Charles Morand

Natural gas is the one commodity that has mostly resisted the rally ushered in some three months ago by a growing consensus that the worse may be over for the economy.

A number of reasons have been put forward to explain this, including record storage levels and a growing supply base being unlocked through shale gas production in North America.  

Yet natural gas’ future looks bright: (a) it burns a lot cleaner than
coal, making it a superior alternative to meet base- and peakload power requirements in a carbon-constrained world; (b) it is receiving growing attention as bridge fuel
between gasoline-powered internal combustion engines and electric
vehicles; (c) there is ample supply of it in the U.S. and Canada,
making it popular with the energy independence crowd.

The near-term picture, however, is bleak…and it could be about to get bleaker. According to analysts at Citigroup Global Markets, trading activity at the US Natural Gas Fund (UNG)
may be ‘artificially’ propping the front-month NYMEX contract. The
storage situation is apparently bleak enough to warrant yet lower
prices, begging the question: when, if it all, will the chickens come
home to roost?

Although the combination of a bright future and depressed prices make
natural gas – through UNG – an interesting investment idea for light-green alt energy
investors with a time horizon beyond 12 months, there could be further
price declines on the way. Right now may yet be a little early to pull
the long trigger…

DISCLOSURE: None                

by Richard T. Stuebi

Ever wonder whether recycling really works? Or, how it’s done? Last week, I found out — by touring a material recovery facility (MRF) operated by Waste Management (NYSE: WMI).

The process in an MRF is pretty straightforward. The recyclable materials accumulated from various end-user disposal points — for households, this would be curbside bins — are trucked into the facility and then dumped. The materials travel along a maze of conveyor belts, along the way being sorted by various means — mechanical shaking, blowers, magnets, and even some manual labor — into an increasing number of streams: paper, cardboard, clear plastics (e.g., water bottles), colored plastics (e.g., milk bottles), clear glass, colored glass, aluminum, other metals, and general refuse.

General refuse is then trucked to landfill (f.k.a. dump) for disposal. The other items are each quality-checked checked (97+% purity) and then compressed, for sale and delivery to processors to convert the material back to a state in which it can be reused.

I always wondered why phone books aren’t usually recycled, and now I know why: their bindings often jam the machinery, which causes lots of downtime and equipment repair expense. Apparently, newer equipment is being made today that can handle phone books. (A better answer is for phone books to stop being printed. Tell me, when you need to find a company to buy a product or service, would you rather use the Yellow Pages, or the Internet?)

The important point here is that, with an MRF of this type, the citizen isn’t required to separate out recyclable materials into different baskets depending on the material. All recyclables can be dumped into one bucket, and the recycler will take care of sorting it out. To me, this eliminates one of the key obstacles to recycling: the burden/hassle of having to maintain and manage multiple containers of recyclable material.

Something in excess of 40% of all disposed material can be recycled, so if you or your community isn’t recycling, this is unnecessarily contributing to landfills, while also taking prime resources out of the pool of future supplies, needlessly accelerating depletion rates.

The tour I took is one that every citizen, and especially every schoolchild, should take. Upon entering the MRF, I was greeted with an odor I hadn’t encountered since handling weekend trash duty in my college dormitory. By no means is it a pleasant smell. And, it’s not very pretty to see the incredible volumes of refuse being sorted.

But, I think it’s important that responsible citizens know what happens to the stuff they buy, consume and dispose. To paraphrase one of Bill McDonough‘s zingers in his speeches, “When you throw something out, where is the ‘out’? It’s gotta end up here, on the planet, somewhere.”

Well, an MRF or a landfill is the “out”. The sights and smells are powerful reminders of the hidden but very real costs of a materialistic lifestyle.

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become Managing Director at Early Stage Partners.

Content provided by and all rights reserved to CleantechBlog.com. Also check out http://www.cleantech.org

John Petersen

After six months of regulatory silence and $100 million in new funding, A123 Systems href="http://www.sec.gov/Archives/edgar/data/1167178/000104746909006463/a2190066zs-1a.htm">amended
the SEC registration statement for its proposed IPO on June 23rd.
While this latest filing may simply be A123′s way demonstrating its
ability to raise matching funds for a scaled back ATVM loan request of
$1 billion and pending applications for $438 million in direct Federal
grants, my sense is that the proposed IPO will probably come to market
in early September. Since ATVM loans will require 20% cost sharing and
direct Federal grants will require 50% cost sharing, the IPO will
probably be a good deal larger than the
$175 million contemplated by A123′s original filing.

I’m very interested in A123′s IPO for several reasons. First, it will
be underwritten by Morgan Stanley, Goldman Sachs, Merrill
Lynch and Lazard, which will give us the first clear picture of how the
top-tier investment banks and institutional investors value
pure-play energy storage companies. Second, the emergence of A123 as a
sub-sector leader will encourage lesser Li-ion battery developers to
adopt comparably transparent disclosure metrics that will make it much
easier to
assess their relative strengths and weaknesses. Third, the existence of
a large, adequately capitalized and business driven leader in the
Li-ion sub-sector will probably dampen some of the unbridled
optimism we’ve seen in the markets for transition stage Li-ion battery
developers. Finally, the A123 IPO is likely to launch a renaissance of
interest in a basic industrial sector that’s been undervalued and
ignored for years.

I spent some time over the weekend studying A123′s draft prospectus and
was
able to glean important current data that tends to highlight the
yawning economic chasms that Li-ion technology must bridge before it
can compete in applications where the end-user has a choice. During the
first quarter of 2009, A123′s cost of goods sold was
$1.89 per watt hour, which does not compare favorably with an average
cost of roughly $0.20 per watt hour for lead
acid batteries. Likewise A123′s $41 million investment in property,
plant and equipment that can manufacture up to 151,000 kWh of batteries
per year is at least an order of magnitude greater than the capital
cost of lead-acid battery manufacturing facilities.

I fully
expect that capital outlays and manufacturing costs for Li-ion
batteries
will both decline dramatically over the next ten years. For the short-
to
medium-term, however, I expect gross profit margins in the Li-ion
sub-sector to remain narrow and sales revenues to ramp-up slowly as
Li-ion battery
chemistry and manufacturing methods progress through two or three
generations of technological change. It all boils down to href="http://seekingalpha.com/article/111835-alternative-energy-storage-needs-to-take-baby-steps-before-it-can-run">baby
steps;
learning to crawl, then toddle, then walk and then run. The bumps,
bruises, skinned knees and tears are all part of the learning process.

As regular readers know, I come from the lead-acid side of the battery
business and believe that over next ten years the bulk of the expected
revenue growth in the energy storage sector will flow to established
manufacturers of inexpensive lead-acid batteries that can do the
required work for a reasonable cost even if they are bulkier and
heavier. Over the longer term, I expect leading Li-ion battery
developers like A123 to overcome a myriad of cost, performance, safety,
cycle-life, abuse tolerance and raw material constraints that I’ve
written
about in other articles, and ultimately usher in a golden age of cheap
energy storage for applications ranging from portable power, to
vehicles with plugs, to a smart grid that smoothly integrates a host
of emerging power generation technologies. The changes won’t come
overnight and they will be expensive, but by 2020 the world will be
very different from the one
we live in today.

While I’m not so old that I avoid buying green bananas, I expect to be
cold, dead and buried long before competition from Li-ion batteries
results in a year on year decline in global sales of lead-acid
batteries. Nevertheless, A123′s upcoming IPO is certain to focus
the market’s attention on the storage sector in a whole new way. Since
I’ve been around long enough to know that a rising tide of investor
sentiment lifts all of the boats in the marina, I think astute
investors ought to be doing their boat shopping now.

Last week, an article in Green
Car Congress summarized a market forecast that Dr. Menahem Anderman
presented at this month’s Advanced Automotive Battery Conference in
Long Beach, California. In his presentation, Dr. Anderman evaluated the
market for
HEVs in 2011, projected a $1,230 million market for automotive NiMH
batteries, and projected a $320 million market for automotive Li-ion
batteries. The following graph comes from Green Car Congress, is based
on data from Dr. Anderman’s AABC presentation,
and shows both unit sales and market value of the Li-ion batteries that
will be used in
HEVs by 2011 (click on the graph for a larger image).

It’s sobering if not downright
depressing when you get to the middle of the article and read about Dr.
Anderman’s analysis of the gasoline prices required for HEVs to make economic sense.

Based on a five-year net present value analysis, Dr. Anderman concluded
that:

• Stop-start hybrids make economic sense in the $5 per gallon range;
• Mild and strong hybrids require a gasoline price of roughly $7
  per gallon; and
• PHEVs and full EVs require a gasoline price of about $10 per
  gallon.

When he performed an eight-year present value analysis, Dr. Anderman
concluded that:

• Stop-start hybrids make sense in the $3 per gallon range;
• Mild and strong hybrids make sense in the $5 per gallon range;
• PHEVs require a gasoline price of roughly $7 per gallon; and
• Full EVs still require a gasoline price of about $10 per gallon.

I know very few people that can perform a net present
value analysis. I know even fewer who go looking for a new
car with the idea that they’re going to drive it for five to eight
years. Given the dismal economics of mild and strong hybrids and the
ghastly
economics of cars with plugs, I believe the high-end market
for the next several years will be limited to the image conscious affluent who are willing
and
able to
pay big premiums to make a statement. While Dr. Anderman’s forecast of 40,000 Li-ion powered HEVs in two years strikes me as a very ambitious target, I’m
willing to set aside my reservations for purposes of this article and assume that manufacturers
of automotive Li-ion batteries will be guaranteed revenues
of $320 million in 2011.

While most would agree that $320 million of total revenue
by 2011 sounds impressive, it loses a bit of luster when you consider
that advanced lead-acid battery manufacturers can expect $900 million
to $1.8 billion of incremental
revenue by 2011 from the widespread
implementation of stop-start technology as standard equipment.

I’ve used the following graph from an October 2008 Frost
& Sullivan
presentation in a couple of recent articles, but it bears repeating
because the law of large numbers is the fundamental reason that short
term revenue growth in the
automotive battery market favors lead-acid by 6 to 1 over Li-ion. The
long blue segments represent the stop-start market
that will be dominated by advanced lead-acid batteries because they can
do the required work, they cost 60% to 75% less than NiMH and Li-ion
alternatives, and they are the only batteries that can be manufactured
in sufficient numbers to serve the short-term needs of automakers. The
red, green and violet
segments represent the high priced “centerfold”
alternatives favored by EV advocates, reporters, politicians and public relations managers who would rather sell a sweet dream than grapple with economic reality.

In How
Short-Term Supply Constraints Will Impact Booming HEV Markets, I
explained that Frost & Sullivan based their original forecast on
European CO2
emission standards but did not account for President Obama’s subsequent
acceleration of domestic CAFE standards. That change alone will push
growth that would
normally have occurred between 2015 and 2020 into earlier years and
could easily double the growth rates Frost & Sullivan expected last
fall. So with that
background in mind, let’s run the numbers.

Currently automakers spend between $50 and $100 for the commodity
lead-acid batteries they use for starting, lighting, ignition and
accessories; call it an average of $60. Since stop-start hybrids put
far more stress on the battery, the advanced lead-acid
batteries needed for stop-start vehicles will probably cost the
automakers
$250 to $300 per vehicle; call it an average of $260. That means the
battery cost increment for a stop-start vehicle will be in the $200
range.

A quick eyeball of the Frost & Sullivan graph shows forecasted
sales of 4.5 million stop-start vehicles by 2011, which works out
to about $900 million in incremental
revenue for lead-acid battery manufacturers, or roughly three times Dr.
Anderman’s forecast for Li-ion. If accelerated
CAFE
standards double global demand for stop-start vehicles, the
incremental
revenue for lead-acid battery manufacturers will be closer to $1.8
billion, or roughly six times Dr. Anderman’s forecast for Li-ion.

Li-ion battery developers Altair Nanotechnologies (ALTI),
Ener1 (HEV)
and Valence Technologies
(VLNC)
have a combined market capitalization of $935 million and will be vying
with a host of established domestic, European and Asian competitors for
a piece of $320 million in total revenue.

In comparison, lead-acid battery manufacturers Exide Technologies (XIDE),
C&D Technologies
(CHP)
and Axion Power International (AXPW.OB)
have a combined market
capitalization of $340 million and will be vying with their traditional
competitors for a share of
$1.8 billion of incremental revenue.

Benjamin Graham said, “In the short term, the stock market
behaves like a voting machine, but in the long term it acts like a
weighing machine.” The voting is based on hopes, dreams and expectations. The weighing is based on revenue growth, earnings and other business fundamentals. Any time
I can identify one industry sub-sector that trades at one-third of the
market value of its more glamorous cousin but is likely to enjoy three
to six times the short-term revenue gains, I have to believe the
undervalued
sector will reward investors handsomely as the weighing machine returns
to balance.

DISCLOSURE: Author is a former director and executive officer of Axion Power
International (AXPW.OB)
and holds a large long position in its stock. He also holds a small
long position in Exide (XIDE).

John L. Petersen, Esq. is a U.S. lawyer based in Switzerland who works
as a partner in the law firm of Fefer
Petersen & Cie and represents North American, European and
Asian clients, principally in the energy and alternative energy
sectors. His international practice is limited to corporate securities
and small company finance, where he focuses on guiding small
growth-oriented companies through the corporate finance process,
beginning with seed stage private placements, continuing through growth
stage private financing and concluding with a reverse merger or public
offering. Mr. Petersen is a 1979 graduate of the Notre Dame Law School
and a 1976 graduate of Arizona State University. He was admitted to the
Texas Bar Association in 1980 and licensed to practice as a CPA in
1981. From January 2004 through January 2007 he was a director of Axion Power International, Inc. a public
company involved in advanced lead-carbon battery research and
development.

Cleantech investor Sunil Paul doesn’t just invest his time and effort into startups, he and a lot of volunteers have also now launched the “Gigaton Throwdown”, an effort to answer a huge question:

What would it take to reduce CO2e emissions by a gigaton by 2020?

It’s well worth downloading and reading the report at the GT website. 

The report looks at nine different technology areas (ones where cleantech VCs have been putting in a lot of dollars, in most cases) to see what it would take to scale up each one to a gigaton of annual emissions reductions by 2020, including an estimate of how much money would need to be invested in order to make that kind of impact.

• Next generation biofuels (“corn ethanol cannot deliver 1 gigaton of CO2e reductions because of massive land-use requirements,” the report states) could achieve the target with an investment of $383B, creating 394k jobs.
• Building efficiency technologies could achieve the target with an investment of $61B, creating 681k new jobs.
• Concentrating solar power could achieve the target with an investment of $2.24 trillion, creating 484k new jobs.
• Construction materials could achieve the target with an investment of $445B, creating 328k new jobs.
• Enhanced geothermal could achieve the target with an investment of $919B, creating 448k new jobs.
• Nuclear could achieve the target with an investment of $1.27 trillion, creating 269k new jobs.
• PHEVs cannot achieve the target by 2020.
• Solar PV could achieve the target with an investment of $1.71 trillion, creating 1.63 million new jobs.
• Wind power could achieve the target with an investment of $1.38 trillion, creating 452k new jobs.

A couple of surprises here — I would have thought wind power would have been in a better position, given existing low costs, to make a cost-effective impact on emissions reductions.

But the big winner here in terms of cost-effective impact is, unsurprisingly, energy efficiency (long-time readers of this site will know this is one of my favorite investment areas for this very reason).  And the big winners in terms of jobs creation are the service-intensive areas like building efficiency equipment/system installation and solar installation.

A few favorite areas for big venture investment don’t end up looking so good, on the other hand.  Remember, this is just one (pretty good) report, and it doesn’t have a direct bearing on returns potential in these sectors.  But it’s still interesting to juxtapose which sectors would have the biggest “bang for the buck”, versus where the venture bucks are going.

Kudos to the Gigaton Throwdown team for a great and timely report.  Hopefully policymakers will read the report — and hopefully investors will, too.

OK. I admit it. I am writing this article from a Summit about cow poop. No, this isn’t a joke to get 8-year olds rolling on the floor with laughter. This is serious.

I am reporting from the inaugural National Biomethane Summit, in Sacramento, California, where over 300 attendees including elected officials, government agencies, farmers, ranchers, landfill owners, facility owners and operators, technology leaders, researchers, regional planners, and carbon trading experts.

Biomethane is renewable natural gas because it is from biological sources. In some areas, biomethane is called renewable gas. Biomethane is a low carbon fuel – CH4. John Boesel, President of CALSTART, calls biomethane “Our lowest carbon fuel.” Just like the fossil fuel version of natural gas, biomethane can be converted into electricity or fuel.

Making money from meadow muffins is helping dairy farmers stay in business. Among the Western United Dairymen, 18 projects that capture biomethane from manure are generating 4.425 MW of electricity. Hilarides Dairy also converts enough biomethane into fuel to power two of its heavy-duty and five pick-up trucks. Michael Marsh, CEO of the Western United Dairymen quipped, “This smells like an opportunity.”

Dallas Tonsager, Undersecretary, U.S. Department of Agriculture (USDA), is a former dairyman who sees big economic opportunity in methane from manure. Since 2003, USDA has helped 121 projects with co-funding and/or loan guarantees. These projects have generated 449 GW hours/year of electricity, reducing emissions 384,664 metric tons of CO2e and displacing 8 million gallons of oil.

The 121 projects include WI 24, PA 18, CA 14, NY 14, and VT 7. There are opportunities in every state. USDA is encouraging the growth of biomethane for energy and fuel. This is definitely a “shovel ready” opportunity to create green jobs.

Across the nation, ranchers, farmers, landfill operators, and all that generate agricultural waste, forest residue, and municipal waste can increasingly become energy independent. Through anaerobic digestion much of their biological waste can be converted into biogas which can run electrical generators, turbines, or fuel cells to generate electricity. Biogas can also be converted to cleaner biomethane for cleaner electricity and renewable fuel. These operations can generate their own electricity and fuel their own vehicles. Increasingly, excess electricity and fuel can be sold as added revenue streams.

A growing number of our nation’s buses, refuse trucks, delivery vans, airport and port equipment has been converted from diesel to natural gas. Michael Gallagher, CEO of Westport Innovations (WPRT), has already sold 20,000 engines for such applications. He estimates that 20 percent of our nation’s diesel vehicles could be running on biomethane produced in the United States.

Nations like Russia and Iran that control the largest reserves of natural gas may not like this trend of making our own natural gas, but if we want energy independence then we need to follow W.C. Field’s advice, “Take the bull by the tail and face the situation.”

Before our growing population with its output of waste puts us hip deep in this slop, we want to do something useful like make money converting all this waste into energy and fuel. Currently, as the waste decomposes, a greenhouse gas twenty times more destructive than carbon dioxide – methane – goes into the stratosphere, putting our future in a pressure cooker. The whole thing stinks.

There is a climate payoff as well as help with energy independence. California with its Low Carbon Fuel Standard (LCFS) has put teams of scientists to work calculating well-to-wheels, or in this case waste-to-wheels, lifecycle emissions using the newly developed GREET 1.8 model. Biomethane has 4 times less lifecycle emissions than gasoline in the LCFS analysis. Because biomethane avoids release of the destructive greenhouse gas, biomethane into an internal combustion engine vehicle shows fewer emissions than electricity into a far more efficient electric vehicle.

In transportation, we will see the growing use of renewable electricity powering everything from city light-rail to city cars. We will also see the growing use of biomethane powering buses and the vehicles used by the biomethane producers. In Orange Country, California, where thousands of electric vehicles are used, there are also several hundred refuse trucks and public transit buses using biomethane from the nearby Bowerman Landfill where biogas is converted into liquid natural gas (LNG).

The Orange County Sanitation District is bringing online a combined heat and power plant developed by Air Products (APD) and Fuel Cell Energy (FCEL) that converts municipal waste into electricity, heat, and hydrogen fuel. In the county, hydrogen vehicles are in use by city fleets such as Santa Ana, the University of California, Irvine, the South Coast Air Quality Management District, and even individuals that drive Honda (HMC) Clarities and GM Fuel Cell Equinoxes. This breakthrough innovation results in record toilet-to-tank efficiency. Orange County Register Article

Texas, of course, thinks bigger than California. In Dallas, the McCommas Bluff Landfill will achieve 95 percent methane recovery from 30 million tons of waste. Output will scale from 35,000 gasoline gallon equivalents (GGE) per day to 122,500 GGE. Using a novel leachate recirculation process for early capture of biomethane would shrink the landfill growth by 3 feet per day, adding years of life to the landfill.

Summit attendees had mixed reactions about the idea of using biomethane as a vehicle fuel instead of the more common approach of making electricity by running biogas in large ICE gensets. Renewable electricity is in big demand as utilities across the nation struggle to meet renewable portfolio standards (RPS). Natural gas prices, however, are down 70 percent from their peak, making biomethane for fuel a losing proposition unless there is government funding or carbon credits to sell at a significant price.

But new ICE gensets increasingly cannot be permitted. Regulators have greatly tightened standards on emission of health damaging criteria pollutants and greenhouse gases. In California, air quality regulations are forcing farmers, landfill, and waste operators to spend more on clean-up of biogas. Turbines, fuel cells, and conversion to fuel are becoming more promising options. Regulators are also helping with selective co-funding of some projects.

Biofuels have gathered significant opposition in much of the world. Biomethane has avoided the food for fuels controversy associated with ethanol from corn and biodiesel from soy and palm oil. Biomethane is normally processed from waste. Biomethane has over four times the energy production than corn ethanol from an acre of land. Clean Fleet Biofuels Reports

These challenges are also opportunities for Waste Management Inc (WMI). Of their 370 landfills, 33 percent already produce methane for energy, the rest flare the gas due to economics or regulatory difficulty in using ICE gensets to produce electricity. About 1,000 of Waste Management’s fleet of trucks run on either LNG or CNG creating the opportunity to produce their own fuel. 2,500 trucks run on diesel with WMI plans to hybridize.

Waste Management landfills contain significant organic waste which is suited for anaerobic digestion. WMI also captures significant waste that is lignin which is appropriate for its waste-to-energy plants. In the long-term it may be economical to convert the lignin to biofuel in a gasification process.

Can biomethane scale to a size that will impact United States needs for energy and fuel? Yes. Sweden has been an early leader in using biomethane. Over half of their natural gas for transportation vehicles such as buses and cars comes from biomethane sources such as municipal waste and agricultural waste. Biomethane is part of Sweden’s strategy to be petroleum free.

In 1970, 77 percent of Sweden’s energy came from oil, but by 2003 that figure had fallen to 32 percent. In 2006, about 40 million cubic meters of renewable biomethane, “enough to support 1,000 buses and refuse trucks and 9,000 light duty vehicles.” In Sweden, light-duty vehicles cost an average of 70 percent of the cost of a petrol fueled vehicle. The opposite occurs in the United States, with the Honda Civic CNG being the only available CNG passenger car.

Biomethane is also important to Sweden being energy independent. Russia has famously flexed its political muscle by temporarily cutting-off the natural gas pipeline supply that is critical to Europe’s energy and heating. Sweden already has 230 biomethane plants build including 138 from sewage waste water and 60 from landfills. Some Swedish dairy farmers are making more money from manure than from milk.

A decade from now, cost effective large-scale plants have the potential to produce multiple outputs include electricity, heat, natural gas transportation fuel, algal fuel utilizing CO2, biofuels from lignin, biomaterials, and fertilizer. Production could be accelerated if cap-and-trade carbon credits are produced.

This potential is part of the reason that Summit attendance is double what was expected and that this became an international summit with delegates from Sweden, UK, Spain, Canada and other countries. We do not need to dispose ever increasing quantities of waste. We do not need bigger landfills. The vision is a zero-waste society where anything no longer used is converted into something valuable, be it recycled paper, building materials, electricity, heat, fuel, etc.

We can achieve energy independence and avoid a climate crisis with a portfolio of solutions leading us to a near zero-emission future. Yes, the Prius, solar power, and eating tofu make a difference. Energy efficient buildings, transportation, and sustainable living make bigger differences. Now, we must put on our boots and roll-up our sleeves and give a whole new meaning to the mantra “reduce, reuse, and recycle.”

Clean Energy Stocks Shopping List: Five Energy Efficiency Stocks

Posted on 24 June 2009 by Sustainability Digest

Stocks may be expensive now, but they won’t be forever.  Five energy
efficiency plays to buy when they’re cheap again in efficient HVAC,
desalination, thermal imaging, and lighting.

Tom Konrad, Ph.D., CFA

This article continues my Clean
Energy Stocks Shopping List series.  In the first, I looked at five
clean transport stocks I’ll be looking to buy when the market
falls.  In the second, I took a step back, and outlined why it makes
sense to wait for better prices than to buy these companies now.  Here
are five stocks I’ll be looking to buy  in my all time favorite sector, Energy
Efficiency.  Future articles
in this series will be found here.

#1 Energy
Recovery, Inc. (ERII)

Much has been written about how energy
and water are increasingly becoming interlinked problems, with the
production of energy (especially
biofuels) and the pumping, sanitization, and desalination of water requiring
increasing amounts of energy.  One way to invest in this theme is by
investing in wind
stocks or solar
photovoltaic stocks, since these technologies require little or no water to
generate electricity.  

Another way would be to invest in water rights or water suppliers, or a water
ETF.  I have long avoided this method, because I consider water to be
far too politically sensitive.  People have a deep distaste of companies
making money from water, and this often leads to politicians expropriating water
company assets or changing the rules so that owners of water rights don’t make
"unreasonable" profits from them.  With all this political risk
surrounding water, the only way I feel comfortable investing is through an
equipment supplier which can make a profit by selling equipment to utilities. 
Once the sale is made, the profit can be booked, and there is much less ongoing
political risk than there would be by investing directly in such a utility.

Energy Recovery, Inc. is such a company.  They sell systems which
greatly reduce the energy used in desalination, making this both an energy
efficiency play and a water play.  Better, they are currently profitable,
and have an extremely strong balance sheet and good cash flow.  However,
its valuation ratios are all quite high because of high expected growth. I’m waiting for the price to fall before I buy any more (I’m currently
short a few August $5 puts.)

#2 and #3 LSB
Industries and Waterfurnace
Renewable Energy (WFI.TO / WFFIF.PK)

I wrote about these two geothermal
heat pump companies last December, and Waterfurnace is one of my Ten
Clean Energy Stocks for 2009.  Since I wrote those articles, Energy
Secretary Chu toured a Waterfurnace plant, and announced $50
million in government support for geothermal heat pump use.  Given all
the attention, both stocks have risen sharply, and I’d be happy to increase
my stakes if a market decline results in a buying opportunity. 

#4 FLIR
Systems, Inc. (FLIR)

I also recently covered
Flir, which I expect to benefit from the growing number of energy auditors
and energy audits which have been spurred by the stimulus package, and this
stock, too, has advanced strongly.  The business case remains strong, and
if a market decline takes this high-growth, high P/E stock with it, I’ll be
ready to buy more.

#5 Cree Inc
(CREE)

Cree is probably one of my longest standing favorite stocks. It is in both my
Ten
Clean Energy Stocks for 2008 as well as the 10
for 2009, and I was writing about investing
in LED companies long before I started the annual lists.  Because the
stock price has gone up so quickly  recently, I’ve sold most of my
position.  I went into some depth as to why I like the company in both
articles, and I still like it and the LED industry in general, because it’s a
rare energy efficiency play that’s a simple product, and hence does not
encounter many of the barriers
to energy efficiency. Reasonably high powered LED light bulbs are becoming
more common in stores, as well as LED fixtures.  I recently purchased an LED Lamp
for reading, and an LED Grow Light.
If a market decline provides the opportunity, I plan to
rebuild my position in Cree.

DISCLOSURE: Tom Konrad and/or his clients own ERII, LXU, WFIFF,
FLIR, and CREE.  

DISCLAIMER: The information and trades provided here and in the comments are for
informational purposes only and are not a solicitation to buy or sell any of
these securities. Investing involves substantial risk and you should evaluate
your own risk levels before you make any investment. Past results are not an
indication of future performance. Please take the time to read the full
disclaimer here.

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Cancers Threaten Wild Animal Populations

Posted on 24 June 2009 by Sustainability Digest

Image: Green Turtle Face, by Sharon Deem, courtesy of WCS

Sad Green Turtle
If this Green Turtle appears sad, perhaps it is pondering the newest threat to its endangered species. Green turtles belong to the groups of marine denizens known to suffer from high levels of cancer in the wild. Cancer kills about one in every ten humans; now a new study done under the auspices of the Wildlife Conservation Society reveal…

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