Deep Throat's admonition to "follow the money" couldn't ring truer than in recent signals on climate change sent out by the big banks. The Carbon Principles, a set of guidelines addressing investment risk in electric power plants, were launched today by Citi, Morgan Stanley, and JP Morgan. While the guidelines themselves are high on fluff and low on actual guidance, they presage highly anticipated GHG regulation and provide a glimpse at what's ahead for advisers and lenders in the traditional power gen industry. The biggest development in today's announcement is the enactment of a so-called Enhanced Diligence framework, essentially a process allowing potential investors to evaluate risk factors in new plant construction. Power companies incorporating energy efficiency, carbon capture and sequestration, and/or renewables into new construction are assessed less risk than those that do not. With the Enhanced Diligence framework, the banks are sending a clear signal to power companies that business as usual construction will be penalized under any future regulatory framework. This is clearly not a cost the banks are willing to bear. What The Carbon Principles tell us is that the big banks - old pros at following the money - are ready to begin thinking critically about technologies enabling a low carbon future. Power plant construction is a multi-billion dollar business, and investors and lenders stand to lose big time if they get caught with their pants down after the initiation of GHG regulation. But The Carbon Principles are more than hedge against future regulatory uncertainty. They're also a smoke signal to Washington that the train is leaving the station. Most major American banks have already built carbon trading practice groups with eyes towards London (and Hong Kong). If the government blows this one, profits won't be the only thing we lose.

Finally some good news for publicly traded solar companies. Yingli Green Energy's shares bounced 14 percent today on news the company has successfully reduced its wafer thickness from 200 microns to 180 microns. The 10 percent reduction means the company will save on feedstock costs as it brings down polysilicon per watt while jacking up wafer output per ingot. In announcing its 2008 guidance, Yingli also noted it has secured roughly 70 percent of its polysilicon for 2008. The vertically integrated supplier also pegged its 2008 module shipment target at around 260 MW. Yingli's stock suffered along with other public solar companies in a big slump that started around Christmas. Today's breakout may signal a light at the end of the tunnel for some stunned solar investors. My guess is that Yingli benefited from its vertical integration, which allowed it shore up its supply chain while also investing in the engineering breakthrough. If this is the case, it means good news for a few companies in a similar position, like SunPower. While the well-stocked companies break away, the rest of the pack will be stuck at the bottom for some time to come.

A few of the interesting pictures follow!! The scene from my hotel room. Although the room itself brought back fond memories of my student days, staying at the YMCAs, the view was fantastic!! Only the Swiss can think of playing golf in the snow!!! Closing session with CNN interview

Thinking back to the Davos experience, these are my observations in a random order:

1. Davos is an excellent forum for the leaders of the world’s nations and companies to come together, exchange ideas and form consensus on various issues; and swap ideas on how their counterparts are handling some common issues. It is so because the forum has a very informal setting - people mingle without their security details or bag-men buzzing around them. While having coffee in the lounge area or during receptions, you run into thought leaders and experts on various subjects, CEOs of large companies, ministers from various national governments and, most importantly, Technology Pioneers. Discussions are almost always cordial and two-way. People are open about their agreements and disagreements, respecting various perspectives and seeking rational arguments for various points of view.
2. The world is very big and we know very little of it. Sitting here in the US, even those of us who pride ourselves on being ‘global’ through extensive travel around the world don’t know a tenth of what is really going on in the world. I will never pretend that Davos is the place to discover the world, but I was amazed at the stuff I learned through informal chats with social entrepreneurs from various places (‘Africa is the next Asia’, etc.), researchers from the cutting edge of science (‘mood control through magnetic waves’), etc.
3. Climate change is a top priority for the world. Duh!, you say but looking at some of the recent policy failures in the US, you wouldn’t think so. However, rest of the world, even Asian countries like India and China, are keyed in on this issue and struggling to find a balance between growth aspirations of their people and the effect of emissions on the climate change. Although policy frameworks are being debated and implemented, I believe that it will take strong and entrepreneurial business talent to guide the world out of the climate mess that we find ourselves in.
4. Water has risen to be near the top of the agenda, as it should. The issue of a viable business model still remains unsolved.
5. Adaptation to climate change is still getting short shrift and that amazes me. Regardless of what we do on GTG emissions, climate change is upon us and violent environmental events are already a reality. I wish that the world paid a little more attention to taking steps that risk-proof people from environmental events and have strong emergency prepared infrastructure.
6. Swiss are a wonderful wacky people – where else in the world can you play golf in snow?

Andy Karsner, the former managing director of wind giant Enercorp and current Assistant Secretary for Energy Efficiency/Renewable Energy at the DOE, was supposed to be Our Guy inside the Bush Administration. Even I was (slightly) convinced by his sweaty, impassioned speech on his team's revolutionary approach to EE and RE at the ACORE Phase II Policy Meeting. The hallmark of that speech was his team's big budget - over which he claims they had ultimate control. But, as with all things Bush Administration-related, Andy Karsner is a fraud. The FY 2009 Budget dropped today and it's hotter than the new Vampire Weekend album. Karsner's EE/RE budget was slashed 28 percent to $1.255 billion, including big reductions in solar, vehicle, hydrogen, and facilities & infrastructure research and technologies. Not to worry, though. Another DOE department, the Fossil Energy Research and Development program, received a 25 percent boost in funding to $997 million. So much for Our Guy in Washington.