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  • Background Information For Investing Opportunities Associated With The Transition From Centralized To Distributed Energy Resources

    Background information for investing opportunities associated with the transition from centralized to distributed energy resources

    After Friday's (September 20, 2013) EPA proposed regulations placing curbs on power plant carbon emissions I started a line of research looking more closely at the issue. What I found was that there are several market forces converging that will likely change the nature of the power grid in the near future irrespective of the regulations.

    I don't know if there is any investor interest in these issues at this time. But I thought it would be interesting to summarize a few articles I found that surface key issues.

    I am going to start off with three articles that provide an informational overview of many of the issues. I will follow that with a brief summary about the impact of the EPA's proposed regulations.

    In my opinion, the EPA's actions are mostly irrelevant as market forces are already in place that signal the beginning of the end for coal fired electricity generation plants in the US.



    Why the U.S. Power Grid's Days Are Numbered

    By Chris Martin, Mark Chediak, and Ken Wells August 22, 2013

    There are 3,200 utilities that make up the U.S. electrical grid. These companies provide $400 billion worth of electricity per year, mostly derived from burning fossil fuels in centralized facilities and distributed over 2.7 million miles of power lines. Regulators set rates; utilities get guaranteed returns; investors get sure-thing dividends. It's a model that hasn't changed much since Edison invented the light bulb, and it's doomed to obsolescence.

    That's the opinion of David Crane, chief executive officer of NRG Energy, a wholesale power company based in Princeton, N.J. Crane says that a confluence of technology, deregulation, cheap natural gas, and political pressure poses "a mortal threat to the existing utility system." He says that in about the time it has taken cell phones to supplant land lines in most U.S. homes, the grid will become increasingly irrelevant as customers move toward decentralized energy. Rooftop solar, in particular, is turning tens of thousands of businesses and households into power producers. Such distributed generation, to use the industry's term for power produced outside the grid, is certain to grow.

    Crane suspects some utilities will get trapped in an economic death spiral as distributed generation eats into their regulated revenue stream and forces them to raise rates, thereby driving more customers off the grid.

    Anthony Earley Jr., CEO of giant Pacific Gas & Electric, doesn't share Crane's timetable for the coming disruption. He thinks it's further out, but he does agree about the seriousness of the threat. Solar users drain revenue while continuing to use utility transmission lines for backup or sell their power back to the power company. Earley questions how power companies pay for necessary maintenance and upgrades of the transmission system [the grid] if the free ride continues? So far regulators in Louisiana, Idaho, and California have rejected calls to impose fees or taxes on solar users.

    A July report by Navigant says that by the end of 2020, solar photovoltaic-produced power will be competitive with retail electricity prices, without subsidies, in a significant portion of the world. []



    Game Changers to the U.S. Electric Utility Industry.

    The Edison Electric Institute recently released a report entitled "Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business" [].

    The report describes what it terms as a series of disruptive innovations that are encroaching on Electric Utilities. The changes are due to convergence of factors such as:

    * Enhanced focus on development of new distributed energy resources [DER] technologies in conjunction with falling costs.

    * Increasing customer, regulatory, and political interest in demand side management technologies.

    * Government programs to incentivize selected technologies.

    * Declining price of natural gas.

    * Slowing economic growth trends.

    * Rising electricity prices in certain areas of the country.



    In an article appearing in Forbes that discusses the Edison Electric Institute's publication, Peter Kelly-Detwiler reports that these factors are potential "game changers" to the U.S. electric utility industry, and are likely to dramatically impact customers, employees, investors, and the availability of capital to fund future investment. []

    That Edison Electric Institute publication suggests that financial markets are not aware of the scope of disruptive potential. The publication further suggests that with the advent of demand response, distributed generation [behind-the-meter solar, storage], and increased end use efficiencies, revenues may fall and new tariff structures may become necessary.

    If tariffs for capacity or kilowatt-hours are raised to compensate for declining centralized generation utilization, the effect may be to further drive customers away from a centralized grid system.

    Germany and Australia:

    In some overseas markets with high tariffs, the push to distributed generation is proceeding more rapidly than in US market. CEO Peter Terium of RWE (RWE AG ), one of Europe's largest utilities, stated in 2012 "Our core markets are changing remarkably fast." With 32 gigawatts of solar, 40% of that on residential rooftops, consumers are now both producers and consumers. The success of this transformation of the energy industry will be decided at the local level.

    [Note: there are definite signs that the transition in Germany is proceeding too rapidly.] []

    RWE is already living the Edison Electric publication scenario. With the advent of solar, as well as increasing end-use efficiencies, the utility now forecasts declining electric sales from now to 2035, with mid-afternoon peak demand falling almost 20% from just over 24,000 MW to 19,000 MW.

    Australia is looking at similarly rapid and significant changes, having gone from 20,000 solar rooftops in 2008 to over 1,000,000 as of March this year (2013). Australian utilities are struggling to cope with this change, and looking to find new ways to remain relevant to customers.

    In the US:

    NRG's CEO David Crane recently indicated that solar power and natural gas are coming on strong, and that some customers may soon decide they do not need a centralized electric utility. He predicted that within a short timeframe, we may see technologies that allow for conversion of gas into electricity at the residential level. If this occurs, one could expect a significant impact on the value of existing generation companies as well as the value of electric distribution utilities.

    [I looked into the technology that Crane was referring too and found the following example of a direct conversion of natural gas to electrical power and heat. Redox's Power SERG 2-80, also called "The Cube," that connects to a natural gas line and directly electrochemically converts methane to electricity. The first generation, scheduled for release in 2014, has a nameplate capacity of 25 Kw, which can power a gas station or small grocery store, and is roughly the size of a dishwasher. The system can presumably run at an 80% efficiency when used to provide both heat and power.] []

    By the way, The Cube uses Rare Earths to function - []

    It remains to be seen if Redox can deliver what it promises, but the point is that technological advances are likely going to substantially modify the market environment for large electric generating/ utility companies in the next ten years.



    Changes in the U.S. Regulatory Environment

    Curbs on power plant carbon emissions.

    The Obama administration on Friday [September 20, 2013] announced regulations setting strict limits on the amount of carbon output that can be generated by NEW U.S. power plants. The proposed regulations quickly sparked a backlash from supporters of the coal industry and are certain to face legal challenges. []

    The new EPA guidelines make it nearly impossible to build economically feasible new coal plants without using expensive technology to capture carbon emissions.

    In practical terms, the proposed regulations are likely to be irrelevant because economic/ technological forces are already reshaping the power markets.

    Current natural gas-fired power plants are already within the rule's emissions limits without requiring new equipment. That means natural-gas fired plants, already by far the cheapest power plant to build and operate, will likely remain the top choice for utilities.

    While coal will continue to be an important fuel for electricity generation in the U.S. the country will get less and less coal from high-cost Appalachian mines. Companies with large Appalachian operations, such as James River Coal (JRCC) and Alpha Natural Resources (NYSE:ANR), will likely suffer. []

    Sep 21 1:47 PM | Link | 17 Comments
  • Stability Of The European Union (21) August 28, 2013 To November 8, 2013

    This instablog is designed as an interactive News Concentrator devoted to news and discussions about the debt and associated problems in the EU and its member states.

    The top portion of the instablog contains useful background information/ charts.

    Up-to-date news content is posed in the comments area. So if you are interested in current news, read the comments.


    A picture is often worth a thousand words. Here we have the Percent Economic Growth Rates for three countries: US, Greece, Germany. Note the distinct downturn in the US Economic Growth Rate.

    Here is National debt as a percentage of GDP in 2009 for the Euro Zone. Look at Greece and Italy.

    Here is Government deficit as a percent of GDP for 2009. Look at Greece and Ireland. Look at UK and Spain.

    Here is the all important Jobs Picture as of March 2010. Look at Greece, Spain, Ireland and France.


    What is the EFSF?:

    The European Financial Stability Facility (EFSF) is a special purpose vehicle financed by members of the Eurozone to combat the European sovereign debt crisis. The €110 billion bailout to Greece is not part of the EFSF guarantees, but a separate commitment.

    When you look at the Guarantee commitments by the different euro zone countries [] you will see something interesting. Greece, Ireland, Italy, Portugal, and Spain (i.e., the PIIGS) account for over one-third (36.7%) of EFSF commitments. All by themselves, Italy and Spain have a financial commitment of almost one-third (29.8%) of the total EFSF commitment.

    (October 23, 2011) I added this nice summary graphic of the Dominoes effect associated with the European debt crisis. You can also see the graphic and the accompanying article with the following link:

    (October 23, 2011) Guest Post: The European Financial Crisis In One Graphic: The Dominoes Of Debt. From: Zero Hedge, by: Tyler

    The original copyrighted graphic is from Charles Hugh Smith (" 2011)

    Added February 9, 2012

    Greek General Government Debt Percent GDP

    (March 10, 2012)

    Unemployment for individuals less than 25 rose to 51.1 %, twice as high as three years ago as budget cuts imposed by the European Union and the International Monetary Fund as a condition for dealing with the country's debt problems have caused a wave of corporate closures and bankruptcies.

    Fantasy Greek GDP Growth Rates:

    In the fantasy report "Greece: Preliminary debt Sustainability Analysis" dated February 15, 2012 which I referred to as the "Deus ex machine" report one of the EUs key economic assumptions was that Greek GDP growth in 2012 would be -4.8% and -1% in 2013.

    The Greek economy saw growth rates of:

    -0.2% in 2008,
    -3.3% in 2009,
    -3.4% in 2010,
    -6.9% in 2011
    -7.5% in fourth quarter of 2011.
    (Data from John Mauldin report

    I plotted the Greek GDP data below and projected the GDP values for 2012 and 2013 based on the current data. I also plotted the Greek GDP projections from the Deus ex machine report - blue line.

    There is no Greek stimulus, jobs are in freefall. Which projection do you believe?

    (March 29, 2012) Greek Deposit Run Update: Hopeless And Getting Worse.


    Added April 27, 2012

    Q1 unemployment is now one quarter of the working population or 24.44%, up nearly 2% from the 22.85% as of December 31

    (click to enlarge)

    Global PMI Changes from March to April 2012

    (click to enlarge)

    From: ZeroHedge


    (click to enlarge)

    From: ZeroHedge -

    Ten Year Bond Yield Curves as of 7/20/2012

    From: The Disciplined Investor

    (click to enlarge)

    Here are some interesting charts on Italy sourced from Bloomberg's BRIEF
August 7, 2012, available on "The Big Picture"

    I verified the shadow economy figures in the following sourced article about shadow economies:

    Shadow Economies: Size, Causes, and Consequences by FRIEDRICH SCHNEIDER and DOMINIK H. ENSTE, Journal of Economic Literature
Vol. XXXVIII (March 2000) pp. 77-114

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)



    (click to enlarge)

    From: Labor Force Survey by the Hellenic Statistical Authority January 10, 2013

    (click to enlarge)

    From: Labor Force Survey by the Hellenic Statistical Authority January 10, 2013

    (click to enlarge)

    This chart is based on the data from the Hellenic Statistical Authorities Labour Force Survey published January 10, 2013.

    This shows the rate of change of unemployment among age groups from 2011 to 2012.

    Yet the Greek government, under the direction of the Trokia, is about to initiate an even more Draconian series of spending cuts and tax increases.

    Remember the IMFs fantasy report? GDP was supposed to start increasing again in 2012. Instead, it continued to fall, and this is one of the reasons why. They are systematically forcing people out of their jobs. No jobs, no income, no income, no spending.

    Yes, the 15-24 age group has unemployment at 56.6%, but as this chart shows, the older age groups are suffering a higher rate of increase of unemployment. So they are rapidly catching up.


    Latest youth unemployment chart as of May 31, 2013

    (click to enlarge)


    Remember, the top portion of this insta contains some useful historical information. CURRENT NEWS is posted in the comments area.

    WARNING: This is a no Troll Zone. If you are disruptive, your comments will be deleted.

    Aug 28 1:04 PM | Link | 252 Comments
  • Swine Flu AND Medical News Concentrator August 28, 2013 To November 8, 2013

    This instablog is designed as an interactive News Concentrator devoted to news and discussions about Swine Flu and other medical news.

    The top portion of the instablog contains useful background information/ charts.

    Up-to-date news content is posed in the comments area. So if you are interested in current news, read the comments.


    Some Definitions:

    What is Reassortment

    When two different virus strains infect the same host, they often exchange genes, a process known as reassortment.

    A significant number of experts are concerned that as H5N1 (Avian Flu) spreads more widely and infects more people, it will come across more hosts who are also carrying human flu viruses. This increases the likelihood of a new strain emerging that has the severity of the bird flu virus and the infection rate of the swine flu virus, leading to a new global pandemic with much deadlier consequences than the one we are experiencing at the moment.

    What is R naught (R 0)

    How many people the average infected person infects is called the basic reproductive number, or R0 (pronounced "R naught").

    Measles, which is probably mankind's most contagious infection, has an R0 of about 18. Polio's number is about 6; severe acute respiratory syndrome (SARS) about 5. For seasonal flu strains, the R0 is about 1.2, and for pandemic strains it is rarely higher than 2. For the novel H1N1 strain, it's about 1.6. What this low R0 means is that flu outbreaks are always teetering on the verge of having their myriad chains of transmission broken by people who get infected but don't pass the virus to anyone else.

    Swine Flu - Novel H1N1 flu, popularly known as swine flu, is a respiratory infection caused by an influenza virus first recognized in spring 2009. The new virus, which is officially called swine influenza A (H1N1), contains genetic material from human, swine and avian flu viruses. (By Mayo Clinic staff)

    Pandemic - The word "pandemic" comes from the Greek "pan-", "all" + "demos", "people or population" = "pandemos" = "all the people." A pandemic affects all (nearly all) of the people.

    A World Health Organization phase 6 pandemic indicates that influenza due to the novel H1N1 swine flu is occurring in multiple countries around the world and that human infection is widespread. The classification does not reflect the severity of individual infections.

    Cytokine Storm -
    When our body detects foreign micro-organisms indicating an infection, our body might respond by over-protecting the site of infection. The body may race so many antibodies to the infection site that they collect in what is known as a cytokine storm.

    A cytokine storm, or "Hypercytokinemia" is a potentially fatal immune reaction consisting of a positive feedback loop between cytokines and immune cells.

    A positive feedback loop means that as something increases, that increase stimulates further growth.

    What makes younger people more susceptible to H1N1 is that their "vigorous immune systems pour out antibodies to attack the new virus. That can inflame lung cells until they leak fluid, which can overwhelm the lungs.

    This vulnerability in the young is reminiscent of the Spanish flu of 1918. That strain of flu also struck mostly healthy young adults.

    Pulmonary Embolism - Occurs when a blood clot forms in an arm or leg breaks free and enters the lungs where it is too large to pass through the small vessels of the lungs and forms a blockage. This stops blood from flowing into an area of the lung, and the part of the lung dies because it does not receive oxygen.

    What is an Emergency Use Authorization (EUA)?
    An EUA may be issued by the Food and Drug Administration (FDA) to allow either the use of an unapproved medical product or an unapproved use of an approved medical product during certain types of emergencies with specified agents.

    What is the PREP Act?
    The PREP Act authorizes the Secretary of the Department of Health and Human Services ("Secretary") to issue a declaration ("PREP Act declaration") that provides immunity from tort liability (except for willful misconduct) for claims of loss caused, arising out of, relating to, or resulting from administration or use of countermeasures to diseases, threats and conditions determined by the Secretary to constitute a present, or credible risk of a future public health emergency to entities and individuals involved in the development, manufacture, testing, distribution, administration, and use of such countermeasures.

    The PREP Act also authorizes an emergency fund in the United States Treasury to provide compensation for injuries directly caused by administration or use of a countermeasure covered by the Secretary's declaration. While no funds have been appropriated for this purpose, if funds are appropriated, compensation may then be available for medical benefits, lost wages and death benefits to individuals for specified injuries.

    What are Clinical Trials:
    Clinical trials, also known as clinical studies, are research studies in which scientists and doctors test new drugs and treatments to see if they will improve health. Many of today's treatments for cancer are based on the results of past clinical trials. Because of progress made through clinical trials, many people treated for cancer are now living longer.

    Clinical trials are divided into four phases.
    Phase 1 trials: These trials are the first time a new drug or treatment is given to humans. They are normally carried out in a small number of volunteers (typically 6-20 people) who may include healthy volunteers or patients with the disease for which the product is intended as a treatment in order to find out how safe the treatment is. They also look at how a new drug should be given (by mouth, injected into muscle or the bloodstream, etc.), how often and at what dose. Phase 1 trials can also involve patients for whom standard therapies have failed and for whom no other therapies are available.

    Phase 2 trials: These trials involve larger numbers of people (typically 12 - 50). Phase 2 trials continue to look at safety of the therapy but also test how well the new drug or treatment works in patients with different disease types.

    Phase 3 trials: These are large studies (100+ people) that look at how well a new drug or treatment works in comparison to current therapies to see which treatment is better. Those taking part are usually divided into two treatment groups: standard treatment versus new treatment.

    Phase 4 trials: These trials are usually carried out after the drug or treatment has been approved by the FDA and is readily available for use in the general patient population. The purpose of Phase 4 trials is to continue to study the effects of the drug or treatment on different populations and to look for side effects associated with long-term use.
    Back to Top

    What is a Protocol:
    Clinical trials use written guidelines called protocols. The protocol explains what the trial hopes to accomplish, how the trial will be carried out, and why each part of the trial is necessary. For example, the protocol includes:

    * The reason for doing the trial
    * How many people will be in the trial
    * Who is eligible to take part in the trial
    * What study drugs participants will need to take
    * What medical tests participants will have and how often
    * What information will be gathered

    Every doctor or research center that takes part in the trial uses the same protocol. This makes sure that patients are treated identically no matter where they are receiving treatment, and that information from all the centers taking part can be combined and compared.

    Why Slow Production for Traditionally Produced (chicken eggs) Swine Flu Vaccine:
    One dose of swine flu vaccine for every two eggs, compared with two doses of
    seasonal flu vaccine per egg

    Sorry if the link does not work... it appears the Boston Globe newspaper appears to be playing games with link addresses... Just copy the link, and Google it.

    Brief Overview of Categories of H1N1/ Vaccine Investment Plays:

    I - Vaccines / Prevention
    1) Production Method / Capacity plays (NASDAQ:NVAX) (NASDAQ:VICL) (NYSE:NVS) (NASDAQ:INO) (NYSE:CSL)
    2) Nationalistic / Population Size Play (SVA - China) (NVAX - India)
    3) Injection / Vaccine support services (syringes etc.) (NYSE:BAX) (NYSE:BDX)
    4) Outsourced production plays
    5) Bio -Defense (MDCGF - France)
    6) Anti-Mutation / Pan-Influenza Play (NYSEMKT:CVM) (NYSEMKT:NNVC) (INO)
    7) Universal Flu Vaccine Play (INO)

    II - Treatment After Infection Occurs:
    1) Dealing with severe lung infections (Fludase® (DAS181)) (NYSE:CBM) (OTCQB:AEMD)
    2) ICU treatments (NASDAQ:BCRX) (NYSE:GSK) (NYSE:ROG)
    III - Population Avoidance:
    1) masks/ disinfectants… Surgical masks are good enough (NYSEMKT:APT) (NYSE:MMM) (NYSE:CLX) (NYSE:ECL) (OTCQB:PURE)

    IV - Testing do you have it? (NASDAQ:GPRO)
    1) Test kits - (NYSE:DGX)

    V - Merger / Acquisitions / Licensing (VICL) (NVAX)
    Sorry this is still a graphic instead of a table. I played with the table tool, but its a
    PITA to work with.

    Swine Flu Companies Discussed and Their Web Sites

    Swine Flu Hits Stuffed Animal World:

    Link to 2011 H1N1 US Flu Outbreak Map is broken... sorry.

    Red Cross Tips For Dealing With The Flu:

    * Stay in a room separate from common areas of the home and avoid contact with others as much as possible.

    * Stay at home for at least 24 hours after their fever is gone without using medicine to reduce the fever.

    * Get lots of rest and drink plenty of fluids.

    * Consider wearing a face mask, if available and tolerable, when sharing common spaces with household members. (ed - surgical masks ok).

    * Check with your healthcare provider about whether to take antiviral medication, or if fever persists, whether antibiotics are needed.

    *Disinfect door knobs, switches, handles, toys and other surfaces that everyone touches.

    * Use detergent and very hot water to do dishes and wash clothes. It's okay to wash everyone's dishes and clothes together. Wash your hands after handling dirty laundry.

    * Designate only one adult as the caregiver. People at increased risk of severe illness from the flu should not be caregivers.

    * Although not mentioned by the Red Cross, the caregiver should probably ware a surgical mask as well when entering the sick room.

    * Deal with crisis situations calmly and confidently to give the best support to the person being cared for.
    _____________________ Provides Credible, Up-to-Date Information And Decision-Support Tools For Flu Season

    Click here to link to the Mayo tool:

    Suggested Protocol For Schools To Decide When Flu Should Trigger A Shutdown

    After comparing more than two dozen possible scenarios for closing a school, the analysis suggested three optimal scenarios:

    1. A single-day influenza-related absentee rate of 5 percent

    2. Absenteeism of 4 percent or more on two consecutive days

    3. Absenteeism of 3 percent or more on three consecutive days

    Disclosure: (sometimes trading, sometimes holding)

    Disease outbreak map on

    Link from Guns and OG.

    Aug 28 12:57 PM | Link | 230 Comments
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