It's right there in the picture. These are oil tankers in Scapa Flow, the deep harbor formed by the Orkney Islands in the North of Scotland. These tankers -- we counted four -- have been sitting here for weeks waiting for the price of oil to rise. The Scapa Flow, which covers about 250 square miles, is also where the German Navy scuttled its fleet rather than give it to the British after the end of World War I.

What steel really needs is a fine bath in an acid degreaser. So says Robert Patterson, product manager from NexChem, which was a runner up in the energy-efficiency category at the California Clean Tech Open. NexChem has devised a process, called SteelCleaner Pro, that eliminates many of the steps necessary for processing and finishing steel. Traditionally, steel needs to be run through a twelve step chemical cleaning process. Otherwise, it rusts and becomes useless. NexChem has it down to five steps. The NexChem process also only takes about 20 to 30 minutes, way less than the hour-per-beam time for the traditional process. Overall, this cuts down on the amount of nasty chemicals required (particularly those deployed to pickle steel) and energy. SteelCleaner Pro also results in a higher quality steel. The secret sauce is NexChem's acid degreaser. Steelmakers effectively dunk fresh beams into large vats filled with the stuff. The traditional process uses a base degreaser. "The formulation is totally radical," he said of the formula. "It's basically fondue for steel."

Oil prices are wallowing in the $65 a barrel territory these days, less than half the level crude hit this summer. It even dipped below $60 briefly. But the real number to think about is $40 a barrel, a former oil exec turned investor told me. Why? Well, $40 a barrel is the level that many Middle Eastern OPEC nations need to achieve to continue to fund their somewhat lavish public works and social programs, the exec estimated. Dubai, Abu Dhabi, Saudi Arabia and Kuwait aren't cheap countries to run. The economic explosion in the past few years has caused a building boom in Dubai, which in turn has meant more public works projects. Some of the newest, smoothest pavement in the world can be found there. Many countries also offer massive incentives to U.S., European and Asian institutions to install offices and facilities there. In Dubai, for instance, chip companies can qualify for tax holidays that last 50 years. Texas A&M, Cornell, Northwestern, Georgetown and Carnegie-Mellon have all opened satellite campuses in Qatar while NYU and MIT are opening campuses in Abu Dhabi. Building a school out of scratch isn't easy. The hospital associated with Cornell's medical school has an endowment in the billions. Citizens often tend to expect cushy, well-paying jobs from their home governments. Many governments are trying to phase out these programs, and hope that the universities will generate opportunities for private sector jobs in the region, but workfare-like employment persists. OPEC nations probably aren't too terrified of oil skirting the $40 a barrel level just yet. The current drop in prices has largely been caused by a decline in demand due to economic conditions and the bursting of the speculative bubble in commodities. It did not result from new oil strikes outside of OPEC or the sudden availability of cheap ethanol or electric cars. An economic turnaround, combined with a further dwindling of existing supplies, could perk prices back up. Nonetheless, the outlook for oil producers is certainly less optimistic than it was a year ago and transportation technology continues to improve. So keep that number in mind.

Sydney, AUS – It’s the last day of a round-the-world solar trip that’s taken me through Spain and Australia with pit stops in the UK and Hong Kong. I’ve met a lot of really interesting people – a Belgian PV engineer, a suicidal Valencian cab driver, an overly talkative Aussie faith healer, and kangaroos. That’s right. Kangaroos. I haven’t added up the numbers yet, but it’s possible I’ve spent more time on airplanes in the past week than on the ground. Most of my photos from this trip are from inside airports. Ooh! There’s Kowloon Bay! Right there – behind Terminal A. In between bits of hallucinatory airplane sleep I’ve had a lot of time to think about greentech and the renewable energy industry. Over the course of this week I’ve met analysts, technology suppliers, investors and project developers. Only one, Travis Bradford, was American. And Travis, who was on a Euro-dash of his own, is more global citizen than your average putz from Padukah. Granted, I wasn’t in the U.S. But from all the talk there about leading the greentech industry through innovation and investment, the absence of America from the conversation was striking and perhaps a bit revelatory. The other day Rob Day wrote an interesting piece on energy independence, arguing the concept of energy independence deserves a demand-side focus. Sure, when we’re thinking about fossil fuel, “The single most ‘Energy Independent’ barrel of oil is the one not consumed.� But underlying the notion of energy independence as an end-use issue is a more complex problem regarding the technology driving consumption Energy independence in terms of renewables is both a demand and a supply issue. In theory, deploying renewables at scale would allow us to maintain our consumption levels while reducing our demand for fossil fuels. The supply of fuel is free – sun, wind, tides, ground heat, etc. – though the supply of technology used to convert that free fuel into energy isn’t. If you can imagine a future powered by renewables, then you should also be able to imagine a future where a new kind of energy independence issue rears its ugly head. While it’s not linked to fears of Middle Eastern or Venezuelan oil, it’s one we’re equally familiar with, one that’s equally xenophobic, and one that’s equally idiotic. The issue of globalization and international is inextricably linked to the development of green technology and the growth of the renewables industry. Whether it’s Brazilian thermochemical lignin convertors, Chinese solar cells, or German turbine nacelles, the technologies driving the growing penetration of renewable energy are, by and large, not coming from the U.S. The solar industry, because of its relative maturity, is a good example of this. The commoditization of input materials and secondary goods – polysilicon, cells, wafers, modules – has driven the emergence of a global supply chain. While some of the ideas driving this supply chain may start in the U.S., when the vapor depositor hits the epotaxial layer, it’s increasingly not going to happen in this country. Take SunPower, one of the U.S.’s leading solar companies. It started out as a concentrating PV company, moved into optics and optoelectronics (I found out this week SunPower occupied a pretty large piece of the IrDa market), and then finally into flat plate PV. It’s highly efficient panels, derived from the company’s work in CPV years ago, have high average selling prices but fetch fairly small margins. If markets in the U.S. and Spain fail to meet demand projections next year and prices fall, a situation that’s looking more and more likely, SunPower’s margins will get even smaller. Good thing most of its manufacturing capacity is located in Malaysia. Without that, it probably wouldn’t have any margins at all. I’m waiting for the day that some politician rails against Chinese PV because the factory workers in Shenzhen Took Our Jobs. The problem is that those weren’t really our jobs anyway. Even less so because that same politician probably also voted against extending the investment tax credit or a national RPS, while voting in favor of expanding offshore drilling. Energy independence is a joke and a myth – and that’s a good thing. No one talks about computer or t-shirt independence, yet neither computers nor t-shirts are made in the U.S. Even if the federal government took the step of actually supporting a renewables industry in the U.S., it wouldn’t be long before most domestic greentech companies move their operations somewhere else. Companies like A123 and First Solar have already figured that out – the rest will soon follow. We'll need to accept a global supply chain in renewables in the same way that we need to accept one for other industries. The difference between renewables and other industries, however, is that not doing so will cost us a lot more than just some jobs. When utilities and power retailers talk about security of supply, they’re not talking about natural gas reserves or coal contracts. They’re talking about power over-the-lines in whatever 10-minute increment they happen to be in at the moment. Regardless of how efficiently we use fossil fuels, they suffer from volatile prices, uncertain supply, and perpetually increasing demand – all bad conditions from the utility’s perspective. If, instead of gas turbines or coal steam boilers, power producers used renewables, the price and security of their supply would be much more stable. Getting to that point requires a steady stream of cheap renewable technology – something available only if we accept the idea that true energy independence is both undesirable and impossible to achieve.

The Regional Greenhouse Gas Initiative marked the start of operations Friday, trading 70 futures and options contracts on the Chicago Climate Futures Exchange. The contracts, which represent 70,000 emissions credits, were the first traded in the U.S. under a regulated cap-and-trade scheme. Many believe RGGI, which comprises 10 Northeastern and Mid-Atlantic states, will set the tone for a future federal emissions reduction scheme that is likely to be implemented under the next presidential administration. Let's hope not. While investor interest in the pre-sale - RGGI opens officially on January 1, 2009 - is heartening, the market itself suffers from serious design flaws. Most of these are related to political compromise that will sink the market before it has to chance to make a significant difference. If the design flaws evident in RGGI are replicated on the federal level, we should give up hope for a thriving carbon market in the U.S. in the short- to mid-term. Emissions credits in RGGI are limited to the power sector, binding generators to cumulative emissions of 188 million tons per year from 2009 to 2014. This number is set to decrease by 2.5 percent annually between 2015 and 2018, at which point climatologists expect most of the RGGI states to have sloughed off into the Atlantic. The emissions caps are set at higher-than-historic levels, meaning power generators will be allowed to emit more, though probably at a slower rate, than what was previously planned. Slowing emissions in the natural gas-dominated Northeastern power sector won't be difficult, and an emissions credit surplus problem will probably emerge within the first few months of trading and last beyond 2014. The contracts ended their first day of action at $5.58 per short ton, far below the level required to illict credible behavior change. Trading yesterday wasn't too thrilling either, with a meager trading volume of 4 contracts sending prices for December 2009 deliver down to $5.56. The spread out to December 2012 is still below $6.00, meaning traders don't expect market conditions to become more competitive anytime in the near future. And this is exactly what the power producers want. Electricity prices among RGGI states are some of the highest in the country, with New York and Massachusetts regularly topping out above $0.15/kWh. Because of retail choice, wheeling and common carrier requirements in the PJM Interconnection, NYISO, and and the Mass ISO, RGGI power producers often steep price competition from coal burners in West Virginia and hydroelectric producers in Quebec. The power producers within RGGI lobbied hard for relaxed emissions requirements - more stringent caps would have forced them to alter the fundamentals underlying their retail rates, which are negotiated annually with state-level public utility and public service commissions. By keeping caps high and requirements low, the cap-and-trade scheme will have little impact on the planning decisions of power producers. This defeats the purpose of emissions reduction. The regularly cited figure for incentivizing behavior change is €35 per metric ton (U.S. emissions credits are traded on the short ton, equivalent to 907 kg - another market design flaw). Credits on the EU market trade around €24 per metric ton, below the line, but inclusive of emissions in both the power and industrial sectors. Because of the retail rate restrictions and public service obligations regulators place on power producers, including the industrial sector in the reduction scheme necessarily places pressure on power producers to make creative, often risky decisions, like building out renewable capacity. Fortunately, EU countries offer policy support for these projects. While not perfect, the integration of policy across both incentives and mandates makes conforming to emissions reduction regimes less painful. Perhaps American power producers wouldn't balk at carbon regulation if government bodies set about getting the incentives right. Whether this involves extending the production and investment tax credits, introducing a federal RPS or REFIT program, tax breaks, or merely directing subsidies to emitting companies for technological development and process innovation (kind of like how the government gives money away to oil companies), remains to be seen. To ask entrenched sectors like power, construction, or the industrials to cut emissions without support is ludicrious and leads to markets as potentially disfunctional as RGGI.

The possibility of Congress granting oil companies rights to develop offshore reserves in previously protected areas is one of the hottest topics going these days. The U.S. Energy Information Administration estimates there may be as much as 18 billion barrels lying under protected areas and 80 billion barrels total offshore, though the EIA isn't exactly known for its accuracy. While there's virtually no potential for oil drilled offshore in the U.S. to have both a direct or immediate impact on domestic prices - the government can't tell oil companies where to sell, how much, or at what price - both presidential candidates support it. John McCain was against it before he was for it, and even Obama is saying Yes We Can to some limited proposals. And then there are these jokers, whose press conferences have replaced the Daily Show as my daily fix of political humor. For the energy majors, increased access to offshore sites represents a far greater prize than any good PR associated with low gas prices. Proved and probable reserves are a widely accepted way of determining an oil company's value and expanding access for these companies will benefit their share prices and revenue forecasts. This is good for companies like BP who are finding it harder to do business in places like Russia and Nigeria these days and risk losing booked reserves in those areas. It's likely, however, that much of the newly granted reserves won't be developed or produced - American companies currently produce from about 15 percent of their offshore sites. While this controversy rages in the U.S., an offshore oil boom in Brazil and India may create some problems for the development of the offshore renewables industry in Europe and North America. Supply chain conflicts may prove a significant limiting factor for growth in that sector and may have ramifications for the evolution of the energy sector generally. The wind industry, ocean power industry, and offshore oil and gas industry draw their installation, monitoring, and maintenance vessels from the same companies and same limited inventory. Anchor handling vessels, jack-up barges, and seismographic monitoring are in particularly high demand these days. According to Baker Hughers, in the last few months Brazil has deployed 29 additional offshore rights, while India has deployed two and ordered another 28, drawing much of the world's installation vessels to those projects. Competition for inventory among these industries isn't strong however, with the well-capitalized oil projects winning out nearly every time and low return renewables project often getting shuttered as a result. The high risk and low returns of installing wind turbines and ocean power devices offshore oftentimes do not justify the cost of hiring these vessels at market rates. The surge in offshore drilling has been a boon for the relatively small offshore oil services industry. In a market where vessel charters go for a minimum of $60,000 per day, an onset of new entrants is not unexpected. India's Varun Shipping recently raised $300 million to expand into the business with a focus on deep-water and ultra-deep water operations. But the rush to serve the expanding offshore oil industry may put a crimp on construction of offshore wind farms and the development of the nascent ocean power industry. Larger service opportunities in the offshore oil industry will draw installation vessels to oil faster than they'll go to wind and ocean power, while wind and ocean power installers may not be willing to pay the high rates the installation vessels command. Lower installation costs and higher margins may keep wind turbines on dry land for longer than most expected, while the shortage of installations vessels may make it difficult to keep the ocean power industry afloat. Already, one major marine turbine installation was delayed by several months because the jack-up barge intended for the installation was called away to service an oil rig. European offshore wind installers were expecting to soak up surplus capacity from depleted North Sea natural gas fields, but those vessels are now in service in India and Brazil. Short supply and high prices add to the already outsize installation costs for offshore wind, which have caused a number of major developers to put some big projects on hold. This has sent investment return opportunities tumbling, making offshore renewables projects even less attractive than before. Shell stepped out of the 1 GW London Array, citing equipment shortages and spiraling construction costs. Both Vestas and General Electric have slowed production of their offshore units because of shrinking sales. Vestas, for example, hasn't sold an offshore turbine since late 2006. There are currently $120 billion of offshore wind projects in Europe that are stalled because of high construction costs and installation vessel shortages. As long as costs remain high and vessel availability remains uncertain, it is unlikely most offshore renewables projects will get built. This will certainly impact the EU's goal of meeting 20 percent of its electricity demand from renewables by 2020. However, lessons from Europe should give American renewables developers and drilling opponents another kind of ammunition in their fight to expand renewables capacity and limit the future development of fossil fuels.