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June 30, 2007

The Week in Cleantech (June 25 to June 29) - At The Copa, Copa Cabana

On Monday, Todd Sullivan at Seeking Alpha informed us that ADM (NYSE:ADM) was planning on entering the Brazilian sugar cane ethanol market. It's no mystery that Brazil is an ethanol powerhouse and will be looking, in the years ahead, to export much of its output to the lucrative US and European markets. There is a lot of talk about China becoming an emerging market cleantech powerhouse, but don't forget about Brazil!

On Monday, Mark Gongloff at the WSJ's Energy Roundup reported that Shell (NYSE:RDS-B) CEO Jeroen van der Veer was a big believer in energy efficiency, but not much else. Efficiency will play a large part, but I am a lot more sanguine than Mr. van der Veeron on the capacity of humans to innovate their way out of problems.

On Wednesday, Xavier Navarro at AutoblogGreen informed us that Petrobras wanted Brazil to become the Saudi Arabia of ethanol. See above...

On Thursday, the Biopact Team informed us that Suez (NYSE:SZE) was going to build a sugarcane biomass plant in Brazil...and try to monetize the carbon credits thus generated. Brazil again. Another interesting thing about this project is the carbon credit angle. The potential of the credit income stream to add to normal ROI for these sorts of projects is becoming a lot more tangible to investors.

On Friday, Climateer Investing told us that the US Futures Exchange would offer renewable energy futures, beginning with wind power. The interesting thing with alternative energy is that it is emerging at a time of tremendous innovation in financial markets. This confluence creates a lot of opportunities for people passionate about both.

June 29, 2007

What's In Store For The Grid

One the biggest problems facing North American power markets is the age of, and lack of investment in, power grids. Over the next few years, we can likely expect some major investments going into refurbishing and expanding North American electricity distribution networks.

As an alternative energy investor, you probably want to have the grid issue on your radar. The reason is that as new money pours into this sector, certain firms with interesting technologies to make the grid more efficient could see some substantial upside.

The DOE announced, two days ago, that it had awarded funding for five grid-related projects. Among recipients of these funds are two publicly-listed alternative energy companies, namely American Superconductor (NASDAQ:AMSC) and SC Power Systems, which is the US unit of AIM-listed Zenergy Power (LSE:ZEN.L) or (ZNEPF.PK).

Grid modernization, like smart metering a year ago, is unlikely to get the average investor especially excited. However, given
the degree to which our power grids do need an upgrade,
this is definitely an area worth keeping an eye on.

DISCLOSURE: AES Contributing Editor Neil Dikeman's firm has a banking relationship with Zenergy Power.

June 27, 2007

America Forecasted To Be Hit By Strong Winds

A recent study by Emerging Energy Research confirmed what we have been saying about wind power for some time - namely that growth prospects look very strong for the North American market.

The study, entitled "US Wind Power Markets and Strategies, 2007-2015", is not available free of charge but you can access a summary here (PDF document).

The US: The World's Top Dog

Here are some of the key takeaways from the summary:

a) The US wind power market is expected to grow from 11,000 MW in 2006 to around 49,000 MW by 2015 (for those for whom MW doesn't mean much, this essentially equates to very solid growth)

b) Over $65 billion is expected to be invested in new US wind capacity over the 2007-2015 period

c) By 2015, the US will have a 19% share of global installed wind capacity, making it the single largest wind market in the world

The study notes that there will be (and currently are) wide disparities in regional wind activity. Texas, California, Minnesota, New York, Colorado, and Washington will together account for around 53% of market growth between 200t and 2015.

Consolidation, Consolidation

EER also reports a consolidation trend in the industry, as Independent Power Producers (IPPs) seek to solidify their positions in the market. The study notes that a group of 10 to 15 IPPs is currently emerging from the pack, including strong international alternative energy players such as Iberdrola (IBDRF.PK) and EDP (ELCPF.PK).

We have written in the past about problems with shortages in wind turbine components. EER discusses the intensification of vendor competition in the US wind market. The report notes:"Turbine manufacturing investment in the US has grown markedly in the past two years, with aggressive new entrants now vying with US market veterans GE and Vestas for big name contracts."

Implications for Investors

So what does this all boil down to for the public market investor? It's simple: wind is a good business to be invested in or at least thinking about. The fundamentals look strong, in part because governments are not going to stop supporting it anytime soon, and the industry is fast reaching the kind of scale that will allow wind to be competitive with other forms of electricity generation (especially so as climate change regulations are introduced and CO2 emissions are priced). One more thing: the technology is tried and tested.

There are investment opportunities at three main levels: (a) IPPs, which are a relatively safe play on wind as utilities tend to be stable investments; (b) wind turbine vendors, whose order books are full and showing no signs of emptying out; and (c) feedstock providers, such as providers of carbon fiber. Browse through our Wind archives for potential company names.

There is, however, one big caveat: watch out for transmission bottlenecks. Problems with grid stability were cited as the reason to put a moratorium on all wind development in the Canadian province of Alberta, and underinvestment in transmission capacity has been a problem across North America.

DISCLOSURE: The author does not have any positions in any of the companies discussed above.

June 25, 2007

Smart Metering: A Smart Investment in Energy Efficiency

Information Empowers

Browsing AltEnergyStocks new CleanTech News page (I find it a good way to discover quality stories I wouldn't have come across otherwise) I came across one of the best articles I've seen yet on Smart Metering.  Smart metering is one of the biggest win-wins available when it comes to reducing our carbon footprint by providing real time feedback on our electricity use. It allows us to see how we are wasting electricity and choose to take action.  When Woodstock Hydo's customers were given this information (without any other encouragement to save electricity), their average usage fell by 15%.

In addition, Woodstock Hydro discovered that participants complained much less frequently than other customers. By giving people real time information about their electricity usage it empowers them to make their own decisions, and the better information they have (if accompanied by the  tools to manage the new information), the better decisions they will make.  

My own utility, Xcel Energy (NYSE: XEL), is just completing a year long trial of time-of day pricing, and the preliminary results indicate that when customers have the controls necessary to program or cut their usage of high consumption appliances such as air conditioners, either ahead of time or remotely, their usage decreases most.

Investment Opportunities

Smart metering is just the sort of less-than-sexy energy efficiency sector I think cleantech investors should focus on.  Because it's not as sexy as, say, solar, there are fewer investors bidding up the price of the companies (although, like everything in this sector, they are far from value plays,) yet the strong economic case for smart meters means that smart meters could easily be one of the first energy efficiency measures rolled out by many utilities.

The leading pure-play company in smart metering is Itron, Inc (NYSE: ITRI.)  Itron does not have the field to itself, since energy management companies such as EnerNOC (NasdaqGM:ENOC) (previously covered here), and Comverge (NasdaqGM: COMV) offer similar products and services to utilities. Also, conglomerates such as GE and networking services companies such as Echelon ,(NasdaqGM:ELON) also compete in the area..

The competitive forces in this rapidly growing sector are intense, and it is difficult to pick winners in a market whose customers are dominated by regulated utilities.  Because of these factors, I prefer acquiring small stakes in as many smart metering players as possible, rather than trying to pick an eventual winner.  


Woodstock Hydro Pay as you Go program

New York Times article on time of day pricing (subscription only)

The Psychology of Energy Efficiency

Clean Tech News

DISCLOSURE: Tom Konrad and/or his clients have positions in all the stocks mentioned here: XEL, ITRI, ENOC, GE.
DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

June 24, 2007

The Week in Cleantech: June 18 to June 22 - Do We Really Have to Worry About Peak Coal?

On Monday, Richard Blackwell at the Globe & Mail told us how the center of the Earth may power our portfolios. Geothermal is a sector we believe is poised for solid growth over the next few years, and the Toronto Stock Exchange is a good place to look for geothermal plays.

On Tuesday, John Addison at the Cleantech Blog gave us a few highlights from the Fuel Cell 2007 Conference. With all the talk around batteries, plug-in hybrids and biofuels, fuel cells have somewhat fallen out of favor recently. This article is a good way to catch up with what's currently happening in this industry (and there are interesting things happening).

On Thursday, Mark Gongloff at the WSJ's Energy Roundup wondered whether we were overestimating coal supply. Lucky for you, we know how you can benefit from peak coal.

On Friday, Mike Millikin at the Green Car Congress informed us that Alstom had signed two development contracts for its CO2 capture technology. We have mentioned in the past how we believe that CO2 control technologies will present attractive investment opportunities once their technological viability has been established.

On Friday, Chuck Marvin at TheStreet.com discussed a new MIT study shedding yet more doubt on the viability of corn ethanol. Ironically, a lot of this bad press may create good value opportunities for some of the stronger corn ethanol players.

On Friday, Todd Wenning at The Motley Fool argued that the 21st century would be a very prolific century in terms of technological innovation, and, more importantly, he told us how investors could capitalize on this trend. Unsurprisingly, alternative energy is one of the key areas he identifies in his article.

June 21, 2007

An Insider's Take on the Ethanol Industry

Biofuels: Panacea or Pandora's Box?

Last night, I attended a talk in the Rocky Mountain Institute's "Quest for Solutions" lecture series titled "Biofuels: Panacea or Pandora's Box?"  We were told that a video of the event will soon be up on RMI's website.  Most of us were probably there to hear Amory Lovins speak, and no doubt most of the news coverage of the event will focus on him.  Amory is a visionary as well as an engaging speaker, and Tom Foust of the National Renewable Energy Lab helped shed light on the science of biofuels, but for stock market investors, the speaker with the most useful insights was without a doubt Mark Wong, CEO of the private corn based ethanol company, Renewable Agricultural Energy (RAE). 

Here are some of his insights helped refine my perspective on the ethanol industry:

Ethanol Supply:

    There is currently an oversupply of ethanol on the market.  As evidence, Mr. Wong cited the fact that in recent months, ethanol blenders have been able to capture most of the federal government's tax credit, while in the past, most of this subsidy has gone to ethanol producers, a situation which attests to the increased bargaining power of blenders over producers which stems from the current overproduction.  He expects the current oversupply to worsen over the next couple years.   After the talk I asked him if he felt that his company could make a profit, given the oversupply he cites, and he felt it would be possible if oil says above $70 a barrel.  I told him that I wouldn't be surprised to see $90 oil before the end of the year and he agreed.

    If we can extrapolate RAE's economics to public ethanol companies, traders should think of ethanol stocks as leveraged bets on the oil price, similar to long term oil futures.  They are likely to swing between profit and loss mostly due to oil price movements, but the percentage change in profit or loss will be large compared to the percentage change in the price of oil.  Given that I think it is likely the price of oil will rise further (and possibly dramatically) this year, that would certainly be a reason for speculators to buy ethanol stocks, now that they have retreated from the massively inflated levels of 1-2 years ago.

Competitive Strategies:

    RAE is currently still in the process of adding ethanol plants.  Mr. Wong detailed several factors the company considers when choosing plant locations.  He mentioned the local supply of corn, access to rail transport, other uses of corn in the area, access to water, and local demand for distiller's grains, all unsurprising considerations.  Interestingly, RAE has chosen to reduce the ethanol yield they get from a bushel of corn in order to provide a better feed (in the form of distiller's grains with a higher percentage of carbohydrate) for livestock.  He didn't say it, but I infer that one factor in this decision is the current low profitability of ethanol.

    More surprising to me was his emphasis on the yield variability of nearby corn crops.  I would not have thought of this, and as such, I believe that it may be a useful too for gaining insight into the riskiness of public ethanol producers.  A producer working with a highly variable supply of corn feedstock would be considerably riskier than a producer with an assured supply.

The Future

    In the future, RAE plans to use anaerobic digestion on their lower value output streams to produce gas which can be used in the distillation process, which should increase the net energy benefits of their process.  Mr. Wong also brought up the idea of using fractination to separate the corn into various components before they process it, which he expects will allow them to improve process efficiency.  Prior to this, I had only considered fractination as an early step in the process of making cellulosic ethanol.  This interested me, because one of the pioneers in biomass fractination technology is PureVision, a private, Fort Lupton based company where I know the management, and this is an existing (as opposed to the nascent cellulosic ethanol market) where they can apply their technology.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

June 14, 2007

Micro Fuel Cell Killer - What's Next?

About 4 or 5 years ago micro fuel cells were quite a hot topic in cleantech. They were going to power our laptops, cell phones, PDAs, blackberries, hand held multimedia devices, etc.

The story ran like this:

The digital age and increasing customer demand for more power hungry features like bandwidth, multimedia, et al on mobile devices like laptops, PDAs and cellphones mean the increase in power requirements are outstripping the pace of technology of lithium ion battery - therefore the only solutions will be micro fuel cells. And since battery manufacturers are a plodding, unimaginative lot, silicon valley and smart scientists can build a company to leapfrog them.

We saw major players like Motorola, Toshiba, Intel, and others taking a look, and startups like Smart Fuel Cells, Medis and MTI Micro seeking to make their name on a fuel cell the size of a credit card (or thereabouts) .

Today, still no micro fuel cell powered devices are on the market, many of the larger players have gone quiet, and all the startups are talking up battery charger (not device power pack) products - especially for the military and first responders.

What happened? What killed the micro fuel cells? Can they come back? And is something similar lurking around the corner for solar, electric vehicles, biofuels, next generation batteries or one of today's other darlings of the cleantech sector that we can learn from?

Well . . . let's see:

The technology is actually hard - Micro fuel cell technology proved a harder nut to crack than everyone thought (at least at anywhere near the same cost point) - and the product development issues given the state of the technology proved to be a real challenge.

Rational expectations - Market reaction to the underlying drivers has been aggressive. We've got global warming and high energy prices making people like Sun, Dell, and others hell bent on designing power saving devices - which the consumer is now interested in buying as a premium product. Once the electronic product companies actually put their minds to reducing power usage - well, it turned out that you actually CAN optimize a device to save power, and still pack enough features in to sell product.

The incumbent technology - Despite high profile thermal issues, the incumbent lithium ion technology turned out not to be so bad, and has continued to keep pace (as far as us lowly consumers can tell) - Bottom line: I now carry 2 very small 4 hour battery packs for my laptop - I can last a transocean plane flight without needing to plug in.

Infrastructure, infrastructure, infrastructure - And yes, having to make infrastructure changes is very costly in anything energy-esque, whether its in fuel, entrenched distribution, or tooling. As usual, winning technologies in energy tend to be owned by businesses that find a way to work with existing infrastructure, not to try and replace it.

And in the end, the batteries (and the big battery makers) still rule the roost, for now.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Author for Inside Greentech, and a Contributing Editor to Alt Energy Stocks.

June 13, 2007

Linking Emissions Trading Systems

For those interested in the topic of emissions trading, a new piece was just published by the International Emissions Trading Association on the topic of 'linking' different emissions trading regimes (PDF document).

Linking entails allowing emission credits from one scheme to be rendered tradable in another. For example, European credits would be valid and tradable in California, and vice-versa. Beyond allowing the carbon market to become more efficient and liquid, linking could also present a range of arbitrage opportunities.

For all of you environmental markets fiends out there, I would definitely recommend this paper. It's short (13 pages) and gives a good overview of where things are currently at with emissions trading and the possibilities associated with linking.

June 10, 2007

Introduction to Investing in Renewable Energy

UPDATE 3/4/2011: An up-to date article on selecting green mutual funds and ETFs can be found here.

Why Invest in Renewable Energy?

Given all the attention that renewable energy is getting in the news over the last couple years, investing in renewable energy has become a hot topic.  People are drawn to renewable energy for one of several reasons:

  1. To fight Global Warming
  2. To prepare for Peak Oil.
  3. To improve Energy Security and local economies.
  4. To cash in on the above trends.

The beauty of investing in renewable energy companies is that these goals are not mutually exclusive.  With one investment, the investor can feel good about what his money is doing for three reasons, while putting his money in what is proving to be a spectacular growth story.

Internet Bubble Redux?

To many, this sounds too good to be true.  Many have pointed out the similarities between today's renewable energy boom and the internet bubble of the late 1990s.  The speculation has been intense, especially in ethanol and photovoltaic companies.  And, similar to the internet craze, many of the companies are no-profit startups, and even the established companies with a solid record of profits trade at nosebleed price multiples.  Yet the internet did not go away because the bubble burst; more people are shopping online and more business is moving online than ever before.  Most likely, you are reading this article online... would you have been doing that in 1997?  The forces behind the advance of renewable energy are at least as compelling as those behind the internet.

I believe that we are still in the early stages, but even so, we can learn valuable lessons from that last boom.  One of the most important lessons is that the first mover does not always have the advantage, and often the winners are established companies that see the trend, and get on it in a measured way over time.  But the analogy also has weaknesses.  The internet was characterized by its low barriers to entry and exit, leading to cutthroat competition and me-too sites.  With Renewable Energy companies operate mostly in a heavily regulated, capital intensive sector, a sharp contrast to the internet, which will likely make the boom happen in relative slow motion compared to the internet.  I believe we're much more likely to see a series of mini market bubbles during the ramp-up, than to see a single gigantic bubble, as we saw in the late 1990s.

How To Invest

For mutual fund investors, Renewable Energy focused mutual funds are few and far between.  US investors are limited to the New Alternatives Fund (NALFX) and the Guinness Atkinson Alternative Energy Fund (GAAEX).   The former has a 1.25% expense ratio despite the fact that it also has a front-end load, and while the latter is a no-load fund, its expense ratio is a pricey 1.98%.  Given these high expenses, I strongly prefer the Powershares Wilderhill Clean Energy ETF (PBW) and NASDAQ Clean Edge U.S. Liquid Series ETF (QCLN).  Both of these have expense ratios currently capped at 0.60%, which is high compared to a general energy sector ETF such as XLE (0.24%), but is a much more economical way to invest than the sector mutual funds.

Given the relatively high expenses of the sector ETFs, I believe it makes sense for investors who are looking to invest $25,000 or more in the sector for a period of years to build their own ETF from individual stocks gleaned from the holdings of the above ETFs and mutual funds.  This also opens the possibility of focusing on established companies which are early movers into the renewable energy arena, a strategy which is less likely to lead to spectacular gains, but which also gives some protection against spectacular dot-com bust style losses.  

Finally, I believe that, given the complex nature of the technologies, and the sparse coverage of many of the companies by industry analysts, there is still considerable room for active management in the sector.  Given the emotional nature of the reasons for investing in Renewable Energy, a good understanding of practical behavioral finance, as well as an understanding of the technologies are likely to be necessities for success in the active management of an alternative energy portfolio.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.


June 09, 2007

The Week in Cleantech: June 4 to June 8 - Is China Really Getting Serious About The Climate?

This week, we particularly liked...

On Monday, Andrea Quong at Red Herring told us how China was about to take aim at global warming. This is latest move by the Chinese government only reinforces the perception already held by many industry observers that China is on its way to becoming a true global powerhouse for alternative energy.

On Tuesday, Martin LaMonica at CNET Newsblog informed us that cleantech investing was surpassing telecom and medical devices. Another day, another report report pointing to exceptional and sustained growth in the cleantech sector. This is nothing to alleviate fears of a bubble.

On Thursday, Neal Dikeman at the Cleantech Blog let us know that the cleantech media juggernaut was not slowing down. Check out this post for some interesting new cleantech sites.

On Thursday, Kevin Bullis at Technology Review told us that new batteries were being readied for GM's electric vehicle. The cat is now out of the bag - we know who will be fitting the Volt with its batteries.

On Thursday, Michael Kanellos at CNET Newsblog informed us that an algae start-up had signed a contract for biodiesel. The potential of algae as a biodiesel feedstock has been in the news a fair bit over the past few months, so it will be interesting to see what happens as firms try to scale up production. The other interesting angle here is that algae has also been identified as a potentially effective sink for for CO2 emissions - this could mean big business.

On Friday, Dana Childs at Inside Greentech warned us that corn ethanol could be unprofitable by 2008. The results of the study discussed in this piece are in line with our belief that the wealth of micro and macro factors currently lining up against corn ethanol make it an unattractive long-term proposition for investors.

The Week in Cleantech is a weekly roundup of our favorite cleantech and alt energy blog posts and stories from across the web. If you know of a good piece that you think should be included here, don't hesitate to let us know!

June 07, 2007

The Economist is Cleaning Up

The Economist ran, in its edition for the past week, a series of very interesting articles on the topic of business and climate change called "Cleaning Up: A Survey of Business and Climate Change". To access the articles, go to the Economist's page for that edition and scroll down to the section called A survey of business and climate change (right side of the page).

Some of the more interesting articles, from my point of view:

1) Emissions trading

2) The wind and solar industries

3) Clean coal

Happy reading!

June 05, 2007

The Launch of CleanTech News

I am very pleased to announce the launch of cleantech news which is the first phase of an ambitious plan to create a cleantech information community.

The cleantech news page consists of news items that are generated automatically by scanning over 200 cleantech blogs and news sources. The algorithm that is used to establish relevance and determine ranking currently takes three main criteria into account: 1) what other bloggers are saying about a news item, 2) how users across the Internet prefer a news item (which we call 'social popularity'), 3) the 'freshness' or age of the article. Over time, the algorithm will evolve and become smarter as it incorporates new criteria, some of which is discussed below in "What's Next?".

When we set out to build the application, we were not sure what we would get. I am very pleased to say that the quality of the cleantech news is better than I had expected. Of course, you are the real judge of that and we welcome your comments and feedback.

Please note that the Alt Energy Stocks blog will continue to be focused on investing in cleantech. At this time, the clean tech news page will have a broader, more general focus on cleantech.

How To Get on CleanTech News
If you have a blog or news source that you would like to appear on the cleantech news page, the first step is to make sure your RSS¹ feed is added to our list of clean tech feeds. We have done a good job seeding the list with many clean tech feeds but we are sure that we are missing other quality sources of information. To add a feed, you will need to register - of course, registration is free. We accept all feeds that relate to some aspect of clean technology. We often get requests for links and this is a good way of getting a link from our site. All feeds accepted will appear in our list of feeds.

The listing of a feed does not ensure that stories will make it to the cleantech news page - that is determined by the algorithm. Writing good content that is engaging to the cleantech blogosphere is the best way of being featured on the cleantech news page. Providing insight and coverage of other important news items in the clean tech blogosphere will also help.

What's Next?
Cleantech news is the first step in creating a cleantech information community. When I use the term cleantech information community, I use it to describe an online community built around cleantech news and information that allows for participation, sharing, discussion and networking.

Here are some of the features that will be added to the current cleantech news that we hope will help us to grow into a vibrant cleantech community:

Additional Categories - At this time, we have a general category for 'cleantech news'. We will be adding categories for the many areas of cleantech, categories such as: climate change, ethanol, solar power, biofuels, wind, geothermal etc. These categories will contain news that only pertains to that topic; this will make it easier for you to focus on the particular aspects of cleantech that you are interested in. A bit farther down the road, we also plan on tracking specific companies and ticker symbols in this way.

RSS Feeds - Each category will offer an RSS feed of its news items to make information tracking easier.

User Submission - Users will be able to submit stories directly. We will also continue to automatically scan the blogosphere for important cleantech news.

User Voting - Users will be given the opportunity to vote on news items. Voting gives users a direct method of influencing what we read - this makes the news smarter as we harness the collective wisdom of our users.

User Comments - Users will be able to comment on the news; sometimes the comments are better than the news itself. Users will be able to comment on a specific new item or they will be able to comment on all the news for the day in a category. Commenting on the news for the day provides an opportunity for the news to be summarized.

Focus on Users - A community is built of people and any good community should highlight the people in that community. Our pages will designed to spotlight the participation and contribution of each category’s top users. A category is made richer and more valuable if we can quickly identify the experts in that category. User profiles allow users to let the community know who they are and what affiliations they have in the cleantech community. We hope this will encourage networking and interaction directly between users.

Focus on Information - In addition to every category page identifying the top users, category pages will also identify the top news items over the last year and the top websites for that category.

Feedback - We are committed to making the community better by listening to your feedback and suggestions. The community pages will provide unobtrusive ways for you to tell us what you think. We will use that information to improve the community.

We are excited about these changes and the road ahead. We welcome and appreciate your feedback on clean tech news.

¹RSS (Really Simple Syndication/Rich Site Summary) is a format for delivering regularly changing web content. Many news-related sites, weblogs and other online publishers syndicate their content as an RSS feed to make it easier for their users to follow changing content. More on RSS and web feeds.

June 03, 2007

LED Stocks Get Some Respect

Cree's Wild Ride

On May 21, I noticed a big up-move in Cree, Inc. (CREE), a company I've been adding to most of my managed portfolios for the last year, at prices averaging around $18.  Checking recent news stories, I noted two articles on TheStreet.com which had recommended it over the weekend (as a beaten down stock and chart of the day.)  It turns out this was just the beginning of a feeding frenzy among the media which has gone on for the last couple weeks, bringing a lot of attention to what I call "the next compact fluorescent:" light-emitting diodes, or LEDs.  Highlights have been LEDs Emerge To Fight Fluorescents, by Peter Svensson, a story that got picked up by innumerable media outlets, and a Newsweek article by John Carey.  The icing on the cake was when Am Tech / JSA Research initiated coverage on Friday with a price target of $50, more than double the current price.  sccree.png

The attention is deserved.  White LEDs are rapidly catching up with CFLs  in terms of light output per watt.  Energy efficiency and light output continue to improve at rates more characteristic of the semiconductor industry (LEDs are semiconductors) than the lighting industry.  Since they don't contain Mercury, are dimmable and instant-on, and last even longer than CFLs, the only thing holding LEDs back is price, and the lighting industry struggling to deal with a new type of lighting.  A typical replacement for a 60watt incandescent will still set you back $50-$100.  But given the advantages, they have long found application in specialty uses such as solar powered garden lights and rechargeable candles that flicker realistically and most people can't tell from the real thing if they don't look inside the holder or notice how cool they are to the touch.  They are also used in solar flashlights, which are not only a nice emergency light, but a great boon to the third world.

Other LED Plays

Given the growing awareness of energy efficiency as the greenest and cheapest way to reduce our carbon impact, I expect the investing public's awareness of LED technology to continue to improve.  Besides Cree, another industry play which has taken off recently is Color Kinetics (CLRK), which specializes in taking the LEDs (which are tiny electrical components on their own) and designing applications for end-users.

For investors like me, who prefer to get in on a stock before it has taken off, it's not to late to ride this boom.  A couple of speculative companies I also like have yet to feel the effects of the new media attention: Lighting Science Group Corp (LSGP.OB [Note: Ticker has been changed to LSCG.OB with a 20 for 1 reverse stock split.]), which makes LED replacements for traditional bulbs, and Carmanah Technologies (CMHXF.pk or CMH.to), which integrates LEDs into solar outdoor lighting applications such as runway lighting and billboards.

For more cautious investors, I think Philips (PHG) is the most serious lighting manufacturer about pursuing LEDs, and also produces CFLs, which are unlikely to go away just because LEDs are now appearing on the scene (something I hope will not be the case for incandescent bulbs.)

In additional to the usual disclaimer, I should note that I personally have substantial positions in Cree and Carmanah.  I'm basically a massive fan of LEDs... I even included them (and CFLs) in my New Year's Top Ten Technologies for a Altenative Energy Future.

DISCLOSURE: Tom Konrad and/or his clients have positions in all the stocks mentioned here: Cree, Color Kinetics, Lighting Science Group, Carmanah Technologies, and Koninklijke Philips Electronics NV.
DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

June 02, 2007

The Week in Cleantech: May 28 to June 1 - Emissions Trading More Than Hot Air

On Tuesday, I learned from a reader that a CO2 emissions trading platform for California, called the California Climate Exchange, had just been launched. The new California carbon bourse will look to service organizations with emission reduction obligations under the state's AB 32. Who's behind this? None other than Climate Exchange plc (CXCHF.PK), a company we've discussed on several occasions in the past.

On Wednesday, Mark Gongloff at the WSJ's Energy Roundup informed us that HSBC was going green. This is the latest in a series of similar commitments by global financial institutions. Good business sense or a waste if shareholders' money? The future will tell.

On Wednesday, Dana Childs at Inside Greentech told us that Chinese solar companies had gotten spanked after Solarfun missed its quarter. Alt energy, despite impressive revenue growth, remains a very risky asset class marred in volatility. This fact should always remain at the back of an investor's mind.

On Wednesday, Rob Day at Cleantech Investing examined, for us, the issue of whether or not there is a biofuel bubble currently underway. The article looks at this debate from a venture capital angle, but some of the key points, such as the future of cellulosic ethanol, bear relevance for public market investors.

On Thursday, Environmental Finance informed us that, last week, European carbon prices had spiked to a 13-month high. It may be too early to tell, but my sense is that the second phase of the European Emissions Trading Scheme, which will coincide with the initiation of regulation-driven carbon trading in the US, will be far more successful than was phase one.

On Friday, Biopact gave us the heads up on a recent academic journal article that found that emissions trading in the EU was one of "the most significant accomplishments in climate policy to date". Moreover, contrary to what has been claimed in the popular press, the article found that emissions trading in Europe was indeed working well.

The Week in Cleantech is a weekly roundup of our favorite cleantech and alt energy blog posts and stories from across the web. If you know of a good piece that you think should be included here, don't hesitate to let us know!

June 01, 2007

Annual Alternative Energy Market Survey

The Distributed Energy Financial Group LLC (DEFG) and Market Strategies Inc. (MSI) released, on Wednesday, the results of their Third Annual Alternative Energy Market Survey. This report is based on a online survey of 450 "industry leaders".

Unsurprisingly, survey participants remain very bullish on revenue growth in the sector, expecting aggregate revenues to grow by 87% in 2007. That growth, several agree, will continue to be driven in part by strong support by various levels of governments.

Some other interesting bits information from the survey:

- While energy is forecasted to continue being a main driver for industry growth, demand management and energy efficiency are now seen as appreciably contributing to that growth as well. This is because technologies such as smart metering provide tangible and immediate economic benefits to customers.

- Some good opportunities for growth now appear to lay with governments and the residential segment (see point above)

- Wind, solar and biofuels are forecasted to remain strong to 2012 - no big surprise here

- Tax credits are perceived to be the most powerful tool governments can use to foster expansion in alternative energy

« May 2007 | Main | July 2007 »

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