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karlmitchell

karlmitchell
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  • Solar's Tricky Investment Landscape Today [View article]
    There is a misconception that demand of electricity is constant. It is not, and tends to vary greatly from day to night. Some conventional power stations have to operate below capacity at certain times of day already.

    The nice thing about solar is that the supply peaks, in much of the world, when demand is greatest; during business hours, and when air conditioning use is highest. Many suppliers already vary their prices as a function of time of day in order to smooth out demand to match near-continuous supply. With sensible power use the consumer can take advantage of this.


    To illustrate, have a look at the "current energy" website (http://1.usa.gov/udf0uA). You'll see that, for California, there tends to be a peak around 4pm and a trough around 4am. Solar's peak is, unfortunately, not perfectly matched, but if you imagine adding maybe 25% solar to 75% continuous supply it brings the demand and supply closer together. Diurnal winds, especially in coastal areas, tend to co-incide much closer with peak evening demand, but these are even more variable.

    Sure, solar's variable, but as part of an integrated strategy with other forms of power production (geothermal, wind, wave, hydroelectric, nuclear or conventional) it works well. Peaking in the day might not be right for all users, or even regions, but for many it is a good complement to other forms of energy use. If you combine a rooftop installation with smart metering, managing when certain appliances, rechargers, etc. turn on, you can save a load on power bills, at least in southern U.S.
    Nov 15 12:11 PM | Likes Like |Link to Comment
  • Solar's Tricky Investment Landscape Today [View article]
    My tuppence worth:

    Personally I'm wary of investing any more in polysilicon and module producers until there's signs of either consolidation or a recovery in polysilicon price. At the moment the market is over-crowded, which should affect ETFs as much as individual stocks, and many if not most in the industry are facing potential net losses. This may change if, for example, China uses the opportunity in order to announce even more massive scale installations, which is looking increasingly more realistic as prices drop, but I'm not holding my breath.

    That being said, someone always profits from cheap supply, and to me it is the other parts of the solar industry that I think are likely to yield profits, e.g. rooftop installers (RSOL) and suppliers of other components like power interters such as Power One (PWER) and Satcon (SATC), with lower module prices leading to cheaper installations. At the moment, leased rooftop installations give energy cheaper than grid, at least in the southwest, and fully-purchased rooftop panels give a positive return within 5 years as well as increasing home re-sale value; People are looking for ways to save money in these uncertain times.

    Another area of interest are companies that offer unique patents or processes, such as GT Advanced Technologies (GTAT), that may be potential acquisition targets for companies looking to get into solar at today's discount prices, especially as a hedge against uncertainty in the nuclear and oil industries. This was demonstrated earlier in the year by Total's (TOT) move on Sunpower (SPWRA).
    Nov 14 05:32 PM | 1 Like Like |Link to Comment
  • Wind Power Investors Get Another Reality Check [View article]
    Batteries are insanely cost-prohibitive to implement on such scales (GWh to TWh). They are better suited to demand-side solutions (measured in kWh or MWh), which are implemented by various smart grid firms. The only currently-available supply-side storage technology suitable for load balancing on such scales is Hydroelectric Pumped Storage. Current global capacity is only 90 GW, which is about 3% of instantaneous global generation capacity. In terms of maximum storage, most of the existing projects are around 10 GWh, and these are large projects. Many more will be needed to support expansion of wind at current rates. If you're interested, a list of the world's largest are here:

    en.wikipedia.org/wiki/...

    A huge expansion of such facilities, plus geographic distribution, power source mixing (solar, hydroelectric, geothermal, wind, wave), demand response management, and national scale grid improvement will be necessary in order to support massive expansion of renewable energy.
    Apr 29 07:42 PM | Likes Like |Link to Comment
  • What's Next for American Superconductor? [View article]
    A bear spread might also work: sell a call near current price, and buy a cheaper one higher. You'd profit from a large rebound, and you cover yourself against small losses.
    Apr 29 04:37 PM | Likes Like |Link to Comment
  • Zipcar's Long-Term Sustainability Is Questionable [View article]
    I'm going to strike something of a middle line between previous pro-Zipcar comments and the article. I certainly see a large market for Zipcar's services, and an expanding one. With the rising cost of car ownership, and increasing environmental awareness, I see many more circumstance in which 0- or 1-car families will want access to occasional-use vehicles. The convenience, if you happen to be in a well-served area, seems excellent (some are available 6 blocks from me at the moment). In order to become a profitable company with the current business model, they need to expand massively, and an IPO seems a good way to do it.

    However, the valuation is way too high. It seems to reflect market potential well, and MIGHT end up a good investment, but I think they've caught a wave of initial optimism that is not looking at the inherent risk. A moderate fraction of nonprofitable IPOs seem to fail within a few years, and Zipcar could well be one of them.
    Apr 29 11:02 AM | Likes Like |Link to Comment
  • Zipcar: Steer Clear of the Winner's Curse [View article]
    I agree that Zipcar are probably overvalued at the moment, and as such I'm not seeking to buy in. However, I decided to do some research and think, contrary to your opinion, that Zipcar have plenty of opportunity for growth and are "a true cost saver" in certain areas.

    Looking at the price of renting for many days sequentially is missing the point. This is a hybrid car-rental/ride-share company, and they compete best in the rather unique mid-ground. Consider instead the price of renting their car for just an hour or two, maybe a few times a week. At $9/hr, insurance and gas included, that's actually pretty good in short bursts. I can see plenty of room for market growth there. Those who want more flexibility than local ride-share schemes, one-car families, the environmentally conscious, people who live close to their work ... the list goes on. I notice also they've managed to make some deals with universities. That's another big market. I could see them turning into something that justifies the current valuation, eventually.

    Many IPOs are loss-making, and many companies on the stock market have the "we have experienced net losses..." caveat. Some go on to do really well. In fact, a good fraction of my portfolio involves finding those companies not long before they hit profitability, admittedly normally a long time after IPO. And of course their margins are poor at the moment. The question is whether, with investment, they will be able to turn a healthy profit. I'd say the odds are against them (www.ipo-dashboards.com.../), but, if they succeed, who knows how far they can go? I see they're already international.

    From a personal point of view, during my cursory research I was pleased to find that I could book Zipcars that are right now parked just 6 blocks away from me. As part of a more-adults-than-cars family, I can see how that could be useful, and if they were to expand to other cities I travel to, it would be even more tempting. So, thank you for your article, Lou! I found the analysis to be overly simplistic, but by bringing them to my attention, you may have just saved me some cash and won Zipcar another customer.
    Apr 29 02:17 AM | 5 Likes Like |Link to Comment
  • What's Next for American Superconductor? [View article]
    I like your thinking about AMSC. Options plays would seem to be the place to be at the moment, although I'm personally exploring some more convoluted plays. American Superconductor are a remarkable company that have the potential to expand massively as alternative energy use grows, not just in wind turbines but also in improving large scale grid efficiency and helping to balance variable supply. They have been punished for their reliance on Sinovel, but they could hardly turn down such massive orders. Let's hope they can come up with a more stable arrangement if the orders are ever renewed.
    Apr 29 12:53 AM | Likes Like |Link to Comment
  • Wind Power Investors Get Another Reality Check [View article]
    Correction: Dinorwig has 9.1 GWh capacity. I should also have added that this technique is massively scalable. Opportunities exist in many locations for such facilities with 100s of GWh capacity, if not TWh-scale.
    Apr 10 10:58 PM | 1 Like Like |Link to Comment
  • Wind Power Investors Get Another Reality Check [View article]
    John,

    Let me restate my main (second) point as succinctly as possible, as it seems to have been drowned out in my verbiage.

    Specifically, you said, as something of a central thesis, that "until somebody develops and deploys gigawatt-hour scale energy storage systems that can cope with the day-to-day variability of wind, I have to believe [wind] investments ... should be avoided.". Well, those solutions are already here. Simple math using hard data (1800 MW load over 6 hours maximum) of my prime example shows that Dinorwig Power Station has an ~10.8 GWhr (typo in first version) storage capacity. This easily satisfies the gigawatt-hour scale energy storage need. So, where's the problem?

    Small scale smart grid companies like the ones you mention at the end of your first report deal with sub-grid-scale problems; they are not appropriate for this analysis. For larger scale problems you have to look at Dinorwig, and the likes of American Superconductor's R&D department; the latter I point out without judgement of their worth as an investment.

    And as far as the parts you did respond to, both hard data and scholarly exercises are required to make sense of observations; data tend to require context and a model (whether mathematical or conceptual) to relate it to real world application. Your conceptual model that related BPA energy production variability to 'what is useful' appears to me to be flawed. It's the "hard data" that the John Muir Trust report uses that's disputed; they appear to be off from other studies by a few percent, and use their data to support their inevitably biased conclusions using the same logic as your present (inevitable, because they have an agenda they are trying to promote). The DoE figures use hard data too; they don't just pluck figures out of the air, and are well respected. They have to consider long-term costs in order to guide policy, and so some level of informed extrapolation is necessary. In many ways, their approach is what is useful for long-term investors. In order to make investing judgements you need that ability to extrapolate into the future to some extent, and so some level of estimation is necessary. But that's something of an aside. Regardless of how accurate the various data, models and assumptions are, your central thesis about wind variability being an insurmountable problem is what I question.

    Thanks again for reading.

    Regards,

    -Karl
    Apr 10 10:20 PM | 2 Likes Like |Link to Comment
  • A Reality Check for Wind Power Investors [View article]
    Rather than repost, please see my comments in the link below which addresses both of your "reality check" articles.

    seekingalpha.com/artic...
    Apr 10 03:51 PM | Likes Like |Link to Comment
  • Wind Power Investors Get Another Reality Check [View article]
    Hi John,

    A few quick points relating to your two articles on wind power.

    First off, I'd ignore anything the John Muir Trust say on the subject of wind power. They have been campaigning against wind power for years, and are known for their bias. They commissioned an overtly anti-wind-farm campaigner (Stuart Young) to write the report, and his previous efforts have (a) been based on the calmest years he could find, and (b) contain errors that are unsupported by other studies. For the record, 25% is a typical "calm year" load factor for the UK, but 30% is commonly reached, and in some parts of the world better than 35% is possible; it is not, however, a good solution for all locations.

    Secondly, and for my main point, mismatch of times of peak electricity supply and demand is not nearly as big a problem as you seem to think it is, and you do not need vast amounts of batteries to deal with it. A little research online shows that there are various methods for buffering energy. A good example is at the Dinorwig pumped storage plant in Wales (en.wikipedia.org/wiki/...), where they use the simple concept of converting electricity to gravitational potential energy, by pumping water uphill. The energy efficiency is only about 75% in this case (so ~25% loss), but bear in mind that it is only used to offset the excess, and so the net effect on a pure wind local grid is a loss of ~15% under circumstances in which generation is poorly matched with demand (see below for my final point). A non-random example is American Superconductor (www.amsc.com/REF_AMSC%...). These are only two solutions of many. The demand issue can, of course, be offset further to some extent by variable tariffs, encouraging people to use their washing machines, etc., at times of peak production. So, there are many solutions.

    Regarding the efficiency of various methods of energy product, check out:

    www.eia.doe.gov/oiaf/a...

    The assumptions behind the figures presented in figure 1 and 2, which do NOT include government subsidies, are summarised here:

    www.eia.gov/oiaf/aeo/a...

    The DoE aren't idiots; they have quite comprehensive ways of estimating for wind generation efficiency that are at least close to reality, as the figures are already there. There is uncertainty, of course, but other forms of energy production have their own errors; nuclear power, for instance, assumes long term nuclear waste storage based on very poorly characterised uncertainties. As far as I can tell they also do not consider the costs of cleanup of nuclear plant disasters, which can be massive. Given that it would take many thousands of new nuclear power stations in order to supply the world's electricity requirements, I would propose that such costs need to be factored in; we already have quite a few "incidents" to draw on (en.wikipedia.org/wiki/...) and Fukushima is only going to increase the cost-risk. The long term effect of environmental change of all of these methods are also not factored in, which may elevate the relative cost of coal significantly.

    Consider the relative costs of energy production in table 2 of the DoE electricity generation report; in particular, note how much cheaper wind is than advanced nuclear. Even if you factor in transient energy storage solutions, they are at least comparable, and wind is coming down in price as technology improves and mass production reduces unit costs. Natural gas is the most efficient. Unlike some environmental advocates, who point out that natural gas is non-renewable and not 100% clean, I think that natural gas makes sense in the near-figure while the reserves are there. The power stations are relatively fast and cheap to implement, and "relatively" clean, compared with coal. However, like oil, the global supply is going to dwindle over time; when demand increases due to building of gas power stations, so will price

    For those that remain skeptical about wind power, I encourage you to have a look at Roscoe Wind Farm, Texas. This spans multiple farmers' lands over 4 counties and is, I believe, the largest wind farm in the US (400 km^2, 627 turbines, 781.5 MW). The farmers benefit, as they receive an income from the activity, and it is helping to revive the local economy. In my opinion, the aesthetic issues many have with wind farms is not a big deal here; if anything, I think in this context they actually look quite good. I am NOT in favour of installing wind farms in national parks, etc., but to my understanding this is not on the tables. If such efforts were to be expanded over ALL farm land in the U.S., a very simple extrapolation would suggest that most of the nation's electricity could be supplied, even at <30% efficiency.

    Finally, regarding the mismatch of peak supply and demand from wind, bear in mind that wind energy is only one part (although potentially a substantial one) of an integrated national clean energy solution. Geothermal is cheap and provides relatively consistent supply, albeit only in the western United States. Solar energy is also time-variable, and rarely synchronised with wind; photovoltaic solar may look cost-inefficient in that report, but this is improving faster than anyone anticipated largely due to increased competition thanks to China's massive expansion in the industry. We are already close to grid parity in California and Hawai'i (and I assume Nevada and Arizona too by now), and solar leasing deals for household rooftop installations are finally cost-efficient, at least for those with large roofs. Solar thermal has its own internal energy buffering, and may be suitable in the future. Wave and offshore wind also have a lot of potential, but perhaps are more relevant to the likes of Northwest Europe where efficiency is greater. Smart grid technologies and methods of energy buffering are also critical.

    In conclusion, Wind Power remains a useful contributor to an integrated energy supply policy, and has the potential to become a major one. Demand response and supply buffering are complex issues, but the you'll find that viable solutions are already in existence should you do you due diligence.

    Thanks for reading,

    -Karl
    Apr 10 03:40 PM | 3 Likes Like |Link to Comment
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