Charged Up About Alternative Energy

Much of the hopes for a fast global economic recovery rest on China’s shoulders. The country is certainly doing its part, with its low interest rates and stimulus package that trumps ours in size (relative to GDP). It’s a similar story in the alternative energy arena, where China’s centralized efforts are likely to have a faster and more direct impact than here in the West.

China’s alternative energy efforts are killing two birds with one stone. China’s poor air quality has become notorious in recent years. Alternative energy is much cleaner than coal, which still provides about 80 percent of the country’s electricity. The move toward alternative energy will create a greener tomorrow for this world’s biggest emitter of carbon dioxide. And, of course, much like with the U.S., alternative energy projects are a part of the new stimulus package.

It should come as no surprise that solar stocks jumped in March when China first announced its solar subsidies plan. This week, in another positive development for the alternative energy industry, it was reported that the country is drafting a stimulus package to more than double by 2020 the output of alternative energy over targets set in 2007.

Two years ago China targeted 1.8 million kilowatts of solar power capacity, 300 million kilowatts of hydropower, 30 million kilowatts of wind power and 30 million kilowatts of biomass power by 2020 and a goal for renewable energy to account for 15 percent of China’s total use. Powered (pun intended) by the new subsidies, solar capacity in China can increase to 10 million kilowatts by 2020.

Spain and Germany, early movers and long-time leaders in solar power, are Europe’s largest in terms of the size of their solar markets. The U.S. is also fast becoming one of the top players in the world. But China is becoming the power to be reckoned with as it could pass Europe, Japan and the U.S. to become the world’s biggest renewable energy consumer by 2010, according to WorldWatch Institute.

In the U.S., The Renewable Energy Act, as a part of the American Recovery and Reinvestment Act (ARRA) stimulus package contains a suit of financial incentives intended for renewable energy and energy efficiency. The stimulus also provides loan guarantees to help solar energy grow by making more credit available, introducing a grant program for commercial and utility-scale solar installations, and a manufacturing investment tax credit. The federal solar investment tax credit, which has helped stimulate the U.S. market growth for the last three years, has been granted an eight-year extension.

Among U.S. states, California has instituted a mandate to produce 20 percent of total power from renewable sources by 2010 and then 33 percent by 2020. With the leadership role California has taken in the alternative energy arena, including its spending on solar power systems and cash rebates on renewable energy-generating installations, most of the U.S. solar power has been built and installed in that state.

That doesn’t mean, however, that other states aren’t participating in solar power development: this a growth area, even in a slow economy. In 2008, amidst the worst credit crisis, the U.S. solar market increased by more than 16 percent.

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To benefit from the strong drive toward renewables in general and solar in particular, we suggest buying an ETF. The Market Vectors Solar Energy ETF (KWT) offers a diversified portfolio of solar stocks whose performance is set to track the price and yield of the Ardour Solar Energy Index. The Index provides exposure to publicly traded companies from around the world that derive at least 66 percent of their revenues from solar power and related products and services. On a weighted basis, the companies in the Index derive in excess of 90 percent of their revenues from the solar industry.

Altogether, the diversification of this ETF allows you to be exposed to the largest pure-play solar companies in the world, including those from the U.S. (32 percent), Germany (31.5 percent) and China (26 percent of total assets). The fund’s top 10 holdings represent nearly 64 percent of total assets, and include Solarworld AG (SRWRF.PK), First Solar (FSLR), SunPower (SPWRA), MEMC Electronic Materials (WFR), Suntech Power Holdings (STP), Yingli Green Energy (YGE) to name a few better-known names.

Even after the strong run of the past month, the shares in the Solar Energy ETF trade at a moderate average P/E of 16.9, suggesting that more upside is possible, especially considering that solar industry is one of a few true growth industries and growth rates for many of these stocks can easily exceed 20 percent a year for the next several years. We are adding KWT to our Portfolio.

Comments

[Windsun33:]

Just a comment on solar stocks in general - we have been in the solar business on the retail/install side for over 30 years.

During that time I have never seen a single solar manufacturing company consistently make a profit in the longer term. Right now solar is riding high - in fact it all reminds me of the dotcom bubble. Right now there is an excess of Silicon and of solar panels, and the only thing keeping many companies afloat at all is the massive solar subsidies - in some cases as high as 85%.

Given the government penchent for changing the rules in midstream, especially this administration, I would keep my nimble shoes on if investing in solar.

May 19 08:46 AM

[billp37:]

Energy is not an area of our expertise or perhaps even ability but an area of interest.

"Two years ago China targeted 1.8 million kilowatts of solar power capacity, 300 million kilowatts of hydropower, 30 million kilowatts of wind power and 30 million kilowatts of biomass power by 2020 and a goal for renewable energy to account for 15 percent of China’s total use. Powered (pun intended) by the new subsidies, solar capacity in China can increase to 10 million kilowatts by 2020."

From our reading on Internet and filtering we are concerned that the BTUs IN may not be available for the sought BTU's out.

Gasoline, regular unleaded, (typical) gallon 114,100 BTU = 1.00 gallon (typical)

www.nafa.org/Template....

Q How much does a gallon of gasoline weigh?

A 2.69 to 2.91 kg (5.93 to 6.42 lbs), depending on temperature, type and blend

114,100/ 5.93 = 19,241.15 and 114,100/6.42 = 17,772.59 which means that gasoline contains about twice as
many BTUs per pound as coal.

Here are two of perhaps two more important posts addressing this issue.

"Chairman, President and CEO Questar Corporation Keith O. Rattie said on April 2, 2009

Why did my generation fail to develop wind and solar? Because our energy choices are ruthlessly ruled, not by political judgments, but by the immutable laws of thermodynamics. In engineer-speak, turning diffused sources of energy such as photons in sunlight or the kinetic energy in wind requires massive investment to concentrate that energy into a form that's usable on any meaningful scale. "

home.comcast.net/~bpayne37/pnmelectric...

"fast neutron
Santa Fe, NM
January 12, 2009

From actual experience, wind farms produce 1.2 watts per square meter. Solar Thermal and Photovoltaic methods capture 5 to 6 watts per square meter. There is no economy of size in either technology. Dividing the watts you need by those values gives the land area in square meters needed to produce the juice. The numbers are astronomical "

www.topix.net/forum/so...

We're concerned about possible consequences of expression of view that we all may using less energy in the future.

"Let your gun be you constant companion on your walks" Thomas Jefferson

home.comcast.net/~bpayne37/concealcarr...

----- Forwarded Message -----
From: [e-mail]
To: [e-mail]
Sent: Tuesday, May 19, 2009 5:10:05 AM GMT -08:00 Tijuana / Baja California
Subject: If you don't have a larger caliber gun, I can loan you one.

Tom

----- Forwarded Message -----
From: "David Woodward" <dawood01@earthlink...
To: [e-mail]
Sent: Friday, May 15, 2009 9:49:30 AM GMT -08:00 Tijuana / Baja California
Subject: Re: concealed carry course sign up

I'd kind of like to take another course, but it looks like I'm leaving
for Florida that weekend. It's nice that that guy will give a senior
discount.
If you don't have a larger caliber gun, I can loan you one.

Dave

Dave is seen holding the bottom 3/4 of rattlesnake in November 2008.

www.prosefights.org/ka...
bill

----- Original Message -----
From: [e-mail]
To: [e-mail]
Sent: Monday, May 18, 2009 8:19:21 PM GMT -08:00 Tijuana / Baja California
Subject: Re: check in mail
Bill,

Great to hear. Consider yourself enrolled. If you have any questions at all please don't hesitate to call or e-mail.

Tom Tomasi

c: 249-9942

----- Original Message -----
From: [e-mail]
To: [e-mail]
Sent: Monday, May 18, 2009 8:53:10 AM GMT -07:00 US/Canada Mountain
Subject: check in mail

Tom
I have written check for $112 [senior citizen discount] which I will mail to you today.

Thanks

bill

May 19 08:51 AM

[manya05:]

Someone smarter than me can run the numbers, but it would be interesting to compute the following: take all the TARP/TALF (bailout) money and see how much it is per household (average). Then see if you converted that to an extra utility bill, how much more per kWh it would equate to over, say, the next 10? 20? years. At that level of $/kWh (a subsidy equivalent), would wind and solar (with its concomitant energy storage/smart grid add-ons) be cost-effective? I guess the question I am asking is: did we have, as a nation, the choice between becoming 100% energy-independent and green, or, saving the banksters, did we chose to save the banksters? Did we have that choice? or is the bailout money pennies compared to what is needed to fully subsidize going green? As a taxpayer, and voter, I sure would like to know the answer to that question.

May 19 09:00 AM

[gebby:]

i agree with the author , times have changed and he gets it. obama is not changing rules in midstream. he is changing the rules. to the benefit of alternative energy and more sustainable economics. be enlightened. the u s taxpayer has already made money on the bank bailout. the spending is investment, not wasteful unless managed by those that dont want good government in the first place.

May 19 09:03 AM

[Ferdinand E...:]

Move toward alternative energy? People keep telling me that China may be opening a coal-powered electric generating plant every week. That sounds like a lot, but face the facts of life. Given their industrial ambitions, China has to have inexpensive, reliable energy, and that means not overdosing on solar.

Something that nobody seems to have noticed, is that some of the profits from coal plants and the industries that can buy inexpensive coal-based power can be used to finance renewables. I figured this out a couple of centuries ago when I was teaching in Senegal, but people kept telling me I was...wrong. And it could apply to the US too, especially if the power plants were nuclear based, and constructed as rapidly as they could be constructed if 'somebody' understood their importance.

May 19 09:50 AM

[devassocx:]

Pity the poor consumer in CA. that has to pay for all that solar
generated electricity. Maybe good for the investor but not
the end user.

Makes you wonder whose side the government is on.

May 19 05:39 PM

[C Zeller:]

Ryan,
Good points. Each incremental $0.20 would generate about $25b in annual revenue. One added virtue of a gas tax over regulation is simplicity.

May 19 07:32 PM

[C Zeller:]

Ignore this. I entered this on the wrong tab. Apologies.

May 19 07:32 PM C Zeller wrote:

> Ryan,
> Good points. Each incremental $0.20 would generate about $25b in
> annual revenue. One added virtue of a gas tax over regulation is
> simplicity.
>

May 19 07:48 PM

[billp37:]

Rattie's talk continues to haunt.

"Chairman, President and CEO Questar Corporation Keith O. Rattie said on April 2, 2009

Why did my generation fail to develop wind and solar? Because our energy choices are ruthlessly ruled, not by political judgments, but by the immutable laws of thermodynamics. In engineer-speak, turning diffused sources of energy such as photons in sunlight or the kinetic energy in wind requires massive investment to concentrate that energy into a form that's usable on any meaningful scale.
Chairman, President and CEO Questar Corporation Keith O. Rattie said on April 2, 2009

Why did my generation fail to develop wind and solar? Because our energy choices are ruthlessly ruled, not by political judgments, but by the immutable laws of thermodynamics. In engineer-speak, turning diffused sources of energy such as photons in sunlight or the kinetic energy in wind requires massive investment to concentrate that energy into a form that's usable on any meaningful scale."

home.comcast.net/~bpayne37/pnmelectric...

May 19 08:43 PM

[Dirk McCoy:]

Bill,

When oil hits $120/barrel, solar (and even wind) and coal will look much better again. But giving big subsidies to install current technology instead of waiting for improved technology could be a mistake.

But given handguns are more often used for suicide or accidentally discharged by a child than used for home protection, having one of those may be a mistake as well.

May 21 01:22 AM

[PeteK:]

Don't worry, the President will think of something
to encourage Solar power etc etc.
Just buy the American companies, and wait for the words.

May 30 06:12 PM