Two Weeks In Cleantech, 8-31-2012
August 21: What Will Happen to Trina Solar (NYSE:TSL)?
Following the hypocritical “unfair subsidy” complaint against China solar panel producers along with the 31 percent import duty placed on them by the US government, the Chinese have now responded through their Commerce Ministry by stating that the United States must cut support for six government-backed renewable energy programs or face unspecified penalties.
And so continues the trade war, which was launched by the sour-grapes management of SolarWorld,(PINK SHEETS:SRWRF) and supported by those in Washington who have no clue how bad this could be for the US economy, the growth of clean energy, and domestic job creation.
China's Commerce Ministry said that it will now adopt relevant legal measures, demands that the United States cancel part of the measures that violate World Trade Organization rules and give Chinese renewable energy firms fair treatment.
This isn't even close to over.
Meanwhile, and this certainly wasn't unexpected, Trina Solar (NYSE:TSL) just missed on revenues and lowered shipment guidance for FY 2012. It's crazy, I made a fortune on Trina just a few years back. Once one of the most lucrative solar plays in the market, hitting highs in excess of $30 a share, it's now trading for around $4.60.
Although solar's future remains bright, it remains a minefield for investors. And as I've stated in the past, I will likely remain on the sidelines until sometime in 2013, when more consolidation tightens up the marketplace, and more of that glut gets eliminated.
August 22: The Wind Energy Taxpayer Boondoggle
But like all industries that experience rapid growth, eventually the party comes to an end, and reality sets in.
Although the wind energy industry continues to grow dramatically all over the world, recessionary headwinds, loss of government support, and dirt cheap natural gas are creating a temporary slow-down. As a result, the wind energy industry is going to have a rough time in 2013.
Truth is, we've seen plenty of indications of this throughout 2012. Particularly with so many wind turbine manufacturers idling or shutting down plants, lowering guidance and laying off workers. In fact, we learned today that Vestas is now set to go forward with its second round of lay-offs this year. This time around, 1,400 folks will lose their jobs.
The company has not made it clear where the jobs will be cut, but you can bet that a sizable portion will be from the US, where there just doesn't seem to be enough support in Washington to extend the wind energy tax credit for another year.
Although I would argue that a one-year extension is of little use at this point.
The best way to move forward on this is to extend the credit for four to six years, with the understanding that it will never be extended again. This will at least give the wind industry enough clarity to make long-term decisions and prepare accordingly. That's not possible when you keep handing out these tax credits every year or two. As well, it'll keep the industry from turning into a decades-long tax payer money sucker. We've already gone down that path with nuclear. We don't need to make the same mistake twice.
As stated in a 2011 report published by the non-partisan group Union of Concerned Scientists, after decades of government support, nuclear power is still not viable without subsidies.
The report also notes that government subsidies to the nuclear industry over the past 50 years have been so large in proportion to the value of the energy produced that in some cases it would have cost taxpayers less to simply buy kilowatts on the open market and give them away.
And as reported in Forbes. . .
“Nuclear power is no longer an economically viable source of new energy in the United States, the freshly-retired CEO of Exelon, America's largest producers of nuclear power, said in Chicago Thursday. And it won't become economically viable for the foreseeable future.”
Not economically viable? After 50 years of taxpayer subsidies?!
Now understand, this is not an attack on the nuclear industry. It's merely an observation of how subsidies can become dangerous and addictive. We simply can't afford any more of these decades-long subsidies burdening taxpayers. Not for anything.
I don't know if the wind energy tax credit will be extended before the end of the year. I am doubtful. But if it is extended, and it's only extended for one year with the possibility of going through this same song and dance next year, and the year after that, and the year after that - well, we're just wasting valuable time and money. And that's not going to help anyone.
August 27: How Tesla (NASDAQ:TSLA)
Crushes the new Hybrid Lexus
The GS 450h, the new generation hybrid version of the Lexus GS 350 looks like it's going to deliver an EPA-rated 31 mpg. This is a 35% improvement over the previous generation, and of course, a complete yawnfest. I get that this is about luxury and not necessarily fuel economy, but I'd happily take a Tesla Model S over a 31-mpg Lexus any day of the week. You can get a Tesla Model S for about $58,000 before the $7,500 tax credit. The 2013 Lexus GS 450h is priced at around $59,000. If I'm dropping $60k on a car, you have to at least give me the same fuel economy as a 50 mpg Prius. The Tesla Model S, by the way, delivers about 160 miles on a single charge. With that, I'd never have to pull into a gas station again. Unless maybe I wanted to grab a candy bar or bag of chips.
It was once the world's largest maker of solar cells. But around 2009, Q-Cells reluctantly handed over that title to a handful of low-cost suppliers from China. And today we learn that South Korea's Hanwha Corp (NASDAQ:HSOL) is looking to buy the now insolvent German group. Of course, this comes as no surprise to those of you who are regular readers of these pages. We've been preaching about, and watching unfold, the continued consolidation of the solar industry. We expect to see more of this throughout the rest of this year and well into 2013 and beyond. We believe that by 2015, there will be fewer than a dozen major solar players operating globally. For now, we continue to watch everything play out from the sidelines.
August 28: California - Fiscally Responsible?
Although California tends to be a punching bag for fiscal
irresponsibility, such rhetoric isn't always honest. California,
just like every other state in the nation, has its fair share of
waste. This is certain. But thanks to a plan designed to reduce
petroleum consumption in fleet vehicles, the Golden State has
successfully slashed its petroleum use by 13 percent compared to a
Under Assembly Bill 236, California will reduce or displace petroleum consumption by 10 percent by 2012 and 20 percent by 2020. Today we can see that the state is certainly on its way to reaching that goal.
Some of the actions that have enabled California to come this far include the following. . .
In 2009, California eliminated 3,397 of the state's oldest and most fuel inefficient passenger vehicles.
Also in 2009, the state reduced vehicle miles traveled (VMT) by eliminating non-mission critical VMT. This was done by eliminating 2,121 vehicle home storage permits.
In 2010, California restructured the lease rate of its rental fleet by separately billing state agencies for their fuel. As a result, these agencies began actively managing their fuel usage internally.
In 2011, the state, along with Coulomb Technologies, installed 24 Level 2 fast-charge charging stations at five separate Department of General Services parking facilities.
In 2012, Governor Brown issued an executive order for California's state vehicle fleet to increase the number of its zero-emission vehicles through the normal course of fleet replacement so that at least 10 percent of fleet purchases of light-duty vehicles be zero-emission by 2015, and 25 percent by 2020.
Also in 2012, California directed state agencies to order solar reflective colors when they acquire new light-duty vehicles. This enables a vehicle's air condition system to work less, thereby reducing fuel consumption.
Quite frankly, this really should be used as a model for other states. There's no doubt that a significant reduction in petroleum use serves to provide a budgetary buffer – particularly in these tough economic times that are only going to get tougher as inflation takes hold.
This also gives states the opportunity to get aggressive on petroleum reduction without relying on the heavy hand of the federal government.
That being said, this type of thing should also be done responsibly. California has unfortunately relied on the utilization of biodiesel and ethanol to help it reach its goals. Long-term, this is not economically or environmentally sustainable. Certainly it would be nice to see more natural gas and electricity serving as fleet fuels in the future.
August 29th: Wall Street Journal Misinforms Investors about Electric Cars
Jim Jelter over the Wall Street Journal wrote his obligatory electric vehicle-bashing piece right on schedule.
After it was announced that GM has temporarily suspended production of the Volt for a month in order to address both an oversupply issue and to prepare for production of the 2014 Impala, Jelter wrote that he didn't buy it. What's to buy?
We went through this song and dance back in March. GM temporarily halted production of the Volt due to an oversupply, and the anti-EV brigade ran to tell everyone that electric cars, including the Volt, were dead. Meanwhile, since that date, nearly 11,000 Volts have been sold.
This may not seem like much. And it's not. In fact, it's well below targets. But let's revisit some other numbers from previous disruptive vehicle technologies.
When Toyota first launched the Prius Hybrid in 1997, the Japanese automaker sold only 3,000 units. GM sold 7,671 units in its debut year. So in its first year, GM sold 4,671 more units of a plug-in hybrid electric vehicle.
And look at the all-electric Nissan LEAF. In its first year, Nissan sold more than 20,000 units. And let me remind you that the LEAF carries with it the issue of range anxiety – something Prius owners never had to deal with. So essentially, we're talking about a vehicle that requires the driver to make some pretty major changes in operating and fueling behavior.
Anytime you ask the consumer to do something differently than he's done for years, it's a monumental task. Yet more than 500% more units of the Nissan LEAF were sold in year one compared to the Toyota Prius in its debut.
Today, Toyota has sold more than 3 million units of that particular vehicle.
Jelter says consumers aren't embracing electric cars. But the data suggests otherwise.
I'm not sure if ol' Jimbo thought electric cars would bust out of the gate, selling millions in a matter of years. But I would suggest he, and other EV haters take a look at previous technologies that took decades to develop – but are now standard for most Americans. Cell phones, high-speed Internet. Hell, even what is now the outdated conventional internal combustion vehicle.
It was in 1903 when the president of the Michigan Savings Bank told Henry Ford's lawyer that the horse was here to stay, and the automobile was only a novelty – a fad. We know how that one worked out.
Of course, the Volt story was really just used as a segue for an attack on the latest fuel economy standards that'll take our CAFE up to 54.5 miles per gallon. Claiming that it will tack on another $3,000 to production costs, the new standard is being vilified. Never mind the fact that by 2025, when the standard will be reached, 87 Octane will likely cost you anywhere between $7.00 and $9.00 a gallon.
Now I fully admit, I rarely agree with much government intervention in these situations. Quite frankly, perhaps the market can get us to the 54.4 mpg fuel economy standard by 2025 on its own. But being that this really is a matter of national security, I don't see much of a downside to this new CAFE standard. I'd certainly rather take these types of steps to displace foreign oil, then keep our military in the Middle East to protect and secure oil supplies.
Of course, none of this really matters. At this point, partisan slavery always wins out over rational policy. And while I wish guys like Jelter would stop contributing to the illusion that electric cars are failures, I at least give him credit for acknowledging that, as a nation, we are struggling to get long-term planning in place – because of politics. Following on his brief coverage of Romney's joke of an energy plan, Jelter writes. . .
So what is it going to be? More regulation or less?
This is exactly the kind of political sparring that drives corporations crazy. What one party puts in place, the other seeks to remove. As long as their so-called principles leave no room for compromise, regulatory matters are doomed to lurch back and forth with every election. This stifles long-term planning and kills investment.
I couldn't agree more.
Sadly, there seems to be no middle ground. And while the Wall Street Journal will continue to publish it's anti-EV rhetoric – which, quite frankly, is incredibly unpatriotic seeing as EVs require not a single drop of Saudi oil to operate, left-leaning rags will continue to sing the praises of over-regulation, which absolutely inhibits our ability to kick OPEC to the curb.
Neither are doing us any favors.That, my friends, should make this a national security issue, not a partisan one.
August 30: Is Suntech (NYSE:STP)
a Giant Fraud?
- Yesterday, an Italian court filed criminal charges against an investment fund controlled by Suntech Power Holdings (NYSE:STP). The charges claim Suntech illegally built solar farms to take advantage of state subsidies. If the charges stick, about $100 million in subsidy-backed solar farms could be dismantled. This comes on the heels of the world's largest solar panel maker getting hit with a class action lawsuit that claims the company didn't reveal that a Global Solar Fund executive (and shareholder) used $700 million in fake German bonds to help guarantee some of the fund's financing. And just when you think it couldn't get worse, Suntech is now desperate to land some financing to cover a convertible bond due in early 2013. Suntech has certainly had better days.
- In more positive solar news, it looks like India's making new moves in the solar space again. According to Tarun Kapoor, the joint secretary of the Ministry of New and Renewable Energy in India, India may soon auction about 30 percent of the solar projects it has planned to be online by 2017. This would double the nation's solar capacity. In total, India is aiming for 20 full gigawatts of solar by 2022. Following India's blackout last month, solar got a fresh coat of shine. Considering the country currently relies on coal to generate more than half of its electricity, and coal shortages have India on high alert, this isn't surprising.
DISCLOSURE: No positions
Jeff Siegel is Editor of Energy and Capital, where these notes were first