Call it what you want: Clean-tech or renewable energy or alternative energy but despite historical trends of surging hype followed by sharp decline in public interest, clean-tech is here to stay this time. The only possible obstacles standing in the way of the growing industry is a third presidential term for Bush and relationships with Venezuela, Iran and other OPEC nations making a 180 degree turn. Democrats in Congress are pushing for a Clean Energy bill that will increase the fuel economy standards of the auto industry and increase use of renewable energy for electric utilities.
Winter weather forecasts by Accuweather and the National Oceanic and Atmospheric Administration have predicted warmer than normal winter temperatures in the Northeast and Midwestern Regions. This is a brief but sweet respite for mounting price pressures on crude oil supply.
Depleting crude oil inventories, the weak dollar value through the summer, refinery bottlenecks, and political tension in the Middle East have all lent a hand in the crude oil price index increasing more than $30 or 54% for the year. The favorable weather prediction will thus be sweet music to the ears of consumers. The double-pronged price surge of crude oil and natural gas will force some consumers to go from 5th Ave to Walmart Ave for their holiday shopping escapades.
Natural gas index on the other hand has slipped down to $7.70/BTU since the start of ‘07, partly due to unexpectedly warm winter temperatures last winter. The warm winter prediction this year has given little support to an imminent rise in natural gas prices. Oil prices will probably fall from their latest record highs but it should not divert the pressing long-term vision of moving to a less oil-reliant economy.
A high-growth trading market has been developed in the alternative energy (or clean-tech) industry including fuel cells, biofuels, wind power and solar. Capital Venture deals and IPOs in clean-tech are generating a multi-billion dollar market. The 3 largest public solar companies listed in the US have a combined market cap of $25 billion. Thats from a nascent industry where most companies IPO'ed only in the last 2 years and where most companies have not started or are just starting to generate operating profit.
Clean Edge Inc., a research and strategy consultant, predicted in 2004 that the TOTAL clean-energy market will grow to $92 billion by 2013. It has since adjusted that outlook to $226.5b by 2016 based on calculated '06 market size of $55.4b. From '04-'06, market size grew more than 4 times, and thats when crude oil prices were averaging under $60/barrel. At this rate, it will reach the targeted $226.5b by '09. Crude oil prices have since surged to an average of $70-$75/barrel from '06-'07. With the direct proportionality of clean-energy markets and crude oil prices, '07 market size calculation will surely prompt a further upward adjustment in projected market growth.
Morgan Stanley is one of the major banks bullish on clean-tech. They are projecting a $1 trillion market, with solar solutions producing 11.2% of the nation's electricity by reducing their cost from $8/GW to $1.60/GW by 2030. Wind power and biofuels would claim about 9.8% and 21% of electricity generation respectively. Deutsche Bank is pumping $8.5b into its climate change funds that invest in clean-tech companies.
The fledging clean-energy market is a volatile one as it requires the support of government tax credits to keep it viable. Political trade-offs have to be made when it comes to growing this market as a total concession to clean energy companies would be unthinkable for politicians who are allies of oil and gas companies and utilities and auto workers union. Nevertheless, the political revolution has started taking root in California and 18 other states which are driving up clean grid electricity generation and fuel economy standards in cars sold in their states.
Saturday, October 20, 2007
Sunday, October 14, 2007
Energy Futures: Solar or Wind
With all the hohum about renewable energy especially about ethanol, solar and wind power are basking in the reflected limelight. For decades, we have known solar and wind energy to be highly expensive sources of energy as compared to fossil fuels even with government subsidies, thus the renewable concept was never widely harnessed. However, current projections from energy industry analysts have solar and wind energy to play an increasingly competitive role in the energy market by 2011.
Soaring utility bills as a result of $70 plus/barrel crude oil prices is starting to make large up-front investments to install solar panels more consumer viable. More abundant silicon supply and cheaper thin film semiconductor solar panels has allowed cheaper installation of solar panels to homes and appliances. Solar panel roof installations on residential property average about $30k-40k after consumer rebates and credits. A consumer takes typically 8-10 years to realize the cost savings from paying traditional electrical bills which in a lifetime, can amount to $140,000.
Wind farms are starting to sprout up all over Texas, California and the Northeast. Wind energy production costs have decreased to 4.5 cents per kilowatt hour from 6.1 per KWH in 1999. European wind farm operators and manufacturers of turbines and blades have orders backlog of 3-5 years and many new US wind farm operators are fighting to get their orders fulfilled elsewhere. The nascent US wind energy market is experiencing a growth in foreign investments which sees wind power as a largely untapped resource in the US.
2 of the biggest names in US Solar power are Suntech Power (STP) and Sun Power (SPWR). Each company develops its own silicon photovolataic cells and sells them to distributors all over the world. First Solar (FSLR) is a major developer of the less efficient but cheaper thin-film solar cell and generates cost savings for customers through mass production capacity. Shares of FSLR and SPWR, both US-based firms, are up 350% and 90% YTD. STP shares are biting their dust at a relatively laggard 22%.
Major oil companies performed slightly better than STP, yielding an average of 25-30% for '07 locking in another high-performing year. Meanwhile, electrical and gas bills are rising at an alarming rate. An average household spends $400/month on utilities, and this winter's bills are expected to double that amount. There seems to be no end to the sky-rocketing oil and gas prices in sight, and none is expected by industy players.
Many newly developed homes are being outfitted with solar panels and homeowners are taking the plunge by investing heavily in solar panels for their homes. Solar power seems to provide a microeconomic solution to the hefty electrical bills. On a macroeconomic level, wind power can soon contribute as much as 25% to the electrical grid capacity at little or no incremental cost other than the fixed starting investment.
Soaring utility bills as a result of $70 plus/barrel crude oil prices is starting to make large up-front investments to install solar panels more consumer viable. More abundant silicon supply and cheaper thin film semiconductor solar panels has allowed cheaper installation of solar panels to homes and appliances. Solar panel roof installations on residential property average about $30k-40k after consumer rebates and credits. A consumer takes typically 8-10 years to realize the cost savings from paying traditional electrical bills which in a lifetime, can amount to $140,000.
Wind farms are starting to sprout up all over Texas, California and the Northeast. Wind energy production costs have decreased to 4.5 cents per kilowatt hour from 6.1 per KWH in 1999. European wind farm operators and manufacturers of turbines and blades have orders backlog of 3-5 years and many new US wind farm operators are fighting to get their orders fulfilled elsewhere. The nascent US wind energy market is experiencing a growth in foreign investments which sees wind power as a largely untapped resource in the US.
2 of the biggest names in US Solar power are Suntech Power (STP) and Sun Power (SPWR). Each company develops its own silicon photovolataic cells and sells them to distributors all over the world. First Solar (FSLR) is a major developer of the less efficient but cheaper thin-film solar cell and generates cost savings for customers through mass production capacity. Shares of FSLR and SPWR, both US-based firms, are up 350% and 90% YTD. STP shares are biting their dust at a relatively laggard 22%.
Major oil companies performed slightly better than STP, yielding an average of 25-30% for '07 locking in another high-performing year. Meanwhile, electrical and gas bills are rising at an alarming rate. An average household spends $400/month on utilities, and this winter's bills are expected to double that amount. There seems to be no end to the sky-rocketing oil and gas prices in sight, and none is expected by industy players.
Many newly developed homes are being outfitted with solar panels and homeowners are taking the plunge by investing heavily in solar panels for their homes. Solar power seems to provide a microeconomic solution to the hefty electrical bills. On a macroeconomic level, wind power can soon contribute as much as 25% to the electrical grid capacity at little or no incremental cost other than the fixed starting investment.
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