Viewing posts tagged: "Policy"

In the Beginning there was the Carbon Tax, and it was Good

Daniel Englander: May 22, 2008, 8:43 AM
Evolution, for the 62 percent of us who believe in it, happened incrementally, over millions of years, and involved a few missteps here and there. Grover Norquist is a good example. It is often said progressive policy changes happen in the same way. Yesterday, the Bay Area Quality Management District came out as the nematode of the climate policy world, voting 15-1 in favor of a carbon tax for the nine counties in the Bay Area. The legislation imposes a $0.044 tax per ton of carbon dioxide and will target close to 2,500 Bay Area businesses, if the plan gains approval from the California Air Resources Board. Unsurprisingly, the Bay Area business community is up in arms over the proposed legislation, though not because of the program's cost. The carbon tax would raise close to $1.1 million in its first year, enough to cover the program's operating expenses, while drawing the majority of its revenue from seven refineries and power plants . The remaining businesses would pay about $1 per year. Groups like the Western States Petroleum Association and the AB32 Implementation Group, a climated-minded business group, worry that balkanizing greenhouse gas legislation within the state will lead to inconsistencies in implementation of statewide policies. Another problem is that added levels of regulation will increase transaction costs for companies operating in the Bay Area, which may lead to a kind of localized outsourcing pattern. This is the same kind of effect national business groups expect when California moves ahead with some of its own stringent climate policies. It's possible the carbon tax is aimed more at stirring the pot for state-wide action, as it seems localized impacts will be limited. Still, it's an effective way of getting companies to think about potential carbon-based impacts on their bottom line. Berkeley professor Dan Kammen said the carbon tax is "not enough of a cost to change behavior, but it tells us where things are headed. You have to think not just in financial terms, but in carbon terms." In other words, us Darwinians may have to borrow something from the freaky Creationists - effective climate policy can't evolve slowly, it just needs to happen.

Sal DiMasi’s Green Jobs Bill Mandates Cake, Eating Too

Daniel Englander: May 20, 2008, 10:25 AM
Yesterday Massachusetts House Speaker Sal DiMasi, flanked by Gov. Deval Patrick and Senate President Therese Murray, held a press conference introducing the Speaker's $100 million green jobs bill. DiMasi, speaking at the press conference, said the bill "combines our commitment to jobs creation and economic development with our duty to protect the environment and increase energy efficiency." All good things, right? Certainly the Massachusetts greentech sector, which is "poised to be the 10th largest cluster in the state" (pdf) with 14,400 jobs created so far, needs ongoing support for both economic and environmental reasons. The support itself, which calls for the creation of a Clean Energy Technology Center with a five-year, $65 million fund, $5 million in research grants, a $500,000 per year clean energy fellowship program, and $2.5 million for workforce development, is a sign Massachusetts is ready to get behind greentech in a big way. But did anyone bother to check where this money's coming from? Buried deep in the last page of the proposed legislation is a paragraph stating (pdf) the "state comptroller shall, for state fiscal years 2009 through 2013 inclusive, annually transfer moneys from the Massachusetts Renewable Energy Trust Fund established in said section 4E of chapter 40J in an amount not less than $5,000,000 annually for deposit" in the new program. For anyone not familiar with the Massachusetts Renewable Energy Trust Fund, it's a branch of the Massachusetts Technology Collaborative that "provides financial assistance to individuals and business for solar panels and wind turbines at their homes and facilities." As far renewable energy subsidies go in Massachusetts, the Trust Fund is it. Taking $5 million out the Fund represents a 21 percent annual revenue reduction. The Fund has subsidized 479 projects in the past ten years, adding up to 87,301 kW of installed renewable capacity, with another 149,082 kW of capacity in the development pipeline. While not a large number, it's also nothing to sneeze at. These are projects that likely would not have been built otherwise. So this leads us to an interesting series of questions. Why would DiMasi cannibalize funds from a renewable energy installation subsidy fund to promote green jobs and early stage research? If the amount of funding available to install renewable capacity decreases, won't the number of projects being installed also decrease? And, if that's the case, won't the number of people needed to install these projects also decline? As for all the early-stage research and entrepreneurship receiving grants from this program, what happens when this research matures and the entrepreneurs behind the research start shopping around for ramp up and commercial production? If the Trust Fund is too small to help subsidize these commercial projects, where will all the startups go? I hear California's nice this time of year.

Our Long, Tortured, Corn-Based History

Daniel Englander: May 20, 2008, 7:20 AM
In 40,000 years, after the last of the Himalayas have disappeared under the Indian Ocean, and future generations with webbed feet and gills rule the world from their outposts on rusted-out oil platforms, the memory of corn will have long been forgotten. Perhaps it will survive as a chapter in some elementary school history book - "The Cult of Corn," or possibly "Corn: God of the Ancients" - though it's doubtful anyone will understand our close, personal relationship with the cereal grain. I certainly don't. What's interesting about our addiction to corn are the steps government bodies have taken to maintain corn prices at artificially low levels. And there are several examples. The Corn Laws, enacted in Britain in the 1840s, sought to keep grain prices at extremely low levels to protect British farmers from cheaper imports. The tariffs resulted in both the collapse of British agriculture and the founding of The Economist. Tariffs on the import of refined sugar were aimed at protecting a burgeoning sector of the U.S. corn production industry - high fructose corn syrup, a form of sugar made from corn. This tariff, while crippling agriculture production in developing countries, has succeeded primarily in making Americans fat. With the average American now consuming roughly 42 pounds of high-fructose corn syrup annually, and with per capita production up 4,000 percent since 1973, the average American now consumes an additional 75,281 calories per year. But in the future this shouldn't be a problem, because the Renewable Fuels Mandate has succeeded primarily in raising food prices and cutting down on the amount of corn moving in to direct and indirect food consumption. The new corn tariff, which is what the RFM is, has raised prices for animal feed and, therefore, animal products sold in super markets, resulting in a short to medium term 10 percent increase in food prices. The long term effects of this may be even more drastic. Other advances are possible. There's an open debate now about what else the government can do to keep corn prices artificially low while attempting to solve some ongoing macroeconomic problems. One solution is to "Make mortgages out of corn. Turn what is plentiful into what is scarce." The credit crunch roiling international markets can easily be solved by transforming corn into mortgages, which "can be 'offset' by employing other corn products as corbon-offset and corn price deflators." In other words, with the right mix of wrong-headed government subsidies and continued reliance on an agricultural commodity that has no business outside of Oaxaca, we can make the banks start trusting each other again. Basing the overnight Fed rate on corn production would spur an increase in lending, while decreasing the amount of production devoted to making Americans fat. Ultimately, we believe, along with Long or Short Capital, the optimal strategy is to go "long corn, long real estate and long any problem which can be solved by corn, which as far as we can determine is EVERY problem." Because anything else but a corn-based economy would be untrue to the primary goal - making farmers rich.

Luxim unveils the svelte streetlight

Michael Kanellos: May 14, 2008, 8:00 AM
That\'s a real quarter Someday, downtown streets may be lit with bulbs the size of a Tic Tac. Luxim, a lighting start-up in Silicon Valley, has released a lamp--the elegantly named LIFI STA-40-01—that delivers as much or more light than a standard street light. The trick is that it consumes less power. The new lamp cranks out 120 lumens per watt. Top-end LEDs provide around 70 lumens per watt. High-intensity discharge (HID) lamps, which you see on light poles today, get about 90 lumens per watt. HIDs are also quite large, which means a heavier street light or spotlight. The bulb at the center of Luxim's lamps is only a centimeter or so long. It looks like a Christmas tree light. You can pick up the whole lamp with your hand. The company has talked about putting its LiFi lamps inside cathedrals and other public spaces to replace architectural lights. The lamp also lasts 30,000 hours, longer than HIDs, so the repairmen don't have to replace them as often. The company, which has received over $60 million in venture capital from Crosslink Capital and Sequoia Capital among others, initially concentrated on providing lamps for rear-projection TVs. With projection TVs fading away, the company shifted to tackle the larger, and potentially more lucrative, market for commercial lighting. Although it doesn’t get as much attention as solar or biofuels, lighting is expected to be one of the growth markets for green tech. Approximately 22 percent of the electricity used in the U.S. goes to lighting, according to an oft-quoted statistic from the Department of Energy, and light sources weren’t designed for efficiency. Incandescent bulbs only use around 5 percent of the energy fed into them for light: the rest gets converted into heat. (That’s why Easy Bake ovens work.) Light-emitting diodes are already replacing neon signs and some public light fixtures. LED maker Cree, for instance, is currently working with several cities to convert garages and municipal buildings to LEDs. Other LED companies to watch include Luminus Devices, a Boston-area company that landed $72 million recently, and the stealthy Kaai. Like LEDs, Luxim’s lights cost more than incumbent solutions, but the company (like LED makers) says the difference can be made up in lower replacement rates, lower maintenance costs, and lower power bills. Both LEDs and Luxim’s bulbs can also be remotely controlled by sensors to crank the amount of light coming out of them up or down, depending on foot traffic and other factors. How does Luxim’s bulb work? Energy is pumped from a puck into a small gas-filled chamber. The gas gets heated up, turns into a plasma and emits light. Crazy, eh? Check out this cinematic masterpiece for more.

A novel large solar project takes flight in New Jersey

Michael Kanellos: May 12, 2008, 11:23 AM

Drug maker Schering-Plough is getting a 1.7-megawatt solar system for its New Jersey facilities in a deal that, to some degree, forges new ground in solar.

The novelty in the deal is that Schering-Plough makes medicines. So far, the big solar installations have mostly been commissioned by companies directly or strongly interested in seeing solar power grow. Sharp, the biggest PV maker in the world, put up a 5-megawatt system to help run its advanced solar manufacturing facility in Japan while Applied Materials, with its 1.9-megawatt system, makes equipment for the solar industry. Nellis Air Force Base installed (with MMA Renewable Ventures) a 14-megawatt system, but the government has an obligation to fund emerging industries and technologies. Who do you think is buying fuel cells? Google? The two founders have a personal interest in carbon-free energy.

Schering’s main interest seems to be in the fact that it is located in a state with great solar incentives and that the company has publicly committed to reducing its carbon emissions by five percent by 2012. It should be operational by the end of the year. 

PPL Renewable Energy will design and operate the system on behalf of Schering.

Oil could hit $90 a barrel, or $200

Michael Kanellos: May 9, 2008, 10:07 AM

 The world could see an unprecedented spike in oil prices toward $200 a barrel that could plunge the world into a panic.

Or it might drop to $90 a barrel after a new president is inaugurated in 2009 as the Saudis try to cozy up to a new U.S. president.

Arjun Murti of Goldman Sachs put out a recent report, according to the Telegraph, that demand from China and lackluster growth in supply will push oil near the $200 mark over the coming months.

“We believe the current energy crisis may be coming to a head. A super-spike end game may be in the early stages of playing out,??? Murti wrote, according to the paper.

But wait! Edward Morse over at Lehman Brothers in a report speculated that Saudi Arabia may boost output by 1.3 million barrels a day next year, more than the growth in demand. This could push prices toward $90 a barrel, according to the report, as reported by Forbes.  The Saudis recently said that three new fields have entered production. And the country has used oil for diplomatic overtures before. A weakened correlation between the dollar and oil prices may also help push prices down.

Lehman, however, admits it predicted oil would drop to $90 a barrel this quarter in an earlier report. It sells for around $122 to $126 a barrel. Hurricane season could also hurt a drop in prices.

I also had my cat, Fraulein Katze, walk across my keyboard. She came up with $132 a barrel. (disclosure: Frost and Sullivan sometimes employs her as a consultant.). 

News like this really must be tough on survivalists. I mean, do you stock up on more canned foods and ammo, beating the surge in demand that’s going to occur, or do you unload all that powdered milk you have stored in that cave near McGill, Nevada  and buy more armor for the Hummer?

No matter who you believe, however, it does point to an essential truth in the oil business.  It is wildly unpredictable. I recall once attending an oil technology conference in Qatar in 2005.  Oil had just come down from $70 a barrel to the mid-50s range.  Despite the drop, companies were enjoying a surge in profits. So you’d expect everyone to be excited.

Not so. Most of the speakers went out of their way to remind the audience that boom times only last for brief periods. 

Sun not shining on IPO for solar installer

Michael Kanellos: May 8, 2008, 6:04 AM

Not all solar IPOs are created equal.

Real Goods Solar, a solar installer that says it erected the first residential solar panel in the U.S. in 1978, started trading in a public offering at $10 a share today. The stock, however, is hovering around the $9 level at the moment. It has traded mostly between $8.25 and $9.25 so far. It's not the end of the world. Dell geared up for its IPO amid the 1987 stock meltdown. Nonetheless, it's not the best news in the world. The $10 offering price was at the low end of the pre-IPO $10 to $12 offering price range.

Solar installation is, according to some, the next hot frontier in solar. Installation takes up about half of the cost of a residential solar system, but it’s still relatively antiquated. Basically, guys with tool belts clamber up onto your roof, do a lot of measuring and cutting, and then hand you a bill for several thousand dollars. (There’s your answer when some dolt says “Why can’t the solar industry grow like Facebook or Google????). Most of the research in the solar panel universe has been spend on improving the efficiency of solar cells.

In recent years, however, SolarCity, Standard Renewable Energy and others have come up with ways to reduce some of those onerous install costs. SolarCity organizes installations to reduce time in the field truck runs. Sungevity, a newcomer to the field, has developed software that can give a customer a solar system estimate over the Internet, a process that most companies can only accomplish with a visit to the home. Real Goods’ main selling point is that it has done a lot of installations—more than 2,400—and can use this experience to expand rapidly. The company is part of the Gaiam lifestyle group, which also sells yoga tapes. Some may scoff, but lifestyle products are expected to grow too.

Still, installation is essentially a branch of contracting and thus margins are tight. The queasiness surrounding the solar tax credits doesn’t help either. Not counting two acquisitions, Real Goods pulled in $16.8 million in revenue in fiscal 2007 and $102,000 in net profit. Including the acquisitions of Marin Solar and Carlson Solar, Real Goods had revenue of $32.7 million and net income of $491,000, according to the S-1 filed with the SEC.

Real Goods hopes to expand beyond its traditional base in California and Colorado into Arizona, Nevada and other states rolling out solar incentives.