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We recently attended the 2nd annual "REFF-West" (REFF for Renewable Energy Finance Forum) conference in San Francisco on behalf of Seeking Alpha.  Seeking Alpha made arrangements for us, as contributors, to receive "press credentials" to the event, and we agreed to select some highlights to report back to SA readers.

First, a few words on the sponsor of this event: ACORE, the American Council on Renewable Energy, and Euromoney Energy Events.  ACORE is an organization supported by member companies in renewable energy that does a lot of work promoting the sector through events like this conference, REFF Wall Street and the annual Phase II Policy Forum famously held in the Cannon Caucus Room on Capitol Hill. Keeping the theme consistent with the conference title, the panels were representative of a wide spectrum of the renewable energy finance chain, from Venture Capital to Project Finance to Government. 

This two-day event had an array of speakers (61 to be exact, spread across 12 thematic "sessions").  Each speaker provided a presentation (often mainly an infomercial for their firm/organization) and then answered questions from one or two moderators.  Given the format, the quality of the dialog really came down to the effectiveness of the moderator to identify key themes and pursue them; in general, the quality of the conversation was very good and we'd recommend attending future REFF events.  At the end of each panel, Michael Eckhart, the President of ACORE, did a nice job of summarizing what he felt we’d learned from that exchange.    

To synthesize a large amount of information into blog-able sized posts we decided to distill the conference into broader themes and to post separately about each of them:

1. The High Level Perspective on the Renewable Energy Sector.

As the cleantech industry has matured, “The highs are higher and the lows are lower.”  That was the assessment of the situation by Dan Reicher of Google.org and we found that, as a theme, it ran through almost all the presentations and discussions. 

The highs:

- Unprecedented federal funding of tens of billons of dollars due to the American Reinvestment and Recovery Act (ARRA) has flowed into the sector.  Along those lines, the Obama administration is the most forward thinking government towards renewable to occupy the executive branch of the US after a long history of blunders in R& D and policy in the area. 

- The upcoming Copenhagen Summit has put carbon emissions into the forefront of the global dialog.

- The advancements in technology for renewable energy have made them, in many situations, within striking distance of traditional fossil fuels on a cost basis. 

- Finally, oil price volatility has refocused people’s attention on the need for energy security and stability, which renewables provide.

The lows: 

- The Federal deficit situation means that once the funds from the ARRA are deployed, the industry faces a “massive cliff,” as Richer states, from which Federal support for the sector will fall when the stimulus runs out in 18 months.

- In the 2009, the US is facing the first year-over-year decline in electricity demand since World War II, something that a half century of previous crises could not do.  This reduces the pressure on the power generating industry, absent RPS standards, to embrace renewable projects at this time.

- The current House and Senate energy legislation is stalled and important political capital is being used for healthcare legislation instead.  Almost all of the presenters, with the exception Matt Rogers of the Department of Energy, do not think that a cap and trade bill passes by the end of 2009 and are skeptical that it will even be done in 2010.  

- The prospect for an agreement in Copenhagen that puts a real price on carbon seems remote at best. 

- The recent discoveries in shale based natural gas and large oil fields in Brazil and the Gulf of Mexico threaten to dampen the price signal for energy that is necessary to make renewable competitive.

Finally, everyone echoed the fact that if you are involved in the renewable sector today the government is your partner, whether you like or not, which is very different from how capital providers normally look at favorable market opportunities.  Our next blog post will summarize theme number 2: the array of government initiatives that are being launched in California, which may become models for the rest of the country.  

If there is any topic you would like further elaboration on, feel free to post a comment and we’ll respond.

Disclosure: NA 

The concept is simple and ancient: apply intense heat to biomass in the absence of oxygen (pyrolysis) and the resulting elemental carbon, or charcoal, can be used either as a fuel, along with its associated byproducts of syngas, heavy oil and heat. Or as a form of carbon sequestration when the material is buried or used as fertilizer.   Left in the ground, biochar will stay intact for years, stretching out the normal carbon cycle where plant debris decomposes, emitting carbon each season.   Not to mention the second order effects of enhanced fertilization and reduction in natural methane and nitrous oxide emissions.

On the policy level, the idea bears exploration.  As this week's Economist reports, very preliminary modeling shows that one to two gigatons of carbon could be sequestered annually in soils (out of global emissions that are estimated to be around 9.7 gigatons - thus not insignificant) at very low cost.

Where the debate takes hold is the issue of unintended consequences.  The ETC Group recently released a published opposition to BioChar from 147 environmental and human rights groups.  Along these lines, Biofuels Watch in the UK also voiced concern that a scaled effort in biochar could result in growing crops exclusively for char, displacing forests and food production - similar to the effects of ethanol production.  Given the potential that biochar has to produce low cost carbon offsets if included in the CDM mechanism of any future cap and trade systems, the potential for abuse is real.

We are sympathetic to these concerns given the ethanol example, but would set the hurdle high for rejecting this solution on derivative concerns.  The potential for a low cost, large scale reduction in carbon that includes both the developed and developing world has our preliminary support.

From a public investor's perspective, the ability to invest in biochar is limited.  As discussed on Alt Energy Stocks, efforts to commercialize the oil component of the output is being pursued by Dynamotive Energy Systems is overly risky.  As Tom Konrad correctly points out, the commodity risk in end market prices for biofuels are not connected to the input price of the biochar inputs, setting up the potential for negative spreads.  On the equipment side, the current crop of manufacturers are private (for one see, Carbonscape out of New Zealand) and barriers to entry will be low.  The Economist points to a potential breakthrough in continuous batch processing that may differentiate this group, but it is too early to tell.

At the moment, we would look toward the resource owners who may have a new end market for their waste.

Disclosure: None

Many people are wondering whether the future will be "green" or business-as-usual". The answer in our view is "No." It will be neither. It will be BOTH.

Opinions about he future tend to fall into one of two camps. The "Green" camp advocates "cap-and-trade," wind power, solar power, electric vehicles, a simpler lifestyle with less transport, and backyard gardens. The business-as-usual crowd thinks that global warming is a hoax, plenty of oil, gas, and coal exists and can be economically recovered with only modestly higher prices or even with lower prices, technology can solve resource constraints, nuclear power is always available if fossil fuels get scarce, and the needs of the economy take precedence over environmental considerations.

In the news today are two stories about what is actually happening that should give members of either "camp" reason to pause and think a bit harder.

China is investing US$1.7 billion in two Alberta oil sands projects.

The Financial Times reports that the investment needs oil at US$50 to $60 per barrel to be successful. The Chinese investment was made after ten years of watching and waiting for the price to be right. The Canadian oil sands are notorious with environmentalists as major sources of carbon emissions, downstream pollution of rivers, and marginal "energy return on energy invested".

Another bit of news from China: BYD, the Chinese electric car producer owned 10% by Warren Buffett, has moved up by one year its plans to introduce an all-electric vehicle into the US market, in 2010.

So whose side are the Chinese on? Or is this a case of two opposing factions making these investments?

Again, the answer is neither. As oil becomes more costly to find, its price will rise. This will make cars running on gasoline more expensive to operate, and electric vehicles will be increasingly competitive. It is impossible to convert the world's fleet of vehicles from gasoline to electric in less than a generation, and so gasoline will continue to be needed for many years. And as the price of oil rises, more sources will become economic, such as the Canadian oil sands and the deepwater resources off the coast of Brazil. Electricity will become more expensive too, in part because the world will recognize the need to place a price on carbon emissions, and the share of electricity generated from economically-viable renewables will grow.

Yet another insight into the need for the two "camps" to break out of their ideological strait jackets comes from a book published earlier this year written by veteran journalist William Tucker titled "Terrestrial Energy." He takes climate change and "peak oil" concerns seriously, which means conservatives won't listen to him. He also makes a compelling case that nuclear energy (based on uranium and thorium from the earth--hence terrestrial) is the alternative to fossil fuels with the greatest potential to solve both the problems of environment and energy. That means the "green" camp won't listen to him.

In our view, both "camps" should be listening to him, and to each other.


Disclosure: None.