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April 30, 2012

Report: Electric Cars Cost Less (But watch the assumptions)

Tom Konrad CFA

Pike Research just released a report on the Total Cost of Ownership of Alternative  Fuel Vehicles for Fleet Operators.  The report compares the purchase price plus lifetime fuel cost of mid-sized cars available in the US.

leaf.png Although the authors hesitate to declare any alternative fuel the cheapest option, the chart below clearly shows that the “BEV-100″ (Battery-Electric with 100-mile range, a.k.a. the Nissan Leaf) to be the least expensive option even at high electricity prices ($0.14/kwh) and low gas prices ($3/gallon.)  However, the Leaf only has a clear lead when the $7500 tax credit is taken into account.

Pike TCO comparison.png The other vehicles in the chart are (from left to right):
  • A conventional car with a 4 cylinder, 2.4 liter engine
  • A flex-fuel vehicle (FFV) with a 4 cylinder, 2.4 liter engine
  • A car with a four cylinder diesel engine.
  • The diesel car running on Biodiesel.
  • A conventional car (same engine) with start-stop technology which turns off the engine when the car is stopped.
  • A mid-sized hybrid-electric vehicle with a 2.4 liter engine.
Also compared in the report (but not shown in the chart) were natural gas (CNG), plug-in hybrid (PHEV) vehicles, and also vehicles of various sizes.  The following chart shows the total cost of ownership of these at today's fuel prices.

Pike TCO list.png
So Cost-Conscious Fleet Managers Should Buy the Leaf?

Even with the tax credit, there are a few caveats. 
  1. This analysis does not account for the time value of money.  A cost-conscious fleet manager would be discounting future fuel costs at his company's cost of funds.  For the US government, that may be only a couple percent, given what Treasury bonds are selling for these days.  But most public companies cannot borrow at nearly so low a rate, and raise a good portion of their funds through more-expensive equity, so a discount rate in the 5% to 15% range would be more appropriate.  This will make fuel costs relatively less significant, and disadvantage BEVs and PHEVs relative to other vehicles.
  2. No account is taken of the need for additional fueling infrastructure.  This gives an advantage to BEVs, PHEV-40s, and natural gas vehicles relative to the rest.  PHEV-10s (i.e. the plug-in Prius) have small enough batteries that they should be able to get by with inexpensive level 1 (120 V) charging.  A decent extension cord would do the trick.
  3. No account is taken for differences in maintenance costs, which are lower for pure electric vehicles, and may be somewhat lower for PHEVs as well, when they are run primarily on electric power. 
  4. Flex-fuel and Start-stop technology are currently only available on higher-end vehicles, which makes these inexpensive technologies seem much more expensive than they really are.  Fleet operators wishing to use such higher end vehicles already may find them to be more attractive options than they look like in this comparison.

Conclusion: Get the Prius

prius.png

After I make back-of-the envelope adjustments to the report’s results for maintenance, charging infrastructure, and the time value of money, the Plug-In Toyota Prius (PHEV-10) seems to have the lowest cost of ownership in most cases among mid-size vehicles.

Fleet operators with low cost of funds (discount rates) will still prefer the Leaf, while operators with relatively high costs of funds will find normal hybrids to be the most cost effective mid-sized cars.

Even cheaper options exist with the largest cost savings coming by down-sizing to a small or compact car, especially if it is a hybrid.

With a larger vehicle you pay for the extra size twice:  First you pay for all the extra metal directly, and you pay again in all the extra fuel needed to move that metal around.

This article was first published on Forbes.com.

April 29, 2012

Next Move After the Solar Sell-off

by Debra Fiakas CFA
 
opel solar concentrator.png
Image: Opel Technologies
After a string of high profile bankruptcies, solar cell producers have taken some material hits in recent months.  Out of a group of three dozen public solar cell and module producers listed and trading in the U.S. only three reported profits.  The group is trading on average at 29% of 52-week highs.  This looks like a corrected sector to me!  What is the next move?

Crystal Equity Research has a buy recommendation on GT Advanced Technologies, Inc. (GTAT:   Nasdaq)  -  one of the three in the group to consistently report profits.  GTAT shares are trading at 5.8 times trailing earnings, while the average of the three profitable solar producers is 7.8 times earnings.  GTAT is also trading off its own average price-earnings multiple of 8.8 times established over the four years since the company achieved profitability.

Maybe you are one of those “glass half empty” investors who believe even a strong company like GT Advanced Technology is not impervious to the stresses of falling prices, oversupply and competitive pressures that hang over the solar cell industry. I thought it might be interesting to consider the other side of solar energy  -  solar concentrating energy  -  to see if its unique economics has sheltered the group from the sell off that has plagued photovoltaic producers.

Concentrated solar applications avoid the high costs of photovoltaic cells.  In the least, use of concentrated sunlight reduces the cost of solar power by requiring fewer photovoltaic cells to generate a given amount of electricity.  A concentrator makes use of relatively inexpensive materials, such as plastic lenses and metal housings, to capture the solar energy shining on a fairly large area and focus that energy onto a smaller area, where the solar cell is.   Solar concentrators can also be used for thermal solar applications for ambient air or water heating.

The solar concentrating group is not large it is not certain that the group has been spared the solar sell off.  One in the group, Opel Technologies, Inc. (OPL: TSX) is located in Ontario, Canada where solar technologies still benefit from considerable government support and consumer interest.  The Canada Solar Industry Association (CanSIA) has forecast double digit growth in solar thermal units.  By 2020, when solar thermal has become mainstream, the group has forecast 500,000 square meters will be added per year.  This compares to about 120 square meters per year in the four years ending 2011.  CanSIA has also forecast that the Canadian solar photovoltaic market will grow steadily increasing from less than 500 MW per year between 2011 and 2015 to up to 1,000 MW per year 2016 to 2020.

Opel has a customer following, but has yet to report a profit.  Management recently secured a $5.0 million revolving line of credit to help support operations as sales ramp.  Working capital had been an issue in recent quarters as Opel struggled to ship its historic largest order of 4.6 MW of its TF-850 solar trackers to Global Energy Service USA.  That order was completed in the March 2012 quarter.

As the solar industry struggles to reduce costs, it stands to reason that the more successful in the group will turn to lower-cost solar concentrating technologies   -  even as simple as such technology might seem in comparison to solar cells.  It makes sense to include solar concentration properties like patent-rich Opel Technologies in a solar portfolio. 

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries. 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. OPL is included in the Solar Concentrating Group in Crystal Equity Research’s Beach Boys Index.

April 28, 2012

Battery-powered Locomotives – Compellingly Green Economics

John Petersen

For the last two years I've been paying increasingly close attention to trailblazing work by Norfolk Southern (NSC) in the field of battery-powered locomotives. My interest was piqued in June of 2010 when Norfolk Southern hired Axion Power International (AXPW.OB) to develop a battery management system that would allow rail locomotives to run on battery power and recharge their batteries through regenerative braking. I believed the decision was positive news for Axion because nobody hires a battery manufacturer to design a BMS for somebody else's product. My enthusiasm was tempered, however, by knowing that an earlier Norfolk Southern retrofit, the NS 999, was unveiled in September 2009 and quickly proved to be an insurmountable challenge for the AGM batteries that were used in the original design. I also knew that a technical development project for a Class I Railroad would require a couple years of work before a rational implementation decision could be made.

A key milestone was reached this week when Axion announced that NS had ordered $475,000 of PbC® batteries that will be installed in the NS 999 over the next couple months. The two companies are also moving forward on a parallel development track for a larger and more powerful long-haul locomotive that will use twice the battery power.

Now that I have a clear data point on battery costs for both the switcher and a long-haul locomotive, I can finally dig into the fundamental economics of what Norfolk Southern is trying to accomplish with this project.

The raw unsubsidized numbers are amazing!

The technical case for a battery-powered switching locomotive is easy to make because they operate in urban rail-yards assembling and disassembling trains, which means travel distances are short and charging infrastructure is both easy and cheap to install. On average, a switcher spends about 75% of its time idling and only 25% of its time working. While it's a little dated, this 2004 graph from the Argonne National Laboratory summarizes daily fuel consumption for a GP38-2 switcher, the locomotive platform Norfolk Southern used for the NS 999.

4.27.12 Switcher.png

While the exact numbers used to generate the graph are not available, my best estimate of total fuel consumption is about 340 gallons per day, or 85,000 gallons for a 250-day work year. At the current price of around $3 per gallon for off-road diesel, the annual fuel cost for a switching locomotive is $255,000. Since switching locomotives are already equipped with electric drive, dynamic brakes and power control systems, the biggest cost of converting a locomotive to battery power is pulling the fuel tanks, diesel engine and generators and replacing them with a big rack of batteries and a custom BMS to keep things in balance.

I can't accurately estimate the power subsystem costs for a locomotive conversion, but I'm certain that it will be less than the $400,000 per MW that Sandia National Laboratories recently estimated for grid-based power subsystems that use expensive inverters for AC-DC conversions. Using a high-side estimate of $400,000 for the balance of system costs on a switcher retrofit, the cash-on-cash payback period from fuel savings alone will be about 3-1/2 years. Using a more conservative mid-range estimate of $200,000, the cash-on-cash payback period will be closer to 2-1/2 years. When you factor in collateral environmental benefits like 875 tons of annual CO2 abatement and the elimination of diesel emissions from urban train-yards, battery-powered locomotives offer compelling value and utility.

The planned long-haul locomotive, which will cost twice as much but save about 170,000 gallons of diesel fuel per year, should offer similar economic and environmental benefits.

The following table provides summary information on the locomotive fleets operated by the four largest North American Class I Railroads.


NSC
CSX
UNP
BNSF
Multiple purpose units
3,904
3,579
7,632

Switching units
123
322
426

Auxiliary units
116
215
155

    Total locomotives
4,143
4,116
8,213
6,900

In light of the economic and environmental benefits of battery-powered locomotives, it seems reasonable to assume that at least half of the switcher fleet and up to 20 percent of the freight locomotive fleet would change to battery power over the next decade if the second-generation NS 999 and the planned long-haul locomotive perform as expected. The batteries required to support such a transition would cost something on the order of $4.4 billion.

Today, the biggest question on everybody's mind seems to be "since laboratory testing took two years how much longer will it take to test the two prototypes before implementation begins in earnest?"

To understand the likely deployment timeline, you need to understand what the laboratory testing accomplished. As I noted above, a typical switching locomotive spends 75% of its time idling. In a battery laboratory, much of the idle time can be eliminated and a company can pack the equivalent of three or four year's use into a single testing year. It can also stress the batteries with extreme load profiles that go beyond the normal operating range.

In a situation like the Norfolk Southern project where parallel testing was conducted concurrently in three battery laboratories, a company can condense the equivalent 18 to 24 years of application experience into two years. So by the time the batteries are installed in a prototype vehicle, the battery manufacturer and the user know how they're going to perform and the principal goal of the prototype testing is to identify any complications that were missed during the laboratory phase.

In light of Norfolk Southern's prior experience with the NS 999 and the extraordinary amount of laboratory testing that was conducted over the last two years, I expect the next round of prototype testing to be measured in months rather than years. While I'd be pleasantly surprised to see significant implementation beyond the planned freight locomotive in 2012, the ramp rate in 2013 could be impressive because the market is so large and the economic and environmental values are so compelling.

In the November-December 2009 issue of its employee magazine BizNS, Norfolk Southern explained that the biggest challenge was developing "an energy management system that allows us to take maximum advantage of kinetic energy," emphasized that "advances in battery technology will be the primary driver for widespread industry use of electric locomotives" and observed that it was "eying the use of lithium-ion and nickel based rechargeable batteries, as well as improved lead-acid batteries."

Two and a half years later, there's only one contender left standing, Axion's PbC®.

Battery-powered locomotives are a potential billion-dollar niche market where size and weight are not mission-critical but cost and performance are. There are several comparable niche markets in automotive applications like micro-hybrids and stationary applications for power generation, distribution and use. I expect the PbC to be a formidable competitor in many of those markets.

Disclosure. Author is a former director of Axion Power International (AXPW.OB) and has a substantial long position in its common stock.

April 27, 2012

The Week In Cleantech: Powersecure, Altair Nano, Zipcar, Waste Management, and Maxwell -Apr 27, 2012

Jeff Siegel and Tom Konrad

April 23: Solar Grade Silicon Industry Under Pressure

TK:

April 24: Will PowerSecure (NASDAQ:POWR) Bounce Today?

JS:

  • PowerSecure International (NASDAQ:POWR) announced today that it landed $10 million worth of new orders for its smart grid power systems and LED area lights. Some of these deals are actually repeat orders, which certainly offers some confidence for the company's products. That being said, I don't know how much today's announcement will effect the stock. Earnings are a couple weeks away, and I suspect most investors that don't want to take on much risk will hold off on making any moves until those earnings are released on May 2. Traders, on the other hand, could end up playing this thing today for a quick one. We'll find out shortly.
  • Altair Nanotechnologies (NASDAQ:ALTI) announced this morning that it has entered into an economic cooperation agreement with two Chinese cities to promote the development, production, sale and deployment of energy storage systems. I think ALTI is smart to expand its presence in China, and at the end of the day, deals like this could really bolster the company's growth prospects. I actually like this company and made a boatload on it a few years ago. But the battery space is incredibly competitive right now. And given the uncertainty of the market, I'll likely view these smaller battery companies from a distance this year. Still, I wish nothing but success for ALTI.

April 25: Zipcar (NASDAQ:ZIP) Raises Profitability Outlook

JS: Zipcar (NASDAQ:ZIP) announced Q1 results today. For the first quarter, revenue increased 20% to $59.1 million compared to $49.1 million a year prior. Total membership also grew 23%.

I've actually been a fan of the car sharing model for years. In fact, I first wrote about car sharing back in 2006, before Zipcar went public. Interestingly, the company I focused on for that article was Flexcar – which actually merged with Zipcar in 2007.

Today, Zipcar is the major player. And I wish nothing but success for this forward-thinking company. Of course, car sharing is not monopolized by Zipcar. There are a few others that are also doing quite well. Take Car2Go, for instance – a company that's been building some nice momentum recently.

This particular car service offers the advantage of not having to book a car in advance or commit to a return time and location.

I'm particularly fond of the company's San Diego operations, too. This is where car2go boasts 300 electric cars in its fleet.

Quite frankly, as we start to see more and more electric cars on the road, I suspect the car sharing model will quickly adapt and take advantage of the fuel and maintenance cost advantages of electric vehicles.

There's actually another car-sharing operation in Chicago called I-GO. This small outfit boasts 36 electric vehicles in its fleet – all of which are charged at solar-power charging stations around the city.

Of course, Zipcar isn't sleeping on this. The company actually launched its first large-scale electric vehicle program in Chicago last month with five Chevy Volts, and is looking to add another 20 electric cars to its fleet this year.

TK:

  • Daimler Buses is winding down North American operations.  Production of Orion transit buses will cease after fulfillment of current orders.  This should help the remaining North American Transit bus manufacturers, including New Flyer (NFYEF.PK).  (Thanks DLane.)

April 26: Waste Management (WM) Dumped by Investors: You Shouldn't

TK: 

Waste Management (NYSE:WM) is dipping on a slight earnings disappointment this morning.

I like this company as a long term income play.  Although, contrary to popular belief, we will stop throwing away as much trash because of resource depletion, WM has been assiduously re-positioning itself to help customers reduce their waste streams, and to make the most (in terms of biofuels, electricity, and recycled commodities) of the remaining waste stream.  In other words, unlike most of the industry, WM is preparing for a more sustainable future.

That sustainable future may be arriving by stealth right now, in terms of decreasing volumes which most people attribute to the economic downturn.  I’m not so sure.  This change in the waste management industry will be (at least in part) secular, rather than cyclical.  Higher commodity prices are driving reduced consumption, reuse (think FreeCycle and eBay (NASD:EBAY) , and recycling.

But the transition is likely to be slow enough that forward thinking companies like WM will be able to transition with it.  Wait a few days for the impact of this earnings disappointment to sink in, and pick up a little to take advantage of the well protected 4% annual yield.

JS:

LINN Energy (NASDAQ:LINE) announced Q1, 2012 results today. Net loss narrowed to $6 million, from $446.6 million a year ago, and production increased 51 percent to average 471 million cubic feet of natural gas equivalent per day.

While my primary focus is on clean, alternative energy, it is unwise for any energy investor to put all his eggs in the alternative energy basket. This is why we are well diversified throughout the energy sector, and certainly have a piece of the booming domestic oil & gas market. LINN Energy is currently my top pick here. It has one of the best hedging programs in the industry, it's expansion plans are aggressive, yet rational and also well underway, and it offers a fat 7% dividend. And yes, I do own shares. I'd be crazy not to.

April 27: Analysts Downgrade Maxwell Technologies (MXWL), Market Makes Sure It's Dead

TK: Maxwell (MXWL) is selling off badly as growth investors abandon ship as analysts respond to lowered guidance by downgrading the stock and chopping earnings estimates. I don't expect to see the stock back near $16 anytime soon, but once the value investors come in to absorb the selling by the growth investors, I think people who buy today below $10 could see a quick 20-30% profit.  If so, I'll probably hold mine. I like this company long term... I just prefer to buy when others are panicking.

For more, see my coverage on Forbes:

I may write more later today, if anything new comes up.

Disclosures:

  • TK - Long NFYEF, WM, MXWL. 
  • JS - Long LINE

Jeff Siegel is Editor of Energy and Capital, where his notes were first published.
Tom Konrad CFA is Editor of AltEnergyStocks.com, and a blogger on Forbes.com, where the note on WM was first published.

April 26, 2012

Covanta Tackles the Biofuel Front-End

Jim Lane

Making good, affordable syngas from municipal solid waste to unlock 9 billion gallons of low-cost covantalogo.pngfuel? Covanta’s (CVA) hot new gasification technology makes a big dent in the big challenge.

Just after mealtimes, in the hours after mail delivery, and occasionally when the world’s youth resolve certain unhygienic conditions prevalent in the science experiments known as teenage rooms, we as a species make that materials-or-waste decision known as tossing the garbage.

The MSW opportunity

Here in the US, “Americans generate about 4.3 pounds of municipal solid waste per person per day, or 260 million tons per year nationwide, of which a little over 130 million tons is biogenic” according to Auburn University professor David Bransby. At biofuels conversion rates of 70 gallons per ton, that represents just north of 9 billion gallons of cellulosic biofuels from it every year.

So, why is there not a rush to embrace technologies such as Enerkem, Terrabon, Coskata, Fulcrum Bioenergy or others that convert MSW into liquid fuels?

After all, the sins of waste generally condemn us, if you take Dante’s The Divine Comedy as your guide to the afterlife, to the third circle of Hell. There gluttons and sloths, with their sins of waste, are “forced to lie in a vile slush produced by ceaseless foul, icy rain.” Sounds remarkably like a gig working in an outdoor, dirty Murf (materials recovery facility, where people sort the trash by hand) on a remote island north of the Shetland Islands.

Rough job in the afterlife, eh? So, why are we not more focused on deploying those hot technologies that can save us from a bad fate here on Earth and, apparently, much worse in the hereafter?

The Syngas challenge

The bumps in the road are three. One, the technology is expensive over the generally small radius in which MSW can be profitably aggregated. Two, the technologies themselves are just reaching commercial demonstration scale. Three, they all could use a more affordable stream of optimized syngas.

Generally speaking, enzymatic technologies do not work well with MSW because of the variable mix of waste – basically, there could be anything in there, and magic bugs can be finicky.

So, one of the generally common features of the new generation of technologies coming forward is a front end gasification system. The gasifier produces what is known as a synthesis gas, composed of hydrogen and carbon monoxide, which is what you get when you heat up the biomass at temperatures of between 400 and 1500 degrees under optimal pressure conditions.

Syngas, as its commonly known, can be fermented into biofuels by magic microorganisms (such as the case with Coskata, INEOS Bio) or via catalytic technologies (as in the case of Enerkem, Terrabon or Fulcrum).

But that front end problem – getting the right syngas at the right price. Well, that’s been an area where a lot of companies have been working.

A leap forward from Covanta

Which is why it is big news this week that Covanta Energy Corporation (CVA) announced at the North American Waste-to-Energy Conference that it has completed commercial demonstration testing on its 300 ton per day modular system, called CLEERGAS (Covanta Low Emissions Energy Recovery Gasification).  The technology has demonstrated the ability to gasify unprocessed post-recycled municipal solid waste (MSW) in a commercial setting, while reducing emissions and increasing energy efficiency.

Covanta’s gasification unit has been processing 350 tons per day of post-recycled municipal solid waste and has demonstrated superior reliability at 95+% availability. Municipal solid waste, which does not have to be pretreated, is subjected to high temperatures and reduced air on the gasification platform, where it undergoes a chemical reaction that creates a synthesis gas, or syngas.  The syngas is then combusted and processed through an established energy recovery system, followed by a state-of-the-art emissions control system.

“We are always working to stay on the cutting edge of technology to convert waste into clean energy,” said Anthony J. Orlando, Covanta’s president and chief executive officer.  “This new gasification technology is truly exciting. Communities interested in emerging technologies can now partner with Covanta’s industry leading team to assure successful project execution.”

“Successfully completing this commercial demonstration was a major step in developing new facilities capable of gasifying unprocessed post-recycled municipal waste,” said John Klett, executive vice president and chief technology officer. “Moving forward, our research and development efforts will continue to improve the syngas quality created in the gasification process.  One day, we anticipate this syngas will be utilized as a fuel in a combined cycle facility and potentially, in the production of liquid fuel.”

The Bottom Line

Now, Covanta’s technology works with post-recycled MSW, which means there is some processing that goes along with the technology. Well, sure, all bio-based technologies need to separate out the refrigerators and the plastics from the biogenic waste. Note that Covanta says that their system does not require pretreatment. That’s interesting. What that means in a commercial setting will be figured out over time.

Syngas, keep an eye on it. We have found more profitable, breakthrough ways to use it, than make it. We will see, over time, the extent to which Covanta has solved “the front end problem” – but the fact that they are releasing a 350-ton per day front end technology, well, that unit should support around 9 million gallons of renewable fuel. String together a couple of them, and you have a very nice size syngas platform for the new fermentation and catalytic technologies coming forward.

Disclosure: None.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe  here.

April 25, 2012

Junior Uranium Miner ’In Position’ to Grow

by Debra Fiakas CFA

To understand UR Energy, Inc. (URG:  NYSE AMEX, URE:  TSX) investors need to polish up on their Latin phrases.  UR Energy is planning to mine uranium for the nuclear power industry using a mining practice called in situ or literally in position.  In conventional mining operations large amounts of uranium-laced rock are cut out of the earth and sent to a milling center where the rock is crushed as the first step in separating uranium from the other minerals.  In situ miners like UR Energy leave the earth and rock undisturbed, instead injecting oxygenated water and baking soda down into the strata suspected to hold uranium.  In limestone formations the water mix  - which has the unlikely name lixiviant  -  coaxes the uranium out of the rock. Then the mix is pumped back up top where it is sent through an osmosis process to remove the uranium.  The water is reclaimed to be used again and the uranium then goes through conventional processes that turn it into yellowcake for sale to nuclear power plants.

In situ is beguiling in its simplicity.  It reduces radiation exposure to animals and humans compared to conventional mining and milling operations.  The land is largely undisturbed beyond the roads and processing facilities needed for mixing, pumping and water reclamation.  The downside is that the in situ approach is only appropriate in formations with soft, porous rocks.  Uranium in hard rock formations is impervious to a water and baking soda injection.

UR Energy is counting on consumers and governments to stand by nuclear energy despite the Fukushima disasters in Japan.  The World Nuclear Association has forecast worldwide construction of 10.2 reactors per year for the next ten years.  This is a bit slower than the rapid pace of expansion in the 1980s when an average of 21.9 reactors were added each year, but it represents an acceleration from the past two decades when developers could only muster up four reactors every twelve months.   Of course, some nuclear reactors are taken off-line each year as they reach their full life.  Others are going off-line prematurely as in Germany where all nuclear power plants will be shuttered by 2022 after Germans decided they no longer have the stomach for the risks in nuclear power.

There appears to be no ground swell for a similar decision in the U.S.  UR Energy expects no change in that sentiment.  Indeed, the company thinks there is a particularly enticing opportunity in the U.S. market.  The U.S. imports over 50 million pounds of uranium each year, well over 90% of the country’s total annual uranium needs.  The U.S. is currently producing only 4 million pounds domestically.  UR Energy is counting on making good as a domestic uranium producer.

UR Energy has yet to record a sale.  In 2011, the company used $12.7 million in cash to support operations.  With $16.7 million in cash in the bank at the end of 2011, it looked like there about a five-quarter “runway” ahead.  In February 2011, the Company completed $15 million private placement, giving it a nice cushion against delays in opening its first mine operation.

Engineering designs have been completed for the Company’s Lost Creek Mine site in Wyoming, where UR Energy plans to processing two million pounds of uranium per year.  The Company continues to prepare an economic plan for Lost Creek and is seeking the appropriate permits.   The Company is expects to begin production in the second quarter 2013, and ramp at least one million pounds in 2014.

UR Energy has signed three supply agreements for the uranium it expects to bring out of the Lost Creek property.   The most recent covers 100,000 pounds per year over multiple years at delivery prices near $60 per pound.  The three agreements together cover well over 300,000 pounds per year.

URG trades near a buck and as such may not be appealing for some investors.  However, with about a year to go before initial production, the pricing presents an interesting option on an aspiring domestic uranium producer.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries. 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. 

April 24, 2012

Enbridge, Hydrogenics partner for utility-scale energy storage for renewables

Tyler Hamilton

Oil and gas pipeline giant Enbridge Inc.(ENB)  has invested $5 million in Mississauga, Ont.-based Hydrogenics (HYGS), a leading maker of proton-exchange membrane fuel cells and electrolysis systems for producing hydrogen gas from water.

Gotta say, I wasn’t expecting this announcement. I know Enbridge has invested in fuel-cell technology before, and I know it has purchased hundreds of megawatts of solar capacity, operates wind farms and is dabbling in geopower. And yes, it has invested some money into Toronto-based Morgan Solar. What surprises me about this announcement isn’t so much the investment itself, but how Enbridge plans to strategically collaborate with Hydrogenics to bring utility-scale energy storage to renewables in Ontario. You’d think this was about using renewables to generate hydrogen during off-peak hours, storing it, and then putting it through a fuel cell to generate electricity during peak hours. And perhaps this is the longer-term vision. But the way Enbridge describes this collaboration, it has little interest in fuel cells. Instead, it wants to generate hydrogen and inject it into its natural gas pipeline assets, “proportionally increasing the renewable energy content in natural gas pipelines.” In other words — the way I read it from the press release — it wants to reduce the carbon intensity of the natural gas in its pipelines by mixing it with hydrogen. That cleaner natural gas will then be burned in natural gas-fired plants, people’s home furnaces, etc…

Perhaps I’m missing something. If there’s someone from Enbridge reading this, please correct me if I’m wrong.  (I’m right).

Here’s how the two companies describe their “Power-to-Gas” strategy in their press release:

With ‘Power-to-Gas’, the hydrogen produced during periods of excess renewable generation will be injected into the existing natural gas pipeline network, proportionally increasing the renewable energy content in natural gas pipelines for essentially the operating cost of the electrolyzer. Small quantities of hydrogen can be manageable in existing natural gas pipeline networks. With the significant scale of the natural gas pipeline network, these same quantities of hydrogen have a very meaningful impact on electricity energy storage potential.  The natural gas pipeline network represents a vast energy storage system which already exists. The utility scale energy storage leverages existing natural gas pipeline and storage assets to enable improved operability for the electrical system. Furthermore, the economics are further improved by leveraging existing gas generators to bring this renewable energy back to the electrical grid where, and when, it is needed most.

The companies said they will initially focus on Ontario. And Hydrogenics will have the opportunity to participate in up to 50 per cent ownership in a build-own-operate model for energy storage services. I have no clue how the economics will work. I mean, if the hydrogen is being blended with natural gas how can Enbridge capture that value when it sells that gas? How will this work with Ontario’s feed-in-tariff program, which doesn’t have any rules or tiered (peak, off-peak) FIT rates to encourage energy storage services? I’m very curious to learn more about this (and will over the coming days).

What’s clear is that there is momentum building for energy storage solutions in Ontario. Hydro One is testing out Temporal Power flywheels to relieve congestion on its transmission lines. Toronto Hydro is piloting bulk lithium-ion battery storage and testing underwater compressed-air storage in Lake Ontario. Annette Verschuren, former chief executive of Home Depot Canada, is heading up a new venture called NRStor that wants to bring an energy storage park to Ontario. And word has it that the Ontario Ministry of Energy — or the Ontario Power Authority — is sitting on a large draft policy paper related to energy storage that will be released later this year. Perhaps we’ll get some clarity around energy storage after all. There seems to be enough activity in the province to suggest that something is going on behind the scenes to stimulate strong interest in energy storage.

We’ll see.

NOTE: Just got my hands on a backgrounder Q&A from Hydrogenics that explains the above in more detail. A few interesting points, according to this backgrounder:

Injecting only small amounts of hydrogen into the gas grid (less than 5% by volume) offers significant potential. In large markets, like Ontario, the energy storage potential could provide power for over 160,000 homes. This is the equivalent of the new Niagara Tunnel hydro power project in Niagara Falls.

and…

Every GJ of hydrogen produced by a Power-to-Gas application converting surplus renewable generation will displace one GJ of natural gas consumption with a commensurate reduction of 56kg of CO2 equivalent. The estimated annual GHG reduction from a 100MW Power-to-Gas project would be 25 CO2 equivalent kilotonnes.

and…

The first stage will be to develop a 1 MW Power-to-Gas pilot project in Ontario to test the integrated system, develop gas network interconnections and work with the IESO and Canadian Gas Association to design the operating standards and market protocols to run a Power-to-Gas application. After developing commercial scale electrolyzer capability, Hydrogenics will have the opportunity to participate in up to 50% ownership in a build own operate model for energy storage projects with Enbridge.

Tyler Hamilton is editor-in-chief of Corporate Knights magazine a business columnist for the Toronto Star, and author of Mad Like Tesla.  In addition to the Clean Break blog, where this article first appeared, Tyler writes a weekly column of the same name that discusses trends, happenings and innovators in the clean technology and green energy market.

April 23, 2012

A Portfolio Risk Wall Street Ignores at Its Peril

Garvin Jabusch

At Green Alpha, we believe in investing in the scientifically objective world, and not an ideologically skewed version of it, so I’m often amazed at the attitudes and behavior of many of our colleagues in the financial services industry. For a group that’s supposed to be practicing objectively quantified decision making, finance-types can be remarkably motivated by ideology. Especially where a particular ideology is being promoted by the largest and richest industry in the history of civilization, fossil-fuels, whose representatives will stop at nothing to convince us that their product is safe, causes no warming, and will last forever.  If there’s a reference case for finance-industry climate denial, it has to be the Wall Street Journal’s piece last January wherein editors not only denied climate science but purported to be the purveyors of scientific truth (i.e., there’s no warming). The Union of Concerned Scientists dismissed the Journal’s claims outright, as did many responsible climate scientists. But, no matter, since it’s in the Journal, finance’s paper of record, many of our colleagues in investment management blithely believed the disinformation and continue to invest accordingly.  But this is both dangerous and questionable from a fiduciary point of view.  Because, yes, truly, CO2 causes warming, and potentially extreme warming. And, yes, in addition, we truly are running up against existentially threatening resource constraints.

MIT researcher Graham Turner, in “perhaps the most groundbreaking academic work of the 1970s (Smithsonian),” The Limits to Growth, famously predicted that humanity’s outpacing of global resources may catch up to us in the form of civilization-level collapse as early as 2030. And it looks like his models may be right on track. However, as Smithsonian pointed out, Turner also noted that “unlimited economic growth was possible, if governments forged policies and invested in technologies to regulate the expansion of humanity’s ecological footprint.” In our terms, the translation is that the investment industry has got to stop placing bets on the legacy-economy technologies that got us into this situation, and start investing in next economy technologies, companies and solutions. It’s simple, we have to align humanities economic interests with earth’s various capacities. In the end, they represent the same goal. 

Financial services has no business helping the fossil fuel oligarchs and their political lackeys bury the light of objective scientific reality. If this was all just about normal, thin veneer political posturing, we wouldn’t care at all. But it's about so much more than that; it’s fundamentally about whether we destroy or maintain the fundamental underpinnings of world economies and of civilization itself. And investing in the world – the world as it is, not the world we ideologically wish existed – is inestimably important for long term portfolio returns, and also, crucially, for mitigating the chances of a failing global civilization.

Believe it or not, the primary risk we at Green Alpha assign to U.S. based next economy companies is home nation political risk. Political risk…of public companies…in a free market economy. Oxymoronic. Sounds more like a corrupt authoritarian regime type problem, right?  Unfortunately, we're not that far from that in the U.S. with respect to renewables and the next economy overall. Because, in general, U.S. policy makers (on the basis of payments, often to super-PACs), prefer to defend legacy fossil fuels at the expense of renewables.  As Bill McKibben recently noted, “It’s as if the politicians are sort of pillows in front of the fossil fuel industry…And you spend all your time going after them and don’t get at the guys behind them.” And, all rhetoric to the contrary, most politicians don’t mind using taxpayer money to pick winners over losers, as observed this month via a decision by “United States Senators [who] voted to kill 37,000 American jobs [in wind energy], while giving $24 billion in tax breaks to big oil companies (story from Climate Progress).”  It’s a vicious circle: congress people give fossil-fuels companies tens of billions of taxpayer money, the companies put part of that back into congress’ super PACs, and repeat. 

I've said before that I don't believe there is any power in Washington that can trump the money and leverage imposed on our system by the entrenched interests of fossil fuels and of Wall Street. And these fossil fuel and Wall Street oligarchs of course don't only protect their interests via buying policymakers, but also, of course by spreading disinformation to the public from outlets from the Journal to the U.S. chamber of commerce. They do all this not caring that a temperature rise of 2° C, probably inevitable already, will make more likely everything from perilous food supplies to extreme weather. And at 3° on up, civilization begins to be at risk. They spread disinformation not caring that unlimited, almost free energy provided by our best renewables operating at scale will remove the billions of dollars a day drag on our economies, and emancipate us to resume real economic growth and prosperity.

Maybe if I was a fossil fuel billionaire I would feel differently. Maybe then the source of my wealth would make me willing to deliberately, cynically sacrifice the greater economy now and maybe civilization in the future. But as it is I can't afford to do that. And, even though I work in the investment management industry, I won’t fall in line to help our oligarchs disseminate lies. Because in the harsh light of day, in the reality of the world as it is, their short sighted defense of the sources of their wealth, vicious as that defense is, may ruin us all.

For us, for me, it’s important that our portfolio constituents reflect the needs of the world – economically and ecologically (to the extent that there’s a difference any more) – as it is objectively defined by our best science. It’s important that our portfolios reflect the immutable laws of physics and thermodynamics, as opposed to the ephemeral laws of human policymakers. Practical, unavoidable thermodynamic laws and physical constraints are what they are, will cause what they cause, and will wreak what havoc they will, no matter what propaganda is unleashed on us by the well funded machine of climate denialism.  As popular awareness of earth’s realities advances, more and more capital will flow to companies, ideas and approaches that help solve our most pressing problems, and next economy portfolios will benefit proportionally. Venture capitalist Vinod Khosla, for example, believes that the next economy will spawn not only the ‘next Google,’ but, in fact, tens of Google-sized firms. We have few doubts Khosla’s right, save that perhaps as a civilization we’ll be so seduced by short term money and corruption that we’ll chase those things off a cliff. If we allow ourselves to brought to heel, to comply with the wishes of the legacy economy bosses, we could suffer the same fate as previous short-sighted societies like the Maya, like Easter Islanders. 

But I don’t think we will. We live in an amazing age of limitless, almost free information (even if some fail to avail themselves of that). And as Ben Franklin said, “A nation of well informed men who have been taught to know and prize the rights which God has given them cannot be enslaved. It is in the region of ignorance that tyranny begins.”  I don’t know about God, but I believe that where people have access to real, objective information about the reality of their world, they will ultimately make the sane and rational decisions required preserve that world. Disinformation, however well funded, won’t prevail forever. America may not believe in climate change, but it is upon us whether we acknowledge it or not.  No matter what you believe in, we all as a civilization are and will be dealing with the consequences of a warming, resource constrained planet, starting, well, now. The sooner we invest in solutions, the better.

GAA logoGarvin Jabusch is cofounder and chief investment officer of Green Alpha ® Advisors, and is co-manager of the Green Alpha ® Next Economy Index, or GANEX and the Sierra Club Green Alpha Portfolio. He also authors the blog "Green Alpha's Next Economy."

April 22, 2012

Wind: Oversupply Heralds 'Flight to Quality'


David Appleyard


A dramatic turnaround in the wind technology supply chain could bring opportunities for qualified suppliers, finds research by BTM Consultant ApS.


Over the past five years the whole of the wind technology supply chain has been in flux. The industry has seen a dramatic turnaround, with a negative supply situation for some key components and materials transformed into the current position, with a significant supply surplus. We present the key findings of the latest BTM Consult Supply Chain Assessment report.

Slower than expected economic recovery in the U.S., combined with the eurozone sovereign debt crisis and most recently the Chinese government's effort to 'overhaul' the local wind industry, have completely transformed the wind industry supply chain. So concludes the latest in the biennial supply chain report from BTM Consult ApS, now a part of Chicago-based consultancy firm Navigant, Inc.

This comprehensive analysis reveals that over the past five years the industry has seen a dramatic turnaround, with a negative supply situation (2005-2008) for some key components and materials transformed into the current position with a significant surplus. Furthermore, with overcapacity now the case for most key components and materials, turbine prices have dropped to a level where both original equipment manufacturers (OEMs) and sub-suppliers are failing to see profitability, suggesting a tough time for the industry and a likely restructuring.

Indeed, in response to a slump in demand and fierce competition based on both quality and price, some suppliers have already reduced or suspended production with even some Chinese companies shuttering their businesses. But BTM believes it is not necessarily a bad thing for wind to be forced to provide products with low cost and high quality. They argue that clear underlying trends of 'a flight to quality' and consolidation have actually brought more opportunities to qualified suppliers with strength in both technology and finance. This is becoming vital, in particular to cater for the offshore wind market, where turbine OEMs already face a sourcing challenge for large components and equipment (for turbine manufacture and installation) and an even greater challenge in achieving rapid industrialization.

A Supply Chain in Flux

According to BTM, there have been significant changes in the supply chain for the wind power manufacturing industry over the past five years, most recently triggered by the worldwide economic downturn. The tight supply chain situation has been eased since the severe global financial crisis weakened the growth rate of wind power deployment two years ago. A balance of supply and demand was finally reached for all key components and materials in 2011 due to a slower than expected economic recovery in most industrialized countries. In fact, there is an overcapacity for many components and materials using standard processes.

In a buyer's market, fierce competition for both quality and price has already pushed many suppliers, mainly from China, to the edge of collapse. Although established European suppliers are better positioned compared to newcomers in terms of perceptions of quality, reducing the product cost without sacrificing margins is still a challenge. Clearly, more consolidation will be seen in the supply chain in the next few years.

Apart from the key strategic parts, components and materials are being increasingly outsourced by large European turbine suppliers to Asia, particularly China which is the world's largest wind power equipment manufacturing base. Although some European turbine OEMs are still hesitant to move away from their established suppliers, due to concerns over quality, economic pressure derived primarily from the decline in turbine prices is challenging turbine vendors, especially those who want to compete in the Chinese market, to accept higher risks to stay in the business.

Following the dramatic growth in installations, leading European turbine and key components suppliers had already shifted part of their manufacturing capacities to China and the U.S. — the world's two largest markets in terms of wind power installed capacity. However, manufacturers face important strategic decisions in diversifying their markets due to the uncertainty of developments in the US and the challenge of overcapacity in China. Suppliers are currently moving into new strategic markets such India, the UK and Brazil. Recently launched local content requirements in Brazil, Canada and India are also encouraging such a trend.

Overall, under current market conditions, many manufacturing facilities which had been geared to the fast growing wind market are running at part-load. There will therefore be enough capacity in the supply chain to cater for growth, assuming that the market follows BTM's demand forecast for the next five years. The recent introduction of multi-MW offshore turbines (mostly 5-6 MW) by turbine manufacturers in both Europe and China, however, means that there may be a tight supply chain situation for some strategic components, partly because it takes time for the supply chain to prepare for mass production of such large parts.

Key Components

During the wind energy boom period, investors were increasingly favoring a vertically integrated approach to turbine manufacture.

More recently, however, the attitude towards investment has clearly changed from one of urgent enthusiasm to one of caution. With a buyers' market, the pressure on the supply chain to meet market growth has gone, resulting in fierce competition for both product price and quality. In addition, the economic turmoil has significantly slowed down the availability of cash. Against this background, turbine manufacturers are much more willing to outsource components.

At the same time, with the average capacity of wind turbines steadily increasing, especially for the next generation of multi-MW offshore machines, the requirements from turbine manufacturers for both new technology and high quality components have limited the number of independent suppliers which can keep up with the pace of development. BTM indicates that these two factors have combined to create the current mainstream wind supply chain strategy.

Enercon is the only supplier in the Top 15 with full vertical integration in the manufacture of turbine components. Although the rest of the suppliers all have in-house capacity for producing vital components such as blades, gearboxes, generators and control systems, they still source a part of their supply from independent sub-suppliers. It is clear that blades and control systems are key components that most turbine OEMs prefer to produce in-house. With the secure supply of gearboxes becoming threatened, several large turbine vendors have adopted a strategy of buying out gearbox suppliers, but this situation has changed as supply chain bottlenecks have eased up with the recession.

Summary of Supply Status

This assessment indicates that although today the technical capacity for key materials exists on a global basis, there are a number of underlying issues which are a cause for concern.

The supply of castings and forgings, when considered on a global basis, suggests overcapacity. Both are, however, characterized by a strong regional imbalance in supply, with forgings in the US being in short supply and fears of tightness in Europe by 2014, despite a significant over capacity in China and South Korea. Severe overcapacity is complemented by fierce competition in both price and quality during a time where both higher raw material prices and labor costs plague European and North American suppliers. Partner selection still remains a key challenge in meeting the strict quality specifications, an issue of growing concern as quality requirements increase with the trend towards increasing turbine size, a key concern for gearbox and bearing suppliers.

For the key materials used in the production of blades it is clear that there is no challenge in meeting demand with evidence for the necessary investment to ensure capacity is sufficient. Similarly, there are no concerns over the woven and stitched fabrics as close coordination between the suppliers and the market ensures that the necessary investment has been put in place to meet demand. The only concern remains in the pre-preg market where only a small subset of companies are providing pre-pregs. Despite recent investments, demand for pre-pregs is expected to be tight for the next few years until new suppliers enter this part of the value chain. Glass fiber is still expected to maintain its position as the material of choice for the general blade industry, although demand for an increase in the stiffness-to-weight ratio in blades catering to the offshore wind segment could mean that carbon fiber will increasingly come into favor. In terms of resins, there is a short-term tightness in the epoxy market due to the market supply of bisphenol A but there are no major long-term constraints expected for either epoxy or unsaturated polyester based solutions. It is still expected that epoxy resins will maintain the lion's share of the market in all regions.

China is home to 97 percent of the world's rare earth elements, a critical material in permanent magnet generators. With China gradually implementing export quotas, it has caused panic in the wind industry. Despite tightness expected for the next two or three years, there are positive movements from both the supply and demand side. Longer term, it is expected that a combination of new reserves, adaptive strategies from OEMs and governments as well as greater resource transparency will ensure that the industry has access to the resource.

There are no reports of any serious constraints in the supply chain for key components and materials at present, despite an increasing concern over the potential supply of rare earth materials. Based on the current supply chain situation that a lot of capacity will be available if European suppliers' newly established facilities come into full operation, and a significant surplus of supply has been identified in China, there will be enough capacity in the supply chain to meet the modest annual growth rate of 15.5 percent up to 2015, the report's authors state. Nonetheless, the recent trend for introducing multi-MW turbines (mostly 5-6 MW) by leading vendors indicates a sourcing challenge for large components and a challenge to get these industrialized quickly enough. This challenge can be eased, however, once the supply chain gains the confidence required to invest heavily.

More immediately, the report concludes, the wind energy boom has come to an end because of the ongoing global financial and economic crisis, with the previous tight situation in the supply chain easing in 2010. Due to the global economic recovery being slower than expected, and a slump in demand from the second quarter of 2011 onwards, not only has a balance been reached between supply and demand and but in most cases a significant surplus has been identified, prompting a flight to quality in a buyer's market.


David Appleyard is Chief Editor of Renewable Energy World. He also currently holds the position of Chief Editor for sister publication Hydro Review Worldwide. A journalist and photographer, he graduated with a degree in Applied Environmental Science.

April 21, 2012

Is Lithium-ion a Borgia Battery?

John Petersen

I’ve recently learned that lithium-ion batteries might be a triple threat – Borgia batteries – cherished by eco-royalty, poisonous in the extreme, and explosive enough to wreak havoc in a $25 million laboratory that was built to safely manage battery explosions.

Is it a battery or a WMD?

On April 11th five employees of the advanced battery laboratory at the General Motors (GM) Technical Center in Warren, Michigan were hurt when extreme testing of a prototype lithium-ion battery pack from A123 Systems (AONE) released chemical gases that exploded inside a testing chamber. Four were treated at the scene and one was taken to a local hospital. The injuries were not life threatening.

About 1,100 employees who work in the Warren facility were evacuated while a HAZMAT team spent four hours taking air samples inside and outside the building. While most of the evacuees were able to return to work, it’s unclear how long it will take to repair about $5 million of damage to the battery laboratory and resume operations.

GM quickly advised the media that the incident didn’t involve a battery for the GM Volt and technically there was no battery explosion at all. Engineers were simply conducting extreme overcharge tests on a prototype battery and it failed, which is exactly what you’d expect.

Or is it?

The fact that there was a battery failure and vented gases ignited doesn’t surprise me. The fact that the explosion was violent enough to cause major structural damage to a purpose-built facility that was designed to safely manage the occasional battery explosion is very troubling. The chemical composition of the gas that allegedly caused the explosion is a nightmare. The terrifying aspect is that these issues are being ignored, or at least swept under the rug, to protect the tarnished image of GM’s Volt.

On Friday the 13th, Torque News reported:

“The battery involved in the Wednesday morning explosion didn’t actually explode but rather gases created in the testing chamber ignited and caused the massive explosion. During the extreme testing process, hydrogen sulfide gas collected in the testing area and when that cloud of gas ignited – we had the massive explosion that injured five and did significant damage to the Alternative Energy Center testing area including blowing out windows and at least one 8” thick door. Afterwards, the reports indicate that the battery pack itself was still intact.”

It may just be my lawyer's fascination with words and sentence structure, but the second sentence of that paragraph sure sounds like an unattributed direct quote from somebody in the know at GM.

I’m not a chemist, but I have substantial oil and gas experience including three years as legal counsel for Boots & Coots, the largest oil field disaster response firm in the world. Because of that experience I know that hydrogen sulfide gas (H2S) is:
  • The reason rotten eggs stink;
  • Explosive at concentrations of 43,000 to 460,000 PPM; and
  • One of the deadliest poisons known to man.
In the US, Occupational Safety and Health Regulations prohibit exposure to H2S concentrations above 100 PPM without a full facepiece pressure demand self-contained breathing apparatus.

A Wikipedia search shows that an H2S concentration of 150 PPM paralyzes the olfactory nerve, killing the sense of smell; 800 PPM is the lethal concentration for 50% of humans with five minutes of exposure; and concentrations over 1,000 PPM can cause immediate respiratory arrest after a single breath.

That makes H2S sudden death by poisoning at 2.3% of the concentration required for an explosion.

If a comparable failure occurred in a moving car, the driver would be incapacitated in seconds while his vehicle careened into a crowded latte bar before exploding.

I know there’s nothing inherently dangerous in the anode and cathode materials for today’s advanced lithium-ion batteries. In fact I was surprised by the reports that a lithium-ion battery could generate enough H2S gas to cause an explosion. When I started to ask questions, however, I learned that any number of electrolyte additives, separators, binders, fillers and ancillary cell materials could release highly toxic fumes from a failing cell or battery pack.

The active materials may be wonderful in their own right, but everything that goes into a cell must be carefully evaluated for its capacity to chemically interact with other cell materials and pose a serious threat to human health and safety.

We know the process failed at least once.

GM’s “industrial accident” may be a one-off oddity if it was testing an exotic lithium-sulfur battery or something else that's radically different from conventional lithium-ion batteries. It may also be just the tip of an iceberg, the first example of unintended interactions between cell components that can render large format lithium-ion batteries too dangerous for use in passenger vehicles or other enclosed spaces.

100 years ago the Titanic was heralded as an engineering marvel until a completely unexpected turn of events in April 1912 forced engineers to question their basic assumptions. I believe the GM explosion should at least force some soul searching.

For four years I've heard nothing but safety talk from lithium-ion battery manufacturers, ideologues, politicians and would-be end users. This is the first report I've seen that threatens to burst the bubble. If H2S gas was generated in GM’s advanced battery laboratory we need to know how much H2S gas was generated, how it was generated and how long the process took. We also need to know to a certainty whether similar problems might exist in large format lithium-ion batteries from other manufacturers. I understand that every battery manufacturer wants to keep its secret sauce recipe proprietary, but there comes a time when customer safety has to take precedence over competitive advantage.

I'm the first to admit profound confusion over the facts that have been reported so far. But there seems to be a consensus that a poisonous gas was generated by a failing battery, concentrations rose to explosive levels in the testing chamber, and the resulting explosion caused major structural damage to a facility that was built in 2009 and designed to withstand catastrophic battery failures.

Under the circumstances, I’m convinced that somebody who doesn’t have a political, ideological or economic interest in the safety of lithium-ion batteries needs to get on the ball and conduct a comprehensive independent investigation to find out exactly what happened and whether comparable risks exist in the battery packs used by Fisker Motors, Ford (F), Tesla Motors (TSLA), Nissan (NSANY.PK), Toyota (TM) and others. I can only hope that an upcoming NHTSA technical symposium with battery manufacturers and automakers will mark the beginning of more rigorous regulatory oversight.

Borgia battery? Inaccurate descriptions from reporters? Prototype testing of a truly unique battery chemistry? Or simply a conventional automotive grade lithium-ion battery that was pushed beyond design limits and failed spectacularly? The difference has to be understood before we go much further.

4.21.12 BI Toon.jpg

This article was first published in the Spring 2012 issue of Batteries International Magazine and I'd like to thank editor Mike Halls and cartoonist Jan Darasz for their contributions.

Disclosure: None.

April 20, 2012

The Week In Cleantech-4/20/12: Solar Industry Consolidation, Fact and Fiction

Jeff Siegel and Tom Konrad

April 16: Canadian Solar (NASDAQ:CSIQ) Soars in Pre-Market

JS:

  • Capstone Turbine (NASDAQ:CPST) announced this morning that it landed a deal with a Michigan hospital to supply a dual-mode C1000 Power Package. The unit will provide both prime and backup power to save energy and increase reliability at the facility. Not sure how much this will do for the stock today, but I still maintain that Capstone Turbine below $1.00 is a gift. Particularly for those who can exercise a little patience.
  • Consolidation looks to continue in the solar space. On Saturday, the China Business Journal reported that China National Offshore Oil Co (CNOOC) is in talks to buy solar player Canadian Solar (NASDAQ:CSIQ). As a result, we're seeing a lot of positive movement in solar this morning. Don't know if this will actually play out, but as we've been saying for almost two years now, the solar space is undergoing some serious consolidation. And we expect this to continue for some time. CSIQ is up almost 12% at the time of this writing.

***Update***

Reps from Canadian Solar have denied the CNOOC takeover talk.  A spokesperson wrote in an email:

"Canadian Solar is not currently in discussion with China National Offshore Oil Corp regarding a potential strategic transaction between the two companies."

And this is why I wrote, "Don't know if this will actually play out. . ."  Until the deal is done, it's not a deal. 

Of course, this doesn't change the fact that Canadian Solar popped nicely this morning.  The stock has shed a small amount of what it picked up in pre-market.  Will be interesting to see how this plays out throughout the rest of the day.

TK:

  • Union of Concerned Scientists releases study: No matter where you drive, driving electric saves money and emissions.  More here.

April 17: First Solar (NASDAQ:FSLR) Shuts Plants, Cuts 30% of Workforce

JS:

  • Capstone Turbine (NASDAQ:CPST) announced yet another order this week. This time for the sale of 30 additional C65 microturbines to be used in the Eagle Ford shale play. This follow-on order brings the total sold units to more than 150 over the past nine months. Capstone is up about 6 percent in pre-market. As I noted yesterday, Capstone below $1.00 is a gift. I continue to recommend accumulating shares below $1.00.
  • First Solar (NASDAQ:FSLR) announced today that it will cut about 30 percent of its workforce, shut manufacturing plants in Frankfurt, Germany and indefinitely idle four production lines in Malaysia this year. Although we did really well with First Solar a few years back, since last year we've been keeping our distance from most pure solar plays. I still believe the solar industry will prove the naysayers wrong over time. But for the next year or two, I expect continued shaking out and consolidation. First Solar is up about 4% in premarket. I'm uninterested in that action.

April 18: EnerNOC (ENOC) Moves into Demand Response for Natural Gas

TK:
  • Demand response (DR) companies were beaten up badly over the  last two years because of increased competition in the space.  EnerNOC (ENOC) has signed a new deal to help National Grid (NGG) automate temperature-based pricing for natural gas.  Will its competitors follow? More here.
  • Rockwool International (RKWBF.PK) holds AGM, announces DKK 9.60 (1.8%) annual dividend.

April 19: Aviation Biofuels Advance, attract opponents over costs

TK: 

  • UOP announced that Honeywell (HON) Green Jet Fuel will be used for the world’s first comprehensive test program using a new biofeedstock specifically designed for biofuel production, new Resonance Energy Feedstock.  More here.

April 20: How Chinese Panels Are Impacting the European Solar Market

TK:

  • It may not all be China, but only solar cost leaders will survive.  Euro governments are cutting subsidies; advocates push for focus on residential sector.  More here.
  • Solar companies follow range of startegies: Restructuring (FSLR and SPWR), vertical integration (CSIQ), or sticking to its knitting (STP.)  More here.

Disclosure: None

Jeff Siegel is Editor of Energy and Capital, where his notes were first published.
Tom Konrad CFA is the Editor of AltEnergyStocks.com

April 19, 2012

Report: US Re-takes Lead In Clean Energy Race from China... But Not For Long

Tom Konrad CFA

According to the just-released report "Who's Winning the Clean Energy Race?" from the Pew Charitable Trusts, the United States invested the most in Clean Energy of any country in 2011, retaking the lead from China, which had held the top sport for the last two years.  But the US's resurgence is more likely to be a blip than a trend.

Investment by Country and Financing Type.png

The United States' investments in Clean Energy were up 42% in 2011 over 2010, reaching $48.1 Billion.  Meanwhile, Chinese investments were basically flat at $45.5 Billion.

The US maintains a firm lead in venture capital invested in Clean Energy, accounting for 70% of the total $8.6 billion invested, but while that is vital for Clean Energy technology to progress, it is not very significant in terms of total investments, or profits from those investments.

Venture capital investments typically fund technology development, while pubic market investments, asset finance, and debt finance fund manufacturing scale-up and infrastructure investment.  Later stages of investment are typically much larger, because they need to be large enough to fund the returns to early stage investors and still reap returns for themselves.  Similarly, while the returns to early stage investors can be spectacular in terms of percentage, what matters to a country's economy is the absolute size of returns, which require large investments, typically in Clean Energy Infrastructure, such as wind and solar farms.

Financing Types
and Trends.png
Current Boom and Coming Collapse

Expired incentives.png While the US still dominates technology development and venture investment, our inconsistent and fading support for clean energy has allowed China to take the lead for the last two years.

Ironically, fading support for Clean Energy is also what allowed the US to re-take the lead in 2011.  Many developers rushed to get projects started before the end of 2011, when a number of Clean Energy incentives expired (see sidebar.) 

Because so many initiatives expired and may not be renewed, 2011 seems likely to be America's last hurrah in the the Clean Energy race.  Unless we re-initiate significant support for clean energy soon, Clean Energy investment and the industries and jobs it creates are likely to head for more hospitable political environments.

China's pause in Clean Energy investment growth was a re-consolidation, not a sign of a peak.  While the US was cutting incentives in 2011, China was adopting new ones.  Not only did China increase a national target for solar deployment to 50 GW in 2010, but they adopted their first national feed-in tariff.

It looks like America is winning the Clean Energy race, but 2011 was just our year to be the Hare to China's Tortoise.  Next year, look for the US to take a nap along the side of the Clean Energy racecourse, while China resumes its purposeful ramp-up of Clean Energy investment.

This article was first published on Forbes.com.

April 17, 2012

Butamax and Gevo: Bio’s Montagues and Capulets get it on, and on, and on


Jim Lane

gevo logoIsobutanol – a gateway to bioprocessing fortunes? Well, the lawyers are doing just fine too.

Here’s a 2-Minute Guide to all the Gevo (GEVO) and Butamax hollerin’, and how to separate the alcohol from the folderol.

In case it has escaped your attention, Butamax is suing Gevo (GEVO) and Gevo is suing Butamax. Enough paper has been issued by the parties, in court submissions and press releases, that INEOS New Planet  might eventually consider this dispute a low-cost waste stream feedstock for their new biorefinery, if somebody can get it all hauled down to Florida.

Gasify the paper to make it go away? Possible. Gasify the issue? Not happening. Prompting Domestic Fuel’s Cindy Zimmerman to issue an appeal last week for an end to all the tit-for-tat releases.

Butamax logoOverall, in the stream of claims and counterclaims, we’ve seen most of the drama that people usually seek in wrestling matches between exotic dancers, excepting the hair pulling and the mud.

Here in Digestville, we doubt the issue will melt away soon, and with Gevo’s stock price in the toilet, we doubt there is going to be much dampening of the signal and the noise on this one any time soon. For the two companies, it’s big, it’s that big.

In today’s Digest, we are publishing a Two-Minute Guide to the controversy, and we would also like to make three points, for consideration by the broader industry.

The broader issues

1. There’s gold in them thar ‘cules. No one is suing anyone over, say, Cello’s technology, or to gain control of the Range Fuels process. At least not a positive suit aimed at gaining freedom to operate.

For the same reason, you never see a Western where two old prospectors duel it out over a worthless piece of land. In films like Treasure of the Sierra Madre, the fight is invariably over the gold, the map that marks the gold, or the entrance to the mine that guards the gold.

The mounting mountains of paper should be properly seen as a leading indicator of just how valuable a bio-based process to generate low-cost isobutanol from biomass can be, especially if you have figured out the engineering of  separating the alcohol from the broth before it kills the microorganism.

(Note to readers: micro-organisms, it turns out, are just like humans in one respect, you wouldn’t last long, in a closed fermenter, in a swill of your own food and waste by-products either).

Let’s think of it this way. Think of the spread between carbohydrate and oil prices. At $6.50 per bushel of corn and $100 per barrel of oil, carbs are pricing at $305 per metric ton, while oil is pricing at $742 per metric ton. That $437 per ton spread is the foundational market opportunity.

2. The “Sue, Baby” gene that never stops expressing. In the bio-based space, if pharmatech and the Novozymes (NVZMY.PK)-Genencor wars offer any guide, one important byproduct of a successful fermentation process is a whole bunch of lawyering.

The titer of alcohols in a given beaker, from a given process, is sometimes not where we would like it to be.  But yeast appears to robustly and effortlessly ferment claims, letters, and lawsuits from biomass. The titer and yield are never in question, and the “sue, baby, sue” gene never seems to stop expressing.

Nevertheless, lots of pesky legal activity does not generally correlate to long-term loss in company value, for robust management teams that have built companies instead of science projects disguised as companies. Novozymes has, for example, more than 6000 pending and granted patents and a $7.6 billion market cap, and Danisco and its Genencor subsidiary recently sold to Dupont for $6 billion.

3. Big Buckaroos at stake. Just in specialty chemicals, isobutanol is a $7B industry. On the speculative assumption that a bio-based prices could deliver into that market with a 20 percent margin, and that NASDAQ companies will continue to trade at around 20 times earnings, there’s roughly $28B in market value up for grabs in the isobutanol wars.

Throw in the addressable potential for $44 billion in specialty gasoline blendstock, globally, there’s another $176 billion there. Forget Gevo’s market cap of $236 million – DuPont’s market cap is $49 billion. Therein lies the potential for gateway molecules. And make no mistake, really foundational C4 molecules – those have gateway characteristics.

So, the lawsuits? Here’s what you need to know.

The 2-Minute Guide to Butamax vs Gevo, and vice-versa

1. The idea. To make isobutanol, you need a microorganism that makes isobutanol from biomass, and a separation technology. The first gives you isobutanol in a broth, the second gives you isobutanol as a recoverable product. The faster you can pull off the isobutanol, the faster you can make it without killing the little micro critter (keep in mind, when you want to sterilize a wound, you pour alcohol on it – its a real killer of microvarmints).

2. The system. Butamax has a system, Gevo has a system. Both can be bolted onto existing corn ethanol plants.

3. Butamax lands a foundational patent. Amidst a whole lot of patents and patent apps for both companies, Butamax was granted two patents, known colloquially as the ’188 and the ’889 (sigh, only lawyers could love nicknames expressed in three-digit codes).

4. Butamax vs Gevo. Also, last year – and, well you be the judge on the merits of the timing, right in the middle of Gevo’s IPO road show, Butamax sued Gevo over infringement of the patents. That’s Butamax vs. Gevo, and it is set for trial in April 2013.

5. The Gevo response.  Gevo’s defense is two-pronged. One, they don’t infringe on the patent in their process. Two, the USPTO should never have granted ’188 or ’189 in the first place. So, Gevo has petitioned for re-examination of both, and the USPTO is in the process of doing so. Stand by, and we’ll advise further when there’s further to know – you can let the press releases sail on by.

6. Gevo vs Butamax. Gevo has, in turn, sued Butamax over infringement of its ’375, ’376, ’715 and ’808 patents. Butamax has denied the claims,  and is seeking dismissal of the suits.  There’s no trial date set yet that we are aware of.

A Primer

Here’s a timeline of the dispute, as written up by Gevo, for scorekeepers.

Outcomes and dates

1. Gevo and Butamax have participated in court-ordered mediation, in March. Bet that was a barrel of monkeys. Might have been easier to mediate Alec Baldwin and Kim Basinger. Outcome not yet certain.

2. Butamax has filed for a preliminary injunction against Gevo. A hearing was held in March, and a ruling is pending.

3. Trial date for Butamax vs. Gevo is April 2013.

4. First switch-over of a corn ethanol plant to isobutanol in scheduled for the Gevo plant in Luverne, Minnesota, before the end of June. Expect that it will take some period of weeks or months to ramp up to full production – if sooner, great, but don’t expect miracles before the 4th quarter. That’s the magic hour.

The Bottom Line

It’s a serious dispute, for the companys involved. For bio-based pathways to isobutanol as a class, there doesn’t appear to be a losing side, except to the extent that lawsuits slow companies down, and depress stock prices and thereby chill the financing of expansion at commercial-scale.

The scramble over the patents could drag on for years. The loser in the Butamax vs Gevo suit should be expected to appeal almost instantaneously; same with the losing side in Gevo vs Butamax, whenever that comes to trial.

So, eyes might generally turn more towards the commercial-scale activities at Luverne. Because that is the proof of the value of a bio-based process – whomsoever it is determined actually owns it. Something worth fighting to the death over, now that’s music to the industry’s ears.

Disclosure: None.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe  here.

April 16, 2012

Here comes the sun….not

Marc Gunther

 

Germany, once the world’s leading market for solar power, is pulling back its subsidies.

Q Cells (QCLSF.PK), once the world’s largest solar company, just went bankrupt.

This isn’t happy news. If the country that birthed the Green Party cannot sustain its support for solar, what does that tell the rest of us?

It should tell us that it’s time (actually way past time) to get serious about energy and climate policy.

This week, as I followed the news from Germany, I talked with a couple of energy-policy experts who I respect–Jesse Jenkins of the Breakthrough Institute and Gernot Wagner of the Environmental Defense Fund. I also watched an interview (below) with Bill Gates from the Wall Street Journal’s Eco-nomics conference. They disagree about some specifics, but they all agree that the US needs to get a lot smarter about how to drive a transition to low-carbon energy. So let’s try to see what we can learn from Germany, and the rest of Europe.

Perhaps the most obvious takeaway is that we should not place expensive bets on any one solution. That’s what the Germans did, with generous subsidies in the form of a feed-in tariff for solar. Even though the costs of solar have dropped dramatically, the subsidies were not sustainable. Remember when people said nuclear was too cheap to meter. Solar PV is too costly to subsidize on a scale that matters.

Here’s how The Guardian reported the story last month:

You can have too much of a good thing, it turns out. The German government has said it has been forced to cut subsidies for solar panels, because demand was so high it could no longer afford to support the green technology.

In other words, the Germans are cutting back on solar subsidies not because they didn’t work but because they did. The government wants to drive down solar installations to less than half of the 7.5 gigawatts (27% of the world’s total) that it installed last year.

It’s not just Germany, either. The Spanish market went from being the largest in the world, at 2.7 GW, in 2008 to installing 17 megawatts — a drop of 99 percent — after subsidies were slashed and a cap on new installations was imposed, according to ClimateWire [subscription required]. Italy, which was the world’s top market in 2011, is also talking about cutting back.

All this, mind you, is happening in Europe, where there is a broad political consensus that climate change is serious business.

Jesse Jenkins and Gernot Wagner agree that this points to the limits of a clean energy policy that relies on subsidies for deployment. That’s essentially what we have in the US, in the form of tax credits for solar and wind power, and state renewable portfolio standards that require utility companies to generate a percentage of their electricity from renewable sources. Certainly there are benefits to policies that drive deployment–they achieve immediate reductions in CO2 emissions, and they can help get infant industries, like wind and solar, off the ground.

But  by themselves, policies focused on deployment won’t drive a radical transition to a low-carbon economy, which is what we need.

Says Gernot: “Public money is not enough to finance the transition to a green economy. Spending a couple of billion here and there is not going to revolutionize the world.”

Jesse agrees: “The financial burdens of the subsidy will eventually exceed the public tolerance…We need to deploy these technologies, but we need to deploy them in a way that drives the price down as rapidly as possible. We need smarter subsidies.” The Breakthrough Institute, with Brookings and the World Resources Institute, have a report coming out this month that will recommend new approaches–essentially, ways that subsidies can be tied to cost reductions.

What’s more, subsidies can be wasteful.  If I were to install solar panels on the roof of my tree-shaded house in Bethesda, US taxpayers would pay 30% of the costs. That’s unwise and unjust, although not nearly as unwise as given many billions of dollars to oil and gas companies to help them heat up the planet.

So what should we do? Gernot, Jesse and Bill Gates all agree that  we need breakthrough innovation to head off potentially catastrophic global warming. Today’s low-carbon energy sources — wind, solar, biofuels, electric cars, batteries–are still too expensive.

Given the government’s ability to finance renewable energy is limited, more of it should be spent on R&D where it will drive innovation and less should be spent deploying mature or wasteful technologies, like corn ethanol. This requires thinking long term, as Gates explains, because the climate crisis can’t be solved right away:

People underestimate how hard it is to make these changes. That is, they look at intermittent energy sources, they don’t think about storage and transmission. They look at things that are deeply subsidized, and they forget that they are deeply subsidized. They look just at the rich world, and they don’t look at where all the energy increase is taking place, which is in middle and low-income areas. I think the problem is way harder than many observers think.

But I also think, to counterbalance that a little bit…that the potential for innovation, not innovation in the next ten years, because you have to invent in this next ten years, but innovations that will start to be rolled out in say the 20 year time-frame, means that we can be in terms of the first derivative, in terms of the rate of change, we can be pretty dramatic. And so if you took a period like 75 years, if we really fund basic research at a reasonable level, which the U.S. does not, other countries do not, if we have policies to encourage experimentation, which just take any one of the things – nuclear, carbon capture – we’re not doing a good job on that – transmission, storage. If you do the right things, there is a chance to meet very aggressive goals in a 75-year time-frame.

Two final thoughts. As Gernot argues in his book, But Will the Planet Notice? a carbon tax or a cap on carbon emissions is the single best way to drive innovation, deployment and efficiency. Gates says pretty much the same thing:

A serious carbon tax…is the most important thing to do….that’s the greatest failure in our energy policy.

How to change politics to make a carbon tax possible is a topic for another day. I’m skeptical that we will be able to do so rapidly enough to forestall serious global warming impacts, which is why I wrote about the need to research geoengineering and air capture of CO2 (they’re not the same thing) in my short ebook, Suck It Up: How capturing carbon from the air can help solve the climate crisis. In the book, I write about Gates’ finding for research into geoengineering and and his support for a startup company called Carbon Engineering.

His talk is well worth watching, If you prefer, you can download download a transcript [PDF].


Marc Gunther writer for Fortune, GreenBiz and Sustainable Business Forum co-chair, Fortune Brainstorm Green 2012 and a blogger at www.marcgunther.com.  His book, Suck It Up: How capturing carbon from the air can help solve the climate crisis, has been published as an Amazon Kindle Single. You can buy it here for $1.99.

April 15, 2012

Hybrid Locomotives, Vehicle Electrification at Relevant Scale

John Petersen

Last month Ricardo PLC (RCDOF.PK) published a report titled "GB Rail Diesel Powertrain Efficiency Improvements" that it prepared for Great Britain's Department for Transport. While most of the fuel efficiency technologies Ricardo evaluated for the report were mechanical systems, its analysis of the fuel efficiency benefits of stop-start and hybrid systems for locomotives offered an intriguing view of a cost-effective vehicle electrification opportunity that can be implemented at relevant scale within a few years. The two types of locomotive systems Ricardo evaluated for the report were simple stop-start idle elimination and full hybridization. The following table compares the relative fuel economy benefits of these alternatives for local, intercity and freight trains in Great Britain.

Technology level
Local
Intercity
Freight
Stop-start idle elimination
up to 7%
up to 4%
up to 41%
Hybrid powertrain
up to 22%
up to 14%
up to 41%

While raw percentages are fascinating, they can't give you a feel for the magnitude of the potential fuel savings. On its website, the Electro-Motive Diesel unit of Caterpillar (CAT) helps put the Ricardo numbers into perspective by showing how a basic stop-start system can offer 10-year savings of up to $357,308 for a switcher duty cycle and up to $222,740 for a line-haul duty cycle. With full hybridization, the fuel savings can be even more striking.

For the last couple years General Electric (GE) has been preparing to launch its Evolution™ Hybrid Locomotive, which will save approximately 440,000 gallons of fuel over a 20-year useful life, or roughly $1.3 million based on an assumed diesel price of $3 per gallon. In February, Japan Freight Railway Company introduced a hybrid shunting locomotive that slashes fuel consumption by 36%. Both of these hybrids are diesel-electric locomotives that were redesigned to capture the energy dissipated during braking and store it batteries. The stored energy can then be used on demand to reduce fuel consumption. The Evolution hybrid uses a GE variant of the Zebra sodium nickel chloride battery that was originally developed by Daimler and refined by FZ Sonick. JR Freight's hybrid shunting locomotive uses a surprisingly small (67.4 kWh) lithium-ion battery pack from Japan's GS Yuasa (GYUAF.PK).

Between now and 2020, Pike Research forecasts that cumulative sales of new hybrid locomotives will approach 500 units worldwide and require roughly 500 MWh of batteries. While Pike expects new hybrid locomotive sales to ramp rapidly through the end of the decade, the larger near-term opportunity will involve retrofitting the existing global fleet of about 100,000 diesel-electric locomotives to save fuel, reduce emissions and improve the bottom line performance of the world's cheapest land-based transportation networks.

Most developers of hybrid locomotive technologies have followed the path blazed by automakers and tried to build all necessary elements of a hybrid system into a single chassis. The exception to the general rule has been Norfolk Southern (NSC), which is focused on developing a pure battery electric locomotive that can be:
  • Charged from the grid and used as a stand-alone locomotive for yard switching operations; or
  • Combined with one or more conventional diesel-electric locomotives to create a "hybrid train."
Norfolk Southern's battery electric locomotive technology is described in US Patent No. 8,136,454, which issued on March 20th of this year. The beauty of the patent is its inherent simplicity and flexibility. Designing a single-chassis hybrid locomotive is a very complex engineering and space optimization challenge. When the battery elements of the system are separated from the internal combustion elements, however, the engineering and space optimization hurdles get lower while overall flexibility increases.

There are very few industries that can compare with the railroads when it comes to calculating the amount of fuel needed to move a train over a given route. The route data is all computerized with precise grade and speed profiles for every foot of track. If a route needs a five to one balance between diesel and battery power, a railroad can configure a six locomotive consist with five diesel electrics and one battery electric. If another route can handle a one to one balance, a railroad can configure a six locomotive consist with three diesel electrics and three battery electrics. That ability to mix and match locomotives to suit the precise requirements of a particular route simply can't happen with single-chassis hybrids.

The concept even makes the retrofit process cheaper since a railroad can convert its least efficient locomotives to battery drive, keep its most efficient locomotives as diesel-electrics, and effectively upgrade the entire fleet by retrofitting a small percentage of the rolling stock.

Norfolk Southern's first battery-electric locomotive, the NS 999, was publicly launched in September 2009 but severe charge acceptance problems in the AGM batteries it used for the original vehicle had Norfolk Southern actively searching for better batteries by the time the November-December issue of its employee magazine,"BizNS," was published. Since 2010, the primary focus of Norfolk Southern's battery evaluations has been the PbC battery from Axion Power International (AXPW.OB), an asymmetric lead-carbon battery that offers the cycle-life, charge acceptance and power of lithium-ion batteries at a lead-acid price point. While the two companies have been tight-lipped about their progress, Axion has reported that the PbC is meeting all expectations in double redundant long-string testing at Axion, Norfolk Southern and Penn State University. In a presentation at last October's William W. Hay Railroad Engineering Seminar hosted by the University of Illinois at Champaign-Urbana, Gerhard A. Thelen, Norfolk Southern's Vice President of Operations Planning & Support, spoke highly of the PbC's performance and offered an upbeat outlook for Norfolk Southern's battery-electric locomotive plans. Prototype trials of switching and long-haul battery-electric locomotives are anticipated later this year.

Stop-start idle elimination and hybridization of railroad locomotives and other heavy freight vehicles will never have the sex appeal of a Fisker Karma, but for companies like Norfolk Southern that spend $1.5 billion a year on fuel, knocking ten or fifteen points off the fuel bill with stop-start and hybrid locomotives is a compelling strategy.

Disclosure. Author is a former director of Axion Power International (AXPW.OB) and holds a substantial long interest in its common stock.

April 14, 2012

The Week In Cleantech- 4/14/12

Capstone(CPST), Siemens (SI) and China BAK(CBAK) announce deals; Brightsource withdraws IPO.

Jeff Siegel and Tom Konrad

April 9: Capstone Turbine (NASDAQ:CPST) Lands Another 10 Megawatts

JS:

  • Capstone Turbine (NASDAQ:CPST) announced this morning that it received about 10 megawatts worth of new orders from two oil and gas producers in the Eagle Ford shale play. For the past few years we've seen Capstone become one of the many beneficiaries of the oil & gas boom in the U.S. I expect to see Capstone continue to benefit from this space. That's the good news. The bad news is that today's announcement comes on a day when it looks like the broader market could struggle. This will likely weigh on any gains. Still, I remain bullish on Capstone below $1.10.
  • China BAK Battery (NASDAQ:CBAK) announced today that it has entered into a new contract to supply high-performance batteries to China-based Chery Automobile, Inc. The deal calls for BAK to deliver 1,000 lithium-ion units that will be used to power Chery's Ruilin M1 electric cars. This is the second high-performance battery order CBAK has landed from Chery. This particular stock got a nice boost a few weeks ago after picking up about $2 million from the Chinese government for a battery module project. It'll be interesting to see if today's news will give it another boost.

April 10: Rising Oil Prices Cost Importers $5.5 Billion a Day

TK: IEA chief economist Fatih Birol calls it a serious cause for concern.  More here.

April 11: Siemens (NYSE:SI) Lands $54 Million Rail Deal

JS:

  • Siemens (NYSE:SI) has announced that it has won a $54 million contract to provide signaling technology for an extension of a subway system in Athens. Apparently, this deal came to fruition about a week after Greece's Parliament ended a dispute over an alleged bribe scandal involving the company. As part of a deal to end the dispute, Siemens said it would spend more than $131 million to “enhance activities in Greece.” Despite the irony of the “bribery” agreement, this is yet another example of how Siemens is a global leader in the rail space. I'm bullish on Siemens, and currently have a $114 price target on the stock.
  • Just days after landing its high-performance battery deal with Chery Automobile, China BAK Battery (NASDAQ:CBAK) has announced that it has regained compliance with the NASDAQ minimum bid price requirement. I imagine this will offer further support for the stock going forward. Especially today, if the market really does prove to shake off the stink of 5 straight days of losses.

April 12: Brightsource Withdraws IPO

TK: Concentrated Solar Power (CSP) company Brightsource withdrew its IPO today.  The company cited "tough market conditions."  As in the recent bankruptcies of two other CSP companies: Solar Millennium (S2M.DE) and Stirling Energy Systems and a 13% decline in solar stocks over the past month.

April 13: If You Rely On Water To Live, You Need To Watch This Video

JS: As demand for food increases across the globe, agriculture is becoming the largest driver of climate change, loss of biodiversity and environmental destruction.

But there are solutions. And ecology expert Jonathan Foley offers these solutions in his TED talk, which was just recently posted.
Check it out. . .

Disclosure: None

Jeff Siegel is Editor of Energy and Capital, where his notes were first published.
Tom Konrad CFA is the Editor of AltEnergyStocks.com

April 13, 2012

Compared to what: the low-down on alt energy subsidies

Jim Lane

Hybrids, plug-in electrics struggle to pass the consumer’s “compared to what” test – and how much do those tax credits cost, anyway?

Perhaps the three most important words in technology development, bio-based or otherwise are “compared to what”.

It’s a useful way to look at bioenergy – because most studies look at bio-based technologies in a vacuum. Is there indirect land use change? Can you make fuel from algae? Do fuel tax credits raise the US federal deficit?

Yes, yes, and yes.. But compared to what? What’s the baseline?

You could, for example, ask the questions another way. Can eating at Outback Steakhouse cause indirect land use change? Are fossil fuels made from algae? Does having a baby raise the US federal deficit?

Yes, yes and yes.

There’s no end to the ridiculous line of questions that hard-liners can phrase to make anything look bad. It’s all a matter of the framing. That’s why ‘compared to what’ works. I mean, what are we going to do, stop having babies?

Sometimes the “compared to what” factor is a mechanism by which otherwise-admired technologies run into trouble.

The trouble with hybrids

Take, for example, the trouble with hybrids. We saw a report yesterday that only one in three current owners of a hybrid car, who purchased a new car in 2011, bought another hybrid. That’s not so good.

You notice that the question was not framed in the fashion of something like “do you like your hybrid?” or “does driving your hybrid make you feel like you are making a positive contribution to [fill in the blank].” To which the answer is, yes.

But as BP Biofuels chief Phil New observed last week at ABLC, infrastructure is a tough thing to get around, incumbents are hard to shove out. Just ask Mitt Romney, or Bob Dole, or Walter Mondale if you like.

The problem of the hybrid is not in the inherent qualities of the technology, but in comparing it to the convenience of the incumbent, the internal combustion engine. Electrics have a customer base, but the internal combustion engine’s overall cost-benefit proposition seems to be more compelling than previously understood.

The news, from the automotive market research team at Polk, inspired me to look at how the electric platform is doing. Hybridcars.com does an amazing job collecting and reporting on those stats – check out that site some time.

(Note: I wish the electrics platform well. Myself, I started in this world back in the 90s setting up demo drives of the old EV-1 for members of the Sierra Club, to which I have belonged for a long time. I’ve never stopped admiring the technology.)
Who’s selling how much what?
Vehicle sales

Here’s what is happening in hybrids and plug-in electrics, in the US market. Share on market has dropped from 2.78% of all new cars sold, in 2009, to 2.25% in 2011. This despite some well-publicized new market entrants.

Plug-ins have started off slowly, 345 cars in 2010 and 17,813 last year. Growing, but not as fast as once hoped. The Volt is outselling the Leaf by nearly 3-to-1. I bet range anxiety has a lot – a lot – to do with it.

Hybrids have had a drop-off, down to 268,807 cars last year from 290,272 in 2009, on the heels of the global financial crisis.

Bottom line, US automakers sold 1.14 million more cars in 2011 than in 2010, but only 11,435 more hybrids and plug-in electrics. Not an encouraging sign that Americans are falling in love with the electric platform, despite almost uniformly good publicity.

The $7500 alt vehicle tax credit

And despite that tax credit. Hmmm, what about that tax credit anyway? Is it the credit that is failing – not enough? Well, compared to what? Let’s look at how the alt-vehicle tax credit stacks up against fuel subsidies.

What is the credit? It’s a $7500 tax write down against the cost of the car, bringing a $42,000 Volt down into the mid-30s, for example. It applies to the plug-in electric.

The tale of the tape

Now, the average US car drives 190,970 miles in a lifetime (16.9 years at 11,400 miles per year, according to the Department of Transportation), and the average new car gets 33.9 miles per gallon (for 2010, according to the EPA). So, the average new car will guzzle 5,633 gallons of gas in its lifetime.

Now, a fuel tax credit is paid out over the lifetime of the car, not all upfront. So, the tax credit is worth less, because of inflation and the cost of money, at the end of the 16.9 years than at the beginning. It’s the bird-in-the-hand principle at work.

Applying a discount rate of 5 percent to the $7500 tax credit, over 16.9 years, a $7500 tax credit has $17,106 in buying power, compared to $7500 in fuel tax credits paid out over 16.9 years.

So what’s the bottom line? A $7500 tax credit, discounted over the life of a vehicle and amortized over the gallons of gasoline that a comparable fuel-burning car would use, is comparable to a $3.04 tax credit, per gallon of gasoline, for a car with an ICU engine.

Now, I can just about guarantee you that, if there were a $3.04 per gallon tax credit for [name your fuel of choice], you would see a different national attitude towards ethanol, LNG, or fueling cars with algae, crocodile pelts, or liquified tennis shoes.

I mean, ethanol is sold wholesale right now for $2.20 per gallon. And we know what 85 cent ethanol days do for gas stations. They cause mayhem – lines reminiscent of oil shocks.

So, where are the long lines to buy hybrids? It’s the problem of battery cost, which is just a complete problem-solving bummer.

But it gets worse. You see, the problem of the $7500 tax credit is that it is absolutely unsustainable. You remember the national outcry over a 45 cent per gallon tax credit for ethanol, when ethanol reached 9 percent market share. Unaffordable! the opponents cried. Imagine what the alternative vehicle tax credit will feel like when the government is fronting out the billions. The government outlay will reach that same level of Unaffordable! before plug-in even reach 2 percent market share.

The Bottom line

For now, electrics have won a fan base, but bio seems to be doing a better job of advancing the technology, reducing or eliminating tax credits, and giving customers more power of choice when it comes to selecting a car. The reason – bio-based is more affordable, and generally more infrastructure-compatible.

Notice, we didn’t say, “infrastructure compatible,” though drop-in fuels are indeed so. But even the dread ethanol is more compatible than plug-in electrics. It’s that old “compared to what” all over again.

You see, that’s the danger of analyzing technologies inside a bubble. The world is too swimmingly complex. But consumers know – in the way that Churchill once said, “there’s one person smarter than anyone, and that’s everyone.” Despite that enormous, unsustainable subsidy, they are sticking with the old ICU. Long-term, they will move away, but for now, bio-based continues to serve the emissions, energy security and employment goals of those who can’t quite yet part with their old engines, or part with the dollars to embrace the electric world. For now.

 Disclosure: None.


Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe  here.

April 11, 2012

Five More Winners of the Clean Energy Race

Tom Konrad CFA

The Pew Charitable Trusts just released the 2011 edition of their report, "Who's Winning the Clean Energy Race?"

This is the second year I've written about their findings, and I wonder what the question really means.  In particular,

  • Who are the competitors?  (Pew looks at countries)
  • How do we judge the winner? (Pew looks at total investment)
I write about Pew's winner (and why its lead won't last) here, but there are other winners, perhaps even more significant ones, depending on how we judge the race and who's running.

And the Winners Are...

#5 Largest Investment Sector: Solar

Solar manufacturing stocks were lousy investments in 2011.  That was mainly a consequence of rapidly falling solar module prices.  Those same falling prices led to a boom in solar deployments.  Solar attracted more than half of all Clean Energy investments in 2011, at $128 billion, up 44% from 2010.

Investment by Technology.png

Solar deployment was up 54%, to 29.7 GW in 2011.  This was particularly notable in Italy, where solar has hit grid parity.  Grid parity means that power from solar panels now costs the same as grid electricity, and is a consequence of Italy's high electricity prices and good solar resource.  Italy added almost 8GW of distributed photovoltaic capacity, more than half of all distributed capacity added in 2011.  8GW of solar is about the same capacity as six large nuclear reactors, and (due to lower capacity factors) produces almost as much energy as two such reactors.

Italy's rapid solar deployment in the midst of a financial crisis should finally prove that solar can scale as quickly as any traditional electricity generation technology.

Solar investments also surged in the United States (where developers rushed to take advantage of the expiring incentives, and Japan, in the wake of the Fukushima nuclear disaster.
Investment by Country and Sector.png

#4 Most Rapid Transition Towards a Clean Energy Economy: Italy

Rapid
transformation.png The ultimate goal of the Clean Energy Race is to transition the world economy off its unhealthy and resource-constrained dependence on fossil fuels to a sustainable economy based on the efficient use of renewable resources.  To measure progress towards that goal, we need to evaluate not total investment, but rather how significant the investment is relative to a country's economy. 

By this measure, Italy is the clear winner.  Italy grew its investments in clean energy at a compound annual rate of 89% over the past five years, producing 24-fold growth over that period, and clean energy investment now accounts for 1.58% of the country's GDP.

For skeptics who worry that Italy is wasting money on clean energy at a time it can least afford to, it's important to note that solar, which accounts for virtually all Italian investments in Clean Energy, has reached grid parity in Italy.  In other words, Italian solar investments are profitable investments. 

Italian solar power also reduces future imports of natural gas to produce electricity, improving the long term balance of trade in a country with too much debt.

#3 Sector Finally Getting Some Respect: Efficiency

Energy Efficiency has long been the under-appreciated but hardworking sibling in the Clean Energy family.  Energy Efficiency is far more cost effective than renewable (or even conventional) energy generation, and has the capacity to meet at least half of our future energy needs. 

In addition, the arguments that Clean Energy creates jobs are the strongest (and the criticisms the weakest) for Energy Efficiency. Those who argue that Clean Energy will destroy jobs base their arguments on the relatively high costs of some clean technologies relative to conventional energy.  While these arguments are weakening as Solar and Wind deployment gets cheaper, they have never been true for Energy Efficiency, which has always been cheaper than coal.

Efficiency is getting respect in the sense that Venture Capital and Private Equity(VC/PE), are increasingly flowing to the sector.  In 2011, the energy efficiency and other low carbon technologies accounted for 40% ($3.6 Billion) of VC/PE investment.  With luck, other types of investment will follow (as they often do) where VC/PE investment leads.

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#2 Economic Winner: Energy Consumers

The most notable change in Clean Energy during 2011 were the rapid price drops.  With Wind and especially Solar power cheaper, the big winners are Clean Energy consumers.  As discussed above, Italians are already saving money by investing in solar to displace electricity from the grid. 

World Clean Power capacity additions in 2011 were 83.5 GW, 59% more than in 2010, at a cost of $141 billion, up only 12% from 2010 levels.  In other words, we're getting a lot more energy by only spending a little more.  The $59 billion dollars extra that the same amount of capacity would have cost at 2010 prices is pure gain for consumers.

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#1 Winner of the Clean Energy Race: Our Children

At some level, it's not important which country invests the most in Clean Energy, which sector comes out ahead, which country is moving most quickly towards sustainability, or even who benefits the most economically. 

What is important is that we make the transition as quickly as possible, so that fewer resources are wasted digging stuff out of the ground and burning it, scarring the landscape, polluting the air, and messing with our planet's delicate ecological balance. 

With investments in Clean Energy we get what we pay for.  The up-front cost has often been more (although that's rapidly changing), but that's typically the whole cost.  With fossil fuel investments, we've long been getting more than we paid for, but now the difference is coming back in the form of deferred, hidden costs.  Our children and our children's children will be paying these costs in the form of depleted resources and a less hospitable (if not downright hostile) environment for generations to come. 

We're even paying for our previous use of fossil fuels today.  This mild winter may seem like less of a cost than a benefit of Global Warming (unless you are a skier or a maple syrup producer), but any disruption of the natural cycle creates costs far beyond the immediate effects.  Allergy sufferers are already feeling the effects, and the mild winter was even more of a boon to insects than it was to us.

If the Clean Energy Race makes everyone run faster, we all win.  Except maybe the bugs.

April 07, 2012

The Week In Cleantech- 4/7/12

Easter Treats for Energy Focus, Solazyme, Capstone, Alstom, and Iberdrola; SemiLEDS Lays an Egg

Jeff Siegel

April 3: Solazyme (NASDAQ:SZYM) pops 12% in pre-market

  • Energy Focus, Inc. (OTCBB:EFOI) announced this morning that it landed a $1.8 million order from “a leading Energy Service Company” for its LED lamps. Despite the fact that I hate reading press releases about deals like this when all companies are not named, this is a pretty solid deal for EFOI. The company struggled a bit last year, but 2012 has been looking up. Particularly after it was announced a few weeks ago that the company had entered into a 5-year cooperation agreement with Communal International, Inc. This deal essentially allows EFOI access to the Asia market. EFOI could get a quick boost today, although the very speculative nature of this particular stock will likely keep it from getting much love from those seeking to go long in the LED space.
  • Solazyme, Inc. (NASDAQ:SZYM) announced this morning that it and Bunge (NYSE:BG) are forming a joint venture to build, own and operate a commercial-scale renewable tailored oils production facility adjacent to Bunge's Moema sugarcane mill in Brazil. Although I'm not a huge fan of today's conventional corn-based ethanol that we're using in the U.S. (at an enormous cost to the tax payer and to the environment), Solazyme's access to Brazil and its sugarcane will prove to be a good thing for the company. In fact, the stock is up about 12 percent in pre-market. Fortunately, I updated the members of my Green Chip Stocks service to this on back on March 9, when it was trading at around $13.00 a share. Right now it's around $16 – which was my initial price target.

 Certainly I'm pleased with the gains, but my only hangup with this one is that the company doesn't seem to have much of a cushion as it seeks to expand. I wouldn't be surprised if the company had to raise some additional capital sometime in the next year or so.

April 4: Capstone Turbine (NASDAQ:CPST) Lands Singapore Deal

Capstone Turbine (NASDAQ:CPST) announced this morning that it picked up a sale in Singapore for its C1000 microturbine unit. The microturbine is being sold to N&N Agriculture, which is one of Asia's biggest high-tech egg farms. Biogas generated from animal waste will be used to fuel the unit.

Although this is only one order, Capstone's continued expansion into Asian markets is a bullish indicator for the company.

Capstone tends to be one of those stocks that's a hit with traders. When it falls into the $1.10 to $1.20 range, short interest heats up. Historically that short interest will stick around until a few more orders come in. Capstone has a tendency to pick up new orders every month or two. I've played this one many times before – jumping in below $1.10, then waiting it out for a series of new deals to push it back up to around the $1.40 level. What can I say? When it comes to making money, I'm a creature of habit. Not sure how Capstone will perform today, though. Given the way the broader market looks in pre-market, this announcement could fall in deaf ears. But I'm still a buyer at these levels.

April 5: SemiLEDS (NASDAQ:LEDS) Revenue Drops 21%

SemiLEDs Corporation (NASDAQ:LEDS) announced Q2 results this morning. The LED maker showed a 21 percent decrease in revenue, guided to a larger-than-expected loss, and offered a quote from the CEO that I guess is supposed to keep investors from jumping ship. Noting that “given the ongoing challenging industry environment, we are pleased with our quarterly financial and operational results.” It's no secret that the LED space is a tough one to be in right now. And quite frankly, I don't see it easing up anytime soon either. However, LEDS is still a major player, and if it can continue to tread water (as it's been doing) this year, I think it'll be OK. After all, despite the decrease in revenue, the company still beat estimates.  I suspect the stock will get a nice boost this morning.  Of course, the last place I'm going right now is the LED sector. We'll re-evaluate around the second half of this year.

April 6: EDF, Alstom, Iberdrola Chosen For Offshore Wind Deals in France

Yesterday we reported that a decision on which companies will be selected to build 3 gigawatts worth of offshore wind in France, would be made shortly.

Well, this morning we learned that state-owned utility EDF, in partnership with Alstom (PINK SHEETS:AOMFF) won three of the deals. The fourth was won by Iberdrola (PINK SHEETS:IBDRY) of Spain.

The companies will now build 2 gigawatts of offshore wind capacity – or the equivalent of two small nuclear reactors.

France initially launched a call for bids last summer in an effort to help the nation transition 23 percent of its power generation to renewables.

Although this is a big deal for the offshore wind industry, these projects in France still don't come close to what's currently being developed in Spain, Denmark, and of course, Germany, where that country is seeking to replace nearly all of its soon-to-be retired nuclear power plants with offshore wind.

While debate continues in the U.S. over whether or not to embrace offshore wind (although it looks like the state of Maryland is getting very aggressive here and is likely to be a leader in offshore wind in the next few years), Europe is going full-speed ahead. And certainly we're looking to get a piece of this action. My top plays on Europe's offshore wind development are Siemens (NYSE:SI) and ABB (NYSE:ABB).

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Disclosure: None

Jeff Siegel is Editor of Energy and Capital, where these notes were first published.

April 06, 2012

Buying Lime and Finavera (11 Clean Energy Stocks for 2012)

Tom Konrad CFA

Portfolio performance

March was a volatile month for clean energy, with many of my picks reporting earnings.  My 11 picks were down 4% on average since my last update (March 1st to April 5th), compared to a 9% decline in the Powershares Wilderhill Clean Energy Index (PBW), while the broad Russell 2000 index was flat.  The hedged portfolio (see the original article for details) lost 5%.

For the year to date, the portfolio has put in a strong performance, and is up 15%.  PBW and the Russell 2000 are up only 3% and 11%, respectively.  The hedged portfolio is up 10%.  See the following chart for details:
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Stock Notes

Wind Developers: A Little Birdie Told Me

Last time, I mentioned I has a limit order to buy Western Wind Energy (WNDEF.PK/WND.V.)  That order has since executed at $1.68, and the stock bottomed at $1.66.  Since then, I tweeted that the company had applied for the $90M Section 1603 cash grant on their 120 MW Windstar project. While this was expected, it reduces uncertainly around the company's projects.  Even a little more certainty around a $90M payment is significant for a $115M market cap company.

I also tweeted  that Finavera Wind Energy (FNVRF.PK/FVR.V) had received its Environmental Assessment Certificate (EAC) for its Tumbler Ridge project.  This was the last barrier to project construction (funded by GE Energy (GE).)  The EAC is also significant because the EAC applications for Finavera's 77MW Wildmare and 120MW Meikle projects are modeled on Tumbler Ridge.  Not only can Finavera begin construction of Tumbler, but investors can be a little more confident that Wildmare and Meikle will also obtain EACs.  Finally, Finavera also closed on a $200 thousand convertible note in March, easing the company's tight liquidity.  I recently bought more Finavera at $0.355 on the EAC news.

Earnings Notes

Earnings disappointed investors at New Flyer (NFYEF.PK/NFI.TO) and Lime Energy (LIME.)  I wrote about New Flyer last week, so I won't repeat myself here.  Since then, the only news has been the ratification of a new collective work agreement by the union at New Flyer's Winnipeg factory: Good news, but not enough to move the stock much. 

The highlight of Lime's (LIME) earnings were a big write-off and less than expected revenues in their Commercial and Industrial (C&I) division.  When I first wrote about Lime last October, I concluded by saying,

A renewed market decline, along with a possible earnings miss caused by C&I clients hoarding cash in the climate of uncertainty could easily lead to a lower stock price in the coming months. I’ll be watching the stock closely and buying cautiously if either of these comes to pass.

We have not had the stock market decline yet, but this was the earnings miss I was waiting for.  I took the opportunity to scoop up a bunch of this stock between $2.65 and $2.95 over the last week, most notably when Lime had a surprising intra-day sell-off which I tweeted about on Monday.

On March 9th, Waterfurnace Renewable Energy (WFIFF.PK/WFI.TO) announced revenue for 2011, down 0.5% from 2010, but improved margins because of a price increase in late 2010.  The market has reacted mildly favorably, with Waterfurnace's stock climbing slowly but steadily since.

Alterra Power (MGMXF.PK/AXY.TO) also announced earnings on March 28th.  The good news was no news: all Alterra's development project continue on pace, and there have been no significant hiccups in power production.  Given the large number of mishaps in the geothermal industry in 2011, a few months of no bad news is all that it takes a for great stock performance in 2012.

The Acquisition Cycle

Bicycle manufacturer Accell Group (ACCEL.AS) was cruising along with 2011 sales  9% over 2010, and net profit up 11% announced in February.  Profits were driven by a continued shift into higher value electric bikes.  The company is re-cycling its profits into more acquisitions of bicycle brands.   Accell adds value to its acquisitions with a strong distribution network which is unusual in the very fragmented bicycle industry.  Having already purchased American electric bike and scooter manufacturer Currie Technologies, Accell is now in talks to buy storied bicycle brand Raleigh.  (As an aside, I own an older Currie iZip, a utilitarian commuter bike, although I just upgraded to the much sportier EZ008 and am looking to sell the iZip.) 

Conclusion

While my stocks lost a little ground in March and the first week of April, it has been a good month in comparison to Clean Energy stocks in general.  Most of this has probably been due (again) to my avoidance of solar stocks, which are again looking like they are headed for new lows. 

We're seeing decent buying opportunities in Lime Energy, which I think is a deal below $3, and Finavera which seems quite cheap at $0.36, although the company's low cash on hand could drive the stock lower if they are forced to dilute current stockholders to raise funds.

DISCLOSURE: Long WFIFF, LIME, AMRC, RKWBF, WM, VE, ACCEL, NFYEF, FNVRF, WNDEF, MGMXF, and puts on IWM and SPY.

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.

April 05, 2012

Solar ETFs Breaking Support


Steve Sollheiser

KWT Breaks Support

KWT Chart

There is very interesting price-action in the Market Vectors Solar Energy ETF (KWT) in the last trading day. We can see that price has closed below the support level of $3.40 which is a bearish signal. We can also see that the breakout price was touching an ascending resistance line twice - which creates this a Descending Broadening chart pattern.

We would expect price to continue downwards with target at approximately $2.00. If price opens above the level it will be a sign that the support is still strong, and if price opens below the $3.40 level it is a sign of continuation of the bearish move.

If price pulls back to the $3.40 (re-test the level from below) we will enter a short trade with stop loss right above $3.40 and target at $2.00. This trade should have very little risk and relatively high reward.

TAN May Soon Break Support

TAN Chart

The Guggenheim Solar ETF (TAN) is showing the same signals as the KWT, which reenforces our analysis. When two correlated stocks show different signals one can conclude that the signal is weak - however in this case the same thing happened: price has closed very close to the $23.00, without breaking it.

In case price opens below this level, we will expect a continuation of the bearish move. In case price opens above it (we expect a gap to occur, as price stopped near a very psychologically-charged level), it will be a signal that the level is still strong.

In this case, we will still trade the pullback to the $23.00 level from below, with target at exactly $10.00. Note that that this chart pattern has 80% win rate, and the percentage of chart patterns that meet the projected target is 68%. So we will trade it, however if price reaches only half the target we will still take our profits and close the trade.

Summary

If price breaks the support level and re-tests it from below, we will enter a sell trade on both TAN and KWT. In case of a gap upwards we will wait for price to touch the resistance trend line before reacting.

Disclosure: No Position.

Steve Sollheiser is a trader and a writer with experience in trading stock chart patterns and trading Forex. In his site he shares his insight about chart trading and trading psychology.

Neste Renewable Diesel Capacity Hits 2 Million Tons But Feedstock Constraints Loom

Debra Fiakas
 
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Image: Neste Oil Rotterdam Facility.  Source: Neste Oil

Finland’s Neste Oil Corporation (NEF: F) brought its fourth renewable diesel plant on-line in September 2011, earning bragging rights to the world’s largest facility of its kind.  Located at the Port of Rotterdam, the plant has the capacity to produce 800,000 metric tons of renewable diesel that Neste brands NExBTL and claims is the “cleanest and highest-quality renewable diesel on the market today.”  Along with Neste’s three other plants already in operation in Finland and Singapore the fourth plant in Denmark brings Neste’s total production capacity to 2.0 million metric tons per year.

Start-up Date Location Capacity
September 2007 Porvoo, Finland 200,000 tons/year
September 2009 Porvoo, Finland 200,000 tons/year
November 2010 Singapore 800,000 tons/year
September 2011 Rotterdam, Denmark 800,000 tons/year

 Neste’s augmentation of renewable fuel production capacity is also impressive against the total production capacity in the world.  The Renewables 2011 report published by REN21 reported 16.6 million metric tons in total renewable diesel production in 2010.  Two of Neste’s plants came on-line subsequent to that production measure period, adding 1.6 million metric tons or ten percent to world production capacity and potentially increasing renewable fuel production by 10% if both its Singapore and Rotterdam plants operate at full capacity.

It is worth noting the location of Neste’s two largest plants  -  bustling ports with easy access to ocean and rail shipping lines.  Leadership at Neste are not small thinkers.  They apparently view the renewable energy industry the same way they have viewed the fossil fuel stream  -  globally.  With access to rail and ocean shipping services, they are in a better position to source feedstock and distribute final production  -  in volume.

Neste positioning itself as a large producer of renewable fuel, begs the question of feedstock supply.  Investment in upstream supply seems a logical next step after investment in production capacity.   So far upstream supply has remained highly fragmented and localized and investment in the segment is limited to the large agriculture producers such as Archer Daniels Midland (ADM:  NYSE) and Tyson Foods (TSN:  NSYE)

In my view, investors need to consider upstream supply as an investment opportunity.  As new production capacity comes on line, those who control the feedstock supply become more powerful in setting prices or in controlling ownership of production.  Darling International (DAR:  NYSE) is the largest independent food by-products recycler and presents a unique upstream play.  Waste Management (WM:  NYSE) is one of the largest handlers of municipal waste.  I expect these two new age upstream suppliers to take on more importance as renewable fuel production reaches large scale. 

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.  

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Crystal Equity Research has a buy recommendation on DAR shares.  DAR, WM, Neste, and ADM are included in Crystal Equity Research’s Alternative Energy Indices in the Waste-to-Energy, Ethanol and Renewable Diesel Groups of the Beach Boys Index.

April 04, 2012

Grid-scale Energy Storage: Lux Predicts $113.5 Billion in Global Demand by 2017

John Petersen

Last month Lux Research released a bottom-up evaluation of the cost effectiveness of eight energy storage technologies in six grid-scale applications throughout 44 countries, including all 50 U.S. states. Their report titled "Grid Storage under the Microscope: Using Local Knowledge to Forecast Global Demand" predicts that annual global demand for grid-scale energy storage will reach an astounding 185.4 gigawatt-hours (GWh) by 2017 and represent a $113.5 billion incremental revenue opportunity for an industry that currently generates sales of $50 to $60 billion a year.

In the grid-scale sector alone, Lux predicts an average year-on-year demand growth of 231% from 2012 through 2015 when the growth rate moderates to 43% per year for 2016 and 2017. The forecast is tempered, however, by a cautionary note that demand of that magnitude can't be satisfied because "Believe it or not, the grid storage market will be supply-constrained in 2017."

Technologies and players

The eight energy storage technologies Lux evaluated for their new report are summarized in the following table, along with the price and performance metrics highlighted in beige. Comparable price and performance metrics from a recent SAND2011-2730 Sandia National Laboratories "Energy Storage Systems Cost Update" are also presented and highlighted in green. While there's room to quibble over the details and users of Lux's Smart Grid Storage Tracker and Demand Forecaster can fine tune the price and performance variables to suit their analytical needs, the parallels between the two sets of system cost estimates are close enough to lend substantial credence to Lux's basic assumptions.

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Based on a comprehensive evaluation of various local factors including "utility market structure, generation technology compositions, peak power demand, demand growth rate, infrastructure growth rate, penetration and growth rate of intermittent renewable energy sources, grid reliability, [time of use] electricity rates, commercial demand charges, and outage costs," Lux concluded that Japan, China, the United Kingdom, Germany, and the State of Arizona will be the top five regions for grid storage and collectively account for about 58% of global demand in 2017. Japan and China will each account for about 18%; United Kingdom and Germany, will each account for about 9%; and the US will account for about 23%, with Arizona alone accounting for 4% of global demand.

Some of the more surprising conclusions in the Lux report related to the relative importance of the various grid-scale applications by 2017. For me the biggest surprise was the conclusion that the current killer apps, ancillary services and renewable energy integration, will only account for 1.4% of global demand in 2017 while renewable energy time shifting will account for an impressive 54% of demand, or $61 billion in annual revenue potential. I was also surprised by the conclusion that high spreads between peak and off-peak electricity prices would create a major market opportunity in the residential and commercial sectors, which account for 28% and 17%, respectively, of the 2017 demand forecast.

Based on their in depth evaluation of application requirements and the price and performance of the eight energy storage technologies they evaluated, Lux reported that:

Li-ion takes the early lead, but fades to cheaper alternatives. Li-ion batteries for [power] applications capture nearly 80% of the market in 2012, but quickly fade as cheaper molten-salt and flow batteries become available in the ensuing years. By 2017, Li-ion batteries capture only 13% of the market, yielding 33% to vanadium redox batteries and a nearly even split of the rest of the market between sodium sulfur, sodium nickel chloride, and zinc bromine flow batteries at 19%, 15%, and 19%, respectively. This indicates the short timeframe Li-ion battery developers have to reduce their costs. In the long run, systems with discharge durations between two hours and four hours are the “sweet spot” size for most grid applications. Currently, Li-ion batteries are sought-after due to their availability and proven performance. Flow batteries and molten salt batteries, both of which perform well for longer discharge applications, have shown comparable performance to Li-ion batteries at a fraction of the cost and are currently limited by their availability and proven reliability. Flywheels retain 2% of the market in 2017 and find their niche in relatively small frequency regulation market and other niche applications that require rapid discharge capabilities, short durations, and an extremely long cycle life.

Many participants in the lithium-ion battery sector are developing and demonstrating grid-scale energy storage products. To date, the highest profile player has been A123 Systems (AONE), which has shipped over 90 MW of storage systems for ancillary services and renewables integration. While Johnson Controls (JCI) has been quiet about its plans to package and sell lithium-ion batteries for stationary applications, I have to believe the global footprint and sterling reputation of its building efficiency unit will make it a formidable competitor in the commercial markets.

Sodium Nickel Chloride, or Zebra, batteries have been a relatively low profile chemistry for years. They were originally developed by Daimler for use in electric vehicles but failed to gain much traction in that market despite a decade of solid performance in a 3,000 vehicle fleet that's logged over 150 million kilometers. In 2009 General Electric (GE) announced plans to build a NaNiCl factory in New York. In 2010, Italy's Fiamm bought a controlling interest in Swizerland's MES-DEA, the sole European manufacturer of NaNiCl batteries, and is now doing business as FZ Sonick. Both firms are rapidly ramping their marketing efforts on grid-scale systems.

The largest manufacturer of sodium sulfur batteries is Japan's NGK Insulators (NGKIF.PK), which was the global leader in grid-scale storage for the over a decade with an installed base of over 300 MW. NGK had a spotless safety record until late last year when they suspended NaS battery sales and asked customers to refrain from using installed systems pending completion of an investigation into the cause of a battery fire in Japan. Last year, NGK accounted for roughly 54% of the grid-scale energy storage market. While NGK's market share will fall as other technologies gain traction in the grid-scale markets, its revenues should continue to ramp because of rapid overall growth rates in the sector.

There have been no publicly held companies in the vanadium redox battery space since China's Prudent Energy bought VRB Power Systems in January 2009. At present, ZBB Energy (ZBB) is the only publicly held company that's active in the zinc bromine battery space. ZBB is actively exploring markets for a both zinc bromine flow battery that was originally developed by Johnson Controls and novel technology agnostic control systems that can integrate and manage a variety of conventional and renewable power sources and energy storage technologies.

I was a bit surprised that lead-carbon wasn't included in Lux's list of 2017 market leaders. When I asked the analyst why, he explained that the two leading developers of lead-carbon batteries, Axion Power International (AXPW.OB) and East Penn Manufacturing, were currently launching new products and conducting demonstrations, but didn't yet have enough price and performance history to warrant inclusion at anything beyond placeholder values. He also agreed that if Sandia's price and performance estimates prove accurate, lead-carbon could be a formidable competitor and garner a substantial market share.

Supply constraints

While Lux's bottom-up demand analysis contemplates an enormous ramp in new demand over the next five years, they acknowledged that the global battery industry can't satisfy that demand with existing and planned infrastructure. They didn't drill down into the details for the current report, but I think it's critical for investors to understand the magnitude of likely shortages and the market dynamics that are likely to flow from crushing supply constraints.

In its new report Lux predicted that lithium-ion batteries could account for up to 13% of $113.5 in demand by 2017, or roughly 20 GWh of batteries. To put that number in perspective, last year Lux reported that total global manufacturing capacity for large lithium-ion batteries would grow to about 30 GWh by 2017, which means demand from stationary applications alone could absorb almost two-thirds of global manufacturing capacity. This is good news for lithium-ion battery manufacturers in the short-term because it will help absorb an expected glut of manufacturing capacity. Over the long-term Lux believes lithium-ion batteries are not economically sustainable for grid-scale applications because:

"Li-ion batteries developed for transportation applications are energy dense storage devices. Stationary storage projects rarely value this metric, resulting in wasted value for grid-tied Li-ion battery systems. Rapidly evolving technologies with equivalent or superior performance metrics and substantially lower costs and higher resource availability will take over the majority of the grid storage market in the coming years."

For decades the battery industry has striven to standardize battery chemistries, formats and manufacturing methods. As a result, batteries are usually viewed as fungible commodities with little product differentiation or brand loyalty. In the final analysis, purchase decisions for grid-scale storage systems will be driven by the customer's specific power and energy needs and the ability of a particular battery chemistry to serve those needs at the lowest total cost of ownership. Absent a clearly demonstrable performance advantage, comparable products within a technology class will invariably be forced to compete on the basis of price, which will ultimately compress margins.

Any time there are several competing uses for a supply constrained commodity, the buyer that's willing to pay the highest price will get the first call on available production. If electric vehicle manufacturers are willing to pay up and outbid grid-scale storage users, they'll undoubtedly get enough batteries to satisfy their needs. If automakers are not willing to pay a higher price, battery manufacturers will undoubtedly serve their own economic interests first. On balance, I believe rapid growth in grid-scale energy storage will create substantial secondary problems for electric vehicle manufacturers who are already grappling with fundamentally uneconomic products.

As former director of Axion Power International, I'm intimately familiar with the work that's being done in the field of lead-carbon battery technology. Based on everything I know, I believe that Sandia's cost estimates are reasonable and that lead-carbon batteries will be a good choice for a large number of grid-scale storage applications that don't require extreme performance. It doesn't take much market share in a $113.5 billion niche to make for a very successful company.

Disclosure. Author is a former director of Axion Power International (AXPW.OB) and holds a substantial long interest in its common stock.

April 03, 2012

Solar Struggles Continue: Q-Cells to File for Bankruptcy

Steve Leone

Germany's Q-Cells, a solar industry giant that helped usher in a new era of solar energy, announced Monday that it will file for bankruptcy, but that it will continue to work to restructure.

In a statement released by the company, “the Executive Board and the preliminary insolvency administrator will work together to secure the continuity of the company within the insolvency proceedings.”

The move follows an unrelated higher court ruling on Friday that Q-Cells says limits its ability to move ahead with a debt restructuring plan.

The filing is the most prominent to date in the recent shake-out hitting the solar industry. The drastic drop in photovoltaic module pricing, the oversupply that has remained a drag on the industry and drastic subsidy cuts in Europe and beyond continue to put extreme pressure on solar manufacturers. Nowhere, perhaps, has this confluence of factors been felt greater than the headquarters of Q-Cells, which was the world’s biggest solar manufacturer in 2007 and 2008 before being overtaken during the rise of powerhouses coming mostly from China.

The company had worked to broaden its services in recent years. In addition to cell making, the company sells both silicon-based and CIGS PV modules. It also has moved toward project development, and in an earnings report the company said that that move has in fact boosted its economic health.

In 2011, Q-Cell’s production reached 783 MW, 717 of which came from solar cell production. The production of thin-film CIGS modules at German subsidiary Solibro accounted for 66 MW. That figure was down from just over 1 gigawatt produced in 2010. But unlike in 2010 when it was able to turn a profit, the company lost EUR 845 million in 2011. In March, the company said it expected 2012 to be another year of losses, but projected that it would return to positive earnings by 2013.

The company stock price, which hovered around $150 a share in early 2008, tumbled 50 percent to $0.16 per share on Monday.

Since August of last year, several solar companies, including Solon, Solar Millennium, Solyndra, Evergreen Solar and SpectraWatt, have filed for bankruptcy.

Steve Leone is an Associate Editor at RenewableEnergyWorld.com.  He has been a journalist for more than 15 years and has worked for news organizations in Rhode Island, Maine, New Hampshire, Virginia and California.

April 01, 2012

Energy Storage: Q1 2012 Winners and Losers

John Petersen

The first quarter of 2012 was the best of times for shareholders of companies that are developing and manufacturing cheap energy storage products like lead-acid batteries, but the worst of times for shareholders of pure-play lithium-ion battery developers. The following table tracks stock price performance in the energy storage and electric vehicle sectors for the first quarter of 2012 and for the twelve months ended March 31st.

3.31.12 Price Table.png

Long-term readers will notice that the current list is a good deal shorter than it was in March of last year because of my decisions to delete China Ritar Power (CRTP.PK), Advanced Battery Technologies (ABAT.PK), New Energy Systems (NEWN), C&D Technologies (CHHP.PK), Ener1 (HEVVQ.PK) and Beacon Power (BCONQ.PK) for reasons ranging from reporting deficiencies and changed business models to outright business failures. It's been a turbulent year.

The best performer for the year and the quarter ended March 31, 2012 was Tesla Motors (TSLA), a stock that investors either love - or love to hate. Tesla is trading at  a 119% premium to its $17 IPO price and one of the market's most heavily shorted stocks. Where sell side analysts see upside potential to $49, more pragmatic types expect the price to collapse into single digits. While experience tells me that consensus among short sellers is usually right, only time will tell.

It was a solid quarter for several companies that were beaten down over the last year but started to recover some of their long-term price declines during the quarter. The lead-acid group in particular is performing very well. The only group that was down for both the year and the quarter were lithium-ion battery developers. That group's performance would have been even worse if I hadn't culled Ener1 after its public stockholders got flushed in a bankruptcy reorganization.

The following summary table shows how the surviving companies in my five tracking categories performed compared to broader market indexes.

3.31.12 Sector Table.png

My last table for the day provides a summary of some key financial metrics I like to focus on when performing a high level forward-looking analysis of the companies I track. The data is stated in millions, derived from the most recent SEC reports filed by the companies and adjusted for material events including financing transactions and extraordinary losses reported after the date of the most recent financial statements.

3.31.12 Financial Table.png

For companies with a history of losses, the first number I focus on is working capital. If a company can't cover expected losses for the next year and make planned capital investments with available funds, it will almost certainly be forced to seek new financing and that can be tough in a turbulent capital market. This year, only three of the companies I follow have clear working capital issues, a significant improvement from last year. While I've been impressed with its business development activities over the last year, I'm less impressed with ZBB Energy's (ZBB) financing activities, which have boosted its share count by 57% while the balance sheet treads water.

A second key metric is the difference between a company's market capitalization and its book value, which is commonly referred to as blue-sky. Public companies normally trade at a premium to their book value because intangible assets like intellectual property, human resources, industry experience, customer relationships and the like usually have no balance sheet value. When the blue-sky premium is inordinately high, it's a bright red warning flag. When the blue-sky premium is out of line on the low side, it can hint at significant upside potential.

To simplify comparisons among companies I like to calculate the ratio between blue-sky and book value. The result is a "BS to Book Ratio" that can be quite illuminating.

The most alarming BS to Book ratios in my tracking group, in fact the most alarming BS to Book Ratios I've ever seen, belong to Valence Technologies (VLNC) and Tesla Motors. Valence has a $60 million deficit in stockholders equity but it carries a market capitalization of $138 million, which makes its BS to Book ratio infinite. Tesla is a little better since it has $204 million in equity and $182 million in working capital, but it's sky-high market capitalization of $3.7 billion gives it BS to Book Ratio of 16.4. To put things in perspective, Apple has a BS to Book ratio of 5.2 and it's become the most successful tech company in history.

Companies with inordinately low BS to Book ratios include Exide Technologies (XIDE) and A123 Systems (AONE) which both trade at a 40% discount to book value. If you adjust A123's book value to include $128 million of ARRA grant proceeds that aren't reflected on the face of its balance sheet, the discount to book value is closer to 60%. While both companies have had more than their fair share of problems over the last few quarters, I continue to believe their market prices have fallen to very attractive entry points.

I believe a BS to Book ratio of one is healthy for large established manufacturers and that BS to Book ratios of up to four are reasonable for transition stage companies that have completed their principal product development and are focused on commercializing new technologies. Enersys (ENS) has had a strong run over the last two quarters but still has a way to go before it achieves parity with Johnson Controls (JCI). Since Maxwell Technologies (MXWL) is currently sporting a BS to Book ratio at the top of the reasonable range, I don't look for it to outperform the market on a go-forward basis. Active Power (ACPW), on the other hand, seems to have significant upside potential if its management can continue to execute. Baring unforeseen negative developments, Axion Power International (AXPW.OB) should be an easy double as revenues continue to ramp and advanced testing programs with a variety of first tier OEMs and battery users mature into orders.

The energy storage sector occupies a unique position global industry because it must prosper as humanity changes the ways it produces and consumes energy. For those who believe conservation of fossil fuels and waste minimization are key elements of our energy future, batteries are essential. They're also essential to a future powered by intermittent power from the wind and sun. No matter what you believe the path will be, the future simply can't happen without cost-effective energy storage. It's not just a desirable thing – it is an essential thing!

There aren't any silver bullet technologies or killer apps in the energy storage sector, but there are several emerging trends that will create new multi-billion dollar markets over the next few years. In that rapidly evolving environment, every company that can offer a cost effective product will have more customer demand than it can satisfy. As global demand for cost-effective energy storage increases, so will margins and profitability.

Disclosure: Author is a former director of Axion Power International (AXPW.OB) and holds a substantial long position in its common stock.


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