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Building Israel’s Cleantech Independence

Building Israel’s Cleantech Independence. Glenn Yago Director, Milken Institute, USA Prepared for: Globes Conference 2009 Cleantech from Copenhagen to Jerusalem December 13, 2009. “Towards Energy Independence” over the years.

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Building Israel’s Cleantech Independence

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  1. Building Israel’s Cleantech Independence Glenn YagoDirector, Milken Institute, USA Prepared for: Globes Conference 2009 Cleantech from Copenhagen to Jerusalem December 13, 2009

  2. “Towards Energy Independence” over the years Nixon: “In the year 1980, the United States will not be dependent on any other country for the energy we need.” Obama: “Eliminate our current imports from the Middle East and Venezuela within 10 years.” Carter: “This nation will never use more foreign oil than we did in 1977… never.” Ford: “We must end vulnerability to economic disruption by foreign suppliers by 1985.” First World oil crisis 1973 Source: EIA.

  3. 60% of all U.S. oil consumption came from foreign countries in 2008 Imports: 9756 barrels daily 59.2% Domestic production: 6736 barrels daily – 40.8% Source: British Petroleum Statistical Review 2009.

  4. Oil reserves are concentrated inthe Middle East Billions of barrels 2008 1980 Source: BP Statistical Review of World Energy, 2009.

  5. Beta Sites: Building New Markets at Home for Abroad כיצד יוצרים שוק ראשוני וחדשני בישראל? הנהגה והובלה ממשלתית רגולציה ממשלתית עידוד חדשנות (כגון הקלות במתן אישורים לחדשנים) מימון Growth equity (late stage) High risk project financing מינוף תעשיות הידע הקיימות והפוטנציאל היזמי המקומי

  6. Partnershipsשותפויות מיצוב לאומי ובינלאומי של ישראל כמוקד לשיתוף פעולה שיתוף פעולה עם ממשלות זרות: מימון פיתוח הטמעה/ניסוי הדגמה חדשנות בשיתופי הפעולה

  7. Academia מבנה המימון לתעשיות עתירות ידע כלי שוק פרטי: Stock Exchange & Banks Strategic Partners Private Equity Mezzanine Growth Equity Venture Capital Angels כלי מדען ראשי: Incubators R&D Grants ד

  8. התפלגות ההשקעה לפי שלבי הצמיחה בישראל וארה"ב Source: PricewaterhouseCoopers’ Money Tree Reports

  9. חברות תעשייה עתירות ידע מקור: IVC

  10. Diversification & SpecializationVC Investments by Industry – 2008, Israel Israel Total VC Investments $1.4 Billion • Israel’s VCs focus on Hi-Tech only • In Israel the Software, communications, networking and semiconductors sectors receive 70% of VC investments Vs. 32% in the US • In Israel the Biotechnology & Healthcare sectors receive only 10% of investments, Vs. 30% in the US • Israel’s OCS support focuses on manufacturing R&D. Source: PricewaterhouseCoopers’ Money Tree Reports

  11. Oil receives more subsidies than alternative energy Source: Environmental Law Institute.

  12. Global investment in new clean energy US$ billions Source: New Energy Finance.

  13. Funding challenges for AlternativeEnergy Public grants and tax incentives Valley of death Angel investor Project finance Venture capital Technology incumbent Seed/ Start-up Early stage Expansion Late stage • Second generation • Achieve commercial-scale operation • Bringing down costs • - Further investment in facilities • First generation • - Scaling up • Further R&D • Upgrading pipeline • Increase market share • Mezzanine and bridge finance for IPO or M&A • Collapsing market/Falling prices • Third generation • - R&D • Initial investment in demonstration projects Funding challenges Source: Milken Institute

  14. The Water-Energy Nexus Source: Y. Cohen, UCLA Water Center, 2009

  15. Encouraging Economic Growth by: Absorptive Capacity Job Creation (+high skilled) Developing a science-intense industry Improving current account balance (export) Lowering risks of private funding by financing high-risk/early stage projects Market Failure I: Cleantech Water Finance Valley of Death The Cash Flow Valley of Death- as a function of development stage (Enhancing Commercial Outcomes from R&D,2007) Source: NREL, 2008

  16. Market Failure 2: Water Project FinanceInternational Private Investment in Infrastructure 1990-2009 US$ billion Sources: Ti Le-Huu, Sustainable Development and Water Resources Section, UNESCAP.

  17. A Shift in Water Resources & Management Paradigm Source: Y. Cohen, UCLA WaTeR Center, 2009.

  18. Alternative Energy IssuesAdditional Information

  19. A perfect day for biofuels… • Supply Trends • Nationalization of reserves • High oil prices • Peak production • New technology improving efficiency of production • Demand Trends • Oil consumption outpacing discovery • China & India • Consumer awareness • Energy Security • Insufficient domestic supply • Oil supply primarily in unstable regions • Environmental • Carbon emissions • Offshore drilling • Green legislation Pressure to create a significant, renewable, domestic source of liquid fuels Source: CERES.

  20. The advances in biofuels technology is game changing Average U.S. Corn Yields Biotechnology Hybrid genetics & biotechnology have driven a five-fold increase in average U.S. corn yields since 1940. Single-Cross Hybrids Bushels/Acre Open-Pollinated Double Cross Source: USDA.

  21. Oil and biofuels: Two different business models • Biofuel • Low entrance barrier • Higher marginal cost even after scalability is achieved • Profitability is subject to uncertainty in raw material price • Possibility to reduce cost with future technology breakthroughs • Oil • High entrance barrier • High initial investment (for lease and facilities) • Low (and stable) marginal cost once scalability is achieved Cost per unit Cost per unit Units produced Units produced Source: Milken Institute.

  22. The American Recovery and Reinvestment Act of 2009 (ARRA)Total measures worth $787 billion Source: The American Recovery and Reinvestment Act of 2009.

  23. Infrastructure and energy represent 15 % of ARRATotal measures worth $787 billion Energy $49.7B Other stimulus $646.4 Infrastructure $80.9B Source: The American Recovery and Reinvestment Act of 2009.

  24. Energy expenditures within ARRA Other $3.7B Energy efficient smart grid $4.5B Energy efficiency and conservation grants $3.2 B Transmission lines $6.5B Advanced car battery $2B Energy efficiency research $2.5B Carbon capture experiments $3.4B State and local energy Investment $6.3B Federal building Efficiency $4.5B Weatherizing medium income Homes $6B Radioactive cleanup $6B Source: The American Recovery and Reinvestment Act of 2009.

  25. $16.8 billion designated for the Office of Energy Efficiency and Renewable Energy Energy Efficiency and Conservation Block Grants $3.2 billion - Retrofit ramp ups in energy efficiency - $454 million Energy Efficiency Research $2.5 billion Weatherization Assistance Program $5 billion State Energy Program $3.1 billion DOE Recovery Act Funding: $36.7 billion Others - $3 billion Source: The U.S. Department of Energy.

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