1. The Future of Energy Technology Retaining Manufacturing Competitiveness NAM Conference March 2010

2. Copyright © 2010 Deloitte Development LLC. All rights reserved. 1 CHANGE is complicated in a complex society

3. Copyright © 2010 Deloitte Development LLC. All rights reserved. 2 Three Fundamentals Driving Change Policy MarketsTechnology Energy Scalable Economic Sustainable Reliable Enablers & incentives to support investment Consumer acceptance and education Consumer willingness to buy Price and ownership cost

4. Copyright © 2010 Deloitte Development LLC. All rights reserved. 3 The Process of Change has Two Pathways Evolutionary Change that is driven by government incentives and policies Regulatory CAFÉ standards CO2 emissions targets Clean subsidies and loan guarantees Consumer tax credits Change that is driven by innovation Technology advancements Automobile Internet Light bulbs Radio / Television Revolutionary

5. Copyright © 2010 Deloitte Development LLC. All rights reserved. 4 Source: Felton, Nicholas. Consumption Spreads Faster Today. New York Times. February 2008. Market Diffusion Takes Time Percent of U.S. Households

6. Energy Specific Example Automobile Industry

7. Copyright © 2010 Deloitte Development LLC. All rights reserved. 6 Automobile Industry – Current State U.S. light vehicle production was 5.61 million in 2009 1 More than 195 million cars and light trucks are on the road today 2 Average length of ownership of a new car or truck in 2008 was more than 4.5 years (56.3 months) 3 10 million new cars and light trucks sold in 2009 –In 2008, U.S. light vehicle sales volume declined 18 percent from the year before, driven by slowing demand amid a tight credit environment and a severe economic downturn. –1.55 million gas-electric vehicles on U.S. roads today 4 1 Source: CSM Worldwide 2 Source: EPA 3 Source: R.L. Polk & Co. 4 Source: J.D. power & Associates

8. Copyright © 2010 Deloitte Development LLC. All rights reserved. 7 The Automobile Industry: The Implications of Change Policy Consumer Opinion Energy prices Vehicle Technology OEMs with light/small vehicle portfolios Auto suppliers and manufacturers with portfolios that include components for light/small vehicles Emissions control component manufacturers Conventional Oil & Gas Producers Refiners OEMs with vehicle portfolios dominated by large/heavy vehicles Auto suppliers and manufacturers with portfolios dominated by components for large vehicles What Needed To ChangeWinnersLosers Time Fuel Standards: Evolutionary Change Driver Fuel standards change from 17mpg to 35mpg Source: EIA AEO 2009

9. Copyright © 2010 Deloitte Development LLC. All rights reserved. 8 Conventional Oil & Gas Producers Refining Oil & Gas Delivery Pipelines Shipping (tankers) Gas Station Retail Stores Lead Acid Car Battery Manufacturers Consumer Opinion Performance, Range and Reliability Vehicle Price Battery Cost What needs to change Lithium Ion Battery Manufacturers Battery Cell Raw Material Providers OEMs with Established Brand Presence in the Hybrid Space WinnersLosers Conventional Oil & Gas Producers Refining Oil & Gas Delivery Pipelines Shipping (tankers) Gas Station Retail Stores Biofuel/Ethanol Producers Electric Infrastructure Additional Generation Capacity Charging Stations Advances in Battery Technology Battery Cost Performance, Range and Reliability Battery Recycling Infrastructure What needs to change Battery Manufacturers Battery Recycling Operations Electric Power Generators Smart Grid Technology suppliers Charging Infrastructure Installers WinnersLosers The Automobile Industry: The Implications of Change Hybrid Vehicles: Evolutionary Change Driver Electric Vehicles: Revolutionary Change Driver In the low technology case, the characteristics of conventional technologies, advanced technologies, and alternative-fuel LDVs, heavy-duty vehicles, and aircraft reflect more pessimistic assumptions about cost and efficiency improvements achieved over the projection. More pessimistic assumptions for fuel efficiency improvement are also reflected in the rail and shipping sectors. High technology case is the opposite, respectively.

10. Copyright © 2010 Deloitte Development LLC. All rights reserved. 9 Today in the US, capacity is currently in place to produce an estimated 30,000 EVs per year, less than 1% of total vehicle production capacity 1 Limited lithium ion battery recycling infrastructure is in existence today Manufacturing & recycling capacity must increase substantially to meet Obamas goal of 1mm EVs on the road by 2015 EV Adoption Curve 1 Manufacturing Perspective 1 Source: National Highway Traffic Administration, Citigroup Global Markets, Deloitte Interviews and Analysis 2 Source: Deutsche Bank estimates Automobile Industry – EV Transition and Change Price matters – EV prices are high due to the high cost of lithium ion batteries today Where will I plug in? How long will it take? What will it cost? Performance and range anxiety Consumer Perspective Electric Infrastructure How will we generate more electricity to support EV-related demand? Coal vs. renewables Supply Side Perspective Early AdopterEarly Majority 20102020 0 1,100K Traffic Safety Administration (750K) Citi (1,050K) Credit Suisse (335K)

11. Copyright © 2010 Deloitte Development LLC. All rights reserved. 10 Which industries are under threat? Automobile IndustryEV Considerations for the Future How do companies change their game? How do you capture the new technologies? How do companies prepare for change? Conventional Oil & Gas Companies Pipelines Gas Station Convenience Stores Keep eyes on the horizon Be flexible; have a plan B Take advantage of government incentives Retool existing operations Diversify production/portfolio Training Leverage synergies & strengths Collaborate with universities, labs, governments, other companies to shape and develop emerging technologies Listen to customers Shiping industry (tankers) Lead acid battery manufacturers Think outside the box Apply existing strengths to new opportunities Continuous research on emerging trends and technologies Take an active role in shaping the future Explore opportunities in supporting technologies -Widgets, wires, transformers, etc.

12. Questions

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