Let the Sun Shine in for Solar Cities, let’s get FIT!

Solar companies are warning about the potential for a significant hit to demand for solar and falling prices due to Europe government subsidy cuts. It is unlikely that growing demand from other countries and markets can absorb industry-wide module supply. There will be significant inventory build-up & price reductions.
Polysilicon, the main raw material in solar panels, has plunged more than 33 percent in the spot market to $22/lb. during the second quarter, lowering production costs in the $35 billion global market for the photovoltaic devices.

The price for polysilicon, also used in semiconductors, peaked at about $182 a pound during the boom in the Spanish market in 2008 before collapsing. “People are getting rid of stock that’s been on the floor, in some cases actually below cost,” Andrew Lee, head of international sales at Sharp Corp.’s European solar division, said in an interview from Wrexham, Wales.

Profit margins will be squeezed at all polysilicon makers, though it may benefit the newest competitors, such as Hong Kong- based GCL-Poly Energy Holdings Inc. and Korea’s OCI Co., Jefferies’ Xu said in a phone interview from New York.

In recent months the Czech Republic, Germany (moderated growth), France, UK, Italy and Spain have all severely cut subsidies for solar photovoltaic after a boom in projects started to strain public budgets. Europe accounts for 80% of solar demand, the cuts will have a big impact, particularly if the US, China and India don’t pick up demand. The likely result = loads of capacity and few attractive markets. Silicon prices have plummeted. Enter….smart USA cities. Construct a reasonable (read economic) feed in tariff regime and you will light your cities with the sun at a fraction of the cost it ran to illuminate European grids.

Falls in solar panel prices may flatten by 2013-2014, said Steven Chan, president of Suntech America, the North American unit of Chinese panel maker Suntech, who cited studies suggesting widespread grid parity with retail power prices by 2015.

Trina Solar, China's largest solar panel maker by value, was shipping modules at $1.50-1.55 now, down nearly 10 percent from a year ago, and expected prices at $1.40-$1.45 by year-end.

For example Los Angeles County/City

Los Angeles gets 40% of its electricity from coal fired power from Arizona and Utah. Combined, these plants emit nearly 36 million tons of climate-disrupting pollution every year - as much as roughly 6 million cars. These plants are also significant sources of mercury, ozone, and other hazardous air pollutants. In fact, the Navajo Generating Station in Arizona has ranked as high as third in the nation in ozone pollution in recent years.

Enter LA Solar

- Nearly 1.5 million rooftops throughout Los Angeles County could be used as solar power generators.

- On the whole, there’s currently enough potential roof space to create 19,000 MW from rooftop solar.

- The total rooftop solar potential for the city of Los Angeles is over 5,500 MW, which could power the city on most days. (The highest-ever peak in Los Angeles was 6,177.) Of course, the city must have more power capacity than is needed at peak times.

In addition the County could install 19,113 MW over 1.4 million land parcels (parking lots and empty land).

So what would solar capacity cost without subsidies? About $0.16 / kWh v about $0.08 / kWh for conventional. However, the $0.08 kWh is a fiction…it doesn’t include environmental emissions & health costs. If we factor those in then we get – in Los Angeles – to a cost of about $0.12 / kWh. Almost grid parity. With dropping silicon prices and increased efficiencies – we might very well be at grid parity in the next 12 months. Now consider feedstock volatility, for example, natural gas has varied from $3 mmbtu to $17 mmbtu over the trailing decade whereas the price of sunlight has remained a constant zero. I will predict the price of sunlight for the next 20 years will remain zero!

A well-designed Feed-in-Tariff (FIT), 20 year contracts with a fixed price providing 5-7% unlevered return on investment and guaranteed connection to the grid, could create a minimum of 600 MW of solar projects per annum which would provide 3% of Los Angeles city’s energy needs today and in a decade the city would be 30% solar powered. The merit to slow penetration is it allows for deployment of best of breed technology over the investment period.

This investment program would create at least 11,000 jobs.

Next Steps for Los Angeles

LADWP is currently developing a dynamic Local Renewable Energy Program (LREP), also known as a Feed-in Tariff, to encourage renewable energy development within the Los Angeles Basin and to help meet the 33% Renewable Portfolio Standard Goal by 2020. The LREP will allow LADWP to partner with program participants to purchase, through a standard power purchase contract, electricity generated from a participant’s renewable energy plant. These plants will be located within our service territory and connected to our electrical distribution system.

The LREP will be a separate program from the existing the Solar Incentive Program (SIP). The renewable generator under the LREP program will not be able to participate in SIP.

Program Schedule

• March 2011: Conduct workshops to solicit public comments on the principles and design considerations for the program

• June-July 2011: Draft Guidelines and Standard Offer Power Purchase Agreement will be available for public review
Conduct workshops on the Draft Guidelines and Standard Offer Power Purchase Agreement

• August 2011: Present the program to the Board of Water and Power Commissioners for approval

• September 2011: Conduct educational workshops for potential participants to review the program guidelines and the administrative and technical processes

• October 2011: Program launch*

Also if you follow tortoises… UCLA’s Luskin Center reports that rooftop solar in Los Angeles can generate more than five times the output of the desert-destroying 9,500-acre Blythe Solar Millennium project. Save a tortoise!

Luskin Center report: Los Angeles is a Rooftop Solar Hotspot

http://164.67.121.27/files/Downloads/luskincenter/SolarAtlas/LosAngelesSolarAtlas(hi-res).pdf
Companies that might be shorts: WFR, STP and FSLR (margin squeeze as it uses cadmium telluride); to a lesser extent JASO -- of course if they are smart and they are; they will be at the urban workshops pushing for speedy legislation to firm up demand.

A good buy: TSL

Baghdad Texas Tea

USA oil drilling companies will make tens of billions of dollars from the new petroleum activity in Iraq long before any of the oil producers start seeing any returns on their investments.
Lukoil and many of the other international oil companies that won fields in the auction are now subcontracting mostly with the four largely American oil services companies that are global leaders in their field: Halliburton, Baker Hughes, Weatherford International and Schlumberger. Those four have won the largest portion of the subcontracts to drill for oil, build wells and refurbish old equipment.

“Iraq is a huge opportunity for contractors,” Alex Munton, a Middle East analyst for Wood Mackenzie, a research and consulting firm based in Edinburgh, said by telephone.

Mr. Munton estimated that about half of the $150 billion the international majors are expected to invest at Iraqi oil fields over the next decade would go to drilling subcontractors.

The 11 contracts Iraq signed with oil majors, including the six for the largest fields, are intended to raise Iraqi output from about 2.8 million barrels of oil a day now to 12 million barrels daily in 2017. On average in 2002, the year before the United States invasion, Iraq produced only 1.9 million barrels of oil a day.

Most outside experts, including those at the International Energy Agency in Paris, are skeptical of the production targets. The I.E.A. predicts that Iraq will not surpass six million barrels a day until 2030.

Investment ideas: HAL, BHI, WFT, & SLB

To Frack or not to Frack….is it better to have flammable drinking water or energy security? That is the question.

More than 130 people signed up to speak at a U.S. Department of Energy hearing on fracking, a process used in the Marcellus Shale gas drilling industry at Washington and Jefferson College in Washington, Pa.
People on both sides of issue had a chance to share their beliefs with the Secretary of Energy Advisory Board, but shouting started outside the building before the meeting even began.

“My children and I have to wear respirators because the air is contaminated,” said Marilyn Hunt of West Virginia.

Hydraulic fracturing, commonly known as “fracking” involves using high-pressure injections of water, chemicals and sand to open cracks that release gas trapped in rock deep underground. Advances in fracturing technology have led to a dramatic surge in gas extraction nationwide. The U.S. Energy Information Administration (EIA) estimates that the United States has 2,119 trillion cubic feet of recoverable natural gas, about 60 percent of which is “unconventional gas” stored in low permeability formations such as shale, coalbeds, and tight sands. In 2010, production of this “shale gas” doubled to 137.8 billion cubic meters, up from 63 billion cubic meters in 2009. A Pennsylvania State University study stated that deployment in 2008 of hydraulic fracturing technology in the Marcellus Shale region generated more than $240 million in state and local taxes for Pennsylvania, 29,000 jobs and $2.3 billion in total economic development.

A recent study from Duke University suggests that gas drilling can cause methane gas to leak into drinking water and sometimes the air in people’s homes. The study suggests that approximately 44 million Americans rely on a private water supply that is typically sourced from shallow aquifers.

The Duke study also notes that a wide array of factors can potentially lead to contamination from wastewaters associated with hydraulic fracturing including, “the toxicity of the fracturing fluid and the produced waters, how close the gas well and fractured zone are too shallow ground water, and the transport and disposal of wastewaters.” It also says that despite precautions by industry, water contamination can still occur through “corroded well casings, spilled fracturing fluid at a drilling site, leaked wastewater, or, more controversially, the direct movement of methane or water upwards from deep underground.”

Methane, which comprises 90 percent of shale gas, is not regulated in drinking water as it does not alter the color or taste of water, nor does it affect its potability. The Duke study found that methane levels were 17 times higher in water wells near gas drilling operations above the Marcellus and Utica shale gas formations in Pennsylvania and New York than those farther than 3,000 feet away. The study noted that outside extreme cases of explosion, flammability and asphyxiation, methane is not typically viewed as a health hazard in low concentrations.

To make sure that the best practices are followed by the industry, Energy Secretary Steven Chu has appointed a committee to recommend environmental and safety improvements for fracking. The seven-member panel consists of environmental, industry and state regulatory experts and is chaired by MIT chemist and former CIA director John Deutch. Within 90 days (from 9 May 2011) the committee will submit its recommendations on any immediate steps that could be taken; Chu set a six-month deadline for delivery of separate advice for federal regulatory agencies.

Other members of the committee include former Clinton administration officials Kathleen McGinty, who chaired the White House Council on Environmental Quality, and Susan Tierney, former assistant secretary for policy at the Department of Energy. Others are global energy analyst and Pulitzer-prize winning author Daniel Yergin, Stanford University geophysicist Mark Zoback, Texas A&M University petroleum engineer Stephen Holditch, and Environmental Defense Fund president Fred Krupp. The panel was established as a subcommittee of the Secretary of Energy Advisory Board, although only Deutch, Tierney, and Yergin are members of the full SEAB

Some stocks that will benefit when the regulations get certain:

HES, APC, DVN, EOG, ECA, CHK, SWX, PWE, PXD, CLR, NFX

And my favorite of all links (what happens if we don’t regulate Fracking) => Flammable Drinking Water & it taste good too…. Not!!!

http://frack.mixplex.com/content/scientific-study-links-flammable-drinking-water-fracking

Let’s also remember without fracking, which has dropped the cost of natural gas to circa $4 mmbtu, we have predictions of natural gas soaring to $7-12 mmbtu.

The choice is yours, make it wisely.

E.T. bring the greenback home!! (ET = extra territorial in this case)

Corporations with as much as $1 trillion in profits parked overseas should be allowed to bring that money to the U.S. without spending the repatriated funds on job creation or paying taxes (possibly taxes at a reduced rate). Is being debated around Congress.
In 2004, Congress passed legislation allowing U.S.-based companies to repatriate overseas profits at a 5.25 percent tax rate instead of the 35 percent statutory corporate rate. Most of the funds went to buy back shares v creating jobs.

I personally don’t think we’re short of cash – just ideas. This being said bringing more cash into a system is generally good and a Trillion should not be overlooked.

Under U.S. tax law, multinational corporations owe taxes on income they earn from active business operations around the world. They can defer U.S. taxes on money earned outside the U.S. until they bring it home.

“As you know,” Bernanke said, “I’ve suggested looking at the corporate tax code, and one aspect of it is the territoriality provision. If you were to allow firms to bring back cash, you know, from abroad without additional taxation or limited additional taxation, there might be more incentive for them to bring it home and use it domestically.”

The trading play…companies with large cash balances that could lead to share buy-backs:

Google, Washington Post, Humana, WellPoint, ADOBE, Qualcomm, Pfizer, Priceline, Apple, MasterCard, Intuitive Surgical, Motorola, CISCO, CA Technologies, Microsoft, Amgen, Duke Energy, & pretty much any USA multination corporation.

After the Cold War came Al Qaeda and then…..the Cyber Wars!!! By Stuxnet

We’ve seen over the last 5 years countries cyber-attacked (e.g. Iran’s nuclear program by the Stuxnet worm), Sony brought to its knees and now two prominent information security firms hacked – L-3 and RSA (EMC).
The Pentagon has adopted a new strategy that will classify major cyber-attacks as acts of war, paving the way for possible military retaliation, the Wall Street Journal reported on May 31.

The newspaper said the Pentagon plans to unveil its first-ever strategy regarding cyber warfare next month, in part as a warning to foes that may try to sabotage the country's electricity grid, airports, refineries, ports, subways, pipelines or Netflix.

"If you shut down our power grid, maybe we will put a missile down one of your smokestacks," it quoted a military official as saying.

• Oh General, the very nature of a cyber-attack is it comes from the ether and may not be the action of a nation. Scenario 1, a special ops team from oh say North Korea gets dropped into say Belize and launches the attack. Poof no more Belize but Belize was never the issue.

• Scenario 2, replace North Korean special ops team with my next door neighbor’s high school age kid!

CIA Chief Leon Panetta set a particularly decisive tone – and he did so before potential critics had a chance to set a different one – by characterizing a potential cyber-attack as the next Pearl Harbor, a sneak attack crippling power, security, financial, and governmental systems.

NGOs or leftists are rightfully obsessing over the Orwellian possibilities.

As always there is money to be made and Defense contractors that don’t get out ahead in this game will find themselves woefully behind the competition.

Three years ago, for example, Lockheed Martin, Boeing, and Raytheon were investing resources and acquiring new units to gain first-mover advantage in the cyber-war market that observers estimated would reach $11 billion by 2013.

Pentagon spokespersons now talk in earnest about “botnets” (carpet bombing in cyberspace) that can crash adversarial computers worldwide. The Pentagon is developing an approved list of cyber-weapons to streamline its arsenal and provide a structure for adding on future capabilities.

Wow!!! Will future arms talks center not around nuclear arms reductions but reduction of the cyber arsenals…think about it.

National security lifts private as well as public sector entities. Maybe this is the focus that can lift our economy out of its doldrums.

Some companies to think about: LLL, EMC, HON, LMT, NOC, RTN

The little engine that couldn’t!

First the facts. Greek debt amounts to about $380bln or 2.7% of Eurozone total sovereign debt. Greece contributes about 3% to the total Eurozone GDP of $16 trillion. So talk of Greece being the cause of the Euro collapse is a little like the dollar collapsing because Mississippi gets downgraded or defaults. In fact, we have witnessed bigger economic states in the USA default without much effect at all on the greenback…e.g., California and New York to name two.
But that doesn’t mean there isn’t some great trading (ok speculating) to be had -- certainly aided by the capital flight from Greece by Eurozone member banks. More on this shortly.

Some more data. The cost of insuring Greek sovereign debt hit a new lifetime high on Monday (12 June). It now costs €1.6m to insure €10m of Greek debt, a record amount, after the five-year Greek credit default swap jumped 1,600bp. The prices of insuring Ireland and Portugal's debt also hit new all-time highs, according to data from Markit.

On top Greece getting downgraded to CCC, looming quickly is the big sovereign-debt rollover for Italy and Spain. Now, if the debt market locks up, and the global economy falters – then you have about 33% of Eurozone debt in three sovereigns that are struggling with their economies (deficit, employment, debt, negative growth) – things then get very interesting.

A collapse in the euro isn't the only potential catastrophe lying in wait, either. A more immediate concern would be the collapse of a major European financial institution. Any fear of a bank failure will result in another interbank liquidity-and-funding panic.

Figures from the Bank of International Settlements (BIS) show French, German and UK banks have embarked on a mass exodus from Greece, Portugal, Spain and Ireland, in what analysts see as an effort to bolster their balance sheets and conform to new rules designed to protect financial institutions from going bust.

The move is expected to add to tensions in Brussels over how to prevent Greece defaulting on its loans because vital business contracts will cost more to insure.

French banks cut their exposure to Greece from $92bn (£57bn) to $65bn in the last three months of 2010. They also reduced their involvement in Ireland, Portugal and Spain, slicing their total exposure to the four hardest-hit economies by $112bn.

German and French banks held over two-thirds of the Greek government bonds at the end of last year, accounting for 70% of the $54.2bn owned by banks from 24 countries that report to the BIS.

International loans to Greece stood at $161bn at the end of December, down $75bn from a year before.

BNP, which has almost $3 trillion of assets, refused to disclose how much it had reduced its exposure. A spokesman played down its involvement in Greece, Ireland or Portugal, saying that it had no retail operations in those countries.

Of the European banks that are most at risk for Greek default:

* Fortis NV (OTC: FORSY) holds $5 billion in bonds.

* Dexia SA (PINK: DXBGY) holds $4 billion.

* Société Générale (OTC: SCGLY) holds $5.2 billion.

* BNP Paribas SA (NYSE ADR: BNPQY) holds $8 billion.

* ING Groep NV (NYSE ADR: ING) holds $4.6 billion.

* Barclays PLC (NYSE ADR: BCS) holds $6 billion.

* Deutsche Bank AG (NYSE: DB) holds $2.6 billion.

Together, that's a total $35.4 billion in Greek bonds.

There's plenty of opportunity in shorting some of the big European banks and then getting long them after they've taken their hits.

The market is applying a level of pressure well beyond what the Eurozone and European Union (EU) were designed to handle. The Eurozone and the EU are both in trouble.

Change, quick deep structural change is needed now. There could be no better wake-up call than when credit-default-swap (CDS) pricing on Western European states is higher than Eastern European states!

Change = >> Fiscal union, which involves harmonizing aspects of fiscal policy across the euro area, would be a bold move and essentially result in a treasury department for the entire Eurozone.

The euro crisis is just as much underpinned by politics as it is by unbalanced economies, rigid labor and product markets, burst property bubbles and unsustainable public and private debt levels. A Federal Treasury = Fiscal Union for the EU is long overdue.

The alternative – someday – given the lack of fiscal discipline of the EU member states: A Eurozone breakup. The result: widespread series of defaults, bank runs, capital controls and periods during which countries (and their banks) would be frozen out of the markets. It would be extremely messy -- a lot like the 60s & 70s…

To quote the international man of mystery, Austin Powers: “Oops. I did it again, baby!”

Qu'ils mangent de la brioche! (Let them eat cake!) … all 1.4 billion of them…

World food prices are set to rise further. Farmers have faced floods, tornadoes, volcanoes and droughts. For example, widespread flooding in Australia decimated much of that nation's wheat crops. Buyers from Asia must now tap other markets to meet demand, further driving up prices – don’t look to the USA, US Dep of Agriculture has issued a report predicting a smaller Fall harvest.
This year’s USA corn harvest is expected to be off 305 million bushels and not meet the demand for bio-energy, livestock and export. A bushel is already priced at $7.75 up from $3.20 this time last year and headed toward $9.

Much of the growth in global nutrient use has come from developing countries in Asia and Latin America, as those regions' rising populations and income levels boost the demand for grains and meat, products that hadn't traditionally been part of their diets.

Meat prices are expected to rise a further 7% this year. They are already up 8% year on year.

But price hikes are not confined to meat, corn and wheat. In a basket of 16 common food items, the price has increased 8% year on year. Kraft, Kellogg, Sara Lee and Smucker have all increased their prices.

The G-20 meeting on 22-23 June in Paris will focus on global food issues. They are planning to launch an initiative called “Agriculture Market Information System.” This system would push countries to more honestly report on agriculture. For example, China has always been secretive about its stocks of food. So if China signs on, it would start to release more data about it food inventories and consumption.

So while the G-20 launch their monitoring system, I hope the 1 out 4 people (yes that’s 1.4 billion of us) on this planet who are starving today will truly appreciate their resolve & leadership in solving the hunger problem.

Some stocks to consider: SJM, SLE, K, MON, DD, SYT, MOS, SMG , YONG

Oh Governor Brown how about that offshore wind power?

Based on a 5 MW wind turbine on a 264 foot tower with wind speed cutoff of 15.66 mph at water depths up to 660 feet, 112% of California's electricity needs could be provided with offshore wind energy alone!!!

A significant amount of offshore wind energy potential does exist in California, with 330 TWh developable annually in all waters. The vast majority (86%) of California’s offshore wind resource exists in deep waters (160-660 feet). And guess what? The feedstock is always priced the same = zero.

What is mindboggling is that instead of California having enabling legislation; we have a study going on. That would be government speak for let’s put it off to a committee or better yet the next administration!!!

Lawrence Livermore National Laboratory atmospheric scientists are working with a Norwegian company (SWAY) to possibly leverage that wind as a valuable energy source.

LLNL has signed a memorandum of understanding with SWAY, a renewable energy company that has developed floating towers for wind turbines located in deep water. Though California has not yet approved offshore wind turbines, SWAY will launch a 1/5 scale prototype of the technology off the coast of Norway during June 10 to demonstrate how the system could work in the Pacific Ocean.

Towers for offshore wind turbines typically sit 0-30 meters deep in the water and are anchored to the ocean floor. Based on technology that was originally used for deep-sea oil drilling, SWAY has developed a system to generate more offshore power by locating turbine towers deeper in the ocean – at depths from 60-400 meters. The turbines would sit on top of the floating, tethered tower.

"California has an abundance of deep water wind resources, so this is an opportunity for the state," said Nalu Kaahaaina, LLNL's Low-Carbon Energy Program leader. "This technology is clean, reliable and even more consistent than traditional onshore wind turbines."

Power generation from offshore wind turbines is significantly higher than onshore wind turbines.

"We have offshore wind resources in California and the wind is blowing all the time," said Roger Aines, LLNL's Carbon Fuel Cycle Program leader. "If SWAY has success in Norway, the technology could be useful in California."

Now my wonder as to why the study since Siemens and Vestas are the leaders in offshore wind.

Siemens and Vestas are the leading turbine suppliers for offshore wind power. Dong Energy, Vattenfall and E.on are the leading offshore operators. There are about 4 GW of offshore wind power capacity operational, mainly in Northern Europe. According to BTM Consult, more than 16 GW of additional capacity will be installed before the end of 2014 and the United Kingdom and Germany will become the two leading markets. Offshore wind power capacity is expected to reach a total of 75 GW worldwide by 2020, with significant contributions from China and the United States.

Offshore turbines require different types of bases for stability, according to the depth of water. To date a number of different solutions exist:

• A monopile (single column) base, six meters in diameter, is used in waters up to 100 feet deep.

• Gravity Base Structures, for use at exposed sites in water 65- 264 feet deep.

• Tripod piled structures, in water 65-264 feet deep.

• Tripod suction caisson structures, in water 65-264 feet deep.

• Conventional steel jacket structures, as used in the oil and gas industry, in water 65-264 feet deep.

• Floating wind turbines are being developed for deeper water.

Some of those old oil platforms on California’s coast might go to new use?

Offshore wind energy costs of under 6 cents per kWh. Capital costs are around 30-50% higher than onshore, due to larger machine size, subsea cable for tie-in (up to 25 miles offshore) and the costs of transporting and installing at sea. This is partially offset by higher energy yields – with capacity factors at 45%. If the wind systems are mass-produced, their capital costs will drop, which will reduce the cost of electricity to 3 or 4-cents per kilowatt hour (kWh).

Pretty cool!!!