Preparing for the Future of Energy BloombergNEF's New Energy Outlook

Preparing for the Future of Energy BloombergNEF's New Energy Outlook Michael Steele October 11, 218

Introduction: Bloomberg NEF Who we are 1 October 11, 218

Introduction: Bloomberg NEF 5 Bloomberg research professionals in 19 locations* 21 San Francisco North America Houston London Zurich New York Washington DC 16 Europe Munich Milan Dubai Beijing New Delhi Mumbai 95 Hong Kong Asia Pacific Seoul Tokyo Shanghai 3 Africa Singapore 6 South America Sao Paulo Cape Town Sydney * Part of the Bloomberg LP network of 19, employees in 176 locations. 2 October 11, 218

Introduction: Bloomberg NEF The comprehensive Bloomberg research solution Primary research In-depth analysis on clean energy, advanced transport, commodities, and emerging technologies BNEF 2 research professionals in 16 locations Generating over 7 insight reports annually Proprietary data, forecasts, and analysis Investment research Analysis on 1,8 companies across 1 sectors Bloomberg Intelligence 3 research professionals in 12 locations Generating over 1 research notes a day Analyst-curated third-party and companyreported data News, data & analytics Leading global financial information provider Companies Commodities Bloomberg Economics 19, employees in 176 locations 5, Bloomberg News stories a day Third-party and public data Terminal & Excel tools and analytics 3 October 11, 218

Introduction: Bloomberg NEF Bloomberg NEF primary research Clean Energy Advanced Transport Solar Wind Storage Decentralized Frontier Impact on Energy Power Power & Utilities Electrified Transport Autonomous Driving Shared Mobility Impact on Transport Impact on Oil & Power Commodities Digital Industry LNG & Gas Oil & Products Power Carbon Internet of Things Automation & Advanced Analytics Advanced Materials Impact on Industrials and Energy 4 October 11, 218

The Road So Far Recent evolution of energy in the U.S. 5 October 11, 218

The world in 24 Source: NASA 6 October 11, 218

U.S. faced gas scarcity Global gas price benchmarks, 199-24 $/MMBtu 14 Net U.S. LNG imports Trillion cubic feet 6 12 1 8 6 4 2 Japan cif Germany average border price NBP Henry Hub 5 4 3 2 1 24 EIA forecast 199 1995 2 1995 2 25 21 215 22 225 Source: Bloomberg New Energy Finance 7 October 11, 218 Source: Bloomberg New Energy Finance, EIA

Impending nuclear renaissance Reactors in operation in 21 Reactors expected to be in operation by 225 New nuclear powers Source: International Atomic Energy Agency; Bloomberg New Energy Finance 8 October 11, 218

Wind expected to increase Wind turbine capacity Global cumulative wind installation 35 3 25 2 WEO 24 forecast 15 1 5 199 1995 2 25 21 215 22 225 23 Sources: Various; Bloomberg New Energy Finance 9 October 11, 218 Source: Bloomberg New Energy Finance, IEA

Solar expected to increase Solar costs $/W 1 1976 24 c-si module price $4.1/W Global cumulative solar installation 35 3 1 1985 23 25 2 1 15 1 5 WEO 24 forecast.1 1 1 1 1 1 Cumulative capacity (MW) 199 1995 2 25 21 215 22 225 23 Source: Bloomberg New Energy Finance Source: Bloomberg New Energy Finance, IEA 1 October 11, 218

The world today Source: NASA 11 October 11, 218

Shale changed the story on gas Photos: Wikimedia Commons; DigitalGlobe; Pete Marovich/Bloomberg; KAL/Economist 12 October 11, 218

Shale production has boomed U.S. natural gas production Natural gas production (Bcfd) Bcfd 9 8 7 6 5 4 3 2 1 2Bcfd, 5% 15x increase 26 27 28 29 21 211 212 213 214 215 216 217 Other lower 48 Shale 38Bcfd, 49% Source: Bloomberg New Energy Finance, EIA 13 October 11, 218

And gas prices have fallen Global natural gas prices $/MMBtu 18 16 14 12 1 8 6 4 Japan cif Germany average border price NBP Henry Hub 2 199 1995 2 25 21 215 Source: Bloomberg New Energy Finance, BP Statistical Review 14 October 11, 218

Turning the U.S. into a gas exporter U.S. trade balance of natural gas Volume (Bcfd) 1 8 6 4 2-2 -4-6 -8-1 211 212 213 214 215 216 217 Exports to Canada Exports to Mexico LNG exports Imports from Canada LNG imports Net exports* Exports Imports Source: Bloomberg Terminal, EIA Note: *Net export line shows the six-month rolling average. 15 October 11, 218

Nuclear growth never showed up Photos: Wikimedia Commons; DigitalGlobe; Pete Marovich/Bloomberg; KAL/Economist 16 October 11, 218

Japan s nuclear power shut down Japanese active nuclear capacity and power generation GW 6 TWh 3 5 Generation (right) 25 4 3 Capacity (left) 2 15 2 1 1 5 21 211 212 213 214 215 216 217 Source: Bloomberg New Energy Finance. Note: For generation output calculation, we assume 1% utilization ratio and an operation cycle of 13 consecutive months followed by a three-month shutdown for regular inspection. 17 October 11, 218

U.S. nuclear and coal economics U.S. coal and nuclear operating margins Capacity (MW) Coal Nuclear 18 October 11, 218 Source: BNEF. Coal covers historical 212-217 performance. Nuclear estimates based on Bloomberg Fair Value curves.

Renewable growth accelerates Photos: Wikimedia Commons; DigitalGlobe; Pete Marovich/Bloomberg; KAL/Economist 19 October 11, 218

IEA wind capacity forecast evolution Global cumulative wind installations 1, 1,2 1,4 1,6 2 4 6 8 1,6 1,4 1,2 1, 8 6 4 2 2 25 21 215 22 225 23 235 24 Annual wind additions GW per year 8 7 6 5 4 3 2 1 2 25 21 215 22 225 23 235 24 Historical 24 26 28 29 21 211 212 213 214 215 216 Note: 24-29 Reference, 21-216 New Policies Scenario Source: IEA World Energy Outlook 2 October 11, 218

IEA solar capacity forecast evolution Global cumulative solar installations 1, 1,2 1,4 1,6 2 4 6 8 1,6 1,4 1,2 1, 8 6 4 2 2 25 21 215 22 225 23 235 24 Annual solar additions GW per year 8 7 6 5 4 3 2 1 2 25 21 215 22 225 23 235 24 Historical 24 26 28 29 21 211 212 213 214 215 216 Note: 24-29 Reference, 21-216 New Policies Scenario Source: IEA World Energy Outlook 31 October 11, 218

Curve Ball: Batteries Photos: Wikimedia Commons; DigitalGlobe; Pete Marovich/Bloomberg; KAL/Economist 42 October 11, 218

BNEF EV lithium-ion battery pack price survey results Battery pack price ($/kwh) 1, 2% 2% 8 642 7% 599 1% 54 35% 35 22% 273 24% 29 21 211 212 213 214 215 216 217 Source: Bloomberg New Energy Finance 43 October 11, 218

Electric vehicle sales are accelerating Time to sell one million electric vehicles First million 2 years Second million 18 months Third million 8 months Source: Bloomberg New Energy Finance 44 October 11, 218

The world tomorrow? Source: NASA 47 October 11, 218

Renewable Energy Higher cost efficiency for wind and solar 48 October 11, 218

Accelerating renewable growth Historical world power generation mix NEO218 power generation mix 1% Other 9% 8% 7% Hydro Nuclear Wind Solar 48% solar & wind 6% Oil 5% Gas 64% renewables 4% 3% 2% 1% Coal 29% fossil fuels by 25 % 197 198 199 2 21 22 23 24 25 49 October 11, 218

Falling solar prices drive adoption Module price ($/W, 218 real) 1 1976 PV installed capacity (GW) 8, 1 1985 7, 6, 23 28 5, Small-scale PV 4, 1 215 3, 2, 218e 1, Utility-scale PV.1 1 1 1 1, 1, 1, 1,, Cumulative capacity 215 22 225 23 235 24 245 25 Historic prices (Maycock) Experience curve at 28.5% Chinese c-si module price (BNEF) 5 October 11, 218

Wind follows similar trend Wind turbine price (meur/mw, 217 real) 3. Wind installed capacity (GW) 3,5 2.5 3, 2. 2,5 Offshore wind 1.5 2, 1. 1,5.5 1, 5 Onshore wind. 198 1985 199 1995 2 25 21 215 22 Denmark (ExTool) Germany (ExTool) US (LBL) Vestas global China (BNEF) Global (ex.asia) (BNEF) 215 22 225 23 235 24 245 25 51 October 11, 218

Efficiency in wind Evolution of wind turbine heights and output 1,ft 75ft 5ft 4 MW 25ft 1-12kW.5 MW 1.2 MW 2 MW 19 th C 199 1995 2 25 Sources: Various; Bloomberg New Energy Finance 52 October 11, 218

Efficiency in wind Evolution of wind turbine heights and output 75% increase 1,ft 75ft 7 MW 5ft 4 MW 25ft 1-12kW.5 MW 1.2 MW 2 MW 19 th C 199 1995 2 25 21 Sources: Various; Bloomberg New Energy Finance 53 October 11, 218

Efficiency in wind Evolution of wind turbine heights and output 29% increase 1,ft 75ft 7 MW 9 MW 5ft 4 MW 25ft 1-12kW.5 MW 1.2 MW 2 MW 19 th C 199 1995 2 25 21 215 Sources: Various; Bloomberg New Energy Finance 54 October 11, 218

Efficiency in wind Evolution of wind turbine heights and output 1,ft 56% increase 13-15 MW 75ft 7 MW 9 MW 5ft 4 MW 25ft 1-12kW.5 MW 1.2 MW 2 MW 19 th C 199 1995 2 25 21 215 225 Sources: Various; Bloomberg New Energy Finance 55 October 11, 218

Solar and wind attract 6% of new investment in power generating capacity Investment, by technology, 217-24 Investment, by technology, 217-24 ($ trillion - 216 real) Fossil fuels 14% Wind Solar $2.8 $3.3 $1.2 trillion Nuclear $1.4 Hydro $1.1 Zero-carbon 86% Gas $.8 Coal $.7 Source: Bloomberg New Energy Finance New Energy Outlook 217 Source: Bloomberg New Energy Finance New Energy Outlook 217 56 October 11, 218

1: 2: 3: 4: 5: 6: 7: 8: 9: 1: 11: 12: 13: 14: 15: 16: 17: 18: 19: 2: 21: 22: 23: : How does this change power? Intraday power generation by source: Germany 22 Generation (GW) 14 12 1 8 6 4 2 Curtailment Charging Discharging Peaker Solar Wind Baseload Nuclear Demand 57 October 11, 218

1: 2: 3: 4: 5: 6: 7: 8: 9: 1: 11: 12: 13: 14: 15: 16: 17: 18: 19: 2: 21: 22: 23: : How does this change power? Intraday power generation by source: Germany 24 Generation (GW) 14 12 1 8 6 4 2 Curtailment Charging Discharging Peaker Solar Wind Baseload Nuclear Demand 58 October 11, 218

What about for a week? Germany low renewable generation week, 24 Generation (GW) 2 18 16 14 12 1 8 6 4 2 Curtailment Charging Discharging Solar Wind Dispatchable Nuclear Demand 59 October 11, 218

What about for a week? Germany high renewable generation week, 24 Generation (GW) 3 25 2 15 1 5 Curtailment Charging Discharging Solar Wind Dispatchable Nuclear Demand 6 October 11, 218

How about for the US? Daily dispatch, PJM 24 GW 14 12 1 8 6 4 2 Flexible capacity Solar thermal Small-scale PV Utility-scale PV Offshore wind Onshore wind Biomass Geothermal Hydro Nuclear Oil Peaker Gas : 6: 12: 18: Gas Coal 61 October 11, 218

Energy Storage Taking advantage of fluctuating generation 62 October 11, 218

Energy storage tech breakdown Storage % by power output (MW) 5% 5% 3% 6% 6% 2% 19% 7% Other Flywheels Flow Batteries Storage % by energy capacity (MW) 3% 4% 3% Other 21% 23% Flywheels 3% 51% Flow Batteries 63% 87% 91% Sodium sulphur Lead-based 8% 7% 73% Sodium sulphur Lead-based Lithium-ion 27% Lithium-ion 215 216 217 215 216 217 Note: excludes pumped storage 64 October 11, 218

Battery price declines Li-ion battery price ($/kwh) 1, 9 8 7 6 5 4 3 2 1 225 implied price: $96/kWh 23 implied price: $7/kWh 21 212 214 216 218 22 222 224 226 228 23 Observed price 18% learning rate 65 October 11, 218

Flexibility in electricity grids Hornsdale power reserve output on December 14, 217 Hornsdale Power Reserve responds in milliseconds (7.3MW) Gladstone coal unit spins up ~8 seconds later Source: Australian Energy Market Operator, Bloomberg New Energy Finance 66 October 11, 218

Decentralized Energy Stepping away from the grid 67 October 11, 218

Residential socket parity, 218 Value from solar energy ($/kwh, 217 real).2.15 Ge.1.5 Ch: NC SA In UAE. Sp Au Jo It Eg Al Ch: E Fr UK US:CA Ja Tu Ca Me Hu US:HI Chil Ne US:NY...5.1.15.2 LCOE ($/kwh, 217 real) 68 October 11, 218

Residential socket parity, 235 Value from solar energy ($/kwh, 217 real).2.15.1.5 US:HI US:NY SA US:Ca U.A.E. Au Ja Eg JoIt Sp Fr Ch: E Ch: NC Al In Chil Me UK Ge Hu Ne Tu Ca...5.1.15.2 LCOE ($/kwh, 217 real) 69 October 11, 218

Commercial socket parity, 218 Value from solar energy ($/kwh).2.15.1 In.5 Ge US: HI It Jo UK Sp Ne Fr Me US:CA Au Hu Ch: NC Ch: E Ca Chil SA Ja Eg Tu Al US:NY...2.4.6.8.1.12.14.16.18.2 LCOE ($/kwh) 7 October 11, 218

Commercial socket parity, 235 Value from solar energy ($/kwh).2 In UK US:CA US:NY Me It.15 Ge Au Ne Ja Hu Fr Ch: E Chil.1 Ch: NC Tu Ca Sp.5...5.1.15.2 LCOE ($/kwh) 71 October 11, 218

Decentralized energy investment Breakout by technology and region 72 October 11, 218

Decentralization ratio Fraction of capacity behind the meter 6% 5% 4% 3% 2% Australia Japan Thailand Brazil Mexico Germany Italy U.S. 1% China % 215 22 225 23 235 24 245 25 73 October 11, 218

Global flexible capacity 74 October 11, 218

Electric Vehicles How far will they take us? 75 October 11, 218

Lithium ion battery price declines Li-ion battery pack price ($/kwh, nominal) 2% 2% 1, 7% 1% 35% 8 642 599 54 22% 24% 35 273 29 21 211 212 213 214 215 216 217 76 October 11, 218

Global electric vehicle sales 12 million vehicles 1 8 55% 6 43% 28% 4 11% 2 3% 215 22 225 23 235 24 PHEV sales BEV ICE sales All EVs % of sales 78 October 11, 218

EV electricity demand by region TWh 4, 3,5 3, 2,5 2, 1,5 1, 5 215 22 225 23 235 24 245 25 China United States Europe India Japan South Korea Australia Rest of the World 79 October 11, 218

Annual U.S. EV sales forecast thousand EVs per year 9 853 9% 8 736 177 8% 7 6 5 478 625 163 17 7% 6% 5% PHEV 4 3 2 1 316 92 223 144 334 462 566 676 4% 3% 2% 1% BEV EV% of new car sales 218 219 22 221 222 % 8 October 11, 218

Natural Gas & LNG Improving flexibility, connecting markets 81 October 11, 218

Increasing production with fewer rigs U.S. natural gas production and rig count Natural gas production (Bcfd) 9 8 7 6 5 4 3 2 1 26 27 28 29 21 211 212 213 214 215 216 217 Other lower 48 Shale Rigs Rig count 1,8 1,6 1,4 1,2 1, 8 6 4 2 82 October 11, 218

Efficiency in oil and gas Average lateral length in the Woolfcamp shale play 9, 8, 8,555ft 7, 6, 5, 4, 3, 2, 1, 4,917ft 74% increase 214 215 216 217 218 Source: DrillingInfo, Bloomberg estimates 83 October 11, 218

Gas burn levels out Gas consumption (Bcm/yr) 1,6 NEO 217 forecast 1,4 1,2 Peak load fuel burn 1, RoW 8 6 Europe META CCGT fuel burn 4 Americas 2 Rest of APAC India China 218 225 23 235 24 245 25 84 October 11, 218

21 212 214 216 218 22 222 224 226 228 23 Operational, under construction or post- FID Highly likely and 'likely' pre-fid Expansion of global LNG trade MMtpa 6 5 4 3 2 1 West Africa Russia Australia East Africa Qatar North America Russia North America Australia Other West Africa Indonesia Indonesia Malaysia Qatar Demand - Base Demand - High Demand - Low 85 October 11, 218

In Summary Key takeaways from the outlook 86 October 11, 218

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