Initial Market Assessment

1. Initial Market Assessment Energy Cluster ViTAL Economy Alliance

2. 1 Embryonic: An entrepreneur struggles to make the transition from idea to working concept. 2 Introduction: New, unique offering developed and patented. Focused on small group of customers. Industry Life Cycle: Five Stages Co-generation – proven technology Maturity Growth 3 Growth: Market demand grows as the product is accepted. Significant funds required to increase the scale of production. Economies of scale increase; costs decrease. More new entrants join the industry; competition intensifies. Introduction Decline Embryonic 4 Maturity: Growth slows. Industry dominated by a few large companies. Few new product innovations. Algae Bio-Fuels are developing 5 Decline: Sales decreasing at an accelerating rate. Mergers and consolidations may occur in an effort to remain competitive and maintain profits.

3. Maximizing Economic Development Potential • INDIGENOUS • COMPETITIVE • ADVANTAGE • People • Location • Indigenous Assets • Infrastructure • Technology High Potential Clusters High Low High Low MARKETATTRACTIVENESS Evaluating Cluster Potential Clusters that leverage indigenous competitive advantage x high market attractiveness create sustainable economic development

4. Cogeneration (CHP) Algae Biofuels EPA’s Landfill Methane Outreach Program (LMOP) has identified 4 sites in SI as potential candidates for the program. Capturing landfill gases for energy for use in CHP facilities “doubles” the environmental benefits • SI University – conducting extensive research on algae biofuels Examples of Opportunities for SI

5. Energy Niche Examples - Cogeneration Co-generation/Combined Heat and Power Production (CHP): The concurrent production of electricity or mechanical power and useful thermal energy (heating and/or cooling) from a single source of energy. CHP is not a single technology but a suite of technologies that can use a variety of fuels to generate electricity or power at the point of use, allowing the heat that would normally be lost in the power generation process to be recovered to provide needed heating and/or cooling. Trigeneration - Heat from a CHP plant is for heating and cooling. The generating capacity of the more than 3,300 US CHP sites now stands at 85 gigawatts (GW)—almost 9 percent of total US capacity. In 2006 CHP produced more than 12 percent of total US power generation Source: US Department of Energy, 2008

6. Algae Biofuels: • The use of algae for the production of transportation fuels. Attractive because: • Algae’s oil content is higher than all other sources of bio-fuel • Algae can double their mass several times a day • Algae-growing facilities can be built on coastal land unsuitable for conventional agriculture • Significant challenges remain to using it as source of energy: • Cultivation – difficult to harvest cost-effectively. Open-pond systems have been given-up. • Cost – unit cost is too high to be competitive with other fuel sources - US$5–10 per kg dry weight. Energy Niche Example – Algae Biofuels If all aspects of algae cultivation are controlled - temperature, CO2 levels, sunlight and nutrients (including carbohydrates as a food source), then up to 100,000 gallons of oil per acre could be produced annually Source: US Department of Energy, 2008

7. Niche Market Segmentation Co-generation can be applied across a variety of end user markets The oil from algae can be used for a number of purposes District energy systems Edible oils Algae Bio-Fuel Residential Bio-diesel Chemical Bio-ethanol Petroleum Refining Bio-gasoline Co-Generation Iron & Steel Bio-methanol Pulp & Paper Bio-butanol The best segments have Potential, Lifespan, Accessibility, and Profitability Other small-scale manufacturing Jet Fuel

8. Projected Energy Markets Growth Global Clean Energy Projected Growth ($US Billions) Source: Clean Edge, 2008; Global Information Inc., 2006

9. billion kilowatthours History Projections Solar Geothermal Waste Wind Biomass Strong Niche Growth Projected Historical CHP Capacity and Growth Needed to Achieve 20% of Generation In some European countries as much as 60% of electricity is co-generated. The US produces 12%. Twenty percent is achievable by 2030. Non-hydropower renewable power is projected to meet 33% of total generation growth between 2007 and 2030 Source: US Department of Energy Source: Energy Information Administration

10. Energy Markets: Production/Capacity Relatively few states have significant CHP development. Source: US Department of Energy, 2008

11. Cluster Scale: Will the Cluster Contribute to SI’s Goals? Examples of the scale and scope of CHP projects East Chicago plant uses a 95-MW CHP system to provide 25% of electrical requirements and 85% of process steam needs. The device displaces 13,000 tons of NO2, 15,500 of SO2 and more than 800,000 tons of CO2 emissions annually. A 6.4-MW CHP installed in Racine, WI reduces plant CO2 by 52,000 tons. Two industrial turbines burn natural gas and methane from a nearby landfill. The system provides the facility’s electricity and 40,000 lbs of process steam per hour. 4.3-MW, natural gas-fired CHP system meets almost 100% of the hospital’s electrical needs, 60% of the chilled water needs, and saves $738,000 in annual utility costs. It was the only facility to remain open during Hurricane Katrina. Source: US Department of Energy, 2008

12. Energy Markets: Production/Capacity Initial production trials suggest that algae yields 100 times more fuel than soy and 33 times more than palm trees.

13. Cluster Scale: Will the Cluster Contribute to SI’s Goals? In 2008, more than $300 million committed to investment in algae-related projects. These are examples.