture 24 (1%) 6.8 18.0 7.7 Residential 275 (12%) 52.6 7.3 28.7 11.4 Industry 720 (30%) 46.5 3.4 25.4 2.9 21.7 Transport 1,265 (53%) 58.5 <0.1 35.6 0.1 0.3 5.4 Gasoline Electricity Diesel Natural Gas LP Gas Other 1 ▪ Most of the country's energy consumption will be concentrated in the transport, industry and residential sector ▪ Energy consumption will be concentrated on the following fuels: – Gasoline and diesel (transportation) – Electricity and natural gas (industry) – Electricity and LPG in the residential sector Estimated annual final consumption by sector and by energy source Percentaje, 2030 Source: CFE, SENER, IMP, CONUEE’s review. TWh (%)

6. | Energy efficiency potential by sector regarding energy consumption growth and technology supply 2008-2013 ▪ Transport is an area of opportunity with high energy consumption and high energy efficiency rate. ▪ Although energy consumption in lighting is low against other sectors, it is the area of opportunity with highest range of potential in efficiency gains. Consumption 2008 TWh # # 6045509555406530752085100100 Buildings Transport Lighting Energy Efficiency rate differential regarding technology supply in 2009 Percentage of Energy Efficiency potential 5901580257035 Annual growth of energy consumption by sector Percentage, 2008 – 2030 Water Pumps Industrial engines Appliances and equipment

7. | ▪ 7 areas of opportunity were identified as the National Program main goal: – Lighting – Transport – Appliances in households – Cogeneration – Buildings – Industrial Engines – Water pumps ▪ All areas of opportunity, which represent 60% of the energy efficiency potential, have a negative cost. (i.e., Annual investment in year 2030 is lower than the income for energy savings) Abatement cost curve for energy consumption helped to identified the 7 areas of opportunity which are PRONASE´s main goal Source: McKinsey GHG abatement cost curve V 2.0, CONUEE’s review. 1 Considering the cost curve for the reduction in Green House Effect Emissions for main fuels. Cost curve for reduction in energy consumption in Mexico, 2030 1 US$/MWh 2002204060 -70 -40 -50 -60 30 -10 -20 -30 10 0 20 160140120100080180 Potential abatement TWh/year Lighting Cogeneration Appliances and Equipment Motor Engines for Industry Transport Water heating, ventilation and air conditioning Buildings Other actions: Catalytic converters, Continuous steel making, higher efficiency in ovens, etc. Solar water heating Public transport efficiency gains Water pumps rehabilitation Selected areas of opportunity

8. | 7 7 cost-effective areas of opportunities to increase energy efficiency The program focuses in 7 cost-effective areas of opportunities to increase energy efficiency and reduce energy consumption in the medium and long term. Transport. It addresses the energy consumption of motor transportation, both light and medium, as well as heavy weight. Lighting. Includes lighting across the residential, commercial, industry and services sectors, as well as the Federal Government, State governments and local governments. Appliances and equipment. It is related to the energy consumption from the end use electric, electronic and equipment in households, including air conditioning, refrigerators, ventilation and water heating. Cogeneration. Identifies the potential energy savings in industries with high potential for cogeneration. Buildings. Addresses opportunities for energy savings resulting from improvements in construction. Industrial engines. It is related to the energy consumption in three-phase engines under 75 HP, because this kind represent the vast majority of the industrial engines in the country. Water pumps. Includes energy consumption for agriculture and local government’s water pumps.

9. | 8 INTERNATIONAL EXPERIENCE The actions in energy efficiency worldwide focus on two types actions: 1. Promoting technological change The establishment of regulatory frameworks that foster the adoption of energy efficiency measures. The use of economic incentives 3 to influence technology choices among end users of energy (including subsidies to low income households), favoring efficient technologies and penalizing inefficient ones. Promoting high-efficiency technologies through certification, in order to generate greater awareness among the population and to spread the availability of improved technologies. 2. Promoting behavior change in the end-user. It highlights specific efforts to capture energy efficiency measures driving a change of behavior by: The dissemination of best practices through information campaigns focused on relevant groups. The use of economic and non-economic incentives to encourage the adoption of habits aimed for sustainable use of energy. 3 For example, support has been granted for the replacement of inefficient technologies, tax incentives to encourage the supply and demand of efficient equipment, financing of projects classified as DSM.

10. | 9 CURRENT NATIONAL CONTEXT Actions in the past to capture energy efficiency opportunities in Mexico have had 4 main goals: 1. To support low income groups 2. To define standards for equipment and systems (standardization) 3. To promote technological change through economic incentives 4. Changing patterns of behavior. 5. Others. Actions within the Federal Government through a “Protocol of specific actions to improve energy efficiency in buildings, vehicles and installations”. Some of these programs have proved very successful, as the replacement program for appliances, which has managed to replace more than 200 thousand equipment (refrigerators and air conditioning) Nation wide.

11. | 10 National Program´s 26 specific lines of actions for the 7 areas of opportunity Note: N/A means “No appliance” 4 Federal, State and Local governments. 11. To implement the program and the campaign to certify new electric devices for energy efficiency 12. Actualize Norms for energy efficiency on refrigerators and water heating systems 13. Continue the homologation of existing norms 14. Continue with the promotion of solar water heating 15. Continue with the support to low income households for the substitution of refrigerators and air conditioning systems 16. New Norm to foment the moderate use of air conditioning systems 2. New Norms of efficiency for new light and medium weight vehicles 3. New Norm of efficiency for new heavy vehicles 4. To publish mechanic and environmental standards to authorize the use of old imported vehicles 19. Foment the incorporation of insulation standards in the construction licensing of the local governments for: – New non residential buildings – New residential buildings in regions of high average on temperature 20. To foment the coverage of Green mortgages 21. To promote the best practices for high thermal resistance roofs and the use of air conditioning buildings 23. Actualize the Norm of energy efficiency standards for three-phase engines 24. To foment the substitution of three-phase engines 8. New Norm of consumption efficiency for illumination 9. To support low income house holds for the acquisition efficient light bulbs 25. To reinforce the program of support for the rehabilitation of agricultural water pump systems 26. To establish a program of support for the rehabilitation of local government´s water pump systems 17. Campaign to promote the cogeneration highlighting the benefits and the viability of projects for industries with high energy consumption including PEMEX and CFE (State monopolies in energy) Appliances and equipment Transport Buildings Industrial Engines Lighting Water pumps Cogeneration N/A 5. To promote the best practices for vehicles use 22. To develop a certification for the estimated energy consumption of new buildings N/A 10. Promote the use of high efficiency light bulbs N/A Programs for end usersBest practices for sustainable use of energyPublic Sector (PS) 4 Guidelines 1. To apply new efficiency standards to Public Sector´s transport and automobiles 18. Incorporate solar reflectance standards in new buildings of the Public Sector. N/A 6. Speed up implementation of efficient illumination in PS 7. Speed up implementation of efficient illumination in public street lights N/A

12. | 11 High reduction in energy Consumption scenario Low reduction in energy consumption scenario Reference 20082030*** * *** * * * * * * * * * **** * 4,017 Benefits from new policies in energy efficiency will reach an added 4,017 TWh in 2030, equivalent to 3 full years of national energy consumption at today’s rate Potential reduction in energy consumption after the National Program TWh ▪ Programmed actions have a potential reduction in energy consumption of 4,017 TWh from 2010 to 2030 ▪ Energy consumption could reach ~18% in 2030 in the high reduction scenario ▪ Opportunity areas with higher potential of reduction in energy consumption are: – Transport – Lighting – Cogeneration -18% 2,566 Energy savings in 2030 TWh Added Energy savings in 2030 TWh Actions are translated in average energy savings of ▪ 128 TWh in the low reduction scenario ▪ 201 TWh in the high reduction scenario

13. | 12 The energy consumption for air conditioning responds to local climatic conditions, but can represent ~ 50% of total consumption for households 1 HDD and CDD refers to Heating Degree-Days, and Cooling Degree-Days ", respectively 2 Average energy consumption in U.S. households SOURCE: EIA, Department of Energy Average household consumption (MWh per year) 2 % AC and ventilation Extreme cold weather Cold weather Semi cold weather TemperateWarm weather *** *** *** *** *** Climate More than 7,000 HDD Between 5,500 and 7,000 HDD Between 4,000 and 5,499 HDD Less than 4,000 HDD More than 2,000 CDD Caracteristics1 Heating Cooling Others 59% 58% 53% 38% 40% ▪The weather conditions impacting the energy consumption of households ▪Throughout the different climatic zones, the energy consumption by air conditioning can be significant ▪The energy-intensive use of air conditioning has resulted in special efforts for reduce its use

14. | 13 Around the world, actions to reduce energy consumption for air conditioning have focused on three groups of measures SOURCE: IEA, EU Directoate - General for Energy and Transport, Analysis CONUEE DescriptionExamples Installing efficient equipment ▪Replacement of air conditioning and heating by more efficient technologies ▪Programs for an accelerated replacement of old equipment ▪USA - Replacement Program for old and inefficient air conditioning equipment Installing thermal insulation ▪Implementation of standards of construction with the installation requirements for thermal insulation ▪Creating economic incentives for installing insulation in new buildings and existing buildings ▪Certification and labeling for the use of envelope materials ▪United States, Japan - Creation and regular updating of a mandatory building code in California with specific measures for energy efficiency ▪USA - Grants Program to install insulation in low income homes Promoting behavior change ▪Awareness of the population regarding the use of energy in heating and cooling systems ▪Dissemination of best practices including: –Modify comfort temperatures in AC use –Stop thermal leaking in existing buildings ▪European Union - The results of energy efficiency measures are published in local media, along with messages intended to inform the public about the additional potential from existing individual behavior change Learning Policies and programs provide the greatest impact: ▪Clarity: the most successful programs incorporate specific measures for energy efficiency codes and existing processes, leveraging existing regulatory structures ▪Flexibility: Complementarity between minimum efficiency standards at the federal level and local measures adjusted to regional conditions ▪Dynamism: regular updating of construction standards to reflect improvements in technology ▪Consistency: Lasting and long term programs and policies help to raise awareness to end users and even encourage changes in behavior in the medium and long term PRONASE Approach

15. | 14 In Mexico, consumption of energy by air conditioning represents ~ 12% of average consumption in buildings * * * * * * * * * * * * * * * * Energy consumption in buildings TWh In Mexico, energy consumption for air conditioning is substantially less than that observed in developed countries mainly because: ▪The low penetration of air conditioning and heating in homes ▪The energy consumption in air conditioning is concentrated in residential buildings because, despite having a lower intensity of use, represent a higher proportion of existing buildings AC Heater Fan * Distribution of energy consumption for conditioning environment Percentage Residential Business and Public Administration SOURCE: Regional Report on Greenhouse Gas Emission Reduction Potentials from Buildings. Mexico, SIGMA survey of household appliances, Household Budget Survey 2006, Analysis CONUEE Heating, air conditioning and ventilation Others

16. | 15 There have been programs related to energy efficiency in buildings, but has not captured the full impact possible... ▪Energy efficiency standardization efforts in buildings has had a limited impact because of the difficulty of enforcement ▪Local governments may lack the institutional capacities and human resources to elaborate and guarantee the compliance of construction codes which incorporate significant energy efficiency measures ▪ INFONAVIT’s "Green Mortgages" and CONAVI’s subsidy program have been effective in attracting beneficiaries, but still operate on a limited scale To date there have been some efforts to enhance the efficiency of energy use in buildings... Having a moderate impact ▪Standardization efforts –Publication of a Standard Norm for envelopes for non- residential buildings in 2001 (NOM-008-ENER-2001) –Publication of a Standard Norm of thermal insulation for buildings in 1997 (NOM-018-ENER-1997) –Publication of an energy efficiency Standard Nor min industrial thermal insulation in 1995 (NOM-009-ENER- 1995) ▪Promoting efficient buildings –Implementation of program of "Green Mortgages" INFONAVIT, providing low rate financial assistance for the construction of efficient homes. –CONAVI subsidies for the construction of homes that meet sustainability criteria, including insulation in relevant climatic zones, the program complements the financing of ~ 120.000 homes per year.1 –Efforts to implement local construction codes at the municipal level - CONAVI has published a code of construction, which can serve as a guide for local governments in defining their own codes (1)Approximately 50% of the actions of CONAVI complemented the INFONAVIT mortgage financing, the remaining actions in other efficient construction SOURCE: CONUEE, Regional Report on Greenhouse Gas Emission Reduction Potentials from Buildings. Mexico, SIGMA survey of household appliances, Household Budget Survey 2006, Analysis CONUEE

17. | 16 Possible solution strategy... So it is necessary to address the main barriers in order to effectively capture the impact of the measures SOURCE: Analysis CONUEE Description Under compliance of existing envelope Norms ▪There is no effective mechanism to ensure compliance with standards for new envelopes for buildings Misalignment of incentives ▪Builders face uncertainty in their ability to obtain a return on investment because they do not capture the future benefits of energy savings Limited coverage of high-efficiency homes ▪The actions undertaken by INFONAVIT and CONAVI point in the right direction, but are limited in scope Lack of awareness of the population ▪Saving energy in the future is not a determining factor in the decision to purchase a home Barrier ▪Explicitly incorporate thermal insulation requirements and use of envelopes for granting construction permits in local codes of administrative procedures ▪Strengthen financing programs in implementing energy efficiency measures to overcome liquidity constraints ▪Carry out campaigns to raise public awareness on the economic benefits of cost- effective measures like thermal insulation

18. | 17 End Users There have been identified three actions to increase energy efficiency in new buildings Objectives ▪Reduce energy consumption for air conditioning in building insulation Strategy ▪Improve new buildings insulation standards ▪Promote best practices in building Action ▪Incorporate insulation standards in construction regulations and licensing of new residential and no residential buildings in relevant climatic regions 5A Action ▪Incorporate insulation standards in new buildings form the Public Administration 5A Action ▪Encourage the expansion of green mortgages coverage 5B SOURCE: Analysis CONUEE Action ▪Develop a certification of the estimated energy consumption of new buildings 5D Action ▪Promote best practices for insulation and use of air conditioning equipment 5C

19. | High reduction in energy Consumption scenario Low reduction in energy consumption scenario Reference 20082030*** * *** * * * * * * * * * **** * 4,017 Expected impact resulting from implementing new policies in energy efficiency Potential reduction in energy consumption after the National Program TWh ▪ Expected impact resulting from implementing new policies in energy efficiency will reach an equivalent to 3 full years of national energy consumption at today’s rate ▪ Programmed actions have a potential reduction in energy consumption of 4,017 TWh from 2010 to 2030 ▪ Energy consumption could reach ~18% in 2030 in the high reduction scenario -18% 2,566 Energy savings in 2030 TWh Added Energy savings in 2030 TWh Actions are translated in average energy savings of ▪ 128 TWh in the low reduction scenario ▪ 201 TWh in the high reduction scenario