Is A Renewable Energy Bubble Looming?

Maybe.

According to a report issued by KPMG (download pdf), a bubble may be developing globally in the renewable energy sector as bidders compete for assets and send prices up.

Oil and gas companies are buying in the hunt for cleaner fuels and financial buyers are searching for stable long-term cash flow - the overall effect has been to push valuations up to record levels. The report indicates that 50 % of respondents, and nearly two-thirds in Europe, agreed that there is a real risk of a bubble in the renewable energy sector.

The KPMG press release also reported:

"On a more micro level, there are other issues including the fact that many sites have difficulty connecting to electricity grids and there is a shortage of turbines to build new wind farms. All this is also putting aside one the most basic risks of all - that investors are putting money into technology that could become obsolete very quickly."

While I agree that investors should be cautious, I think that is always good advice. Although the KPMG report has raised some important questions about supply chain bottlenecks, and uncertainty in government incentives, I would argue that the renewable energy and cleantech sectors are relatively robust, despite the fact that many companies have yet to turn a profit.

In the U.S., a lot depends on what (if anything) comes out of Capitol Hill to stabilize the incentive structure for investment in clean energy technologies. I will argue, as I have before, that even if this current Congress does not pass meaningful extensions this year, some sort of tax credit will be passed early next year, and there is a good chance they could extend it retroactively.

Photo: Limbo Poet via flickr under a Creative Commons License

Spanish Renewable Energy Firms Eye US Market

Obscured by all of the buzz about the opening of wind energy giant Vestas' first North American blade plant, a delegation of about 30 renewable energy executives and government officials from Spain recently visited Colorado to learn about investment and expansion opportunities in the region. Some of the visitors were already in the US for the dedication of Acciona’s new concentrating solar power plant outside of Las Vegas. The Spanish delegation met with state and local public officials, including Gov. Ritter, and toured a number of sites including the National Renewable Energy Lab (NREL) in Golden and Colorado State University in Fort Collins. Others involved in the visit include the US Department of Commerce, Metro Denver Economic Development Corp. and the Northern Colorado Economic Development Corp.

It is no secret that Spanish renewable energy companies like Acciona, Iberdola, and Finavera are aggressively positioning themselves to be major manufacturers in the in the American renewable energy industry. The Spanish delegation is not visiting Colorado on a whim. The state has recently shown with the opening of the new Vestas plant, that it is willing to give cash incentives and employment bonuses to clean energy businesses who want to set up shop in the Centennial State.

Photo Credit: TheFriendlyFiend via flickr

Clean Tech: "It's the Institutional investors, stupid."

[The following article was originally published at CleanTechnica on February 15, 2008]

Nearly 50 leading U.S. and European institutional investors managing over $1.75 trillion in assets released a climate change action plan at the United Nations that calls on Congress to introduce national policy to reduce greenhouse gas emissions by up to 90% below 1990 levels by 2050. U.S. institutional investors also pledged $10 billion dollars over two years in renewable energy technologies and project development, energy efficiency, green building and clean technologies. The group of investors also wants the US Securities and Exchange Commission (SEC), to insist that companies listed in New York and elsewhere disclose their exposure to climate change risk. The plan aims for a 20% reduction in energy used in core land and building investments over a three-year period.

The two largest pension funds in the US, the California Public Employees’ Retirement System, with some $246.7 billion under its management, and the California State Teachers’ Retirement System, $168.8 billion strong, were both on board with the institutional investor coalition. These two large and incredibly wealthy pension funds tend to be leaders in the institutional investor arena. George McPherson, senior managing director of the DC-based private equity firm Global Environment Fund said he expects other pension funds to create more programs geared towards clean technology over the next year.

The initiative was unveiled at the Investor Summit on Climate Risk hosted in New York by the United Nations Foundation and Ceres’ Investor Network on Climate Risk. Ceres is a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.

John Sweeney, the president of the AFL-CIO, a federation of unions, told the summit that some of the $5 trillion of union workers’ retirement funds should be invested in ways that help fight climate change. “These deferred wages of working people are the capital that can fuel the energy economy of the future,” he said.

Summit attendees were also given information from a new report, which concluded that major investments in energy productivity over the next 10 years could bring in double-digit rates of return.

The Take-Home Points:

1. Institutional investors are one of the most important macro-economic drivers in this economy. Many of the assets that the large institutional investment funds have to invest, are collections of people’s retirement funds and 401Ks. People often do not worry a whole lot about their pension funds, and how they are invested, as long as they see a return on their investment. With that said, it is good to see institutional investors combine their tremendous economic clout to put pressure on the federal government while taking some social responsibility themselves.

2. The record-breaking profits of the big oil companies like Exxon Mobil and Chevron over the last few years was made possible, in part, by the large amount of broad-based investment from large institutional investors. People may talk out of one side of their mouth about the evils of big oil without even knowing that their retirement nesteggs are being lined with the profits of those same companies. Institutional transparency and accountability are important to socially-conscious investors, and I see this as a step in the right direction.

3. Clean tech investors (both large and small) want long term security and stability before they are willing to invest significant capital. Investors and industry need certainty over what the regulatory regime will be over the next two to three decades before they release the billions of investment capital that will finance the shift we need to make to a low-carbon economy.

ClimateBiz

Earth Times

Reuters

LiveMint (India)

International Herald Tribune

Photo Credit: chatirygirl via flickr

New and Improved! Vestas Plant in Colorado

Strong third quarter profits have enabled Danish wind energy giant Vestas to announce the planned expansion of their first and only North American blade plant. The Danish company made the announcement on Tuesday despite the fact that the Windsor, CO facility has yet to produce a single turbine blade. Construction of the plant began in June and Vestas officials say it will be online by early 2008.

Vestas originally planned to hire about 400 full-time employees to operate four production lines, producing 1,200 blades per year. The ramped-up plan would add another 250 full time employees and produce 1800 blades per year; an increase that represents a roughly 50 percent expansion of its production capacity.

Vestas is not waiting for an extension of the federal production tax credit, which is set to expire at the end of this year. Or perhaps they know something we don't. According to the report,

"Vestas is now launching an international information campaign aimed at putting wind power at the top of the global energy agenda, where the political targets in many countries have already been defined. Detailed legislation still needs to be put in place for the industry to make investments in the necessary capacity and the skills required."

The report also states:

"Our goal is that at least ten percent of the world’s power production should be based on wind energy by 2020. To achieve this, the wind turbine industry must install a total of more than 900,000 MW over the next 13 years."

Vestas is no stranger to even the most casual observer of the renewable energy business and anyone who invested in the company (listed on the Copenhagen OMX exchange) should be smiling broadly as the value of the stock has more than tripled in the last year. I am no Jim Cramer, but it is my guess this stock is not done climbing. I will be following Vestas closely as they move into the broadening North American market.

The New Politics of the New Energy Economy

Last week I attended a sold-out conference in downtown Denver that addressed the future of Colorado's 'New Energy Economy.' In the absence of any substantial federal legislation to cut U.S. greenhouse gas emissions, state-level government initiatives in such states as California, Vermont, New Jersey, Minnesota, Massachusetts and Colorado to name a few, are giving shape to a technological 'race to the top' scenario where states are competing with each other to attract the type of businesses that can spur the development of a regional new energy economy.

While renewable energy technologies are receiving much needed attention from Wall St. to Main St. and from Cape Cod to Capitol Hill, the consensus at the conference seemed to be that planners, policymakers and investors should focus their immediate gaze on the 'low hanging fruit' of energy efficiency.

A rather interesting group was assembled for this event; it attracted CEOs of major utilities, well-known environmental advocates (and lesser known ones), coal advocates, reps from big oil, governors, farmers, mayors, contractors, energy researchers, policy wonks, etc. It is these sort of interdisciplinary events that have the effect of expanding the green movement beyond the constraints of its traditional boundaries.

In a smart political move, the Governor's Energy Office and the Colorado Public Utilities Commission have already posted links to PowerPoint presentations and high-quality audio of the conference sessions. I have no intention of pouring through the entire conference agenda for you, but if you are interested, I can suggest some worthwhile speeches and panels. The morning began with a pep-talk from Colorado Gov. Bill Ritter who touted a few of the state's legislative initiatives passed in the last session which included a doubling of the renewables portfolio standard (rps) for publicly owned utilities. Ritter delivered his remarks in a high-energy, high-spirited address that started the event off on the right foot. The governor did hint at the proposed policies in his new climate change initiative, but refrained from getting too specific about the details, which will be appropriately announced Monday at Coors Field in Denver. If you do listen to the Governor's talk, pay attention to the Q&A at the end and see if you can pick out which one of the questioners was yours truly! Other worthwhile talks in the morning plenary session came from Ron Binz from the Co. Public Utilities Commission, and from the Director of the Governor's Energy Office, Tom Plant.

If you are interested in traditional fuel sources, you might be interested in listening to the session titled "Coal and Gas: What are the Challenges..." I personally did not attend this session but instead attended the "Consumer Demand" session which featured political analyst Floyd Ciruli and was moderated by the excellent environmental historian Patricia Limerick. During the same time period there was another session for the technically-minded featuring "New Generation Technologies." In the second afternoon session I attended "Meeting Future Demand" which featured some spirited debate between Matt Baker, Executive Director of Environment Colorado and Jim Sims, who is best known as being a part of Vice President Dick Cheney's infamous energy task force (you remember, the one that was criticized for being cloaked in secrecy). This last session was informative but, unfortunately, the equivocating and loquacious Mr. Sims prevented too many questions from being asked by the audience because he was too busy reiterating his redundant messages.

Image Credit: Alexsandar Rodic

Colorado's New Energy Economy: The Path Forward

On Tuesday I will be attending what should be an excellent conference in Denver sponsored by the Colorado Public Utilities Commission, the Governor’s Energy Office, and the Office of Consumer Counsel. The three state agencies will partner with the non-profit organization Energy Outreach Colorado for what is being billed as a "First-of-its-kind conference" (not my word choice, theirs) to examine current and future energy issues in Colorado. State and local elected officials will be joined by academics, energy leaders from various government agencies, investment bankers, energy industry representatives (both clean and dirty), and non-profit organizations to explore the policies, incentives, and economic impact of transitioning to a future of clean tech and renewable energy in Colorado.

Recapitulating on one of the central themes of his campaign stump speech, gubernatorial inaugural address, and 2007 State of the State speech, Colorado Gov. Bill Ritter will deliver the morning plenary address on how his energy initiative coupled with recently passed legislation will be implemented to help construct Colorado's "New Energy Economy." The lunchtime keynote address will be given by NREL Principal Engineer Chuck Kutscher.

Other notable speakers, presenters, and moderators include Richard C. Kelly, Chairman of the Board, President & CEO of Xcel Energy; Greg Wasserman, Vice-President of Alternative Energy Investing for Goldman Sachs; Patty Limerick, Chair of the Center of the American West at the University of Colorado; and Matt Baker, Director of Environment Colorado.

Photo Credit: Denver Metro Convention & Visitors Bureau

Two-strokes to Get Worked Over by Envirofit

One of the more influential green technologies coming out of Colorado State University was given some props by Treehugger today:

Envirofit, an independent, non-profit company established at Colorado State University in 2003, is now working to develop and distribute affordable retrofit kits that will improve the fuel efficiency of two-stroke engines, commonly used in many of the two-wheeler taxis and three-wheeler auto-rickshaws in the Philippines, India, Bangladesh, Sri Lanka, Pakistan and other parts of South Asia.