DarkStealth

Google Drops a Nuclear Bomb on Microsoft. And It's Made of Chrome.

This only seems useful for the Netbook market, and even then, it's not clear that's a good trade for people. Windows is so successful because of network effects - your PC running Windows is more valuable because your friends run it and you use it both at work & home. You reuse learning on one device & it applies to all. And your same applications work everywhere. Providing what they're branding as an operating system will leave their users without some of the network effect. True, maybe you can run some applications in a web browser, but many of them are imperfect substitutes for Microsoft Office.

It's surprising that Google is branding Linux + a window manager as an operating system. And of course, it's a downgrade for people that already have a PC or laptop. (Gotta play my games...)

Does Google really think they can make money this way, or is this just to spoil Microsoft's revenue from Netbooks?

Does the World Need Google's Operating System?

So Google wants to throw away the existing body of applications I've already got, and hope that everyone is happy to migrate to the web, with crappy replacements for Office? How am I going to play my games? I'm not downgrading to Linux and installing a new window manager (which Google is attempting to pass off as an operating system!).

This is useless on the server and a downgrade for existing PC owners. Maybe the Netbooks market is compelling, but that's automatically assuming that everyone will be happy using apps running in a web browser, with their lesser functionality. Do they come with pop-up ads? Perhaps they have a chance on the phone - oh wait, did they think about the iPhone?

It's hard to imagine Google making a decent amount of money here. Maybe they'll disrupt Microsoft's plans. But will a Chrome window manager pay for its own development, or be a huge money sink like most of Google's other free apps?

The Carbon Emissions Tax Effect

On May 18 11:28 PM philais wrote:
> Say what? All this is fine if the private market can seek a profit,
> and all this is not government coercion... but of course it is. Follow
> the government money! '

Yes this is government coercion, and it's necessary to fix a market failure. And private companies can profit from it.

The market (outside of some specific growing portions of sectors) has been woefully unmotivated by any of these issues. Climate change is the largest market failure ever - the cost of living unsustainably is an external cost, not included on anyone's balance sheets, though over time governments at all levels will be forced to pick up the tab for adapting to a new climate. That's the motivation for this government coercion - the market's rules need to be changed to motivate companies to act in their enlightened self-interest (without putting themselves at a competitive disadvantage). Of course we must use the market & let companies do what they do best (which is just gradient searches in some multi-dimension cost curve), but they need to be optimizing within a broader framework (ie, a curve with one more dimension) than they currently do. The only common unit of measurement the market seems to respect is money, hence the idea of placing a price on greenhouse gasses.

Government intervention to correct market failures is the most complete solution, and much better than the "voluntary" (ie, ineffective & unbalanced) efforts championed by industry. Just as many may agree that regulation is required to keep banks & insurance companies from destroying themselves, some cost for carbon pollution is necessary to keep industry from destroying the planet (or our society through using all our liquid fuels before we have replacements). Or if you don't believe in AGW, China's government is pushing ahead with electric cars simply to avoid the worst of Peak Oil.

If the AGW and Peak Oil arguments don't motivate you, companies of any size can save money by buying more efficient equipment that uses less energy, anywhere from a better jet engine or hybrid locomotive, to improved building HVAC systems, to those compact flourescent lightbulbs. Once again, a cap & trade system will help encourage this.

BTW, private companies that really "get" this should make a lot of money off this. Witness the wind & solar industries, as well as corporate pushes in large companies like General Electric. The truth is we'll need to shift somewhere around $2 trillion of investment in the US economy over the next 40 years to rebuild our energy infrastructure & transportation grid. If any company or investor isn't aware of this or paying attention, they need more vision.

The Carbon Emissions Tax Effect

Here are a few reasons to accept a cap & trade system, from different perspectives. If you don't like one, skip to the next:

1) The climate change scientists are probably right - we need to not destroy our planet's ability to sustain humanity.
1a) Consider Australia - climate change has shifted the rainfall patterns 70 miles south, causing increasing droughts since the 1970's. Read "The Weather Makers".
1b) A lot of the people confused about climate science are thrown off by the effects of our own air pollution on the planet. The US Clean Air Act greatly reduced the amount of soot & other gunk pumped into the atmosphere in the mid-1970's, which turned around a 30 year trend of global cooling, leading to increasingly warmer temperatures for the past 30 years. Now that China is burning more fuels without regulating air pollution, this may be affecting some of the recent data. My money's still with the climate change crowd.
1c) The "polluter pays" principal is the only equitable way to deal with the problem. Yes, this means those of us consuming more may need to pay more. But view it as a fee on a percentage of what you spend, and you have the power to reduce this fee through purchasing different items or changes in behavior.

2) Climate change can be used as a proxy for peak oil, and is currently the clearest motivater to get off fossil fuels. In terms of solutions, there's about an 80% overlap. We need to electrify the transportation grid, and whether you believe it's to stop greenhouse gasses from cooking the planet or to get energy from a non-oil-based fuel to preserve our way of life, it doesn't matter. The solution is the same.
2a) Oil is costing the US economy a ton of money, with a lot of it going to regimes that don't like us much. Keeping that money within the US is much more attractive.
2b) Before anyone brings up Canada's tar sands, ethanol, or US coal extraction rates, please read Richard Heinberg's book "The Party's Over", which talks about the "net energy" extracted from each source. The fossil fuels look much more bleak in this context. (And for those believing in the Russian non-fossil basis for oil, well, I'd love to hear that theory arrive at rates of oil production & at what rate oil raises to an extractable part of the Earth's crust.)
2c) Fossil fuels, especially coal, are just downright dirty. You end up with mercury (a neurotoxin), benzene (causes cancer), and all sorts of other unpleasant chemicals in your air. Plus you get the giant TVA coal sludge disaster flooding small towns & contaminating water supplies, repeated every decade or two.

3) There's an excellent chance that reducing our energy use as a society is inevitable (due to ANY COMBINATION of climate change, peak oil, or simply higher prices from OPEC & Russia). The cheapest way there is to improve energy efficiency, and this is generally more acceptable than conservation (ie, changes in individual behavior). A carbon cap & trade system or a separate carbon tax drives investment towards lowering O&M costs. It saves people money, and the payback period is pretty short on most efficiency measures. This makes financial sense for businesses & homeowners.
3a) Coolest, simplest idea I've heard of in a while: Gravity-film heat exchangers. Use hot water draining out of your shower to warm up cold water going into your hot water tank. Simple & cost-effective - just brilliant.

BTW, to anyone above calling a cap & trade system a carbon tax should be aware that all the economists are pushing for a carbon tax instead of a cap & trade system, because it can't be gamed as much in each state legislature or by Wall Street people buying derivatives on carbon allowances. Please keep a carbon tax and this potentially more cost-effective cap & trade system separate in your discussions.

Solar's New Important Players: Chevron, Lockheed Martin

The cool thing is that some solar companies get this & are becoming vertical installers. SunPower has been in the utility-scale business for a while, and First Solar is buying their way into this business as well (by buying contracts from OptiSolar).

Microsoft Becomes Just Another Company

Microsoft will use this money to essentially play the currency market. With 60% of revenue from overseas, I believe the company wants to keep more cash in local markets around the world, or at least not in the US dollar. (Maybe this is a tax dodge instead of a hedge against the US dollar - I'm not sure.) But most of their costs are in US dollars - they just wanted access to really cheap dollars to give them more flexibility.

Also, they are very likely to be buying back MSFT stock.

Falling Dividends: Are Utilities Next?

Cap & trade will benefit utilities in proportion to their carbon intensity from their fuel mix. It should hurt utilities who get most of their power from coal, and benefit ones getting power from renewables. Regulators could simply pass the costs on to consumers (and this happened in the UK - a bunch of utilities raised customer rates to pay for carbon credits but were given the carbon credits for FREE, pocketing billions). However, that would appear to be a tax increase to ratepayers, which wouldn't be popular during a depression. And the entire point of a cap & trade system is to redirect dollars towards renewable forms of generation, like wind and solar. Companies with deep nuclear portfolios may benefit as well. So companies like FPL and CEG & some California utilities may do quite well, whereas coal-heavy utilities may end up losing a good portion of their profit margin.

Additionally, half the states now have renewable portfolio standards, requiring some percentage of their power to come from renewable sources over some time frame, like a decade. Note this is a _legislative mandate_, not something subject to the whims of companies who decide to cut back on spending by 3% due to a depression, and a national cap & trade system will turn this from a basic requirement for staying in business into a potential for making a profit off of slower utilities. If one utility is mandated to generate 15% of their power from renewables but generates 20%, they can sell that 5% to other utilities, most likely at a significant premium to wholesale electricity. Energy traders & merchant power producers w/ wind, hydro, solar & nuclear plants should get rich here. Puget Sound Energy is selling their renewable power to California utilities today, earning a tidy profit.

This renewables mandate is causing a huge scramble to build wind farms and install solar panels (with some utility scale solar projects proposed that rival nuclear plants in capacity). So the solar manufacturers like SPWRA and FSLR will benefit (especially SunPower - they've got the experience in installing the utility scale projects), as well as wind turbine manufacturers (Vestas, Gamesa, GE's wind division) & their component vendors (BWEN, Trinity). Nuclear plants may expand as well, but the construction time and potential for cost overruns will dampen enthusiasm for nukes. The biggest risk here is the credit market - if the utilities can't get financing, these renewable projects will greatly slow down. But the basic requirement for more renewable power generation isn't going away, and may become significantly more profitable with a cap & trade system.

Why I Sold the Utility Stocks in My Portfolio

If the regulated businesses may be at risk, it seems like a great reason to favor deregulated merchant power providers who can sell renewable energy to various states, or utilities that have some mix of both. Half of the country now has renewable portfolio standards, and the best people to profit from it are the renewable energy production companies (like Vestas, Suzlon, Gamesa, GE's wind division, Broadwind) and merchant power companies who have a large installed base of renewable power (like FPL or potentially Constellation Energy for nuclear).

Goldman Disses Solar - Cramer's Stop Trading ! (10/7/08)

Goldman misses the potential of utility-scale solar projects to sop up any excess panels. Check out the deal PG&E made with SunPower & OptiSolar for an 800 MW plant, the size of a coal plant - this is a game changer. Prompted by an aggressive state renewable electricity standard, this utility had to buy a huge amount of solar panels. And guess what - those legislative requirements for renewable energy aren't going away! While wind energy companies (like Vestas & Broadwind Energy) may be the primary beneficiaries, we'll find that wind's growth will be limited in the medium term by transmission capacity. The extra renewable energy will likely come from utilities investing in solar.

BTW, does it strike anyone as odd that Goldman Sachs owns Horizon Wind and is dissing solar now?

Spain Considers Raising Solar Installation Cap

With financial support from Spain & the US, it looks like the solar industry is heading in the right direction. When you factor in higher coal costs (at least from the railroads which ship the coal), lower costs per watt for solar panels, as well as transmission & siting issues limiting wind energy's growth in the US, it seems more utilities will be forced by their state renewable portfolio standards to invest in more solar, including utility-scale power plants (like the 850MW plant - the size of a large coal plant - that Sunpower & another company started building recently). How can you not be bullish on solar right now?

The Sharp Edge of Solar: Are Solar Stocks Cheap?

Solar is really simple once you understand it. First Solar has the cheapest panels & best balance sheet. SunPower has the best technology & the best business with utilities for the incredibly large scale (well, we should look at this newcomer OptiSolar, who I've never heard of until they announced their incredibly large deal (550MW!) in California). I'm not convinced the other solar companies will be around after a few years.

Isn't Sharp anything but a pure play? If you want to buy a company that mixes solar with some chip-making exposure, buy Cypress Semiconductor (who owns ~half of SunPower).