Cleantech

Continuing concerns with economic conditions drove all the broad stock indicators into negative territory for the week. With one expectation our sustainable energy indices followed suit with three indices declining and one, Renewable Electricity, advancing.

The Solar index suffered another large decline dropping 5.9% bringing the YTD decline for the sector to -42.5%. In perspective, even with this large decline the index has some distance to go before it gives up the huge gains we saw in 2007. LDK Solar Co. LTD (LDK) led the declines down 21.3%, closing below its IPO price. Apparently there remains some lingering angst over inventory issues. Overall the sector had 4 advances and 29 stocks declining.

Biofuels suffered a significant 12.5% decline with all 16 stocks falling and 5 falling more than 20%. It looks like concerns about rising corn prices and declining margins affected the ethanol producers. Gushon (GU) reported a Q4 loss and, despite management explaining the loss was due to a large non-cash charge, the stock declined 24.9%

In the Renewable Electricity sector our index advanced 0.9% with 10 stocks advancing and 9 declining. Suzlon (SUZON.NS) is a big component of the index and was down 13.1% percent after reporting turbine blade replacement program for 1,251 blades. This represents a market cap decline of more than USD 1 million per blade against management's estimated cost of USD 24,000 per . blade.

Fuel Cells had a down week with the index decreasing 6.3% on 1 stock advancing and 6 stocks declining. FuelCell Energy Inc. (FCEL) led the movement downward with its stock price falling 14.3% for the week after their earnings call on March 6.

What did I learn this week? Oil prices hit record highs and sustainable stocks declined with the broader market. Given the relatively high beta of the Solar, Fuel Cell, and Biofuels indices, their stock performance seems to be weakly correlated to oil prices and much more strongly influenced by broad market trendsRenewable Electricity, with its lower beta, may offer some portfolio diversification benefit.

Mark is the founder of Camino Energy, a information provider specializing in globally traded sustainable energy stocks. He also is an investor in sustainable energy stocks. Mark doen't hold a position in any of the specifically mentioned stocks.

When something must absolutely, positively, arrive the next day, people increasingly turn to FedEx. Shipped are everything from million dollar loan documents to birthday presents. FedEx is also integral to the just-in-time supply chain that allows businesses to grow, even as they shrink inventory. FedEx generates over $35 billion annually.

FedEx uses 48,000 vehicles global to deliver our goods. Fed Ex probably utilizes another 30,000 vehicles at its airport operations. At the heart of FedEx operations is a hub-spoke private fleet of jets. Fed Ex has made Memphis, Tennessee, the busiest freight airport in the country.

I valued talking with FedEx Engineering Manager of Hybrid & Alt-Fuel Fleet, Sam Snyder, after he presented at the WestStart Clean Heavy-Duty Vehicle Conference. He discussed a number of areas of fuel savings. The volume and weight of an average package is now less. People are shipping more iPods; less big stereos. This allows FedEx to expand its deployment of Sprinter Vans, and reduce its need for the larger 16,000 pound (GVWR) vans. Sam Snyder stated that FedEx uses, "The right truck for the right route, saving millions of gallons of fuel."

With oil topping $100 per barrel, FedEx is also investing in hybrid, alt-fuel, and electric vehicles. FedEx hybrids have accumulated more than 1,000,000 miles in revenue service.100 diesel hybrids are in service globally, primarily in the U.S; 75 more hybrids will be added in 2008. The hybrids are an excellent investment with a 42% improvement in fuel economy. FedEx Hybrids.

FedEx is making a bigger investment in hybrids than its major competitor UPS. UPS Clean Fleet.

An indicator of the future is the 48 FedEx Sprinter hybrids in NY. In Milan, ten Iveco, a Fiat Group company, diesel hybrids will be used in a van similar in size to the Sprinter; a Bosch electric motor and Johnson Controls batteries are used. Green Car Congress. 20 Azure gasoline parallel hybrids on Ford E450 are in use in LA. WestStart is funding and managing this program.

Also being hybridized are he traditional FedEx 16,000 pound vans with a cargo capacity of approximately 670 cubic feet. Eaton's hybrid electric powertrain has been placed in the standard white FedEx Express W700 delivery truck, which utilizes a Freightliner chassis and an Utilimaster body.

FedEx would like to move towards more fuel-efficient 4-cylinder diesel hybrids, but it may not see an EPA approval or waiver until 2011. Until then, FedEx will forge ahead with the less fuel-efficient 6-cylinder diesels. EPA continues to certify based on engine emissions, rather than more efficient hybrid duty cycle.

Hybrids are just one way that FedEx is becoming less oil dependent. Currently, FedEx Freight is actively testing hydrogen fuel cell forklifts, hybrid electric Class 7 trucks, and alternative fuels.

FedEx Express and FedEx Freight are members of the U.S. Environmental Protection Agency's SmartWay Transport Partnership with fuel efficiency strategies such as:

•  Instituting policies and technologies to reduce or prevent vehicle idling

•  Locating FedEx facilities in order to eliminate idling from overnight trips

•  Installation of tractor/trailer/van aerodynamic packages

•  Use of advanced, low-friction synthetic oils and lubricants

•  Introducing automatic tire inflation devices to increase fuel economy

•  Introducing wide-based tires to increase fuel economy through reduced road friction

As one of the world's largest private air carriers, FedEx is a major user of oil-refined jet fuel and a major emitter of greenhouse gases. To improve its carbon footprint, FedEx Express is replacing the B727 model aircrafts in its fleet with the Boeing 757 model. It has 20% greater payload capacity, but it also uses 36 percent less fuel. FedEx Express also plans to acquire Boeing 777 model aircraft, with a greater payload capacity, and 18% reduction in fuel use.

FedEx also saves annually over 5.5 million gallons of aviation fuel by using in-gate aircraft auxiliary power units, eliminating more than one hour of fuel usage per flight throughout the fleet.

FedEx is also taking a leading role in using renewable energy at its facilities. At the FedEx hub in Oakland, California, 80% of the facility's electricity and is provided by a 904 kilowatt Sharp solar rooftop system that over its 25-year life cycle this plant will offset 10,800 tons of carbon dioxide - the equivalent of removing 2,100 cars from the road. Another 550kW will be added at its Fontana and Whittier facilities. FedEx Kinko's, Inc. purchases renewable energy at more than 520 branches in 26 states, for an estimated 69 million kWh per year. FedEx Kinko's, Inc. is procuring its power from a wide variety of sources, including wind, geothermal, landfill gas, solar, and small hydro.

This year, Fed Ex was recognized as #6 on FORTUNE's list of the World's Most Admired Companies and #7 on FORTUNE's list of America's Most Admired Companies. For the seventh consecutive year, Fed Ex has been part of this prestigious list. Fed Ex's leadership in clean transportation helps keep it at the top.

John Addison publishes the Clean Fleet Report and speaks at cleantech conferences.

I have subscribed to Forbes for over a decade because, unlike many other popular business journals, it seems to have a genuine voice -- even if I sometimes disagree with it.

On a plane flight from Cleveland to L.A. last Thursday night, I read the March 10, 2008 issue, and was amazed at how pervasive cleantech has become -- even in its stoutly conservative pages:

• Pages 4-5: an advertisement from General Electric (NYSE: GE) touting their solar efforts.

• Page 24: an advertisement announcing the winners of the 2008 Eni Awards, sponsored by the Italian energy giant Eni (NYSE: E), "aimed to promote research and technology innovation in the field of energy and its concersion, with particular focus on renewable sources."

• Pages 38 and 40: an article on Duke Energy (NYSE: DUK), profiling their (relatively) progressive stance on carbon legislation.

• Page 39: an advertisement from BP (NYSE: BP), illustrating their investments in domestic energy opportunities, especially highlighting biofuels and solar. • Page 56: an advertisement by SKF (Stockholm: SKF) -- one of the largest suppliers of bearings for wind turbines.

• Page 71: an advertisement by XL Capital (NYSE: XL) featuring an illustrated solar farm, promoting their "strength to cover the world's largest energy and environmental risks".

• Page 85: an advertisement by Siemens (NYSE: SI) depicting their offshore wind turbines.

It was the SKF ad that really floored me, making me take notice just how ubiquitous cleantech is truly becoming. I've never seen SFK advertise anywhere before. Just which decision-makers is SKF trying to reach with this placement in a mass-market magazine?

Cleantech is seemingly everywhere. True, some of it may be "greenwash", but a lot of it is real, and it is growing.

Then I went back to reading the magazine, and realized we still have a ways to go: on p. 19, Steve Forbes writes yet another editorial continuing to stoutly deny climate change. I laugh and shake my head: some things never change.

Maybe Mr. Forbes should take better note of what the major corporations showing up in the pages of his magazine are actually doing to make money. After all, isn't Forbes the paragon of capitalism? If companies are rushing to cleantech in droves, shouldn't Forbes take heed of what the market is leading these companies to do to increase their profitable growth?

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Concerns with economic conditions drove all the broad stock indicators such as the S&P, EAFA, and emerging markets into negative territory for the week. Commodities, on the other hand, continued their advance with the broad based ETN tracking the DJ AIG commodity index (DJP) increasing 3.1% for the week. This was the week of oil history. Our sustainable energy indices were mixed with one, our biggest, declining and three advancing.

The Solar index suffered another large decline dropping 5.2% bringing the YTD decline for the sector to -38.9%. Solarfun Power Holdings Co. Ltd (SOLF) -16% and JA Solar Holdings Co (JASO) -13.9% led the decline after an analyst downgrade prompted by declining margins and weaker demand. With 25 stocks declining versus 8 advances, these concerns must be widely held.

In Biofuels our index advanced 1.8% led by an impressive 52.7% increase, in US dollars, for Basil Ecodiesel (ECOD3.SA). Despite Basil Ecodiesel being the largest biodiesel producer in Brazil, none of our usual news sources reported any developments to explain the sharp increase. Aventine (AVR) continued downward off another 7.3% in the wake of its liquidity issues, despite S&P leaving Aventine's rating unchanged.

In the Renewable Electricity sector our index advanced 1.8% with 12 stocks advancing and 7 declining. Our scan of the news showed a series of normal announcements typical of an industry with some traction. The index results this week, moving counter to broad markets, are not surprising given the index's 100 day beta of only .3.

Fuel Cells had a strong week with the index increasing 7.8%. The increase was due in large part to the 44.6% gain for Ceramic Fuel Cells Ltd. (CFU.L) Ceramic reported it was constructing a manufacturing plant in Heinsberg, Germany and a substantial order for 50,000 2 kW micro CHP units from NUON. If these units are able operate reliability at a reasonable cost this could be an important breakthrough in a significant market targeted by a number of fuel cell companies.

What did I learn this week? Market developments reinforced the highly "leveraged" nature of solar stock prices. High growth expectations result in high volatility. I also realized I need better information sources for some of the lesser developed markets like Brazil. These are important investment centers and I'll be looking for improved resources. We also saw investors are carefully looking for the key breakthrough. Ceramic is now center stage.

Mark is the founder of Camino Energy, a information provider specializing in globally traded sustainable energy stocks. He also is an investor in sustainable energy stocks.

Green message crafting
Americans and the U.S. have a reputation of flaunting their wealth. Today, however, they are starting to proudly (sometimes loudly) show off their greenness. There's a debate over whether this is just a fad or the start of a nationwide trend to support sustainable practices.

Companies around the world are now racing to establish their credibility in green production. But they must also be careful of not being perceived as greenwashing.

On the other hand, being too inconspicuous in their efforts could hurt a company. With public awareness and demand for products that have smaller impacts on the government, companies are forced to let the public know what they've been doing.

Joel Makower writes:

Companies are being pressed to talk about what they're doing--and not doing--by customers, employees, investors, activists, and others. Previously reclusive companies are rethinking their taciturn strategies.

With the hype building up for greenness in corporate America, it may be a while until the public can properly discern the genuine stuff from noise.

Pedaling for water
Bikes have many uses including generating electricity and powering the Internet in rural villages. Some people even use it for transportation.

But a group of students in California have just developed a new use. Actually it's for a tricycle, but the idea is a foot-powered water filtration device-vehicle hybrid. Called the Aquaduct Mobile Filtration Device, the vehicle sucks water from reservoir in a rear tank and cleans it through a filtration system. The purified water is stored in a reservoir in the front.

Joshua Liberles writes in Carectomy:

Five California-based design students built the Aquaduct for rural, third-world countries where many people either walk for miles or use a motorized vehicle to retrieve water, and then use up time and energy to boil the water. The Aquaduct provides the transportation sans fossil fuel, eliminates the need for wood or other fuels to heat the water, and is emissions free.

U.S. solar check
It's been said that each of the renewable-energy sources could theoretically power the U.S. many times over if they were exploited to their full technical potential.

But how reliable are these figures? For instance, can the U.S. really get all of its electricity from the sun?

Robert Rapier, in the R-Squared Energy Blog in Green Tech Media, did a quick calculation:

Peak U.S. demand, according to the EIA, is almost 800,000 megawatts. Actual available capacity is 900,000 megawatts. So let's make our solar capacity equal to today's total installed electrical generating capacity.

Assuming the entire 1,900 acres is needed for the plant (maybe not a good assumption, but all I have), then this breaks down to 280 megawatts/1,900 acres, or 0.147 megawatts per acre. This of course includes all of the land associated with support functions, and it may include area for future expansions. So the calculation may be conservative.

The second assumption is that the areas where our plants will be put will be as productive as this one in Arizona. That is not a conservative assumption, and will somewhat offset the previous conservative calculations.

Then to get 900,000 megawatts is going to take 900,000 megawatts/0.147 megawatts per acre, or 6.1 million acres. How large of an area is this? I don't know. I have to get out my calculator.

My calculator indicates that 6.1 million acres is an area of 9,531 square miles, which is equivalent to a square of just under 100 miles by 100 miles (which would be 10,000 square miles).

Of course, this doesn't take into account transmission losses and the fact that the sun is not around 24 hours a day. Still, that is a lot of energy coming from the sun.

Just how many square miles would Las Vegas need? :)

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show.

Neal asked me if I would comment on the markets for sustainable energy stocks in the last week. It's an area I follow closely so he hopes I will occasionally stumble across some nuggets.

Let me start by saying I believe there is potential for good returns in sustainable energy stocks over time. In the short term though, it was a tough week. Sustainable energy stocks in all four of Camino's sectors declined. In contrast, broader indicators such as the S&P, EAFA, and emerging markets were all positive for the week.

The Solar index, comprised of 33 companies, suffered the largest decline with a 5.3% drop bringing the YTD decline for the sector to -35.5%. Suntech (STP) was hardest hit with a 20.3% price decline after it reported earnings and revenue below expectations, driven in part by silicon supply issues. If other producers report similar problems I would expect to see further declines in the sector as prices adjust to lower growth expectations.

In Biofuels Aventine (AVR) was off 17.4% after it reported Thursday it had liquidity issues stemming from its $211.5 million invested in auction-rate securities. This issue may delay plant development. I expect analysts are reviewing the balance sheets of other sustainable energy companies to see if they have "cash equivalents" that aren't exactly equivalent to cash. If you don't understand what you're investing in don't invest in it.

In the Renewable Electricity sector Solar Millenium (S2M.DE) declined 10.1% . The company announced a rights issue on Feb 19 that may have triggered concerns about dilution. Overall 8 stocks advanced and 11 declined resulting in relatively modest decline of 1.1% in the index.

In Fuel Cells all of our companies reported price declines with Fuel Cell Energy (FCEL) falling the most at -6.3%. The company presented at the PiperJaffray conference on February 20, 2008 and didn't highlight any items of concern that I noted.

What did I learn this week? Apparently growth constraints are still a factor in the high growth solar sector. I also relearned that unexpected risks occur when broader markets are having problems. Are there more surprises from the credit markets waiting to be revealed in sustainable energy companies?

Mark is the founder of Camino Energy, a information provider specializing in globally traded sustainable energy stocks. He also is an investor in sustainable energy stocks.

Waste to Oil

Think you need special enzymes to convert plant materials into fuel? It looks like science is getting closer to eliminating that step. Pretty soon we might be able to directly convert crop residues, waste paper, and pretty much anything organic into bio-crude, which is essentially oil.

The secret ingredient? Heat. It turns out that raising the temperature breaks the bonds of organic materials (in fact heat pretty much breaks any bond at a high enough temperature) through a process known as pyrolysis.

Jim Fraser, in a recent article at the Energy Blog, explains how this works:

Fast pyrolysis is a process in which the organic materials are rapidly heated to 450 - 600 °C at atmospheric pressure in the absence of air. Under these conditions, organic vapours, pyrolysis gases and charcoal are produced. The vapours are condensed to bio-oil. Typically, 70-75 wt.% of the feedstock is converted into oil.

The product can be used not only to replace gasoline and diesel, it can be used as feedstock for the chemical industry.

Steamed Alaska

Geothermal power is coming to a resort near you. At least the ones in Alaska.

At the Chena Hot Springs Resort in Fairbanks, Alaska engineers have created a breakthrough hydrothermal system that generates power using "low-temperature" reservoir water at 165 F, in contrast to conventional systems that required at least 300 F.

Jack Moins writes in EcoGeek:

The plant cost a mere $2.2 million to build as it uses all off the shelf parts. It produces 200 kw at a cost of 5 cents per kwh, compared to the former costs of 30 cents per kwh when using diesel. The design is projected to pay for itself within four to five years. Hydrothermal power is very promising, as it is estimated that the water beneath the Earth's surface holds 50,000 times the amount of energy in the remaining gas and coal resources.

Among its innovations, the system uses a three-pressure system and ammonia-water cycles, which limits the use of toxic coolants. With this early success, the entire town of Chena is adopting hydrothermal for its buildings and a greenhouse for food production

U.S. Climate Legislation

All the major US presidential candidates are making global warming a part of the their platform. Whoever wins, policy for energy, environment, and even agriculture are bound to change significantly.

But democracy is not always a fast process. Dan Reicher, director of climate and energy initiatives for Google.org and former U.S. assistant energy secretary, says that the next president will indeed push for change but any regulations will take time to phase in.

Rachel Barron, in Green Tech Media, writes: 2009 could bring a dramatic increase in support from Congress for R&D and more favorable approaches to clean-energy incentives.

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show. Content provided by and all rights reserved to CleantechBlog.com, the premier site for commentary on clean technologies, news, and issues relating to next generation energy and the environment.

Last week, three financial titans--Citigroup, J.P. Morgan Chase, and Morgan Stanley--announced "The Carbon Principles" to provide guidance to energy companies in managing carbon risks. The upshot of The Carbon Principles is that these big banks are stating explicitly that going forward, they will only provide debt financing to new power projects if proponents can prove that the proposed plants will remain economically viable under future climate change policies.

Put another way, Wall Street sees federal carbon legislation as imminent, and doesn't want power sector executives to try to "sneak in" any last coal plants before the legislation whose economics might be threatened in a carbon-constrained world. The banks' interest is not necessarily environmentally motivated--they simply don't want to see any more loans go bad--but the effect of this announcement is likely to be positive.

The energy sector can't claim they weren't at the table. The principles were developed by the banks in consultation with a who's-who of power industry giants: American Electric Power, CMS Energy, DTE Energy, NRG Energy, PSEG, Sempra Energy, and Southern Company.

But apparently, the willingness of these utilities to participate in the process of developing The Carbon Principles doesn't mean everyone in the energy sector is yet reading the writing on the wall regarding climate change. In the February 4 Wall Street Journal, reporter Jeffrey Ball quoted Jeffrey Holzschuh, vice chairman of institutional securities at Morgan Stanley, as saying, "We have to wake up some people who are asleep."

If a remarkable July 2006 letter (PDF) from Stanley Lewandowski, general manager of the Intermountain Rural Electric Association in Colorado is any indication, it would seem there's still a number of Rip Van Winkels out there in the electric utility world.

Rise and shine! Climate change is a real phenomenon, and carbon legislation is coming--let's begin to deal with it!

Given how Wall Street didn't seemingly exercise any leadership whatsoever on the subprime mortgage debacles, it's refreshing to see that they're actually out in front (at least a little bit) on the climate change issue.

One of the best things I've read recently is an oped in The Washington Post entitled "Going Green? Easy Doesn't Do It" by Michael Maniates, a professor of political science and environmental science at Allegheny College.

Prof. Maniates gets right to the heart of one of the things that bothers me about what I hear from some of the more ardent proponents of the cleantech movement: the unexpressed sense that saving the world can be easily accomplished with a few minor changes in behavior, and that technological advancements will be coming to save the day at little incremental cost to all of us.

His punchline: "Never has so little been asked of so many at such a critical moment."

I hope we're wrong, but Prof. Maniates and I both believe that, if we're going to seriously address our energy and environmental challenges, we're going to be exposed to major economic and behavioral sacrifice, relative to our current standards of living. I don't see how we can reduce greenhouse gas emissions by 80% from present levels without a fundamental shift in how we do things at every level of existence.

This takes courage and determination. As Prof. Maniates exposes, what we get instead from politicians, the media and (yes) many advocates is a mixture of hyperbole and half-truths that serve to relax the masses.

In a conversation I had about a year ago with David Orr, one of the true pioneers in environmental thinking at Oberlin College, I said to him that we all needed to create and broadcast a story about energy and environment in the U.S. that clearly induces urgency to action without inspiring panic and depression. I know that I haven't been able to craft such a well-balanced story. Has anyone out there?

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.