Clean Energy Intel's Instablog Clean Energy Intel offers free insight and is produced by a retired hedge fund strategist. You can read more at www.cleanenergyintel.com Clean Energy Intel http://seekingalpha.com ABB and Nissan To Develop EV Battery Recycling Solution http://seekingalpha.com/instablog/746773-clean-energy-intel/254771-abb-and-nissan-to-develop-ev-battery-recycling-solution?source=feed 254771 One of the usual charges laid against the electric car relates to the problem of what to do with the batteries once they can no longer be used in the vehicles for which they were designed. The potential for recycling has been discussed for some time. However, leading power and automation group ABB (ABB) has just announced a partnership with 4R Energy, Nissan (NSANY.PK) via its North American subsidiary and Sumitomo Corporation (SSUMY.PK) also via its North American subsidiary, to evaluate the reuse of the lithium-ion battery packs that power the Nissan LEAF.

According to the ABB / Nissan partnership group, lithium-ion batteries for EVs have up to 70 percent capacity remaining after 10 years of use in an automotive application. This longevity allows them to be used beyond the lifetime of the vehicle for applications such as a smart-grid community energy management systems or battery energy storage.

Consequently, the partnership plans to develop a LEAF battery storage prototype with a capacity of at least 50 kilowatt hours (kWh), enough to supply 15 average homes with electricity for two hours.

“The agreement will allow us to evaluate the commercial viability of a grid storage solution and develop a prototype to effectively reuse Nissan LEAF batteries,” said Bruno Melles, head of ABB's Medium Voltage power products business.

Ken Srebnik, Senior Manager, Nissan North America Corporate Planning added “It’s important to Nissan that we manage the complete lifecycle of the electric vehicle battery pack, even beyond its use in a Nissan car….. Innovations in energy storage systems are becoming more viable as the electric grid gets smarter’.

This is clearly not a development that is going to affect the market for EVs in the short term. However, over the medium to long term the benefits of any success in this area are clear:

  • A solution to the recycling question
  • Future demand for used EV batteries for energy storage would help establish a re-sale value for the batteries and improve the economics of EV ownership
  • This would be particularly true for ownership models such as that proposed by Renault and Better Place whereby the battery is owned by the manufacturer and merely leased to the EV owner. The establishment of a resale value for the batteries would clearly bring down EV battery lease charges.

You can read the full press statement from ABB here and a longer discussion on the future of the electric car here.

4R Energy Corporation is a joint venture of Nissan and Sumitomo Corporation.



Disclosure: I am long [[TSLA]].
]]> Fri, 20 Jan 2012 06:13:31 -0500 One of the usual charges laid against the electric car relates to the problem of what to do with the batteries once they can no longer be used in the vehicles for which they were designed. The potential for recycling has been discussed for some time. However, leading power and automation group ABB (ABB) has just announced a partnership with 4R Energy, Nissan (NSANY.PK) via its North American subsidiary and Sumitomo Corporation (SSUMY.PK) also via its North American subsidiary, to evaluate the reuse of the lithium-ion battery packs that power the Nissan LEAF.

According to the ABB / Nissan partnership group, lithium-ion batteries for EVs have up to 70 percent capacity remaining after 10 years of use in an automotive application. This longevity allows them to be used beyond the lifetime of the vehicle for applications such as a smart-grid community energy management systems or battery energy storage.

Consequently, the partnership plans to develop a LEAF battery storage prototype with a capacity of at least 50 kilowatt hours (kWh), enough to supply 15 average homes with electricity for two hours.

“The agreement will allow us to evaluate the commercial viability of a grid storage solution and develop a prototype to effectively reuse Nissan LEAF batteries,” said Bruno Melles, head of ABB's Medium Voltage power products business.

Ken Srebnik, Senior Manager, Nissan North America Corporate Planning added “It’s important to Nissan that we manage the complete lifecycle of the electric vehicle battery pack, even beyond its use in a Nissan car….. Innovations in energy storage systems are becoming more viable as the electric grid gets smarter’.

This is clearly not a development that is going to affect the market for EVs in the short term. However, over the medium to long term the benefits of any success in this area are clear:

  • A solution to the recycling question
  • Future demand for used EV batteries for energy storage would help establish a re-sale value for the batteries and improve the economics of EV ownership
  • This would be particularly true for ownership models such as that proposed by Renault and Better Place whereby the battery is owned by the manufacturer and merely leased to the EV owner. The establishment of a resale value for the batteries would clearly bring down EV battery lease charges.

You can read the full press statement from ABB here and a longer discussion on the future of the electric car here.

4R Energy Corporation is a joint venture of Nissan and Sumitomo Corporation.



Disclosure: I am long [[TSLA]].
]]> abb tsla aoneq.pk Outlook For British Solar: Sunny With Clouds http://seekingalpha.com/instablog/746773-clean-energy-intel/239296-outlook-for-british-solar-sunny-with-clouds?source=feed 239296
Very British Solar: Mr Barbour - Ploughcroft Solar Case Study.
                     Source: Ploughcraft Solar.

Clean Energy Intel’s Edie Lush speaks to Chris Hopkins, Founder and MD of Ploughcraft Solar.

A leading British Solar Installation Company says that while the drop in the Feed-In-Tariff will hurt some solar companies in the UK, the cut means a more sustainable base for the industry.

The UK government announced on the 31st October that they’d cut the solar Feed-In-Tariff by just over 50%, cutting the subsidies available to domestic and small business installations from 43p/kW·h to 21p/kW·h. While this cut was largely expected and follows similar announcements across Europe, solar investors are right to be concerned. As a result of the cut in the tariff, Ernst & Young booted the UK from fifth to sixth place in their latest Country Attractiveness report, a report they produce for investors in renewable energy. (The UK remains fourth in EY’s wind index, but has dropped 3 places to 22nd place in the solar rankings). 

There are those who are protesting the cuts, both through a twitter campaign #cutdontkill and in person – Opposition MPs Ed Milliband and Caroline Flint are leading the charge. Solar Century’s Jeremy Leggett is vociferous in his opposition and Friends of the Earth is threatening to sue the government over the cuts.

But – perhaps surprisingly – not all solar businesses are joining the ranks of those clamouring to keep the FIT at the higher rate. Clean Energy Intel spoke with Ploughcroft Solar’s CEO Chris Hopkins. Ploughcroft has had a bumper year thanks to the boost of the Feed-In-Tariff and an appearance on the BBC’s Dragon’s Den – a reality TV show where entrepreneurs pitch their ideas to Investors. Ploughcroft tripled its turnover – going from selling £500,000/month to £1.5million /month.

Even without the assistance of the BBC, other companies in the UK solar industry have enjoyed 18 golden months. Hopkins says, “A year and a half ago when the Feed-In-Tariff was brought in, it cost us £2 per Watt of energy and two days to install a solar PV system. Today, we can install a system in a day, and material costs have halved to just £1 per Watt a day.” And while costs have shrunk, “the FIT and rising electricity costs have ensured that demand has risen.” 

The UK government’s latest consultation paper on the FIT concurs, saying “we estimate that the installed costs of a typical domestic solar PV project (size 2.6kW) are now around £9,000, having been around £13,000 at the time the scheme was launched. As well as the falling costs of solar PV, the increased returns available from solar PV have also been driven by a 13% increase in retail electricity prices since April 2010.”

The graph below shows the growth in PV installations in the UK since the inception of the FIT. Smaller PV systems are tracked by the Microgeneration Certification Scheme (MCS) database while the Central FIT Register (CFR) tracks larger schemes. Clean Energy Intel readers might notice the similarity in the demand curve between the UK and the US, as noted in our article on the 11 November: Solar's Positive News: Capacity Plans Are Finally Adjusting.







Hopkins points out that when the FIT was introduced, the government clearly indicated that their intention was to give the consumer a Return on Investment of 5%, and that they’d review the effect of the FIT. “At the moment, customers are getting a Return on Investment of approximately 15-16%. It has to be brought to a level which is sustainable, which allows the money in the pot to last longer. I’m now selling systems which I’ll install in January at the new FIT rate. “I’ll sell a 4kW system at £10,000. This will give back £700-800 in FIT/year and reduce the electricity rate by £150/year. Plus the customer gets an export tariff of around £50. The combined benefit gives the customer a Return of Investment of around 9%, which is still higher than the target of 5%.” He’s still selling 20 systems a month at the new price and doesn’t expect this to drop off any time soon.

He doesn’t have a great deal of time for those companies complaining about the drop in the FIT. “If you built your business on a customer ROI of 16%, when the government only promised 5%, whose fault is that? If I were purely driven by greed, then yes I’d be in favor of keeping the FIT where it is. But the new level is more sustainable, and makes the FIT last so that more people can benefit from it.”

But if the ROI stays at this level could the government cut again? While Hopkins demurs on this point, in the current economic climate some are preparing for another eventual cut in the FIT to bring consumer ROI closer to the 5% target. Hopkins remains extremely positive about solar in the UK - while he’ll be cutting the temporary staff he took on in the last few months to benefit from the massive take-up of solar thanks to the FIT, he feels confident the more robust companies in the UK will survive.

Edie Lush is a journalist based in London. She has worked as an Associate Editor of Spectator Business Magazine, Director of the Intelligence Squared Green Festival on Climate Change, a political analyst for Hedge Fund Omega Partners and UBS and a reporter for Bloomberg Television.
 


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
]]> Thu, 24 Nov 2011 10:46:37 -0500
Very British Solar: Mr Barbour - Ploughcroft Solar Case Study.
                     Source: Ploughcraft Solar.

Clean Energy Intel’s Edie Lush speaks to Chris Hopkins, Founder and MD of Ploughcraft Solar.

A leading British Solar Installation Company says that while the drop in the Feed-In-Tariff will hurt some solar companies in the UK, the cut means a more sustainable base for the industry.

The UK government announced on the 31st October that they’d cut the solar Feed-In-Tariff by just over 50%, cutting the subsidies available to domestic and small business installations from 43p/kW·h to 21p/kW·h. While this cut was largely expected and follows similar announcements across Europe, solar investors are right to be concerned. As a result of the cut in the tariff, Ernst & Young booted the UK from fifth to sixth place in their latest Country Attractiveness report, a report they produce for investors in renewable energy. (The UK remains fourth in EY’s wind index, but has dropped 3 places to 22nd place in the solar rankings). 

There are those who are protesting the cuts, both through a twitter campaign #cutdontkill and in person – Opposition MPs Ed Milliband and Caroline Flint are leading the charge. Solar Century’s Jeremy Leggett is vociferous in his opposition and Friends of the Earth is threatening to sue the government over the cuts.

But – perhaps surprisingly – not all solar businesses are joining the ranks of those clamouring to keep the FIT at the higher rate. Clean Energy Intel spoke with Ploughcroft Solar’s CEO Chris Hopkins. Ploughcroft has had a bumper year thanks to the boost of the Feed-In-Tariff and an appearance on the BBC’s Dragon’s Den – a reality TV show where entrepreneurs pitch their ideas to Investors. Ploughcroft tripled its turnover – going from selling £500,000/month to £1.5million /month.

Even without the assistance of the BBC, other companies in the UK solar industry have enjoyed 18 golden months. Hopkins says, “A year and a half ago when the Feed-In-Tariff was brought in, it cost us £2 per Watt of energy and two days to install a solar PV system. Today, we can install a system in a day, and material costs have halved to just £1 per Watt a day.” And while costs have shrunk, “the FIT and rising electricity costs have ensured that demand has risen.” 

The UK government’s latest consultation paper on the FIT concurs, saying “we estimate that the installed costs of a typical domestic solar PV project (size 2.6kW) are now around £9,000, having been around £13,000 at the time the scheme was launched. As well as the falling costs of solar PV, the increased returns available from solar PV have also been driven by a 13% increase in retail electricity prices since April 2010.”

The graph below shows the growth in PV installations in the UK since the inception of the FIT. Smaller PV systems are tracked by the Microgeneration Certification Scheme (MCS) database while the Central FIT Register (CFR) tracks larger schemes. Clean Energy Intel readers might notice the similarity in the demand curve between the UK and the US, as noted in our article on the 11 November: Solar's Positive News: Capacity Plans Are Finally Adjusting.







Hopkins points out that when the FIT was introduced, the government clearly indicated that their intention was to give the consumer a Return on Investment of 5%, and that they’d review the effect of the FIT. “At the moment, customers are getting a Return on Investment of approximately 15-16%. It has to be brought to a level which is sustainable, which allows the money in the pot to last longer. I’m now selling systems which I’ll install in January at the new FIT rate. “I’ll sell a 4kW system at £10,000. This will give back £700-800 in FIT/year and reduce the electricity rate by £150/year. Plus the customer gets an export tariff of around £50. The combined benefit gives the customer a Return of Investment of around 9%, which is still higher than the target of 5%.” He’s still selling 20 systems a month at the new price and doesn’t expect this to drop off any time soon.

He doesn’t have a great deal of time for those companies complaining about the drop in the FIT. “If you built your business on a customer ROI of 16%, when the government only promised 5%, whose fault is that? If I were purely driven by greed, then yes I’d be in favor of keeping the FIT where it is. But the new level is more sustainable, and makes the FIT last so that more people can benefit from it.”

But if the ROI stays at this level could the government cut again? While Hopkins demurs on this point, in the current economic climate some are preparing for another eventual cut in the FIT to bring consumer ROI closer to the 5% target. Hopkins remains extremely positive about solar in the UK - while he’ll be cutting the temporary staff he took on in the last few months to benefit from the massive take-up of solar thanks to the FIT, he feels confident the more robust companies in the UK will survive.

Edie Lush is a journalist based in London. She has worked as an Associate Editor of Spectator Business Magazine, Director of the Intelligence Squared Green Festival on Climate Change, a political analyst for Hedge Fund Omega Partners and UBS and a reporter for Bloomberg Television.
 


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
]]> Non-Farm Payrolls Create Basis For October Relief Rally http://seekingalpha.com/instablog/746773-clean-energy-intel/224509-non-farm-payrolls-create-basis-for-october-relief-rally?source=feed 224509 The release of the September non-farm payroll numbers was obviously crucial to the direction of the market going forward. Another bad number could have been devastating to a market concerned about both the possibility of a synchronized global recession and the affects of a worsening debt crisis in Europe. However, quite possibly we have now just seen the first of two factors with the potential to prime the market for a much needed relief rally -

 

  • The non-farm payrolls were a bit better than expected, particularly allowing for the revisions up in the previous two months. This will no doubt be enough to keep the market's recession barometer just a tad away from double dip for now.
  • Attention may now turn to the potential for some kind of a agreement in support of a resolution to Europe's debt crisis at the November 3-4th G20 in Cannes. Sentiment on Europe is heavily negative. We now have the potential for increased talk of some kind of coordinated action to support a relief rally in stocks. More on this in a follow-up article.

 

In terms of the payroll numbers themselves, as you can see from the table below, the headline number came in at 103k, above expectations of an increase of only 65k. That good news was partially diluted by the fact that some of the increase was also related to the return of 45,000 Verizon Communications workers who had been on strike in August. However, the numbers for July and August were revised up by a net 99k, providing a better than expected outcome all told.

 

Released on 10/7/2011 8:30:00 AM For Sep, 2011

 

Prior

Prior Revised

Consensus

Consensus Range

Actual

Nonfarm Payrolls - M/M change

0 

57,000 

65,000 

30,000  to 115,000 

103,000 

Unemployment Rate - Level

9.1 %

 

9.2 %

9.0 % to 9.5 %

9.1 %

Average Hourly Earnings - M/M change

-0.1 %

-0.2 %

0.2 %

0.0 % to 0.5 %

0.2 %

Av Workweek - All Employees

34.2 hrs

 

34.2 hrs

34.2 hrs to 34.3 hrs

34.3 hrs

Private Payrolls - M/M change

17,000 

42,000 

95,000 

54,000  to 135,000 

137,000 

 

Source: Bloomberg

 

Overall, these numbers remain anemic and are certainly not strong enough to bring the unemployment rate down, which remains at 9.1%. However, the market has been debating whether or not the economy will drop back into recession, following growth of only 1.3% at an annualized rate in Q2. The metrics we've seen so far suggest that Q3 could squeeze out a small improvement to some 2% growth. September's payroll number offers some relief in that it tends to support that overall story - i.e. one of an economy seeing weak growth but one which just manages to skirt around the recession threat. 

 

[Chart]

Source: Bloomberg

 

At time of writing, the market's reaction is not particularly supportive with the S&P and the Nasdaq down and the Dow up a tad.  However, once the dust settles, these numbers should allow for something of a relief rally. At that point, any discussion of negotiations on a potential deal on European debt at the G20 summit could help the market higher. There is certainly room for such a development and my read of the political tea leaves is that it may well involve a significant commitment from China. If that looks likely to be the case, it should again help the market towards a recovery.

 

Following the release of the previous month's payroll numbers for August, I recommended cutting all positions in preparation for what looked likely to be an ugly performance in September (see my original article here). That proved to be the case. However, the bottom line is that these latest numbers have now significantly reduced the immediate threat of another bout of concern over the potential for a renewed recession. As a result, there appears to be good potential for something of an overall recovery in the stock market - whatever the initial reaction in the market on the day.



Disclosure: I am long SPY.
]]> Fri, 07 Oct 2011 11:43:08 -0400 The release of the September non-farm payroll numbers was obviously crucial to the direction of the market going forward. Another bad number could have been devastating to a market concerned about both the possibility of a synchronized global recession and the affects of a worsening debt crisis in Europe. However, quite possibly we have now just seen the first of two factors with the potential to prime the market for a much needed relief rally -

 

  • The non-farm payrolls were a bit better than expected, particularly allowing for the revisions up in the previous two months. This will no doubt be enough to keep the market's recession barometer just a tad away from double dip for now.
  • Attention may now turn to the potential for some kind of a agreement in support of a resolution to Europe's debt crisis at the November 3-4th G20 in Cannes. Sentiment on Europe is heavily negative. We now have the potential for increased talk of some kind of coordinated action to support a relief rally in stocks. More on this in a follow-up article.

 

In terms of the payroll numbers themselves, as you can see from the table below, the headline number came in at 103k, above expectations of an increase of only 65k. That good news was partially diluted by the fact that some of the increase was also related to the return of 45,000 Verizon Communications workers who had been on strike in August. However, the numbers for July and August were revised up by a net 99k, providing a better than expected outcome all told.

 

Released on 10/7/2011 8:30:00 AM For Sep, 2011

 

Prior

Prior Revised

Consensus

Consensus Range

Actual

Nonfarm Payrolls - M/M change

0 

57,000 

65,000 

30,000  to 115,000 

103,000 

Unemployment Rate - Level

9.1 %

 

9.2 %

9.0 % to 9.5 %

9.1 %

Average Hourly Earnings - M/M change

-0.1 %

-0.2 %

0.2 %

0.0 % to 0.5 %

0.2 %

Av Workweek - All Employees

34.2 hrs

 

34.2 hrs

34.2 hrs to 34.3 hrs

34.3 hrs

Private Payrolls - M/M change

17,000 

42,000 

95,000 

54,000  to 135,000 

137,000 

 

Source: Bloomberg

 

Overall, these numbers remain anemic and are certainly not strong enough to bring the unemployment rate down, which remains at 9.1%. However, the market has been debating whether or not the economy will drop back into recession, following growth of only 1.3% at an annualized rate in Q2. The metrics we've seen so far suggest that Q3 could squeeze out a small improvement to some 2% growth. September's payroll number offers some relief in that it tends to support that overall story - i.e. one of an economy seeing weak growth but one which just manages to skirt around the recession threat. 

 

[Chart]

Source: Bloomberg

 

At time of writing, the market's reaction is not particularly supportive with the S&P and the Nasdaq down and the Dow up a tad.  However, once the dust settles, these numbers should allow for something of a relief rally. At that point, any discussion of negotiations on a potential deal on European debt at the G20 summit could help the market higher. There is certainly room for such a development and my read of the political tea leaves is that it may well involve a significant commitment from China. If that looks likely to be the case, it should again help the market towards a recovery.

 

Following the release of the previous month's payroll numbers for August, I recommended cutting all positions in preparation for what looked likely to be an ugly performance in September (see my original article here). That proved to be the case. However, the bottom line is that these latest numbers have now significantly reduced the immediate threat of another bout of concern over the potential for a renewed recession. As a result, there appears to be good potential for something of an overall recovery in the stock market - whatever the initial reaction in the market on the day.



Disclosure: I am long SPY.
]]> spy Solyndra, The Fifth Amendment and The Threat to the US Utility PV Pipeline http://seekingalpha.com/instablog/746773-clean-energy-intel/219409-solyndra-the-fifth-amendment-and-the-threat-to-the-us-utility-pv-pipeline?source=feed 219409 If there had ever been any doubt, it is now clear that the result of the Solyndra debacle has been to heavily politicize the government’s clean energy loan guarantee program and any other measures remotely connected with the support of clean energy.

 

From that point of view, just about the most disconcerting headline that clean energy advocates could be faced with was associated with a report by The Hill late Wednesday night -

 

“Solyndra Executives To Plead The Fifth At Hearing”

 

The hearing in question was of course called by the House Energy and Commerce subcommittee on Oversight and Investigations. And the reaction by the committee’s senior ranking members was fairly forthright:

 

“Who exactly are Solyndra’s executives trying to protect and what are they trying to hide?” full committee Chairman Fred Upton (R-Mich.) and Oversight and Investigations subcommittee Chairman Cliff Stearns (R-Fla.) said in a joint statement.

 

“We would encourage Mr. Harrison and Mr. Stover to reconsider this effort to dodge questions under oath and hide the truth from those American taxpayers who are now on the hook for their $500 million bust,” they said.

 

I have no desire in the context of this article to discuss the politics behind all of this. My sole point is that clean energy investors now have no option but to recognize that the heavy politicization of this arena can only have one affect – that is, that until the 2012 election is behind us, this politicization process is going to have a dramatic affect on the financing pipeline for clean energy projects in the US. Exactly how bad this will be we are yet to discover. However, the market will no doubt have to price in the uncertainty. And in general, the fear factor leads markets to react to political uncertainty by pricing in an excessively negative risk premium.

 

Recent experience with regard to the ‘negotiations’ over the budget deficit should have made this more than clear.

 

For the solar industry this is a particularly pressing issue. As government deficits and reduced tariff levels have resulted in a dramatic fall in demand for solar out of Europe, there have been seen to be roughly three important alternative sources of new demand: 

 

  • The US – and particularly the US Utility-scale sector, which currently has a massive pipeline 
  • Japan – with the prospect of major Utility-scale projects as a result of the country’s new Renewable Energy Bill 
  • China – with the country’s belated focus on domestic solar power generation via the introduction of a feed-in tariff. The 1-2 GW per annum which may result from this is, however, dwarfed by the increase in supply being built out by the country’s solar module manufacturers. 

 

From this perspective, the promise in the US Utility-scale PV pipeline is critical to the health of the solar industry going forward. To put this in perspective, data from SolarBuzz shows that the US Utility-scale pipeline grew to stand at a full 24 GW in September, up from only 17 GW two months previously. This number relates to all non-residential PV - ie both Utility-scale and commercial. However, the majority of the projects relate to Utility-scale.

 

The glaring issue is that there has been and continues to be a financing gap for projects of this scale and the DoE’s loan guarantee program has been essential in seeing many of these projects move forward.

 

The threat to the Utility-scale pipeline is therefore two-fold: 

 

  • The Section 1603 Treasury Program, which has been critical in ensuring the financing of many of these Utility-scale projects, is set to expire at the end of this year. The extension of the program now looks set to become a major election issue. Not a good sign. 
  • In the short-term, there are around 14 new loan guarantees, nine of which are for solar projects, looking to be finalized by the DoE by the end of the month. Again, the final approval of these loan guarantees is likely to become heavily politicized in the current environment. 

 

In relation to the later point, the House Committee on Energy and Commerce already appears to have raised questions concerning these upcoming loan guarantee approvals in a letter to Energy Secretary Steven Chu.

 

In particular, the loan guarantees at issue are reported to include $4.38bn in loan guarantees related to three solar projects being developed by First Solar. At time of writing, reports also suggest that at least one of these, the planned 550 MW Topaz project, will not move ahead by the 30th September deadline.

 

As the threat to the US Utility-scale pipeline becomes increasingly clear this is likely to have a further depressive impact of solar stocks.

 

As I have discussed previously, I had already taken profits on the last of my clean energy stocks by the end of last month and I no longer have exposure to the sector for the moment. The macro-economic and fiscal environment simply presents too many risks at this time. For a fuller discussion, see my article on the issue from the beginning of the month here.

 

Given all of the present risks, this certainly seems a time to keep your powder dry and invest another day.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
]]> Thu, 22 Sep 2011 13:31:27 -0400 If there had ever been any doubt, it is now clear that the result of the Solyndra debacle has been to heavily politicize the government’s clean energy loan guarantee program and any other measures remotely connected with the support of clean energy.

 

From that point of view, just about the most disconcerting headline that clean energy advocates could be faced with was associated with a report by The Hill late Wednesday night -

 

“Solyndra Executives To Plead The Fifth At Hearing”

 

The hearing in question was of course called by the House Energy and Commerce subcommittee on Oversight and Investigations. And the reaction by the committee’s senior ranking members was fairly forthright:

 

“Who exactly are Solyndra’s executives trying to protect and what are they trying to hide?” full committee Chairman Fred Upton (R-Mich.) and Oversight and Investigations subcommittee Chairman Cliff Stearns (R-Fla.) said in a joint statement.

 

“We would encourage Mr. Harrison and Mr. Stover to reconsider this effort to dodge questions under oath and hide the truth from those American taxpayers who are now on the hook for their $500 million bust,” they said.

 

I have no desire in the context of this article to discuss the politics behind all of this. My sole point is that clean energy investors now have no option but to recognize that the heavy politicization of this arena can only have one affect – that is, that until the 2012 election is behind us, this politicization process is going to have a dramatic affect on the financing pipeline for clean energy projects in the US. Exactly how bad this will be we are yet to discover. However, the market will no doubt have to price in the uncertainty. And in general, the fear factor leads markets to react to political uncertainty by pricing in an excessively negative risk premium.

 

Recent experience with regard to the ‘negotiations’ over the budget deficit should have made this more than clear.

 

For the solar industry this is a particularly pressing issue. As government deficits and reduced tariff levels have resulted in a dramatic fall in demand for solar out of Europe, there have been seen to be roughly three important alternative sources of new demand: 

 

  • The US – and particularly the US Utility-scale sector, which currently has a massive pipeline 
  • Japan – with the prospect of major Utility-scale projects as a result of the country’s new Renewable Energy Bill 
  • China – with the country’s belated focus on domestic solar power generation via the introduction of a feed-in tariff. The 1-2 GW per annum which may result from this is, however, dwarfed by the increase in supply being built out by the country’s solar module manufacturers. 

 

From this perspective, the promise in the US Utility-scale PV pipeline is critical to the health of the solar industry going forward. To put this in perspective, data from SolarBuzz shows that the US Utility-scale pipeline grew to stand at a full 24 GW in September, up from only 17 GW two months previously. This number relates to all non-residential PV - ie both Utility-scale and commercial. However, the majority of the projects relate to Utility-scale.

 

The glaring issue is that there has been and continues to be a financing gap for projects of this scale and the DoE’s loan guarantee program has been essential in seeing many of these projects move forward.

 

The threat to the Utility-scale pipeline is therefore two-fold: 

 

  • The Section 1603 Treasury Program, which has been critical in ensuring the financing of many of these Utility-scale projects, is set to expire at the end of this year. The extension of the program now looks set to become a major election issue. Not a good sign. 
  • In the short-term, there are around 14 new loan guarantees, nine of which are for solar projects, looking to be finalized by the DoE by the end of the month. Again, the final approval of these loan guarantees is likely to become heavily politicized in the current environment. 

 

In relation to the later point, the House Committee on Energy and Commerce already appears to have raised questions concerning these upcoming loan guarantee approvals in a letter to Energy Secretary Steven Chu.

 

In particular, the loan guarantees at issue are reported to include $4.38bn in loan guarantees related to three solar projects being developed by First Solar. At time of writing, reports also suggest that at least one of these, the planned 550 MW Topaz project, will not move ahead by the 30th September deadline.

 

As the threat to the US Utility-scale pipeline becomes increasingly clear this is likely to have a further depressive impact of solar stocks.

 

As I have discussed previously, I had already taken profits on the last of my clean energy stocks by the end of last month and I no longer have exposure to the sector for the moment. The macro-economic and fiscal environment simply presents too many risks at this time. For a fuller discussion, see my article on the issue from the beginning of the month here.

 

Given all of the present risks, this certainly seems a time to keep your powder dry and invest another day.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
]]> fslr Solar Taking Profits on SunPower http://seekingalpha.com/instablog/746773-clean-energy-intel/162793-taking-profits-on-sunpower?source=feed 162793 Sat, 09 Apr 2011 14:50:08 -0400 spwr Energy Stocks Alternative energy Long Ideas Egypt: the Democratic Process, Oil and Energy Policy http://seekingalpha.com/instablog/746773-clean-energy-intel/138024-egypt-the-democratic-process-oil-and-energy-policy?source=feed 138024
No doubt there will be a return to something approximating calm in the period immediately ahead as Egypt celebrates and the situation normalizes. However, the issues raised by the pro-democracy movement still require full resolution - and the nature of that resolution remains critical to both people across the Arab world and to the financial markets.

Two pressing questions need particular thought -

1. What will the process towards democracy in Egypt itself look like?

2. How will the pro-democracy movement in the rest of the Arab world react?

Firstly, in terms of the process towards democracy in Egypt itself, clearly the most unstable path ahead would be a rapid move to an early election. Indeed, if Mubarak had simply resigned reports suggest that executive control under the constitution would have fallen to the speaker of the parliament and elections would have to have been called within two months.

However, by handing over power to the Supreme Council of the Armed Forces, Mubarak seems to have circumvented this particularly unstable process. The key figure will now be Mohammed Hussein Tantawi, the Defense Minister and the Supreme Council has already issued a statement that it intends to examine the situation 'in order to materialize the aspirations of our great nation'. The Army appears to be well respected in the country and the hope would be that the people will give it time to plan a stable process towards democracy.

It also seems that the US and the rest of the democratic West are likely to support a fairly lengthy process towards democratic elections. After all, democracy is not just a vote on one set date. It is an open, free process of debate and organization. Given the suppression of any fledgling democratic opposition over the past 30 years, Egypt needs time to let democratic institutions prepare the ground - and most importantly to let democratic opposition parties coalesce.

In what was perhaps an important indication of the thinking developing amongst democrats, Mohammed ElBaradei, ex-UN weapons inspector and key opposition leader, has already said that what is required is a return to stability and a transitional government for the next year. Clearly, he would like to see a stable period in which to build the organizational structure of a democratically-aligned party.

This is a viewpoint which both the Army and the international community can probably both see as justifiable. Perhaps then, Egypt itself is about to enter a fairly stable period of democracy-building. That may suggest that the political premium currently in the price of oil may decline further.

However, the second question outlined above should be a stark reminder that this process has not come to an end. So, how will in fact the pro-democracy movement in the rest of the Arab world react to developments in Egypt?

For the Arab world the message of both Tunisia and Egypt appears to be clear - that the varied autocracies in the region can be challenged. Both the pro-democracy movements across the Middle East and, more worryingly, the more extreme Islamist opposition will have taken note. Though it is difficult to predict when or where any new pro-democracy protests may arise, it is fairly clear that the potential players in these protests will have been encouraged by the success of pro-democracy groups in Tunisia and Egypt.

One other point remains poignant. Regime change in Egypt, though not without an unfortunate loss of life, was relatively peaceful. This probably reflected the restraining influence of the relationships which Mubarak himself had in the West and in the US in particular.

There is no guarantee of the same restraint being in play elsewhere amongst autocracies in the Arab world. And developments in relation to any further pro-democracy protests could potentially be much more explosive.

From this point of view, the respite in the oil market is unlikely to be long-term. Personally, I would think that a further move in WTI crude below $80 or a move Exxon Mobil (XOM) to below $78 would probably represent something of a temporary dip.

Finally, it is critical that Energy Policy in the US and in the West as a whole pays attention to the lesson - and not to the period of short-term calm immediately ahead. Oil has now become heavily politicized and most importantly it has in recent years shown itself to be heavily sensitized and much more volatile than in past periods.

As I argued in a recent article on the subject here

http://seekingalpha.com/article/251036-the-future-of-energy-policy-and-its-effect-on-clean-tech-stocks

the global economic cycle is now far too exposed to the excessive volatility in this one strategic commodity - oil. This makes oil's monopoly as the only readily available fuel for the global transport system untenable - and an Energy Policy must now be constructed in order to break this monopoly.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
]]> Fri, 11 Feb 2011 14:51:34 -0500
No doubt there will be a return to something approximating calm in the period immediately ahead as Egypt celebrates and the situation normalizes. However, the issues raised by the pro-democracy movement still require full resolution - and the nature of that resolution remains critical to both people across the Arab world and to the financial markets.

Two pressing questions need particular thought -

1. What will the process towards democracy in Egypt itself look like?

2. How will the pro-democracy movement in the rest of the Arab world react?

Firstly, in terms of the process towards democracy in Egypt itself, clearly the most unstable path ahead would be a rapid move to an early election. Indeed, if Mubarak had simply resigned reports suggest that executive control under the constitution would have fallen to the speaker of the parliament and elections would have to have been called within two months.

However, by handing over power to the Supreme Council of the Armed Forces, Mubarak seems to have circumvented this particularly unstable process. The key figure will now be Mohammed Hussein Tantawi, the Defense Minister and the Supreme Council has already issued a statement that it intends to examine the situation 'in order to materialize the aspirations of our great nation'. The Army appears to be well respected in the country and the hope would be that the people will give it time to plan a stable process towards democracy.

It also seems that the US and the rest of the democratic West are likely to support a fairly lengthy process towards democratic elections. After all, democracy is not just a vote on one set date. It is an open, free process of debate and organization. Given the suppression of any fledgling democratic opposition over the past 30 years, Egypt needs time to let democratic institutions prepare the ground - and most importantly to let democratic opposition parties coalesce.

In what was perhaps an important indication of the thinking developing amongst democrats, Mohammed ElBaradei, ex-UN weapons inspector and key opposition leader, has already said that what is required is a return to stability and a transitional government for the next year. Clearly, he would like to see a stable period in which to build the organizational structure of a democratically-aligned party.

This is a viewpoint which both the Army and the international community can probably both see as justifiable. Perhaps then, Egypt itself is about to enter a fairly stable period of democracy-building. That may suggest that the political premium currently in the price of oil may decline further.

However, the second question outlined above should be a stark reminder that this process has not come to an end. So, how will in fact the pro-democracy movement in the rest of the Arab world react to developments in Egypt?

For the Arab world the message of both Tunisia and Egypt appears to be clear - that the varied autocracies in the region can be challenged. Both the pro-democracy movements across the Middle East and, more worryingly, the more extreme Islamist opposition will have taken note. Though it is difficult to predict when or where any new pro-democracy protests may arise, it is fairly clear that the potential players in these protests will have been encouraged by the success of pro-democracy groups in Tunisia and Egypt.

One other point remains poignant. Regime change in Egypt, though not without an unfortunate loss of life, was relatively peaceful. This probably reflected the restraining influence of the relationships which Mubarak himself had in the West and in the US in particular.

There is no guarantee of the same restraint being in play elsewhere amongst autocracies in the Arab world. And developments in relation to any further pro-democracy protests could potentially be much more explosive.

From this point of view, the respite in the oil market is unlikely to be long-term. Personally, I would think that a further move in WTI crude below $80 or a move Exxon Mobil (XOM) to below $78 would probably represent something of a temporary dip.

Finally, it is critical that Energy Policy in the US and in the West as a whole pays attention to the lesson - and not to the period of short-term calm immediately ahead. Oil has now become heavily politicized and most importantly it has in recent years shown itself to be heavily sensitized and much more volatile than in past periods.

As I argued in a recent article on the subject here

http://seekingalpha.com/article/251036-the-future-of-energy-policy-and-its-effect-on-clean-tech-stocks

the global economic cycle is now far too exposed to the excessive volatility in this one strategic commodity - oil. This makes oil's monopoly as the only readily available fuel for the global transport system untenable - and an Energy Policy must now be constructed in order to break this monopoly.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
]]> xom Energy Stocks Government Policy Oil