Archive for Renewable Energy

Renewable Energy Mutual Funds

I’m travelling this week (and have had the opportunity to use the energy-efficient train system in the Northeast,) so my column for Alternative Energy Stocks was written ahead of time and saved for a busy day. It’s a run-down of the available renewable or alternative energy mutual funds and ETFs, and a cost analysis of when it makes the most sense to use each.

Click here for a comparison of renewable/alternative energy mutual funds.

(Update: the above link was broken when I first posted it. It’s now fixed. Sorry.)

Comments (5)

Change Winds Blow for Renewable Energy Income Trusts

I just published anoter article for AltEnergyStocks.com, where I talk about the current shakeup in the Canadian Income Trust world, and how it is effecting the ones that have renewable energy generation assets in particular. It begins,

Renewable energy is still very much in its infancy, which means that companies in the space are either profitless or high-multiple startups, or divisions of much larger companies (GE Wind (NYSE:GE), or utilities such as FPL Group (NYSE:FPL) and Xcel (NYSE:XEL) which get much of their power from conventional generation.) This presents a dilemma for investors who understand the compelling drivers for the sector, but whose risk tolerance or financial needs indicate an income-based investing strategy.

A few Canadian Income Trusts have historically gone some way towards filling this niche. These include the Boralex Power income trust (BPT-UN.TO / BLXJF.PK), Algonquin Power (APF-UN.TO/AGQNF.PK), and the Clean Power Income Fund (CLE-UN.TO/CEANF.PK).

Click here to read the whole article.

Comments (2)

Visual Comparison of Electricity Generation Technologies

I just put together a couple graphs for a talk I’m giving on Monday to give people a visual feel of the various technologies for generating electricity.  These come with a gigantic caveat: the numbers are far from precise.

With changing technologies, it’s impossible to represent any of this with a single number anyway.  I’m trying to show how the technologies compare to each other, and I used four parameters:

  • Cost ($/MWh),
  • Availability (better the closer the profile of the technology matches a normal demand curve (wind is bad, baseload is okay, dispatchable is best, solar),
  • Emissions (and I count waste storage when it comes to nuclear),
  • Bubble sizes represent the size and durability of the resource (I’ve tried to combine in one number how much power we can get from the resource, but also how long supplies of fuel will last.) 

In both charts, the “best” technologies are in the upper left (low cost, low emissions, and available when we need them.)

I know that I’m going to upset a lot of people because I was too harsh with their favorite technology, so feel free and comment on the numbers I’m using, but also please provide references for where you get your numbers.  Most of these are off the top of my head, so their accuracy is admittedly questionable.   Here are the numbers I used to make the graphs.

Comments (24)

Canadian RE picks

There’s a good rundown of public Candian Renewable energy companies in the Globe and Mail today by Richard Blackwell.  They mention all of my favorite Canadian companies, and even one I had not yet heard about.logo

One note, there are several Canadian Income Trusts listed.  These are currently very volatile because of changes in thier tax status.  The extra volatility will undoubtedly lead to some excellent buying opportunities, but they are much more volatile than your standard income investor is probably ready for.  Where once I might have bought them for my more conservative clients, now I’m looking at them for my more aggressive clients.

Comments (1)

Bill Ritter Inaugural address

Colorado’s new Democratic Governor, Bill Ritter was sworn in today.  For environmentalists, it is a moment of rejoicing.  Sticking to his themes from the campaign, Ritter outlined his agenda, and the very first item was:

“Let’s start by being bolder than any other state when it comes to renewable energy. Let’s commit right now to making Colorado a national leader … a world leader … in renewable energy. Let’s create a New Energy Economy right here in Colorado.”

I couldn’t ask for anything more. 

He also had some other quite sensible agenda items, such as health care for all Coloradans, something that I think is worth paying for, but which I simply hope does not end up exhausting his political capital.

Here’s to a breath of fresh air (in more ways than one!)   

The full text of his inaugural address follows the break.

Read the rest of this entry »

Comments off

Secrets of the Utility Mind

I feel that many of us renewable energy activists do not understand how utility planners think.  To us, we see wind as cheap electricity, but to them it is the Predator (of movie fame), something that looks benign and friendly, but at any moment will wreak havoc on their grid by turning off unpredictably.

In order to have a constructive conversation with utility planners, I think it is important to understand their point of view.  This is my attempt to do that, with the hope by doing so, we will be able to engage with them more productively.

These are what I see as the underlying principles that shape the utility planning process:

There is no God but Reliability, and Least-Cost is his prophet.

Or, put another way,

The Holy Trinity of electric resource planning: The Baseload, The Cost, and the Holy Reliability.

I use the religious references to make a point: reliability is a religion for utility planners, and people become defensive and angry when you threaten their religion.   If we want to work with the utilities, we need to address their real concerns about intermittent renewable resources such as wind and solar.  And we have to work with utilities if we are going to modernize the way we get and use electricity. 

How do we deal with people committed to this religion?  By taking their concerns seriously, and helping them find solutions.   In short, when we hear “Wind is so unreliable,” we should say “That’s true.   Here are some ways we can take advantage of the benefits of wind without compromising the integrity of the grid.  We can be allies in getting regulators to approve rates that allow utilities to get a fair rate of return on these measures that improve reliability, while also allowing more wind onto the grid without impacting reliability.”

Why do we expect them to listen?  Because they already have and have to work to deal with a problem that is very similar to unpredictable generation from wind: unpredictable loads.  People and companies turn appliances and whole factories on and off unpredictably, and never once do they think about calling up the utility first to let them know that they should have the necessary capacity ready at the appropriate time.  Instead, we as consumers just flip a switch, and never expect that the lights won’t come on because there is not enough capacity.  If they don’t we get angry.

How do utilities accomplish this seemingly impossible feat of matching supply to capricious demand?  They do it with extensive load modelling, so that they can predict approximately how much  load will be on the system at any given time with a fair degree of accuracy, and by maintaining “Spinning reserves,” which are basically generators which are already up an running under very low power (hence “spinning”) and turning in synchronization with the current of the grid, like a non-hybrid car sitting at idle.

When there is a sudden increase in the necessary load, they can then increase the power produced from the spinning reserves almost instantaneously, like the motorist of our metaphor starting up when a light turns green.

There are many types of generation that can be used as spinning reserves, not only gas turbines.  Hydroelectric dams can work well this way, and can agreements with neighboring utilities to supply power when it is needed, on the theory that two different utilities will not have the same load patterns, and so both utilities can gain by trading power back and forth as needed.

There are many proposals circulating to increase grid reliability and ability to accept more intermittent resources.   As is usual in complex problems, there is no one solution, and in this case it will always be a combination of many of these (and some I don’t know about… please leave comments if you have ideas I’ve left out), and the mix will vary widely depending on the unique situation of any particular utility.

  1. More transmission.  Wind not only needs massive new transmission capacity to get the electricity from windy rural areas to the places that need power, but a more robust grid means that widely dispersed wind farms can all provide power to a single utility.  Since the weather varies in different places, this has the benefit of making the system as a whole a lot less variable.  Denmark sells power to Germany, Norway, and Sweden when their wind farms produce more power than they can use. 
  2. Moving to a national electricity system from the current system of regional grids would also ease the flow of wind power from one region to another.
  3. Time of Use/ time-based pricing.  Time of use pricing allows a utility to charge less or more for power depending on how much power is available at any given time.  Time of use pricing is currently a hodge-podge consisting of none at all for some utilities, and others that offer it (or even mandate it) for/to all customer classes.  Often time of use pricing simply consists of two prices: on- and off-peak, but the ideal goal for this is to actually have real time pricing, which will even depend on that day’s weather forecast (on windy days, electricity should be cheaper than otherwise.)  The ideal goal would be to eventually move all electricity customers to real-time or near real-time electricity pricing, so that customers who are willing to adjust their usage patterns are compensated for the service that they are providing to the system as a whole.
  4. Demand side management goes hand in hand with time of use pricing.  Demand side management involves giving customers incentives to keep their load from peaking too much at any one time.
  5. Dispatchable/Interruptible loads involve allowing the utility a certain amount of control over their customer’s energy use.  The classic example is installing a remote switch on an air conditioner, so that on a hot day, the utility can regulate it so that they don’t all come on a the same time, but rather take turns, lowering the peak demand on the grid.   Utilities typically pay their customers for this right for remote control.
  6. Large scale electricity storage: Pumped hydroelectric, flow batteries, hydrogen and stationary fuel cells, and compressed air energy storage are all ways to store large amounts of power when it is plentiful and cheap (on windy nights, for instance) until it is scarce and expensive (late afternoon and early evening.)
  7. Distributed energy storage, such as plug in hybrid or electric vehicles with vehicle to grid.  Vehicles which charge from the grid can be beneficial even if they are not capale of sending power back to the grid, simply because their owners can charge them only at non-peak times, a practice which is easy to incentivize with time of use pricing.
  8. New forms of generation that can serve as backup power.  Concentrating Solar with thermal storage, landfill gas turbines, and biomass gasification are all possibilities.  One often overlooked advantage of IGCC(“Clean Coal”) is that electric power from IGCC is generated by a gas turbine which burns the syngas product of the gasification step.  While it is quite possible that carbon capture and sequestration may never be made to work with IGCC, this is one reason (along with lower emissions of traditional pollutants and higher efficiency, which reduces carbon emissions for MWh generated) that renewable energy activists should prefer IGCC to old style pulverized coal plants.
  9. Increase energy efficiency, especially in appliances that are often used during peak times.  In most of the United States, peak load usually occurs on hot afternoons and evenings when air conditioners are running, so replacing an air conditioner with a more efficient one not only reduces overall energy use, it also reduced peak demand.  Once again, the institution of time of use pricing would give customers the incentive to upgrade the right appliances for energy efficiency first.   Here are two advances in efficient air conditioning I’m particularly excited about the Delphi HMX (formerly known as Coolerado), and thermally driven dessicant cooling.

For another well thought out perspective on energy storage, hop on over the the Ergosphere for the Engineer-Poet’s thoughts.

Comments (2)

Top Ten Technologies for an Alternative Energy Future

Note: These are just my favorites… if your favorite isn’t on the list, leave a comment… 

10. Combined Heat and Power

The muscle car of energy efficiency.  Combined heat and power isn’t sexy… it’s just using the “waste” heat from your powerplant for some useful purpose.  Like cooking your lunch on you car radiator, but using every bit of waste heat you can…  Combined heat and power can use 90% of the power in your fuel source for useful work.  And now you can have it in your home.

9. Solar Chimneys

They’re tall, they’re low-tech, and they’re baseload power.  They don’t pollute, and the fuel is free.  What’s not to like?

8. Molten salt thermal storage

It’s cheaper to store heat than electricity, and molten salts can store a ton of BTu’s very cheaply.  And concentrating solar power can produce a ton of heat… without pollution or fuel.

7. Light Emitting Diodes (LEDs)

More lumens per watt… now that’s energy efficiency. 

6. Vehicle to Grid

Our energy efficient cars can make the electric grid work better.

5 & 4.  Cellulosic Ethanol and Biodiesel from Algae

The two technologies that have real hope of replacing gasoline and diesel as liquid fuel for our cars…  We’ll still need massive efficiency gains and Plug-in-Hybrids to reduce our total fuel use, but even with those, corn ethanol and biodiesel from traditional oil crops just can’t produce enough volume. 

3. Time of Use pricing and Demand Side Management.

Sometimes the best ideas are the simplest.  To make the best use of wind power, we can store power until it is needed, or we can give people incentives to use it when it is available. 

Time of use pricing is also a great boon for solar, because solar energy tends to be available near times of peak demand.

Finally, time of use pricing shaves peak demand, which means that we can delay building new fossil fired generation, while renewables get cheaper by the year.

2. Terra Preta

Discovered by aboriginals in Brazil, thousands of years before Columbus, mixing carbon into unproductive soils can make them much more productive… and the carbon stays there for thousands of years.  Using charcoal dust as a fertilizer not only holds the hope of a replacement for fertilizer based on fossil fuels, but it is also an easy way to sequester carbon.

1. Compact Fluorescent Lightbulbs

Where else can you get a 1000% payback with little or no risk?

Comments (22)

Social ETFs and Clean Energy ETFs

Forbes ETFZone had an article today by Wil McClachy about socially conscious ETFs, with some comparison between iShare’s two social index ETFs, KLD and DSI, contrasted with PowerShares Cleantech and Clean Energy ETFs, PZD, and PBW.   This ties in well with my entry Green ETFs- How to Choose from last month by expanding the field to consider general social investing as well as just clean/alternative energy.  

I also discuss the new Clean Energy Index fund, CELS, in that blog entry; it is scheduled to launch next month.

Holding a broad portfolio is well worth doing, because the basic principle of diversification implies that most investors would be crazy to focus the entire stock portion of their portfolio into such a volatile sector as energy, let alone clean energy.  Even though I’m a strong believer in peak oil, and I feel that the peak may even have already passed, and economic recession in any large part of the world could lead to a fall in oil prices, which would hurt the biofuels sector.  In addition, there is a lot more to energy than just oil prices, and while peak gas and peak uranium may be near at hand, I don’t think anyone is arguing that we’re going to see peak coal soon. 

I agree with McClachy’s point that the extra expense of the Social index ETFs may not justify the additional expense (0.5% vs 0.1% for SPY)… the extra .4% might be better used (and better targeted) by a donation to your favorite charitable cause, but for many investors, it is deeply troubling to own firms that treat the environment, society, or their workers badly, and a donation to charity does not serve as sufficient absolution.  When working with clients, I try to find out the approach that suits them best; it is often a little of both.   Even though choosing SPY and a donation to charity might be the best financial move, it’s more important to do what makes you able to sleep at night, especially when we are talking about fractions of one percent. 

On the other hand, fractions of a percent should not be minimized.  If you had $100,000 to invest in either SPY or KLD, and choose to put the money in SPY, while keeping half of the savings in your account, and to donate the other half to a charity every year, and SPY were to increase 8% every year for 30 years, you would have donated over $25 thousand to charity in the interim, while and end up with over $57 thousand extra in your account after that time.

This is the real advantage of investments in alternative energy: the chance to have your cake and eat it, too.  Both rising energy prices due to peak oil/gas/uranium and the actions our governments take to combat global warming should increase the returns for alternative energy.  To some extent, this is already recognized by the investment community, and already priced in.  However, I feel that the effects of both have been grossly underestimated by most market participants, despite the recent surge of interest.  Over the long term, the seriousness of the situation we are in will become clear, and that will allow ethical investors in alternative to also be successful investors.  When it comes to social investing, I feel there is often a trade-off between loss of diversification and increased cost.  With investment in alternative energy, the trade-off is between increased risk and increased returns.   The increased risks of alternative energy arise from the small size and speculative nature of many (although not all) of the companies involved, and the concentration of ones’ assets in a sector.  But managing risk is what portfolio theory and asset selection are about; as is making wise trade-offs between risk and return.  To me, the case for alternative energy is compelling, the only real question is how much exposure (and volatility) the particular investor is prepared for, emotionally and financially.

 Another Social/Clean Energy ETF article: ETF Guide.

Comments off

The Gust Ceiling: How much wind is too much?

On Dec 13, the Midwest Wind Integration Study, (see article) which was required by the Minnesota legislature in 2005 to evaluate reliability and other impacts of higher levels of wind generation and carried out independently by EnerNex Corporation and WindLogics, found that the total integration cost for up to 25% wind energy delivered to all Minnesota customers is less than one-half cent ($0.0045 cents) per kWh of wind generation.  Great news, but it’s a little bit anticlimactic (as well as “anti-climatic change”) compared to the announcement on Dec 5 that Denmark plans to increase wind powerfrom 20% today to over 50% by 2025.  (All penetration rates are given as percentage of power supplied, as opposed to nameplate capacity, a measure which would make wind penetration rates seem even higher.)

That’s not to say this report is a total yawn.  First, Europe has a much more robust electric grid than the US (as the Northeast found out in 2003), and the fact that the study was sanctioned by a government body, rather than a renewable energy or environmental group gives it added weight.  Finally, by using extensive simulation, they came up with some relatively hard numbers on what it would cost to reach various levels of penetration.

 The study concludes that the total integration operating cost for up to 25%wind energy delivered to Minnesota customers is less than $4.50 per MWh of wind generation, or less than 1/2 of 1 cent per kWh.  Put another way, this is less than 10% of the average cost per kWh of wind energy.

As I alluded to before, when talking about Europe, we need to be careful when we generalize from one utility grid to another as to the costs of integration: Europe’s grid is not the same as America’s, and Colorado’s grid is not the same as Minnesota’s.  Costs for integrating wind into Colorado’s grid are likely to be higher than in Minnesota, because we are behind the rest of the country in terms of how robust and well integrated our grid is to the rest of the country.  Because of the limitations of out grid, all of the major wind farms now in Colorado or under construction have had to be scaled back.

 Nevertheless, the study is great ground for hope.  Colorado desperately needs to upgrade our transmission anyway, and the Minnesota study only takes advantage of one of the many possibile strategies that helps firm up the capacity factor of wind: geographical diversification: “the wind is always blowing somewhere.”

Other strategies not considered:

  • Time of use pricing, which can be used to shift demand to times when the wind is blowing.
  • Plug in Hybrids, which can be programmed to be charged when power is cheap, or even supply peaking capacity to the grid.
  • Energy storage, such as the Wind-to-Hydrogen project recently unveiled at NREL’s Wind Technology Center (in partnership with Xcel Energy.)  One interesting aspect of this project that did not make most of the articles on the center is that they are experimenting with directly connecting the wind turbine to the electrolyzer, without the intermediate step of a transformer which has to be used to convert the wild AC power from a wind turbine the regulated AC power used by the grid. 

In short, I see 25% as a good start, but given that wind power has already shown itself to be cheap, safe for the environment (despite claims to the contrary, wind kills far fewer birds than coal; just ask the Audobon society), and is proving much easier to integrate into the grid than skeptics imagine, we need to start thinking like Denmark, and aim for numbers much higher than 25%.  It will take creative thinking, and serious investment not only in wind farms, but also in our grid, and even behavioral changes on the part of consumers. 

The small sacrifices we will need to make in terms of our behavior to get large penetrations of wind onto the grid, such as checking our time of use meter before we start the dishwasher or dryer, are much smaller, in my mind, than the giant sacrifices we are currently making to coal fired generation in terms of the effects of pollution and global warming on ourselves and our children.  We just don’t see the current sacrifices, because we have become used to the death from a thousand cuts in the form of mercury and other pollutants, and the incremental year on year warming of our planet, lost in the noise of large local and seasonal variations.

Comments (7)

Solar panels for the price of the electricity

Many of us would like to have put solar photovoltaic (PV) panels on our home, and generate our own Citizenre Corporationelectricity.  Until now, I’ve always told people that they have better uses for their money.  Even with the recent extension of the federal tax credit until the end of  2008, and (in Colorado) the rebates being offered by Xcel Energy in order to meet their Amendment 37 requirements for customer sited solar electric, the return on investment for the electricity generated at current prices (about $8 per watt for the panels & system; $4.50 per watt rebates from Xcel, and a $2000 federal energy credit), a 4 kW system only returns 1.4% per year in electricity savings.  (I got these numbers from a workshop presented by Jeff Lyng, who will be vice-chair of The American Solar Energy Society next year, and calculated the return from those.  Jeff was speaking as a consultant for Xcel on their solar rebates program.)   To me, it makes more sense to invest in renewable energy or energy efficiency companies, which are likely to yield a higher return (or put the money in a CD and use the interest to buy RECs or give away CFLs).

Until now.  CitizenRE is offering to install photovoltaic panels on you house, and charge you only for the electricity.  Better yet, the price you will pay is equal to the same price (or less) than your utility charges.   If you like, you can lock in your current price for electricity for up to 25 years (although 5 is standard.)

You do still have to get power from your utility company… there is no provision for battery backup, and they require a $500 deposit which you don’t get back until the end of the contract.  Also, you are only renting the panels from CitizenRE, but you are responsible for damage to them from other than normal wear (as you would be for any other rental), so they suggest that you include them in your homeowner’s policy.

Still sounds pretty good, doesn’t it?  Here’s the big catch: they are signing people up now, but they plan to manufacture the panels at their own plant, which will not start operation until at least September 2007 (and, being a cynic, I’d expect further delays.)  Realistically, don’t be surprised if you don’t have your panels until mid-2008.  But for people who don’t have an extra $10,000 burning a hole in their pocket, you probably weren’t going to get a system until 2008 or later anyway.

This is probably not the only place you’ve heard about them… I’ve read several other blogs (here, here, here, and here. ) about them so far, and part of the reason for that is they are using a multi-level marketing scheme (MLM) (although they don’t like to call it that).  I don’t think any of the blogs I linked to back there are MLM-ers… I also came across several blogs like that (most of which had clearly been started for the sole purpose of selling CitizenRE), and decided not to do them the favor.  I’m not generally a fan of MLM, but I have to admit that it’s probably the best way to reach a lot of homeowners quickly.   As part of my research for this blog, I decided to sign up (it was incredibly easy… I did have to get 4/5 on a quiz, but three of the questions were general ones about solar and electricity, so I only had to guess right on one out of two, which I managed on the first try (but I could have tried again after 2 hours)… they have tutorials for people who are serious about this stuff, but who has time for that?)

Instead, I spent my research time reading the Forward Rent Agreement (FRA) contract their customers have to sign, which is where I got some of the above caveats (also note that they do reporting through a land telephone line, so if you sign up, you have to maintain telephone service for the duration of the contract.  That might be a problem for me, since I use Voice over IP.)

I also browsed through their marketing material, which was available after I took their little test.  After all, if putting solar on your own home is not a good financial proposition, why are they paying their associates $150 for each sale, plus 4% or more of the electricity sold in order to put panels on your house for you?  Here’s what I concluded:

  1. They will have lower costs than an individual homeowner.  Most of us have to pay contractors around $8 a watt for our systems.  Since they will be hiring their own dedicated installers, and install only equipment that they manufacture themselves, they think they can do it for around $4.50 per watt, a price which (In Colorado Xcel territory) would be covered completely by Xcel’s Solar*Rewardsprogram referenced above.
  2. As a business, they can deduct 30% of the full amount of the installation cost under the production tax credit, and it is not capped at $2000, as it is for homeowers.
  3. Also as a business, they are eligible for accelerated depreciation, which basically amounts to an added massive tax deduction.
  4. They get interest on your $500 deposit.  Not much, but if you have 1000 deposits, it starts adding up to real money.   1/15/07: Via PeakEnergy and The WorldWatch Institute I read that interest on the deposit is credited to the consumer.  Checking the associates’ website, it says: “Deposits are invested into 1 year treasury notes. Interest is compounded for the benefit of the customer.”

Starting to come clear?  By my ballpark estimate, if it costs them as much as $6 a watt to install a system in Colorado, they will be able to collect at least that much back under the various tax programs and rebates, and any money they collect from you, the customer, will be pure profit.

So it sounds like a legit business model to me.  In fact, when you look at the above, it’s somewhat surprising that no one has done it before.  If you still want to sign up (and if you want solar on your roof, this seems like the best financial deal currently on offer).

I don’t want to sign up anyone myself… I already have two full time jobs as an investment advisor and environmental activist, but if you use this link, for Frank Knight, who has agreed to make a donation to an environmental charity for any referrals (but not untl you get panels and he gets paid.  Contact me if you have a particular charity you would like to see the money go to.

If you want to become an associate, here’s the link for that.

If you think this whole thing is a scam, and want a random associate, go directly to CitizenRE (there will still be as sales commission paid to some associate, but it will be someone assigned at random.)

I never thought I’d be telling people they could put solar on their roof (in an economical way) so soon.  Keep in mind, this does cost more than your normal electricity bill, because you pay for insurance for the panels, as well as losing the interest on your security deposit, but if you don’t plan on moving, and expect electricity prices to go up a lot, you may come out ahead anyway, because they let you lock in your electricity rate for the duration of the contract (up to 25 years, at your option.)

By the way, I think I read an article recently about a company that’s doing the same thing with solar hot water in Canada (only charging for the price of natural gas not used), but I can’t seem to Google it.  If you saw it too, please let me know.

(Note: apparently you can avoid the deposit if you sign a 25 year contract.  I’m not sure  if that’s a better deal or not… how many of us stay in one house (or even two) for 25-years?  Also, five to ten years from now, the technology will probably reach the point where it does make sense to borrow the money and put up your own panels.  I guess I’m just not a big fan of 25 year contracts for anything.  Mortgages, for instance.)

12/14 I’ve been thinking about this some more, and here are a couple other things to be wary of:

  1. They say they’ll start production of panels in September 2007.   But these things always take longer than expected.  If you sign a contract with them, you’re basically saying that you’re not going to use your roof for anything else while you wait.  At best, you’ll have your panels a year from now, but at worst, they might end up stringing you along for years, when you could have gotten solar from some newer outfit that came along in the meantime… if this model really works, it won’t bee too long before they have competition.
  2. Don’t expect to make money as an associate (salesperson) before 2009, or even later.  A lot of associates are already paying (out of their own pockets) for classified ads, but they don’t start earning any money until systems are installed on homes.  And who is to say that your sales are going to be the first in line… as far as I can tell, they can install systems in whatever order they choose, which means that the location with the highest rebates will probably get all the first panels produced.  Basically, the better a financial deal this is for the customer, the later they are likely to get their systems.  If you are considering signing up as an associate, treat it like a hobby, and don’t pour a lot of money into it.  Frank may be kicking in $75 to charity for each referral I give him, but at least he’s not putting a lot of money in up front… he does not pay unless he is paid.

You may also hear about the CitizenRE offering under the product name ReNu, as well as a couple of thier marketing websites www.jointhesolution.com, and www.powur.com.  The /xxxx at the end of the url is the associate’s ID which they use to track which associate brought in that particular customer.

2/14/07: Given the recent growth in controversy about CitizenRE, I’ve written a followup article here. 

Comments (18)

Other Peoples’ Clean Tech Investment Ideas

Just ran across this article on investing in renewable energy in the New York Times.  The author Norm Alster thinks that the new Democratic Congress will be good for renewable energy (I agree.)  For instance, I think there’s an excellent chance that the Dems will renew the Production Tax Credit before it expires at the end of 2007, and most renewable technologies, especially wind an geothermal will see big boosts when that happens.

He interviews several asset managers, and their picks are Sun Power in for solar, Zoltekfor carbon fiber used in wind turbines (no mention of the fact that Zoltek is currently embroiled in a nasty lawsuit with Structural Polymer Group over breach of contract), corn ethanol producers (too much overbuilding for my taste), Headwaters(more of a emissions reduction company), Herman Miller (I hadn’t realized they were big into recycled plastics) and Interface (one of my faves, but I wish it were cheaper) for the green building angle.

 Just looking at the list of companies above, I can think fo good reasons to buy, as well as good reasons to sell every company mentioned (except Herman Miller & Headwaters, which I have not researched.)  I won’t do anything just because I saw them mentioned in the NYT, but that doesn’t mean that it’s not interesting.

I like to look at other people’s ideas about how to invest in renewable energy, because it tells me what other people are thinking about.  I look for ways to invest in renewable energy that not a lot of others are thinking about… that way, when they do start thinking about (and buying) the ones I have bought, the price rises.   That’s the theory anyway.

 Another way to use others’ research without getting caught in the stampede it to start watching the ones other people like, and wait for them to get bored.   If a company does not produce any good news for several months, people who got in on a rush of excitement will get impatient and sell… that’s the time to get in… unless the company really is boring.

Nobody said investing was easy. 

Comments off

They do it with Mirrors: Concentrating Solar Power

Note 5/3/09 Some more recent CSP articles are here.

I’ve just spent some time reviewing a pile of reports on concentrating solar power (CSP) technologies for Ratepayers United Colorado (RUC), so here is a summary of the various types.

 

Technology descriptions

        Concentrating Photovoltaic

o       This technology uses mirrors or lenses to focus sunlight on high-efficiency photovoltaic chips.  The extra sunlight makes it worth the expense of making a more efficient higher complexity chip because each chip can convert more sunlight to electricity, with conversion efficiencies often twice as high as the efficiencies of conventional soar panels.  This also has the advantage of saving silicon (which is in short supply) for making chips.  Problems are that they do not work as well as conventional panels in diffuse light through clouds (because the light cannot be focused) so they are only appropriate for areas with very little cloud cover, and the extra light heats the chips more, which lowers their efficiency, and so may require some sort of additional cooling loop.

o       Article links:

o       http://thefraserdomain.typepad.com/energy/2006/03/concentrix_conc.html

o       http://thefraserdomain.typepad.com/energy/2005/11/stellaris_conce.html

        Parabolic trough

o       The oldest CSP technology, parabolic trough plants, known as SEGS 1 through 9, have been operating reliably in theParabolic solar trough technology  -  such as this SEGS plant - will be reborn in Red Rocks, California.
California and Nevada deserts since the 1970.  Parabolic trough plants work by focusing sunlight on pipes by means of parabolic mirrors.  These pipes contain a working fluid (several have been used, from water and superheated steam to molten nitrate salts.)

o       Parabolic trough technology is currently experiencing a revival, with several new plants being built.  The using of Organinc Rankine Cycle generators allows solar trough plants as small as 1 MW to be built (such as the new Saguaro plant north of
Tucson, AZ.

o       Parabolic trough technology allows energy to be stored as heat, which is much less expensive than storing electricity.  This allows the energy from these plants to be available at times of peak demand, making the electricity much more valuable.

o       Steve Raabe recently wrote an article for the Denver Post providing a good overview of the prospects of this technology in
Colorado.  The only point that he missed is the potential for hybridization with existing coal and gas plants.  By preheating steam for an existing fossil fuel fired turbine, CSP can make an old power plant operate much more efficiently.  Arnold Leitner of SkyFuel (
www.skyfuel.com) tells me “Our preliminary engineering estimates, satellite imagery of the locations and solar data show that SkyFuel could supply 50-100 MW-electric solar steam to the Comanche power plants generating an estimated 65,700-131,400 MWh of pure solar power at the facility via the existing steam turbine. SkyFuel could deliver this solar-generated steam to the power plant at an effective fuel cost commensurate to the fuel cost of burning natural gas at a modern combined cycle power plant at fuel price of 7-8 cents/mmBtu. In other words, through a FuelSaverTM at a coal-fired power plant SkyFuel could provide solar energy at the price of natural gas generation.”

o       Considering that solar power is available during peak demand, gas ifered generation is the appropriate cost comparison (as opposed to wind power, which does not deserve (or need) a price premium due to its unpredictable timing.

o       A variant on this called Concentrating Linear Fresnel Reflector (CLFR) uses many thin mirror strips instead of parabolic

troughs to concentrate sunlight from a large field onto just two tubes of working fluid.  This has the advantage that flat mirrors are much cheaper to produce that parabolic mirrors, and also allows for a greater density of reflectors in the array, allowing more of the sunlight to be used.

        Power Tower

o       Power Tower technology is similar to solar trough technology in that it uses mirrors to concentrate sunlight on a working fluid which is then used to superheat steam to run a turbine.  The difference is that the mirrors concentrate all the sunlight onto a single receiver at the top of a tower.  This allows for higher temperatures, but leads to engineering problems because of the high temperature at the receiver.

o       Lower price per watt is theoretically possible compared to trough technology because of the higher temperatures.

o       So far, only two pilot plants have been built and operated, called Solar One and Solar Two (actually the same facility as Solar One, but converted to use nitrate salts as the working fluid rather than superheated steam).    Both Solar One and Two incorporated thermal energy storage.  Due to the success in demonstrating the technology of Solar Two, a commercial 15MW plant Solar Tres is in the planning stations.  This station will incorporate enough thermal storage in molten salt tanks for 24h operation.

        Solar Chimney

o       A Solar chimney consists of a large greenhouse (multiple square miles of area covered by a transparent roof) which is sloped gently up to a central hollow tower or chimney.  The sun heats the air in the greenhouse which then rises up the chimney driving an air turbine (similar to the hydroelectric turbines used to generate power at dams) in the chimney as it rises.  Water filled tubes on the floor of the greenhouse serve as heat storage which allows the chimney to operate even at night and on cloudy days.  The amount of water in the tubes can be changed to alter the profile of power production and match it closely to the power demand the chimney serves.

o       The edges of the greenhouse can actually be used for agribusiness to grow plants, so not all the space taken up is solely devoted to electric production. 

o       The beauty of solar chimneys is that they are extremely low tech, and can be built without heavy equipment using simple materials.  The only exception to this is the turbine, and even that is much less complex than turbines used to generate power from wind, because the wind in a solar chimney is much more regular than naturally occurring winds and storms that wind turbines have to deal with. 

o       The first solar chimney was built in
Manzanares, Spain and ran continuously for 32 months in the late 1980s with 95% availability (considerably better than most coal and nuclear plants.)   See a video tour of this chimney I ran across on EcoGeek.

o       A 200MW chimney is planned by EnviroMission of Melbourne Austrailia for the Austrailian Outback.

o       It may be possible to build solar chimneys on south-facing slopes or simply as an extra layer of glazing on tall buildings with a turbine at the top which would make them even cheaper by avoiding the necessity of building the tall chimney (my idea).

 

        Dish Stirling

o       A Dish Stirling system is a parabolic mirror which focuses heat directly on a Stirling engine, a simple closed-cycle engine which operates simply using any heat source.  Sometimes hybridized with a fossil fuel source to provide heat when the sun is not shining. 

o       Dish
Sterling systems have the advantage of small size and scalability, because each individual mirror-engine system produces only around 25kW, but many can by linked together.

o       Because the suns rays are focused directly on the engine, there is little opportunity for thermal storage, a great advantage of several other thermal concentrating technologies.

o       Stirling Energy Systems currently has a few demonstration systems in operation.  They have signed purchase agreements with two
California utilities to build a total of around 1 GW of electric generation, but both projects are still in early testing phases.

o       According to Sandia National labs, this is the most efficient technology for converting sunlight into electricity.

CSP Technology comparisons

Technology Scale Levelized cost per MWh Pros/Cons Complexity/ deployment

Concentrating PV

Any

$15-$20

No storage option; does not work well on cloudy days

High.  Beginning to be deployed in last couple years.

Dish
Sterling

25 kW per dish

Unknown

High efficiency, modular.  No thermal storage.

Just beginning to be deploy

Parabolic Trough

Most: >50 MW for economies of scale;

Organic Rankine Cycle 1MW+

$8-$18 current

$6 potential

Can hybridize with existing fossil plants.

Storage, well understood technology, needs water for efficient cooling.

Plants operating consistently for 30 years in CA.

Solar Tower

>30 MW

$18+ current,

$5 potential,

can hybridize with existing fossil plants.

Storage.  Potentially cheaper than solar trough. Needs water for efficient cooling.

2 pilot plants with operational history.  First commercial plant now operational.

Solar Chimney

100-200MW

Not yet known.

Baseload power, low maintenance.

Low complexity, great potential for 3rd world.

Comments (31)

Vision of a sustainable energy future

I’ve been meaning to write an article outlining a vision of a sustainable energy future, where biomass is converted into fuel and electricity through pyrolysis and the waste product, carbon is used as a fertilizer a-la terra preta to produce more biomass.  The good news is I don’t have to.  The Engineer Poet did, and it’s just part of a much broader vision you’ll find here.   He also goes into a great discussion of transportation technologies and efficiency which would never have made it into the article I’d write.  I like it when other people crunch numbers, so I don’t have to.

Give yourself a half hour to read the whole article.  It’s worth it.

( Terra Preta: I got a comment from Erich J Knight on terra preta here that went into a lot of depth, but I deleted it by mistake.  Forturnately, he says pretty much the same thing in his blog.  I first heard about terra preta from Ron Larson, chair of the American Solar Energy Society, who is very active in the local (Denver) renewable energy scene.  If you haven’t heard about terra preta, and are concerned about globabl warming or soil fertility without fertilizers from fossil fuels, it’s worth looking into.)

Read the rest of this entry »

Comments (4)

Hedging Your Peak Oil Risk

In today’s issue of Peak Oil Review, I wrote a commentary on how to use the financial markets to hedge your peak oil risks.  These risks include not only the cost of energy, but possible job or income losses due to a slowing economy.  I  include some discussion of securities which pay dividends based on income from renewable energy, or may do so in the future.

Peak oil is key to my belief that investing in renewable energy and energy efficiency companies is not only the right thing for the planet, but also the right thing for your pocketbook.  Peak Oil Review is an excellent source for staying up with events and commentary related to peak oil.  It’s on my weekly reading list.

You can read my entire commentary  here (pages 4-5.)

Comments off

Green ETFs – how to choose?

UPDATE: Jan 2009: Here’s a more recent look at the (now 13) available green energy exchange traded funds

In January, index investors will have a second Clean Energy Index fund to chose from. First Trust Advisors L.P. has licensed the NASDAQ Clean Edge U.S. Liquid Series Index, for clean-energy investors, in order to launch a new exchange traded fund (ETF).  (See full article on Renewable Energy Access.)

The new ETF will trade on NASDAQ as CELS, and joins the Powershares Wilderhill Clean Energy Portfolio,which trades on AMEX as PBW, and was launched in March of 2005, as well as Powershares’ recent launches of PowerShares Cleantech Portfolio (PZD) and PowerShares Progressive Energy Portfolio (PUW), and Market Vectors Environmental Services ETF (EVX).

 With so many new “Green” ETFs popping up,  Richard Kang rightly asks “At what point do we have so many ETF offerings that we call this an “ETF bubble”?” on SeekingAlpha.  I agree with him that we’re not there yet

For investors interested in clean energy, who do not have the time or expertise to pick stocks in the field, the question is which ETF to use, or should we use a little of each for diversification?

Criteria to consider are:

  1. Expense ratio.
  2. Index composition.
  3. Index weighting.
  4. Turnover
  5. Availability and liquidity of exchange traded options.

The ETF structure provides assurance that all are liquid; that is an investor can be reasonably assured of getting near the market price even for very large orders.

Read the rest of this entry »

Comments (5)

Five minutes with Xcel’s Dick Kelley

Richard C. Kelly

Dick Kelley, the President, CEO, and Chairman of the Board of Xcel Energy spoke to the board and invited guests of Western Resource Advocates last Friday.  I was invited as a supporter of WRA.

 

His speech was widely reported in the press because he called for national regulation of greenhouse gas emissions.  The AP story emphasized Kelly’s shift from being an environmental skeptic to calling for national Carbon emissions regulation.  This is a big shift, and a giant step for a utility, but Kelly is not so much of an environmental advocate as he might sound.

 

I had a short conversation with him before dinner.  After we introduced ourselves, I told him I’d been making his life harder recently at the Colorado PUC.  Like anyone who’s been successful in business, he didn’t miss a beat, and told me that it was great, and the more people’s input we had, the better.

 

He said that Xcel had been opposed to Amendment 37 because of the cost of the solar set-aside, a position I’m actually sympathetic with.   After all, is it better to have 1 MW of solar photovoltaics on people’s roofs, or 20 MW of Wind?  When you look at the subsidies needed to get people to install PV (which is an Amendment 37 requirement), we could probably get 20x as much wind energy onto the grid for the same cost.   It’s not that wind cost 1/20 as much as solar, but since the price of electricity from wind is comparable to the price of coal, it does not take much to get a lot of wind, while solar needs to be heavily subsidized.

 

What I really would have liked in A37 was an allocation for Demand Side Management (DSM) and energy efficiency.  If the same incentives could have gotten us 20 MW of wind or 1 MW of solar, it could also have gotten us 40 MW of DSM and energy efficiency.  (none of these numbers are precise… it’s hard to tell what an incentive will accomplish until it is implemented, but we do know that DSM is cheaper than wind is cheaper than solar.)  But energy efficiency was not on the table when A37 was being written… polling data said that adding “energy efficiency” to the bill dropped popular support by so much that we couldn’t have gotten it passed.

 

Dick Kelley also told me that Comanche 3 (a new 750 MW coal plant) would be the last conventional coal plant that Xcel would build.  I told him Comanche 3 would be fine with me, if they’d just shut down Comanche 1 and 2 (a couple old, less efficient plants at the same site.)  That was an option that’s clearly off the table, but he did say Xcel needed to find a way to clean up the emissions of those plants.  I suggested wood chips, like Aquila is doing at their  Clark Generating Station in Canon City.  By co-firing wood and pine needles from necessary forest thinning, Aquila is able to reduce net CO2 emissions, as wel as NOx, SOx, and Mercury.

I mentioned the option of hybridizing concentrating solar thermal power (CSP) with existing coal plants.  He didn’t really understand the concept, and thought I was talking about photovoltaics.  I’m not sure I was able to explain myself well.  Put simply, when heat is available from the sun, it can be used to displace heat from coal (or natural gas) in an existing generator.

Kelly also said he’d like to raise wind to 20-25% of generation, but after that they’d have to see what the effect on reliability of the grid would be.  I brought up the idea of Pumped hydro or CAES.  He didn’t seem familiar with the fact that Colorado’s Big Thompson Project could be adapted for pumped hydro fairly easily.  As he said, new big hydro is not going to happen.  Which is all the more reason for adapting out existing reservoirs for energy storage with pumped hydro.

I was encouraged that he has recognized that Carbon Emissions are a massive problem, and that the utilites, who are the biggest emitters of carbon, are going to have a big part in the solution, but discouraged that he knew so little about several pieces of the solution that have great potential to be quickly viable.

Xcel likes wind, but is not looking at new ways to increase how much they can put on their system… they’ll just go to 20-25% and see what happens.  They’re pursuing IGCC (Internal Gasification Combined Cycle a.ka. “Clean Coal”) with carbon sequestration in a pilot plant, which many environmentalists feel is just a distraction from renewable energy, pointing out that no one has ever done any sort of sequestration on a large scale.  To me, that is an argument for IGCC with Carbon Sequestration, on a small scale: let’s give it a try and see if we can make it work or not.

IGCC is a lot better than one of the other ideas that Kelly brought up in his speech: he thinks that part of the solution will be nuclear power.  Nuclear power is indeed carbon neutral, but it requires diminishing uranium supplies, or the use of breeder reactors which make plutonium, an element which is not only extrememly toxic, but also an excellent material for making nuclear bombs.  We still haven’t figured out what we’re going to do with the waste from our existing reactors… until we do that, I think it’s crazy to look into building more.  And considering the real threat of terrorism, a nuclear reactor or wastepile makes a much better target than a solar array or wind farm.

When it comes to Kelly’s call for national regulation of carbon emissions, it’s a great step in the right direction, but it was a far cry from calling for a carbon tax (which economists think would be the most effective method of carbon regulation.)  Kelly knows global warming is real, and he knows that our politicians are going to do something about it.  By calling for national mandatory regualtion (but not a tax) he’s trying to shape the debate to come out in a way that Xcel will find easier to deal with. 

With a little more education about alternatives such as CSP, and ways to make the grid able to accept more intermentent resources (Time of use pricing, DSM, and energy storage), he may come to realize that Xcel has lots of ways to live in a carbon taxed or carbon limited world.  And he seems willing to listen; so if you get his ear for five minutes, try to make the most of it.

Comments (1)

Large Scale Electricity Storage.

One of the biggest barriers to the adoption of wind and solar electricity generation is the lack of storage technology with the capacity to handle the hundreds or megawatt hours necessary.    

Large scale electricity storage technology also allows utilities to flatten their demand, and defer construction of expensive new generation. 

Here’s a quick rundown of some of the technologies vying to meet this need.  Most of this is information is drawn from the Electricity Storage Association website.

Technology

Description

Comments

$/kWh; efficiency

Investment opportunities?

Pumped Hydro: Reservoir to Reservoir

Energy is stored by pumping water from a low reservoir to a higher one, and recovered by running the water back out through a turbine.  This system can be easily retrofitted into existing reservoirs, but has limitations due to water regulations.  First used in 1890.

The cheapest and most developed technology, pumped hydro is nevertheless limited by the availability of suitable sites.

$3-$50 per kWh;

70% to 85%

The major supplier in the business is private.  Could look for opportunities in utilities that have good potential projects.

Compressed Air Storage (CAES)

Energy stored by compressing air into large underground caverns.  Air combined with natural gas on exit and burned in turbine.  The gas compensates for the cooling as air decompresses. 

Gas used is about 40% of the amount used in comparable peaking turbine.  First built in 1978.

70% to 80% efficient; $30-$100 per kWh

 

Underground Pumped Hydro

As above, but water is pumped between an aquifer and an above ground reservoir.

More sites available, developing application.  Might have some water quality issues.

Costs Low

75% to 85% expected efficiency.

Small turbine/pump makers.

Polysulfide Bromide battery

A regenerative fuel cell based battery technology (aka “Flow Battery.)  Seems have run into difficulties due to the toxicity of the chemicals involved.  

15 MW demonstration project in 2003; more recent projects canceled.

75%, unknown cost;

Regenysis, the owner of this technology, was a subsidiary of
Germany’s RWE.  No recent activity; the program may have been wound down.

Molten Sodium-Sulfur (NaS) Battery

Molten battery technology.  “Safety concerns addressed in

30 sites in
Japan, mostly for peak shaving.  Largest is 6 MW for
Tokyo electric

Cost “High” compares to BrS and hydro/ CAES.

NGK, Japanese power equipment supplier focused.  Can be bought by US investors on the Pink Sheets NGKIF.PK

Regenerative Fuel Cell (Hydrogen)

Fuel cells can be run in reverse for electrolysis, with the hydrogen stored in large tanks.

First pilot project 2004

“much less” than 80%

Fuel cell manufactures: Ballard, FCEL, and others.

All these technologies except hydrogen are dealt with very well on the Electricity Storage Association site.  They have some great technology comparison graphs which deal with a lot more variables than I have here in their technology comparison section.

Cost Comparisions

Click to enlargeClick to enlarge

Efficiency/Quality Comparisons:

Click to enlargeClick to enlarge

Of these technologies, Pumped Hydro and CAES are the only ones ready for near term, large scale deployment (with NaS and Flow Batteries applicable in some markets highly constrained markets.)

The major downside for pumped hydro is siting, part of which problem can be solved with the smaller scale reservoir to aquifer option.   For CAES, the downside is the need to use gas to run the turbine, albeit a very efficient one.  One option might be to substitute for the natural gas used in CAES with hydrogen from electrolysis, allowing the system to work at locations remote from natural gas supply, and, for wind energy storage systems, be 100% renewable.

 10/20/06- Article about a flow battery from VRB power systems for an Irish wind farm.

8/5/07: Here’s an article I just wrote about two potential investments in utility scale electricity storage.

Comments (1)

25x’25

I spent much of the last week at the 25x’25 “Twenty-Five by Twenty-Five” second implementation planning meeting.  25x’25 is a coalition advocating the vision that “By 2025,
America’s farms, forests and ranches will provide 25 percent of the total energy consumed in the
United States, while continuing to produce safe, abundant, and affordable food, feed and fiber.”   That’s at least 25% of our energy from renewable sources.

            25x’25 is an open alliance; the participants are the organizations who have endorsedthe 25x’25 vision outlined above.  These include 18
US Senators, 91 Congressmen, 18 state governors, 4 state Legislatures (including
Colorado).  I attended the conference as the representative of the
Colorado Renewable Energy Society. 

            I highly encourage my readers to endorse 25x’25 (you can endorse as an individual, or as an organization, or both.)  Your endorsement helps them demonstrate that a broad swath of Americans support the 25x’25 vision, and will help convince the US House and Senate to pass the concurrent resolutions for 25% of the nation’s energy supply to come from renewable sources.

We are currently in the process of coming up with our vision of how
America can achieve 25x’25.  Any endorsing individual or organization can participate.  The goal is agree on a series of recommendations (the Implementation Plan) as to how we can achieve the 25x’25 vision.  When the Implementation Plan is complete, which we plan to achieve by January, in time for the next congressional session, all partners will have a chance to endorse the plan.

Since the whole process is by consensus, and the 25x’25 goal is an ambitious one, it would be easy to believe that the Implementation Plan will turn out to either be watered down to the point where it does not say anything, or end up endorsing so many points of view that it would be ludicrous to call it a plan at all.

Having now participated in two conference calls and two days of face-to-face meetings, I’m happy (and somewhat surprised) to report that we’re actually managing to form a consensus among a large group of people and organizations you would not expect to get along under ordinary circumstances.  For this, I can only shake my head in wonder at the diplomacy and perseverance of the Steering Committee.  They managed, though two days of what could have turned into a verbal free-for-all, to keep us all focused on the need to work together to reach the very ambitious goal we’ve all agreed upon.  (In that same spirit, and understanding that many of the participants have been willing to voice their true opinions and step away from the party line, I will not name any names here.  This also has the advantage of covering for my lousy memory for names.)

How do they do it?  By keeping us focused on the fact that we all agree on the goal: 25% of our nation’s energy from renewable sources by 2025, and reminding us that we’re never going to get there by half measures.   The second thing they did was keeping the discussion focused on “Yes, if…”: continually reminding people to stay in the mode of working together, and instead of thinking about all the reasons that something was impossible to accept, to instead say “I could accept that if it were this were also to happen.”

So my kudos to the people I met on the steering committee.  I was impressed.

Read the rest of this entry »

Comments (3)

You Can’t Hide from Peak Oil in Big Oil

Last week, Russian Natural Resources Minister Yuri Trutnev signed an order to cancel part of Shell’s Sakhalin-2 license on environmental grounds.  Russia is also pressuring Exxon about cost overruns in a related project.  A triumph for environmentalists over Big Oil?  Hardly.

shell.jpgMost analysts agree that this is an attempt by the Russian government to renegotiate an oil and gas deal struck when prices were low.  Thinking back on what Russia did to Yukos, and Chavez forcing foreign oil firms to renegotiate contracts in Venezuela, the trend is clear:  Countries rich in fossil fuels are increasingly re-writing the rules to their liking, with little regard to the desires of foreign capital.

Given that 90% of the world’s oil and gas is controlled by state owned firms, private companies have little bargaining power, yet desperately need access to new reserves. 

Big Oil needs Russia more than Russia needs big oil: they’re going to have to settle for a much smaller take than they negotiated 10 years ago.  As oil prices rise in response to the peaking of world oil output, realpolitik will continue to trump contracts.  Western, publicly held oil firms will be the losers, as will their investors.

How can we invest to protect ourselves from rising energy prices, if Big Oil is at the mercy of every oil-rich dictator around the world?   I see two choices: fossil fuel reserves in western countries: coal mining companies and tar sands, or renewable energy sources.

Tar sands and coal both have the problem of causing high greenhouse gas emissions.  The process of extracting oil from tar sands releases 80kg of greenhouse gasses per barrel of oil extracted (and that is before the oil is used.)  The extraction of tar sands has caused Canada’s greenhouse gas emissions to increase 24% since 1990, despite the fact that they are obligated under the Kyoto protocol to reduce emissions by 6%. 

Coal is also carbon intense.  So while both coal and tar sands are relatively safe from political risk due to opportunistic regimes, both are likely to become relatively less economic in the face of possible restrictions on greenhouse gas emissions. 

Oil Shale is a boondoggle, and requires even more energy to extract than tar sands. 

This brings us back to investing in renewable energy and energy efficiency companies, both of which will benefit from rising energy prices and restrictions on greenhouse gas emissions.  The problem here is that many of them are start-ups with little or no revenues, let alone earnings.  Right now, I like energy efficiency best, since many renewable technologies have been the subject of a feeding frenzy over the last year.  Although things have calmed down over the last couple months, energy efficiency is still more economic than most renewables, and subject to a lot less hype.

Comments off

« Newer Posts