"But I said 'no,' I'm gonna go ahead with this." I could tell the excitement he felt 30 years ago from the way he told the story. "You'd be amazed what you could do with 48K in those days!"

Even though he was a trailblazer in putting the PC to academic use, Prof. Brown has made a career out of playing with plants. His greenhouse and garden in the hills west of the Texas state capital are immaculately arranged, and at his namesake laboratory back on the UT campus, some beakers hold algae cultures that have been growing for 40 years.

Just as over time the rest of the world woke up to the possibilities of computing and connectivity, today the tiny organisms that Malcolm Brown and dozens of his graduate students have nurtured and examined for over a generation are recognized as potential biofuel powerhouses.

The future of biofuels?

Dr. Brown got in touch with me early this year after reading my dispatch from the American Council on Renewable Energy's RETECH expo. I noted that Brazil's largest sugar processor Cosan (NYSE: CZZ) had entered into a $12 billion joint venture with Royal Dutch Shell (NYSE: RDS), Europe's second largest oil producer.

As I've noted a few times now, there are several pivot points between fossil fuels and renewables. Maybe it's an offshore oil rig being powered by wind turbines, or in the case of Dr. Brown's research, oil fields in west Texas where waste water is host to a cornucopia of productive organisms.

New federal rules and incentives are making collaborations between oil titans like Shell and biofuel powerhouses like Cosan commonplace. The next step is bringing cellulosic ethanol to billion-dollar scale.

On February 3, the Obama Administration released its Final Renewable Fuel Standard, known as RFS2. Under RFS2, corn ethanol's status will diminish over the next decade because of its weakness relative to sugarcane ethanol. This is a point of heavy contention from corn state lobbyists and corn ethanol enthusiasts across the board.

From farmers to ADM crop scientists, many assert rightly that corn ethanol research and development should continue. I invite feedback from anyone involved in the sector.

However, the chain from research to policy to profit right now runs straight through what are known as advanced biofuels. Advanced biofuels have a greenhouse gas (GHG) footprint that is over 50% better than gasoline. Land use factors in heavily to the Environmental Protection Agency's GHG calculation, and RFS2 follows EPA stats showing that sugarcane ethanol has an International Land Use Change (ILUC) impact less than 1/6 that of corn-based fuel.

There's a step above sugarcane feedstock, however, and it's cellulosic ethanol. This is where Dr. Brown and his beakers come into play.

If you think of cellulosic ethanol currently, corn husks and switchgrass may come to mind. Yet, this week I've seen time-lapse footage taken through a light microscope in Malcolm Brown's lab that shows a bug called acetobacter spinning out cellulose like a spider spins a web.

The strands produced by these micron-sized bacteria are nanometers wide, which means that when put together, a sheet of cellulose produced under optimal conditions can be as strong as steel. It can also be used to make paper, of course, since it's analogous to wood pulp.

There are other mighty bugs in Brown's lab, too.

One Man's Trash...

EPA calculations put cellulosic ethanol GHG emissions at 60% less than gasoline, but that includes land use just like corn ethanol. Being a Texan, Malcolm Brown has grown cultures in water from all over the state; he's found that some of the best water for growing bugs that produce sugar and cellulose is found in oil wells where brackish water is a waste product of crude extraction.

Even enhanced oil recovery (EOR) techniques now in use to get more oil out of dying fields can lead to bountiful bacterial produce, because the carbon dioxide from that process can be used to stimulate increased sugar production during photosynthesis.

Prof. Brown also showed me in his lab how cyanobacteria, commonly known as blue-green algae, can be shocked into producing more sugar than normal by changing the salinity of the water they're in. It's basic osmosis—the kind of stuff you learn in high school biology class—but seeing it applied to create next-generation biofuels is pretty amazing.

Now, as with every single renewable energy type we talk about in Green Chip Review, it's a matter of scale. These cyanobacteria have been tested in ponds and can be scaled up to testing in square-mile size tracts of foot-deep water. They can be placed next to power plants to take carbon dioxide into the fuel production process, or large tracts of scrubby west Texas land can be laid across with oil well water to grow the bugs.

The Brazilian Connection

Jose Goldemberg, the Brazilian scientist who set off that country's biofuel revolution in the 1970s, has met with Malcolm Brown and marveled at the production he's been able to get out of such simple organisms.

In test tanks and ponds, the UT-Austin team has logged 14 tons of sugar per acre-foot per year. In laboratory conditions, that harvest rises to 94 tons of the sweet stuff, which is equivalent to 13,000 gallons of ethanol per acre-foot per year. That sucrose can then be added directly to yeast to create ethanol, instead of breaking down cellulose starch to get glucose.

The best part is that while these scummy powerhouses work, the sugar they put out can be taken without blasting the cells apart — this may be the ultimate renewable fuel.

You can learn more about Dr. Brown's work and goals here at his laboratory's website. He'd be happy to hear from you, and I can tell you that his enthusiasm for creating a high-efficiency, world-leading biofuel in the United States is contagious.

Just as Jose Goldemberg's vision in 1978 was turned into a national initiative to make Brazil a world energy power and investment target, researchers across the U.S. are working to make American biofuels maximally efficient and, ultimately, very profitable for investors who follow the idea flow from lab to market.

As Nick Hodge reported last summer, Exxon Mobil has already made a $600 million bet on algae biofuel. Surely that's not the end of the money movement into this sector.

What are you up to? We like hearing from the Green Chip community about the ideas that are driving investment. Contact us any time through www.greenchipstocks.com.

Regards,

Sam Hopkins

Not only have these plastic bags sucked a bit of the aesthetic charm out of Charm City, they also maintain an economic burden on the city, as removing these plastic bags from our water ways is not a free service offered by those who hand them out like paper towels at the grocery check out.

There was a proposal to charge consumers $0.25 per bag. But that was shot down. Instead the City is demanding the following:

• Stores can only give plastic bags out if they participate in a program aimed at reducing the number of bags on the streets. Fines for noncompliance would range from $100 to $1,000. I'd be interested to know how often these stores would be checked. I suspect that if a store gets hit with a yearly bill for anywhere between $100 and $1,000, nothing will change.

• Customers will only get plastic bags if they ask for them. That really adds a lot of bite to the bark of this poodle.

• Retailers have to collect plastic bags and recycle them. Of course, there is nothing that would require customers or incentivize customers to actually bring them in to be recycled. And by the way, according to the EPA, only about 1 percent of all plastic bags in this country are recycled anyway. So perhaps we should ask ourselves, does it make more sense to require plastic bag recycling or just get rid of the bags altogether?

• Retailers must also post signs encouraging customer to use reusable bags. Well, we all know how well signs work to encourage people in this city. Those "Drug-Free Zone" signs have really done a bang-up job.

• Retailers must report back to the city on how many plastic bags they've distributed. Yeah, those numbers won't be distorted. Because clearly, the retailers who have fought quite effectively against plastic bag bans and taxes are going to provide the city with accurate data.

Now don't get me wrong. I know that there are some folks on the City Council who have worked tirelessly to help clean up this city. And I applaud them. But clearly the lobbyists have won at slowing the progress on curbing plastic bag pollution. And you better believe that over the next year, they're going to go full force trying to convince us that plastic bag taxes are a bad idea.

But I'd prefer to look at the data, and ignore the rhetoric.

I'd prefer to look at Ireland, where a $0.30 plastic bag tax was passed back in 2002. Within weeks of the new tax, there was a 94 percent drop in plastic bag use. And for those who did shell out the thirty cents - about $9.6 million was raised and earmarked for a green fund.

And in China, after a ban on super thin plastic bags was introduced, plastic bag usage fell by 66 percent and saved the Middle Kingdom 1.6 million tons of petroleum. Because yes, all those wonderful plastic bags are made with petroleum. Want to cut our use of foreign oil? Stop using so many damn plastic bags!

Of course, I'm not so naïve to believe that this is an easy fight. The resistance has been strong. And the truth is, if you want to get anything accomplished in this world, you do have to make compromises. But how much longer can we "compromise" on this stuff?

These plastic bags have become an environmental and economic burden that no one seems to be willing to pay. So the way I see it, if you can't pay for something, then you can't have it.

It's not rocket science.

It's a basic concept you learn as a child. And it's a basic concept that we better start remembering soon.

Although you're given these bags at your local grocery store, they are NOT free.

There is a cost associated with these things. You may not be paying for them at the checkout now, but rest assured, your tax dollars pay to get them out of the trees and out of the harbor. Your tax dollars pay to move them and dump them in the landfills.  Your tax dollars continue to subsidize the oil industry too, which makes a pretty penny off of our irrational reliance on these plastic bags.

Just something to think about the next time the cashier at your local supermarket offers you a plastic bag for a gallon jug of milk or a candy bar!

To a new way of life, and a new generation of wealth. . .

Jeff

Under the bill, Washington would impose steadily declining limits on the levels of carbon pollutions that companies are permitted to emit.

The pollution permits companies would be required to hold would be traded in a regulated financial market.

The bill, which is being met with resistance primarily by Republicans, has been stuck in Senate since last year.

Republicans refer to the controversial plan as "cap and tax" and are working to kill the bill.

Resistors argue that "cap and trade" will decrease employment rates and raise energy costs.

Senator Joseph Lieberman, an independent from Connecticut, is trying to dispel the negative connotation that comes with the title "cap and trade" by rephrasing the nickname of the bill.

Instead, Lieberman uses the term "pollution reduction targets."

In the past year, other ideas have been discussed for controlling carbon emissions.

Some options include a carbon tax, a "cap and dividend" plan, and a "cap and trade with training wheels" program, where an independent board would set a narrow price range for carbon for eight years in order to give markets experience in trading permits.

Although the bill remains stuck, Lieberman says it is still possible utilities may be subject to a cap and trade system.

However, rebranding "cap and trade" with the title "pollution reduction" probably won't be enough to sway stubborn conservatives in its favor.

Until next time,

Hilary

Right now, peak energy demand for the state of California is 29,000 megawatts by grid operator California ISO.

That means that the state will need to store 1,450 megawatts in order to comply with the goals outlined in the new legislation.

The bill - AB 2514 - is the first of its kind to be introduced at the state level, though the state's Self Generation Incentive Program already offers incentives for energy storage at industrial and commercial sites.

The new legislation will help consumers cut back on their energy costs while at the same time supplying thousands of permanent new jobs.

Advanced energy storage solutions would also make other renewable sources of energy (such as wind farms and solar arrays) more useful by storing the electricity they generate.

Energy storage technologies vary in their power capacities and discharge durations. They also include mechanical, chemical, and thermal processes for storing energy for use at a later time.

Flywheels, for example, provide short-term storage - they only store energy for a few seconds or minutes. They are, however, already relatively economical.

Persistent storage systems that can store energy for hours (or store power generated during off peak hours for consumption during peak periods) are not as economical.

Right now, batteries used in persistent storage systems sell for $500 per kilowatt hour. In order to make persistent storage systems work long-term, the price needs to be lowered to $250 or below.

Pacific Gas & Electric is just one of a few utilities that are already moving forward with plans to develop energy storage systems.

PG&E is currently building a 4-megawatt sodium sulfur battery station in Silicon Valley and a 300-megawatt compressed air storage facility with a gigawatt-plus pumped hydro station.

The compressed air field being developed by PG&E will be able to store energy at $120 per kilowatt.

Another company, SustainX, is also building an industrial compressed air storage system, but it remains mostly in the experimental stage.

Ice Energy, a company located in southern California, has partnered with utilities to install 53 megawatts of its ice-powered air conditioners in the region.

Ice-powered air conditioners shift air conditioning - a peak power function - to nighttime.

By simply installing ice-powered air conditioners, some utilities will be able to hit their 2014 goals in the near term.

Worldwide, approximately a gigawatt of grid storage has been installed. In the U.S., storage has been primarily a theory. Until now.

If AB 2514 gets passed, energy storage may evolve from a theory into a reality.

Until next time,

Hilary

And those who know about it first — and act on it — will walk away with fortunes.

I know this because it's already happened twice before...

The Chinese Solar Cash Machine

The modern solar industry was cradled in Germany. It was the first country to offer robust incentives for solar installations, and now boasts the largest solar market in the world. (See, solar can thrive anywhere.)

And while that world-leading market was developing, German solar companies were on top of the world...

In early 2006, as the solar market really got underway, German companies like Q-Cells (XETRA: QCE) and SolarWorld (XETRA: SWV) doubled shareholders' money inside of two months. Take a look:

But the Chinese are great at reverse engineering, and when they saw how much money was being made — and how they could use solar in their own country — they quickly took action.

In less than a year, multiple Chinese companies entered the market. Aided by cheap labor and relaxed government regulation, these companies were quickly able to steal market share from the Germans.

And while a few German companies had doubled investors' money in early 2006... by the end of 2007, there were several Chinese solar firms that had tripled in value or better:

Those companies would go on to supply not only Germany, but also the rest of Europe, China, and even the United States.

Of course, we were advising premium Green Chip members of this situation as it unfolded, and many walked away with triple-digit gains in hand.

But the solar takeover was only the first leg of China's cash-rich cleantech trinity.

The Chinese Wind Cash Machine

Just like the solar market, the wind energy market was pioneered outside of China, namely in the Netherlands and Scandinavia, where wind power had been used for centuries.

Between 2003 and 2008, as the wind industry really ramped-up, investors made good money playing European wind turbine companies. Vestas (COP: VWS) and Nordex (XETRA: NDX1) were among the few pure wind plays on the market, and their shares rallied as wind farms sprang up around the globe.

But it wasn't long until China made a move on this industry as well.

After buying several turbines from their Western counterparts, Chinese companies quickly learned how to build their own quality version. And soon, wind farms were being built all over the Middle Kingdom.

In fact, in 2009, China not only built the most turbines in the world... they also installed the most wind turbines in the world.

And almost overnight, Chinese companies like Sinovel Wind and GoldWind Science — which you probably have never heard of — have become global Top 10 producers of wind turbines... and are knocking on the Top 5 door.

Green Chip investors have profited from this trend as well, as companies doing wind business in China have blown passed European-based companies like Vestas:

But if you missed the Chinese solar and wind runs... the third horse in this profitable trifecta is just now getting out of the gate.

The Chinese Auto Cash Machine

By now, the Chinese have realized three things:

1. They can produce high quality / high profit cleantech products;

2. They can ensure economic prosperity and energy security while reducing pollution by deploying those assets in their home country;

3. They can make even more money selling those products to other countries.

As you just read, each of those three tenets was realized during the Chinese wind and solar booms.

And it's happening again... in the auto industry.

Undoubtedly, you've witnessed the trend toward more efficient (and even electric) cars. Led by Japan (and, to a lesser extent, the U.S.) sales of smaller, more efficient automobiles have skyrocketed in the past two years... and will only go higher.

Honda, Toyota, and Nissan were well-positioned to benefit (and they have), and Ford has also ramped up its offering of efficient autos.

Now, China is gearing up its effort. Members of its billion-strong middle class are buying more and more cars each day. They want those cars to be efficient. And they want those cars to be Chinese.

You can already see how Chinese auto companies are performing as other mainstream brands continue to struggle:

But there's one Chinese clean car company about to blow all the others away.

They make a series of gas, hybrid, and electric cars that are all the rage in China. And they'll soon be on sale in the U.S and Europe — the same as we saw with solar and wind.

The company sold 165,000 cars in 2008. But that grew 170% in 2009 to over 450,000.

What's more, China is now the world's largest car market, with 13 million cars sold last year.

In all reality, this company could become the world's largest automaker by taking over sales in China, and then the rest of the world.

They've already got backing from Buffett and the right portfolio of cars to make it happen...

We told you China would take over the wind and solar markets.

This is your shot at a ground-floor entry in the company that will help them dominate the car business as well.

Call it like you see it,

Nick

P.S. The secret to making billions from electric cars isn't in the car itself... it's in the battery. And this company has the battery to do it.

Recognized as one of the 50 most innovative companies in the world, this company's batteries are already in nearly every cell phone and power tool in China. Soon, they'll be in every car, as well — and shareholders will walk away with a fortune. Click here to learn about the company that says it'll be bigger than Toyota in the next decade.

I was writing an article this week about the history and development of the Green Chip websites, when I realized something few people may know...

We've been covering the green side of the market longer than anyone else.

Since before First Solar (NASDAQ: FSLR) and Suntech (NYSE: STP) were publicly traded...

Before an Inconvenient Truth finished filming...

Before terms like smart grid and cleantech were even coined...

We were giving green stock advice before wind turbines graced the plains, and certainly before CNBC and Bloomberg were quick to jump on the latest solar news.

The Difference Between News and Ideas

Sometimes, I get frustrated when I put together these weekly news round-ups for you.

You see, many of the topics that are "news" now, we covered months — and sometimes years — ago... when they were merely ideas.

Take the Chinese cleantech boom, for example, which we've been touting since 2007. Back then, we told readers that China would be a clean energy force to reckon with, that their solar companies could produce at lower costs, that their non-democratic government could fast-track projects with minimal bureaucratic red tape.

As such, many of our readers have profited handsomely from our Chinese cleantech picks like JA Solar (NASDAQ: JASO), Trina Solar (NYSE: TSL), Hong Kong Highpower (NASDAQ: HPJ), and plenty of others.

But only lately, as the hindsight data is revealed, has the mainstream media jumped on board, with everyone from the Wall Street Journal to the New York Times touting China's cleantech abilities and the United States' laggard position.

It's not "news" until it happened.

But the profits are made while it's happening (... Whatever it is.).

That's the difference between news and ideas.

You read the news. You profit from ideas... and you usually read them here first.

This Week's News (And Our Ideas)

So it's news this week that Japan, South Korea, and China are spending $9 billion on "infrastructure and information technology to make electricity networks more efficient."

It's news, according to Reuters, because Zpryme, a market research firm, compiled the data and released a report.

But it's been an idea for the past year, as we constantly reported on the necessity of a smart grid to aid the deployment of renewable resources. Green Chip readers have profited from this idea... others are only now reading the news.

It was also news this week when a Chinese wind turbine maker, A-Power Generation (NASDAQ: APWR), announced it's building a production plant in Nevada. The plant will have an annual capacity of 1,100 megawatts and create 1,000 long-term jobs.

I guess it was only an idea on February 10, when I ran an article entitled, Chinese Cleantech Companies: Made in the USA (by China), in which I specifically mentioned A-Power and their plans for a U.S. plant.

In the month it took for that story to go from a Green Chip idea to mainstream news, the stock has gone up more than 17%.

In other news this week, German installer Phoenix Solar (XETRA: PS4) announced it's "expecting business in the ongoing first quarter to be significantly better than in the year-earlier period."

But we've been reporting on the German feed-in tariff cuts since last year, and how that would lead to more installations fueled by Chinese-built panels before the subsidies disappeared, i.e, higher business in the first and second quarters.

And finally, it was news this week that China and India signed up to the Copenhagen Accord for fighting climate change, after being lambasted by politicians and the media alike for stymieing the talks last December.

But we've been reporting on China's and India's ambitious climate energy and energy goals for some time now and how, in many ways, their goals are more ambitious than ours. In an article entitled The Clean Energy Battle: U.S. vs. China, I reported that China and U.S. actually have similar emissions targets, but China's are official policy while the U.S.'s are simply White House announcements.

So you could've known the real story before it hit the wire.

And that's really the point of Green Chip: To know the market so well that we're ahead of it. And by reading these pages, you are, too.

Our premium services take that one step further, and help you invest in green trends before others know about them.

We help you invest in the ideas that will be profitable when they become news.

You can read this week's ideas below.

Call it like you see it,

Nick

How to Rebuild America: The New Road to Energy Sustainability
In his report "How to Rebuild America," Editor Chris Nelder writes a letter to Congress on behalf of the American people, asking for a real energy plan...

A Game-Changer for Nuclear: The Most Profitable Advancement in Half a Century
Green Chip reveals the readers the news of a discovery... still under the radar... that could prove to be the greatest advancement to the world's energy crisis in 50 years! This company has the worldwide monopoly on this "a monster metal." Find out why you should buy this stock while it's still selling for less than 20 cents...

Birth of the Supergrid: 9 Nations and 20 Companies Plan Europe's Clean Power Future
Editor Sam Hopkins uncovers the investing opportunities in burgeoning plans to develop a pan-European power grid.

The Global Energy Race: The Countries Keeping Their Energy Dollars
Energy & Capital Editor Nick Hodge discusses the battle plan of developing countries in today's energy war...

Renewable Energy Capacities by Country: An At-a-Glance Look at Wind, Solar, Geothermal, and Biofuel Energy Resources
Guest Contributor Hilary Stingley discusses Colorado's new renewable portfolio standard.

The Profitable Stocks behind Cash for Caulkers: How to Profit from Cash for Caulkers Investments
Green Chip Editor Jeff Siegel highlights opportunities in energy efficiency and green building.

Investing in Africa with ETFs: Globe-leading Growth Stuns Even the IMF
International Editor Sam Hopkins highlights several plays on Africa's world-leading growth in 2010.

New Green ATF Seizes Canadian Power Grid: A $30 Mil Market Created Overnight
Green Chip Review reports on the ambitious plans by our neighbors to the north as BC Energy Plan outlines 55 green policy actions to be executed between now and 2016 — and how readers can make money with the planned economy that pays you. But hurry... only seven days remain to claim 171% gains. 

Wind Power

1. United States - 35,296 MW
2. Germany - 25,777 MW
3. China - 25,104 MW
4. Spain - 19,149 MW
5. India - 10,925 MW
6. Italy - 4,850 MW
7. France - 4,492 MW
8. United Kingdom - 4,051 MW
9. Portugal - 3,535 MW
10. Canada - 3,319 MW

Hydro power is most available in China by more than twice the MW of Brazil, the country with the second largest capacity. The United States has the third largest capacity for hydro power.

Hydro Power

1. China - 179,056 MW
2. Brazil - 81,955 MW
3. United States - 78,054 MW
4. Canada - 75,287 MW
5. Russia - 46,756 MW
6. India - 39,546 MW
7. Norway - 29,317 MW
8. Japan - 22,089 MW
9. France - 20,850 MW
10. Sweden - 16,266 MW

Germany's capacity for photovoltaic solar power is roughly 6 times larger than that of the U.S. However, the United States still has the largest capacity of concentrated solar power.

Solar (PV) Power

1. Germany - 6526.00 MW
2. Spain - 5504.76 MW
3. Japan - 2347.00 MW
4. United States - 1487.71 MW
5. Italy - 908.59 MW
6. Republic of Korea - 557.60 MW
7. France - 253.42 MW
8. China - 223.00 MW
9. India - 223.00 MW
10. Australia - 114.39 MW

Solar (CSP) Power

1. United States - 900.0 MW
2. Spain - 130.0 MW
3. Australia - 37.0 MW
4. Mexico - 25.0 MW
5. Algeria - 20.0 MW
6. Morocco - 20.0 MW
7. Italy - 5.0 MW
8. N/A
9. N/A
10. N/A

The range in capacities for geothermal power as a renewable energy resource is drastic. The United States has roughly 3000 more MWe of geothermal energy available than the Russian Federation, which ranks tenth on the list.

Geothermal Power

1. United States - 3153.0 MW
2. Philippines - 2195.3 MW
3. Indonesia - 1132.0 MW
4. Mexico - 965.0 MW
5. Italy - 810.0 MW
6. New Zealand - 577.0 MW
7. Japan - 535.0 MW
8. Kenya - 169.0 MW
9. Turkey - 83.0 MW
10. Russian Federation - 81.0 MW

Germany has by far the largest capacity for energy available from biogas, a type of biofuel that can be used as a low-cost fuel for any heating purpose. When compressed, biogas can also be used to power motor vehicles. In the UK alone, biogas is estimated to have the potential to replace 17% of vehicle fuel.

Biogas Power

1. Germany - 3,594 MW
2. United Kingdom - 1,425 MW
3. United States - 1,047 MW
4. Italy - 477 MW
5. Australia - 427 MW
6. Spain - 194 MW
7. Netherlands - 130 MW
8. France - 120 MW
9. Canada - 117 MW
10. Sweden - 64 MW

Biomass energy, derived from living or recently living organisms, is most heavily available in the United States. Several countries have large capacities for biomass as a renewable energy resource.

Biomass Power

1. United States - 9,391 MW
2. Germany - 5,890 MW
3. Sweden - 4,522 MW
4. Brazil - 3,970 MW
5. Japan - 2,834 MW
6. Netherlands - 2,531 MW
7. China - 2,381 MW
8. Finland - 2,352 MW
9. India - 2,117 MW
10. Canada - 1,885 MW

There are renewable energy resources available in countries around the world. The next step is figuring out how to utilize them...

Until next time,

-Hilary

The incentives that Congress has created for renewables and efficiency have always had the fatal flaw of being too short-lived. The resulting boom-and-bust cycles were devastating, and caused America to lose the edge in clean tech. Meanwhile, countries that made 20-year commitments to transforming their energy systems have become the world's leaders in it.

It's also time to tell us the truth about the future of energy. We understand now that we have a real problem which no amount of drilling or military intervention is going to cure. In return we promise that this time, we won't crucify you—like we did President Carter.

The Challenge

Here is our reality:

• Oil production has peaked. Supply will be flattish for the next 2-4 years, then begin a long decline.

• We will lose roughly 25% of our oil supply in 25 years; 50% in 50 years; 100% in 100 years.

• To compensate for the decline of oil with renewables, the world would need to build the equivalent of the entire world's existing renewable energy capacity, every year.

• Since that is impossible, efficiency and a long transition to renewably powered infrastructure must make up the shortfall. This will take 50 years or more to achieve.

• It's likely that we will also see the peaks of natural gas and coal in the next 20 years. Hydropower and nuclear will do little more than hold their current market share.

• By the end of the century, nearly everything will have to be powered by renewably-generated electricity, not liquids or gases.

The cap-and-trade bill's aim to cut 600,000 barrels per day off U.S. oil demand — which is currently 19 million barrels per day (mbpd) — over a period of 10 years is a joke. That's roughly the same amount that U.S. demand has grown over the last year.

We need to cut closer to 2 mbpd in 10 years, 6 mbpd in 20 years, 8 mbpd in 30 years and 10 mbpd in 40 years.

Do you have what it takes to confront this challenge, knowing that some of the solutions will be politically unpopular, impact your constituents back
home, and take many times longer than your term in office to achieve?

Can you do what authoritarian and parliamentary governments elsewhere are already doing?

How to Rebuild America

It's time to come up with a real plan, an honest plan, to rebuild America under a new energy paradigm. One with serious, achievable 30-year and 50-year milestones that will slash our need for fossil fuels.

A plan based on facts and science, not political expediency. One that will create true, long-term wealth, prosperity, resiliency, and self-sufficiency.

We need a Taskforce on Peak Oil and Energy Security to prepare the country for the decline of oil, not sweet lies from the EIA which completely ignore it. As Lester Brown observed, "only Sweden and Iceland actually have anything that remotely resembles a plan to effectively cope with a shrinking supply of oil."

We want to stop spending half a trillion dollars a year for imported oil, and develop a defense strategy for the day when our imports dry up.

We need stable, simple feed-in tariffs, which have been proven successes in Germany, Japan and Spain...not complex, corruptible, ineffectual policies like cap-and-trade or cap-and-tax. And we need them for 30 years, not one.

We want solar on every rooftop, a wind turbine in every field and a micro-hydro turbine in every running stream, wherever viable resources exist. Distributed generation is resilient, and brings value to every community. Along with it, we need distributed power storage, and a smart grid with micro-islanding so we can fall back on our own resources if the grid goes down.

We want a plan to manage our resources for the long term health of our society, like Norway and Saudi Arabia have. Instead of planning to use our remaining oil and gas so we can drive in inefficient cars more cheaply, we should be planning to convert it into the renewables and efficiency gains we'll need in the future.

We want a defensive strategy for our grid with hardening against cyber-attacks.

We need to reverse the long process of globalization and bring manufacturing back home. Instead of a society now dependent on complex, world-spanning, highly optimized supply chains, we need local resiliency, redundancy, and diversity in all the essential sectors: energy, water, food, and security.

Finally, we need energy education at all levels — from the street to the universities, from business to government employees.

Do you have the guts to tell the truth about our energy challenge, and bring America up to speed on what she must do? Or will you wimp out and kick the can down the road a little farther, as your predecessors have, leaving America to learn about it the hard way and pay a price so much higher than it would be today?

Time to Act — Wisely

The days of economic growth may be gone forever for import-dependent developed countries like the United States, unless we downsize, relocalize, and work hard on energy transition.

Green Chip Publisher Jeff Siegel has been hard at work on a major research report that centers on one Canadian province's effort to rid itself of dirty energy, once and for all. You can read all about the BC renewable revolution right here. We might be wise to take a lesson from our neighbors to the North...

What we need now is an honest, long-range strategy. We need to build rail, rip up roads and unwanted, unsustainable housing, replant farmland, massively beef up the electrical grid, and deploy millions of renewable energy generators — the more distributed, the better.

By planning for it now, we could achieve a somewhat orderly transition away from liquid fuels and toward efficient electric transport. We'll still create millions of new jobs, only they'll be the right jobs. Jobs that won't disappear the next time oil spikes.

Congress cannot meet this challenge without teamwork and good sportsmanship. The Greens, the Browns, the Department of Energy, Congress and all of us must work together. It will take sacrifice on all sides.

We sincerely hope you are up to the challenge.

Until next time,

Chris

Governor Bill Ritter is expected to sign the bill when the House passes it through.

The bill also mandates that 3% of total electricity sales come from distributed generation systems such as distributed solar. These systems will allow energy consumers to lower their electricity bills and enable utilities to avoid expensive investments in new transmission systems.

In doing so, the bill is expected to deploy 700 MW of solar generation.

If that same requirement were expanded to include all state electricity producers, Colorado could see a total of 1,000 MW of solar power

That much solar power could create more than 33,500 jobs for the state’s renewable energy economy and produce $4.3 billion in total economic output.

Shortly after H.B.1001 passed the Senate, Governor Ritter announced the Colorado Clean Air-Clean Jobs Act. The act is primarily a move away from outdated coal-fired power plants.

Colorado isn’t the only state committed to a clean energy economy. Some 28 states and the District of Columbia have their own renewable portfolio standards.

Nevertheless, the long-term success of renewable energy depends on legislative action by Congress.

The push for a national standard that would increase the country’s RPS to 20% by 2020 is being met with resistance by legislators from coal producing states that claim their states don’t have the same renewable resources as other states.

However, certain bills are beginning to reflect the necessity for a boost in renewable energy standards.

The Waxman-Markley climate change bill, for example, contains provisions that would establish a national RPS. Still, controversy in Congress is holding up the process.

Perhaps Colorado’s H.B.1001 will provide some encouragement to those still holding out in D.C.

Until next time,

Hilary

I took the train early one morning from charming old Edinburgh to Burntisland, a drab manufacturing town of about 5,000 just over an hour's ride across the Firth of Forth. Burntisland was and is one of several North Sea oil and gas towns being revitalized by wind power projects that put industrial workers back on the job.

Despite the driving rain and a bird flu scare just up the road near golf holy site St. Andrews, I arrived to join a roomful of Scottish engineers to learn about an offshore wind farm demonstration project being spearheaded by Canadian company Talisman Energy (NYSE: TLM).

We headed by bus to a manufacturing facility in nearby Methil, where I watched workmen weld gigantic steel structural jackets inside an airplane hangar. That was an industrial operation unlike any I had ever seen.

All the bright-yellow pylons around me that day were soon moved by barge to a site 25 kilometers off the coast in the North Sea and then hoisted into place with a special crane; the two 5-megawatt turbines that crowned the structures I saw have now been powering the adjacent Beatrice oil field drilling platform since 2007.

This image of clean energy giving wattage to a fossil fuel operation as it taps a declining undersea oil resource perfectly exemplifies the transitional energy economy we are investing in.

Beatrice is a true pivot point between the old energy order and the new.

Building on that progress, a 34 billion euro (US$46 billion) European power connection project with a decidedly green bent is now taking shape among North Sea nations. We can expect to see large offshore wind farms become commonplace in the next decade as this "Supergrid" expands.

Investing in the Supergrid

This Supergrid already involves nine countries: Germany; France; Belgium; the Netherlands; Luxembourg; Denmark; Ireland; and the United Kingdom.

Those European Union member states are now being joined by a group of boosters from the business world. On Monday, March 8, the "Friends of the Supergrid" announced their support and hope for the EU to build a power infrastructure system that can completely wean the continental economy off of fossil fuel power by 2050.

These power pals are kicking off their partnership with momentum from national governments and the EU, as well as the electricity industry they represent.  

Friends of the Supergrid is currently made up of ten charter companies:

Siemens (Germany); Areva (France); Visser & Smit Marine Contracting (Netherlands); DEME Blue Energy (Belgium); Mainstream Renewable Power (Ireland); Hochtief Construction (Germany), 3E (Belgium); Parsons Brinckerhoff (USA, EU-wide); Elia (Belgium); Prysmian Cables & Systems (Italy).

Of those ten, five are already available to international investors who want to play the Supergrid:

Siemens (NYSE: SI); Prysmian (Pink Sheets: PRYMY); Elia System Operator (Brussels: ELI); Hochtief (Xetra: HOT); and Areva (Pink Sheets: ARVCY).

This will — at the very least — be the foundation for a major offshore wind energy rollout in the EU. Even for Desertec, the German-led plan to link new North African renewable energy capacity with Europe, what goes on between the British Isles and their North Sea neighbors is of great importance, because it means clean power linkups have grown to continent-scale.

The Supergrid is also good news for hydropower generators, especially in Norway.

Norway: The Saudi Arabia of the North Sea Supergrid?

In the global oil game, the Kingdom of Saudi Arabia has traditionally been the go-to producer when other OPEC members slash output. That role has earned Saudi Arabia the title of "swing producer."

With the need to balance intermittent wind energy contributions to the Supergrid, Norwegian energy companies may step in to make Scandinavia's western branch the swing producer of northern Europe.

Bård Mikkelsen, the CEO of state-owned renewable energy company Statkraft, told the Financial Times this week that hydro power in his country "should be valuable for compensating for the irregularity of wind power."

"That position — being a swing producer to the European market — is a very important role for us," Mikkelsen affirmed. 

Statkraft has been busy both managing existing hydropower facilities in Norway and developing new methods of getting power from water. One example of Statkraft's state-of-the-art hydropower is its power plant at Tofte, where water filtration through osmosis has been kicking out wattage since late 2009. The project is set for commercial generation by 2015.

Oslo policymakers and Statkraft engineers hope to ramp up osmotic hydropower to 1600 TWh (terawatt-hours) per year. That's 13 times Norway's current annual hydropower output!

Each cog in the Supergrid wheel will have to move well for the entire network to grow to maturity. The UK alone wants 50 GW of offshore wind power capacity by 2020 — up from about 2 GW across the entire EU today. 100 GW of offshore wind projects are at varying stages of planning and development right now across the continent, but all the countries and companies I've mentioned here have to share technology to optimize that new capacity.

Offshore wind energy will tie in with onshore wind, hydro, solar, and nuclear power to give Europe a balanced distribution network. Transmission is a huge factor, too — Mainstream Renewable Power CEO Eddie O'Connor, speaking for Friends of the Supergrid, says there is as much as a 20 euro difference in the price of offshore wind per megawatt hour when optimal grid linkup scenarios are put up against connections through less robust cable connections.

The cooperation of companies that make up Friends of the Supergrid today should minimize transmission loss as the project unfolds, and the group is set to double in size to twenty members soon.

Some pieces of the Supergrid puzzle are still missing, like turbine manufacturers and even electric vehicle technology that can provide storage for wind power on the grid. So companies will be added... and I'll be on the lookout for which ones are best to maximize your profits.

Regards,

Sam Hopkins

While the obligatory partisan punches were not unexpected, most folks seem to be pretty supportive of any program that helps us use our energy more efficiently, and of course, that saves consumers a couple of bucks on their energy bills.

For Green Chip readers, this is nothing new.

We've been singing the praises of energy efficiency for years. Especially as it relates to green building. Because let's face it: Not only is the green building industry good for the economy, it's also good for our portfolio. And I'll tell you about a few of the stocks we like in this industry in just a moment.

But first, let's just recap a few important green building figures.

According to a 2009 green jobs study from Booz Allen Hamilton and the U.S. Green Building Council (USGBC), green construction spending currently supports more than 2 million U.S. jobs and generates more than $100 million in GDP and wages.

The report also found that green building will support 7.9 million U.S. jobs and pump $554 billion into the U.S. economy — including $396 billion in wages — from 2009 to 2013.

Not a bad window for those seeking to profit from the early stages of green building momentum.

Of course, opportunities in green building can be found in more than one place.

There's the most obvious, power generation. And for buildings — especially those in regions with strong solar resources — solar's potential remains solid.

Going forward, we believe the best stocks in solar are still with those manufacturers that retain a significant cost advantage. And these are almost all Chinese players.

In 2010, we remain bullish on Suntech Power (NYSE: STP), Yingli (NYSE: YGE), JA Solar (NASDAQ: JASO), Canadian Solar (NASDAQ: CSIQ), and First Solar (NASDAQ: FSLR). The latter has recently picked up some negative publicity due to its exposure to the German market. But overall, First Solar's cost advantage continues and its utility-scale future remains bright. I would caution against underestimating First Solar's potential in 2010.

There's also energy efficiency and conservation.

While there are certainly opportunities here for companies developing energy efficient windows (and of course, the insulation manufacturers), the more pure play efficiency and conservation opportunities continue to be in demand response.

For our money, we maintain our bullish outlook on both EnerNOC (NASDAQ: ENOC) and Comverge (NASDAQ: COMV).

And then there's lighting, which accounts for 11 percent of the energy use in residential buildings and 26 percent of the energy use in commercial buildings. This is a huge opportunity.

Cree (NASDAQ: CREE) has long been a favorite for LED investors. And for good reason... The company maintains a significant leadership position in the market, and guidance remains solid.

We also like a small, below-the-radar stock called Energy Focus, Inc. (NASDAQ: EFOI). It may not get as much attention as Cree, but the company has some solid partnerships with the U.S. government. We believe this will continue to help the company land some very important — and very profitable — government contracts.

Another Piece of a Very Profitable Puzzle

Aside from energy, green building also boasts sustainability features such as water reclamation systems, environmentally-friendly paints, coatings and sealants, and sustainable building materials. Even eco-friendly flooring gets a nice boost from green building momentum. Interface, Inc. (NASDAQ: IFSIA) is a company that will continue to take advantage of this opportunity with its environmentally-friendlier modular carpet designs.

As a side note, Interface has long been a champion of sustainability, even boasting a goal of achieving a zero environmental footprint by 2020.

My point is this: the Cash for Caulkers program supports just one more piece of a very profitable puzzle for Green Chip investors.

And you better believe we're going to continue to profit every step of the way.

To a new way of life, and a new generation of wealth...

Jeff

As always, it was a busy week for cleantech news. But above all else, we finally got a week that looked like this for nearly all green sectors:

Industries represented in that chart include wind, water, solar and smart grid — each up 10% or more for the week buoyed mostly by news originating outside the United States.

Over the past few months, we couldn't have made clearer how bullish we are on Chinese solar firms. We laid out the reasons time and time again... German subsidy cuts pushing first half demand; falling polysilicon costs; high volume on shipment to multiple markets.

Lazard Capital joined the party this week, with one of its analysts saying, "We expect strong 4Q09 earnings across our coverage universe, driven by potential for higher shipments resulting from the demand pull in Germany, along with modestly lower pricing and declining silicon costs." Canadian Solar (NASDAQ: CSIQ), Renesola (NYSE: SOL), and Yingli (NYSE: YGE) were mentioned by name.

You can see how Canadian Solar did this week in the chart above. Yingli reports on Monday morning. We're expecting good performance from the entire group for at least the first half of the year.

This week, Germany made official its solar subsidy cuts, giving some firm guidance to the industry and probably creating a bit more business from China for those waiting for the official announcement.

And China had some news of its own...

Environment Minister Pan Yue said the country is studying ways to implement a new carbon tax.

Battery-maker BYD (HK: 1211) partnered with Daimler (NYSE: DAI) to jointly develop an electric vehicle for the Chinese market.

And the head of China's National Energy Administration told China Daily his office has drafted a 10-year plan calling for 15% renewable by 2020. (I shouldn't have to remind you that the U.S. still has no national policy for renewable energy integration.)

Some brutally honest declarations followed here in the States...

John Doerr, the billionaire investor behind Kleiner Perkins — the venture capital firm that brought us the Bloom Box — said that China is squarely winning the clean energy race. His message was clear: "My conclusion is China is winning. My conclusion is that we are barely in the race today. China's growth in renewables is astounding. The results of their policies are really staggering."

And during a talk in New York about the Clinton Climate Initiative, the former president noted that "China's support for wind and solar will surpass that of the U.S."

In many ways, it already is. Reuters reported earlier this week:

China grew its market share in the solar industry to nearly 50 percent in the fourth quarter of last year from just 2 percent three years earlier. The United States, on the other hand, went from 43 percent to 16 percent in the same period.

China has also pushed ahead fast in developing wind power. It overtook the United States in new installations and in manufacturing of wind turbines last year, nearly doubling its wind generation capacity from 12,100 megawatts in 2008 to 25,100 megawatts at the end of 2009.

Meanwhile, Congress continued the stalemate on domestic soil. Senator Lindsey Graham declared "cap-and-trade bill in the House and Senate are dead." And Senator John Rockefeller introduced legislation that would delay for two years the Environmental Protection Agency from regulating carbon dioxide emissions.

In ten years, these will be the same guys wondering why we're dependent on Chinese wind turbines and solar panels.

Call it like you see it,

Nick

P.S. In case you missed any of this week's Green Chip articles — along with popular stories from our sister publications — you can catch up on them now...

British Columbia Power Costs to Increase: Canadian Utilities Struggle with Demand Trends
Editor Sam Hopkins sees through the Olympic afterglow to Vancouver's looming power rate increases and energy upheaval.

Pickens Plan — Game Back On: Billionaire Back to Backing Wind
Green Chip Editor Nick Hodge talks about a new Pickens Plan announcement, what it means for the wind industry, and how you can invest.

New Green ATF Seizes Canadian Power Grid: A $30 Mil Market Created Overnight
Green Chip Review reports on the ambitious plans by our neighbors to the north as BC Energy Plan outlines 55 green policy actions to be executed between now and 2016 — and how readers can make money with the planned economy that pays you. But hurry... only seven days remain to claim 171% gains.

A Solution to the Coming Energy Crisis?: The Latest News in Nuclear
Short of nuclear fusion — still decades away — this discovery could prove to be the greatest advancement to the world's energy crisis in 50 years! Green Chip reveals the company with the worldwide monopoly on this monster metal — and why you should buy this stock while it's still selling for less than 20 cents.

Residential Solar Installers: Rooftop Solar in for a Boost
Green Chip's Nick Hodge discusses the residential solar boom in California and elsewhere... and the one company poised to take advantage.

Cash for Caulkers: Is It Worth It?
Editor Jeff Siegel takes a look at the new Cash for Caulkers program as President Obama outlines incentives this week in Washington.

Desalination Companies as an Energy Play: The Commodity All Energy Technologies Need
Energy & Capital Editor Nick Hodge exposes water as an overlooked play in the energy space and offers an easy way to start investing.

He says he'll disclose the location of a 500 megawatt plant in the next 30 days, though the Dallas Morning News has reported that approximately 300 General Electric (NYSE: GE) turbines are being sent north - to either Canada or Minnesota - for the proposed farm.

Pickens recently told the Wall Street Journal that "economics favor wind power with natural gas prices around $7 per BTU." But with natural gas seemingly in free fall - trading around $4.60 - the billionaire hasn't been pursuing wind as aggressively.

Perhaps his most recent move is a sign the industry is in for a good year. Stimulus funds should continue to be dispersed, and two large farms have already been announced - 845 MW in Oregon and 600 MW in Texas, supplied by GE and A-Power Energy Generation (NASDAQ: APWR), respectively.

If you're looking for broad exposure to the wind industry as it gets back in gear, an ETF like First Trust Global Wind (NYSE: FAN) or Power Shares Global Wind (NASDAQ: PWND) is a great way to go.

Call it like you see it,

Nick

Across Canada, Montreal's Stade Olympique still stands, though the last race of the Montreal Olympiad was run almost 34 years ago. In Beijing, on the other hand, the famed "Bird's Nest" where the 2008 Opening Ceremonies were held is set for demolition — the Chinese evidently aren't interested in keeping urban mementos that hold 90,000 people.

Despite the desire to bask in Vancouver's afterglow, Finance Minister Colin Hansen announced on March 2 that he wants to pump up infrastructure spending in 2010 and 2011 while cutting funding in the out years to balance the budget. Where governments can rely on taxpayers to make such spending surges happen, BC Hydro is turning to ratepayers for the influx of funds.

BC Hydro customers are looking at 15% in rate increases over the next two years and up to 33% by 2013, with a 9.26% increase taking effect as soon as April 1. That adds up to about $7 extra on everyone's monthly bill — not enough to break the bank for most — but as incremental changes go, it's a sizable one that brings questions.

Namely: "What are we getting for the money?"

Instead of a winter sports wonderland, BC Hydro is upgrading hydroelectric facilities that are a generation old. The newest site slated for capacity expansion is the Revelstoke Dam, built way back in 1984.

The utility has already started bringing school-bus sized transformers to the generating station site, the local Revelstoke Times Review reports, and the goal is to bring new turbines online by October. Eventually, the Revelstoke buildout will add 500 MW to the nearly 2000 MW already up and running, and 40,000 additional residential customers are expected to be served by the upgrade during peak usage hours. In total, BC Hydro (whose full name BC Hydro and Power Authority, indicating a reach beyond just dam-based energy) serves 94% of the province's population centers.

Of those 1.8 million or so customers, nearly all are expected to ramp up consumption in the coming decades.

Gold for BC Hydro? Not So Fast

On its website, BC Hydro awards itself a "gold medal" for its consistent supply of power to the Vancouver Olympics. "By flawlessly powering the games," they say, "we feel we've won a gold medal, too."

Operating 30 hydroelectric plants plus a few natural gas ones, BC Hydro did avoid outages that could have left Bob Costas in the dark. Nevertheless, its upgrade plans don't seem to include any significant changes that will accommodate significant demand increases.

"The demand for energy could grow by as much as 40 percent over the next 20 years as the economy recovers, so we have to be ready for that," BC Hydro spokeswoman Susan Danard said in Thursday's edition of Canada's Globe and Mail national newspaper.

Canadian national net energy consumption grew from 309 billion kilowatt-hours in 1980 to 529 billion kWh in 2006 — a 71% jump. If the 40% in 20 years reckoning is correct, British Columbia electricity residents may be upping their wattage at a slower rate than the country as a whole. However, much of BC Hydro's current price pressure is due to declining non-residential consumption.

Third-quarter net income at the utility was down 50% in 2009 from 2008, as the provincial forestry market weakened and mills used less power. When the timber companies perk up, the power supply rope will tighten even more. The $7/month surcharge may seem like a small bump to avoid power shortages in the jewel of the Canadian Pacific.

If British Columbia is going to continue as a model for energy efficiency, it needs to diversify. The Canadian Wind Energy Association says that as of late last year, every Canadian province has wind energy capacity. Nationally, about a million homes can run off wind-generated power that totals 3359 MW. That represents a tenfold increase over the past six years!

By advancing beyond dam expansions, BC could help make another order of magnitude increase in Canadian clean power achievable.

Jeff Siegel is in Arizona today, but he's told me to let you know that a full report on British Columbia's top green power developer is coming your way very soon.

Regards,

Sam Hopkins

International Editor

P.S. - I'll be in Morocco in mid-April to take part in the Agissons Vert International Green Business Congress. There's a lot brewing in North Africa as European countries compete to establish utility-scale solar in the sunny region, and I'm going to see what's going and which companies are involved first-hand. You can find out how to join me in Casablanca here.

With a price tag of about $6 billion, the program will provide incentives for folks to make their homes more energy efficient. Whether its new insulation, energy efficient windows (which I can tell you from personal experience can save you a small fortune in energy costs), or any other major or minor energy upgrade, the new program is designed to stimulate job growth and help consumers save a few bucks on energy costs.

There's no doubt that improving efficiency is one of the easiest and quickest solutions to our energy woes. And I suspect there will be few political obstacles on this one.

Of course, "cash for caulkers" isn't quite as sexy as "cash for clunkers." Consumers tend to be more interested in the cars they drive than the insulation in their attics. So it will be interesting to see how they promote it.

Nonetheless, this should provide a quick boost to those companies that will undoubtedly benefit from this program, like Owens Corning (NYSE:OC), Home Depot (NYSE:HD) and Lowes (NYSE:LOW). Of course, given the state of today's still very-fragile market, who knows if it will be enough to matter much. It really has become a never-ending battle of optimism versus broader market reality.

But the very real benefits of energy savings could still make this program worthwhile. Long-term economic sustainability depends on smart energy decisions today. Making our homes more energy efficient is definitely a step in the right direction.

Jeff

Wall Street generally gives more attention to global companies providing cells and modules, but mounting policy advantages in certain states are making regional installers increasingly attractive.

At the federal level, everyone is entitled to a 30% investment tax credit for which the $2,000 cap has been removed. And the "10 Million Solar Roofs and 10 Million Gallons of Solar Water Heating Act of 2010" bill introduced by Sen. Bernie Sanders of Vermont would offer a direct rebate of $1.75/watt for PV systems, potentially offsetting another 25% of the cost.

Combined with the solar incentives offered in 19 other states, a homeowner could only be responsible for 25% of the total cost of a photovoltaic system.

Special Financing

My colleague Chris Nelder recently reported on new financing schemes that are also allowing easier access to rooftop solar systems for homeowners:

A different approach uses private third-party financing to front the cost of a solar PV system to end-users, who then pay it off over 15-20 years or more.

In the commercial sector, companies like Solar Power Partners (SPP) and SunRun of California assume the initial installation cost and own and operate the systems in exchange for a power purchase agreement (PPA) with the customer.

Power generated by the system is sold back to the customer, typically at or below grid rates. At the end of the PPA term, the customer can buy the system at fair market value or renew their PPA.

These types of special financing are increasing demand by allowing homeowners to install PV who otherwise wouldn't have all the capital to do so.

And there are a few publicly traded solar installers poised to take advantage of this coming demand.

A Solar Installer With a Plan

SunRun (the company mentioned in the blurb above) has emerged as the nation's leading home solar service company, thanks to its revolutionary financing model. Here's how their website describes it:

With SunRun you purchase solar electricity instead of solar panels, which means that you don't have to burn through your savings to go solar. Most people can get started for as low as $1,000 down. It also means that you'll never have to worry if — or even how — your system is making power. We'll take care of your solar system. You go think about something else.

The man who found that company is named Nat Kreamer, though you won't readily find him on the website any longer...

And that's where it gets interesting for investors.

In April of last year, Kreamer was appointed to the Board of Directors of Lonestar Capital, which is now doing business as Acro Energy Technologies (TSX: ART.V).

He was named President of the company by June with CEO Harry Fleming saying, "Nat's experience in the solar industry will be invaluable to the Company. His expertise will help strengthen our operations in California and his strategic insights will help us grow across the country this year."

I bet it will.

Remember, SunRun's customer database is probably chock-full of homeowners who have applied for financing... just waiting to have solar installed on their roofs.

Not-So-Strange Bedfellows

So they tapped that asset. A strategic alliance was signed under which "Acro Energy and SunRun will offer solar electricity service agreements to residential customers and Acro Energy will sell solar electricity facilities to SunRun as a preferred solar systems integrator."

It's a match made in heaven. Here's what the new couple had to say...

Nat Kreamer, Interim President of Acro Energy (founder of SunRun):

The ability of homeowners to finance solar electricity systems is the single biggest hurdle for the solar integration market. Offering SunRun to our customers is a competitive advantage for Acro Energy. It should help us convert a significant number of currently contracted customers, who want an affordable solar financing option, into revenue.

Lynn Jurich, SunRun President:

Our relationship with Acro Energy will allow SunRun to bring affordable solar to even more homeowners in California. Together, we look forward to growing the number of homeowners who are getting clean energy and saving money.

Acro was the fifth largest solar integrator in California within a month. They're now the fourth largest by sales volume.

Here's how the stock has done against Akeena Solar (NASDAQ: AKNS), the largest integrator in California, since the alliance:

And conditions are right for continued good performance from this installer. Panels are cheap (below $2.00 for Chinese brand), demand is high, and there are good subsidies and financing mechanisms.

In fact, Acro's January year-over-year sales grew 118% according to a release on CNBC, which attributed the growth to recent acquisitions:

In 2009, Acro Energy acquired Acro Electric, Inc, Energy Efficiency Solar, Inc, and the assets of Light Energy Systems. The combined sales of Acro Electric Inc, Energy Efficiency Solar, Inc, and Light Energy Systems grew by 118% in January 2010 compared to their sales in January 2009, based on the number of kilowatts sold.

"We have successfully integrated our California businesses and leveraged them, via organic growth, to catapult Acro to the top tier of market," said Nat Kreamer, president of Acro Energy.

"We plan to capitalize on this success and expertise by expanding into other US solar markets in the first half of 2010," added Harry Fleming, chief executive officer of Acro Energy.

As a residential solar boom gets underway, you may want to consider adding an integrator to your to solar holdings. The action isn't always in cells and modules.

Call it like you see it,

Nick

The battle of cleantech yin and yang raged on this week as multiple billion-dollar announcements continued to remind us of the industry's coming of age.

In Australia, top cleantech operator AGL Energy Ltd. said it's shelving $1 billion in planned wind investments because of "uncertainty in the government's climate change policies."

Then on the same day, the government announced it had in fact overhauled its renewable energy scheme, leading Reuters to report "the changes would unblock multi-million dollar commercial projects planned by companies including AGL Energy Ltd. and Pacific Hydro."

So it looks like the balance of forces is equal in the land down under.

But here in the States, Deere Co. (NYSE: DE) has begun looking at options for its $1 billion wind portfolio (34 farms, 706 MW) under guidance from Goldman Sach's (NYSE: GS). Potential sale was given as one of the "options," but no reason was given for why the company was looking.

In a $1.37 billion announcement of its own, the federal government awarded a loan guarantee to BrightSource Energy to aid development of 400 megawatts worth of solar thermal plants in California. It's the biggest single cleantech funding award by the government to date.

Big save from the Feds, but they choked on the next shot...

The Environmental Protection Agency announced it is softening carbon emission requirements on big industry, offering more exemptions for big polluters and delaying any firm regulation until 2011.

I would submit the agency is yielding to pressure from Congress, industry lobbyists, and the Texas lawsuit, two of which we discussed last weekend.

Luckily, Wal-Mart (NYSE: WMT) was there to step in, declaring in a webcast it will eliminate 20 million metric tons of greenhouse gas from its supply chain by the end of 2015 — the equivalent of taking nearly 4 million cars off the road.

But Congress dropped the ball once more, as a survey of 12 key swing vote senators from both parties showed passage of a climate/energy bill this year is all but impossible.

Only one thing could save evil from reigning: Bloom Energy, which emerged from stealth mode this week with a 60 Minutes feature on their fuel cell.

Away from our shores, the battle remained one-sided, with perhaps even a bit of emerging romanticism between Europe and Asia.

Britain and Japan were sitting in a tree after Mitsubishi agreed to invest over $150 million in UK turbine development facility. The move furthers the Isle's ambitions of becoming an offshore wind energy mecca.

The country remained in the limelight when research firm Verdantix reported "large British businesses will spend over $5.3 billion on climate change initiatives in 2010." And that "will grow by 14 percent a year to reach $8.4 billion in 2013."

Not to be outdone, the British government announced a new Plug-in Car Grant. Capped at nearly $8,000, the grant will cover a quarter of the cost of electric cars for private and fleet buyers.

And finally...

The German government made public its new feed-in tariff (FiT) cuts. Rooftops and "brownfield" installations get a 16% cut after July 1. Farmland installations are no longer available.

Green Chip has covered this topic well, as subsidy reduction is a sure sign of an industry's maturity. And we've also correctly forecast the outcome: A rush on eligible installs would occur, fed by a rush of imported panels from China.

This is exactly what is (and has been) happening. And new financial reports are showing the result, which Green Chip investors have been capitalizing on...

Chinese companies are killing their quarterly reports. Trina (NYSE: TSL) just reported a $49.2 million quarterly profit, worth $0.74 per share. Estimates were only $0.60 per share.

And more companies are reporting soon, leading Deutsche Bank to practically upgrade the entire sector, saying it expects "Chinese solar firms to be the major beneficiaries of a growth in global demand for photovoltaic modules in 2010."

The success is coming at the peril of European based firms though. SolarWorld (XETRA: SWV), Germany's largest solar company, says it won't meet sales estimates for 2020; Q-Cells (XETRA: QCE) won't give an outlook for the year; and Renewable Energy Corp. (OSLO: REC) says the first two quarters would be "challenging."

We'll continue to help you navigate, starting with a summary of this week's coverage below...

Call it like you see it,

Nick

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Short of nuclear fusion (which is still decades away), this discovery could prove to be the greatest advancement to the world's energy crisis in 50 years! Green Chip reveals the company with the worldwide monopoly on this monster metal — and why you should buy this stock while it's still selling for less than 20 cents.

SEC Mandates Disclosure of Climate Risk: The SEC's Energy Game-Changer
Energy & Capital Editor Nick Hodge takes a look at a recent SEC ruling and divulges how it will impact energy investors.

The Golden State's Latest Wind News: The Recent Law that Will Propel Wind to Profit
Green Chip reports: On January 1, 2010, a new California state law went into effect. And now, 20% of all power generated by California utilities must be generated from renewable sources. This single wind energy stock could deliver gains of more than 112% in the next 4 months!

Arizona Anti-Solar Bill Defeated: Bureaucrats Backpedal on Solar-Killing Bill
Green Chip Publisher Jeff Siegel explains why bureaucrats have been forced to kill a bill that would've gutted the state's solar industry.

Change Coming to German Solar Industry: The World's Solar Panel Leader is Transforming
Editor Sam Hopkins separates fact from fiction in the plan to cut Germany's feed-in tariff (FIT) this summer.

Arizona Solar Bill: Bureaucrats Bully Arizona Solar
Green Chip's Jeff Siegel calls out bully bureaucrats that seek to sink solar momentum in Arizona.

Bloom Energy IPO?: Bloom Energy Featured on 60 Min
Editor Nick Hodge dispels rumors of a Bloom Energy IPO after the company was featured on 60 Minutes.

Debating Climate Change: Debating Climate Change Won't Make You Rich
Green Chip's Jeff Siegel explains why debating climate change won't make rich, but reveals some opportune places to look that could.

The Verdict on the Bloom Box and the 60 Min Coup: Is the Bloom Box Energy's Holy Grail?
Green Chip Editor Chris Nelder takes a critical look at the new Bloom Box fuel cell system, and concludes that it's a modest improvement over standard natural gas-fired power... 

Judging by the excitement around the unveiling of the Bloom Box, you'd think it was the Second Coming.

The green blogs fell all over themselves repeating the breathless "Holy Grail" speculations in Lesley Stahl's 60 Minutes report, which was indistinguishable from an in-house marketing puff piece.

Bloom Energy's media blitz ended eight years in stealth mode, and the star-studded coming-out ceremony on Wednesday featured notables such as board member Gen. Colin Powell, California governor Arnold Schwarzenegger, legendary VC John Doerr of Kleiner, Perkins, Caulfield & Byers, Google co-founder Larry Page, eBay CEO John Donahoe, and Wal-Mart COO Bill Simon.

The market could dwarf the Internet, they said. It's like another Google. It's a "disruptive technology" akin to cell phones replacing land lines. It will slash CO2 emissions and replace the grid. It's twice as efficient as grid power generation. Its technology is based on common beach sand, not expensive and corrosive materials. It will "change the world." (Cue Tom Waits' "Step Right Up.")

They congratulated themselves with bear hugs and "I love you, man"s.

Bloom Energy CEO KR Sridhar's laid out his bold vision: Bloom Boxes would provide affordable, abundant, reliable, clean electricity to every home and business and light up the dark areas of the world — in a decade. It's "a market size that starts with a ‘T'," not a ‘B', he said at the company's 2002 launch.

After a decade of studying energy, such claims instantly arouse my skepticism. I had to take a closer look.

What It Is

The Bloom Box is a mini power plant based on fuel cell technology. Fuel cells use an electrochemical (not thermal) process to separate the protons and electrons of the fuel and then pass the electrons through a circuit to generate electricity. At the end of the process, the protons and electrons recombine along with oxygen.

If the fuel is pure hydrogen, the emissions will be pure water, but if the fuel is a hydrocarbon, emissions will also contain carbon dioxide.

Fuel cells aren't new. The first was invented by a Swiss-German chemist named Christian Friedrich Schönbein in 1838, and at least 20 different designs now exist. A long history of companies has attempted to bring a cost-effective and practical device to market, and in the last decade hundreds of millions of dollars have been poured into their research and development.

None have achieved real commercial viability yet. According to data assembled by Fuel Cells 2000, fewer than 1,000 units are in operation or planned worldwide. One of the top public U.S. fuel cell manufacturers, Fuel Cell Energy, Inc. (NASDAQ: FCEL) has a mere 90 installations worldwide, and its stock has been moribund since 2002.

What's new about the Bloom Box is that it claims to be high efficiency (producing more power with less waste heat than other fuel cells), small, relatively cheap, and able to run on a variety of fuels including natural gas, landfill gas, and biogas. Its solid oxide design reportedly uses zirconium oxide for the proton-exchange membrane.

Let's have a look at the numbers, assembled from Bloom's statements and various blogs.

One cell produces 25 watts. A "residential sized" stack of cells produces 1 kilowatt (kW), which Sridhar claims could be on the market at a price point of $3000 in five years.

A 100 kilowatt system (before incentives) costs $700,000 to $800,000. For my purposes I'll take the high estimate and call it $8,000/kW.

Most units will run on natural gas. Assuming the gas costs $7 per million BTU, the cost of generation is in the $0.13 to $0.14 per kilowatt-hour (kWh) range, before subsidies. After factoring in the federal 30% investment tax credit, the $2,500/kW California rebate, and the claimed 10-year lifespan, the unit should produce power for roughly $0.08 to $0.10/kWh. The average retail grid power price in the U.S. is about $0.11/kWh.

Under those metrics, the company claims it will take three to five years to pay itself off, including the cost of swapping out the used-up fuel cell stack twice during the 10-year warranty period or not. This strikes me as a highly dubious claim.

The CO2 emissions when running on natural gas are reportedly 0.8 pounds/kWh, as compared with 2 pounds/kWh for coal-fired plants and 1.3 pounds/kWh for natural gas-fired plants. Hence the squishy claim that the unit produces power with "half the emissions" of grid power from natural gas.

What It Isn't

First, a 1 kW unit isn't enough to power a house in the U.S. I know from my experience in the solar business that 2.5 kW on an averaged demand basis is more like it.

Peak demand loads can be much higher. For example, a hair dryer, a microwave, and a toaster together could draw more than 5 kW. Large houses can need 10 kW or more on average. So even at Sridhar's $3000 price point for a 1 kW unit, a residential application would cost more like $7500.

But long experience in watching "breakthrough" devices like this come to market tells me that one has to discount the initial claims by at least a factor of two. So the real price point will probably be closer to $6000/kW in five years, or $3000 in ten, in which case the unit might never pay itself off in a residential application over the 10-year warranty period.

A quick calculation by Editor Rembrandt Koppelaar at The Oil Drum also questions the payback period. Assuming $0.10/kWh for grid power and an $800,000 cost for a 100 kW unit, he calculates it would pay itself off in 15 years — five years longer than its expected lifespan.

The eBay installation featured in the rollout offers a final example. The scant available information about this installation suggests that it consists of five 100 kW units, at a cost of $800,000 each, which have saved the company $100,000 in grid power costs over nine months. If that surmise is correct, then the $4 million installation will pay for itself in 30 years.

Second, since nearly all customers will run the unit on natural gas, it doesn't fulfill the claims of clean, abundant, or cheap power.

If my expectation of a global natural gas peak in the 2020-2025 range is correct, it could in reality make the situation worse, by moving significant loads to natural gas just as supply starts to flatten out.

In effect, it would allow us to crawl farther out on the fossil-fuel limb just before it cracks.

It definitely won't make sense to use solar power to crack water into hydrogen and oxygen in order to use the hydrogen in a fuel cell. It would be far more efficient, and cheaper, to simply use the solar power.

Third, the suggestion that it will "replace the grid" is simply nonsense. Few of the customers in the commercial market will generate all of their power with Bloom Boxes (the high-profile campuses currently testing the units get 15% of their power or less from them), and most buildings already have grid connections. The units might eventually replace some of the load carried by utility power plants, but that's about it.

Even a residential application would not eliminate the need for grid power unless it was sized to meet peak loads, which would not make economic sense.

Finally, and most importantly, there is the scale problem. I don't know what universe you'd have to live in to think that a company currently producing one unit a day is going to put several billion of them into operation in one decade, or even five. Particularly if your outlook on capital markets for the next five decades is informed by an education in peak fossil fuels.

The Verdict

The Bloom Box doesn't belong in any discussion about renewable, clean power, or changing the world.

The main effect of the device would be to transfer some of the power generation load off centralized coal plants and onto distributed natural gas plants.

Few customers — and probably only commercial and industrial ones, at that — will have the option of running it on biogas or landfill gas. For the slightly more than half of the homes in the U.S. that even have a natural gas line, it won't make economic sense.

Therefore, I do not expect it to become a viable residential application. Nor do I expect it to light up the Third World without installing a network of natural gas lines — in itself, an unlikely proposition.

A fair comparison would be to a standard natural gas-fired backup generator. A quick Google search finds an 18 kW Briggs & Stratton natural gas backup generator for $4,200. If $3,000 will get me a 1 kW Bloom Box, then an 18 kW device would be $54,000. Is that a price premium any homeowner would pay for slightly reduced emissions?

For another cost comparison, at $8000/kW, rooftop solar (after incentives) is cheaper today. As long as you have a functioning grid, the 24x7 benefit of a fuel cell (assuming uninterrupted natural gas supply) wouldn't be worth the cost premium over solar. And once it's installed, a solar PV system consumes no fuel, and produces no emissions.

By time a Bloom Box goes for $3,000/kW, my bet is that solar will still be cheaper. Should natural gas prices go to $15 or $20 in the next decade (a not unreasonable proposition) then solar will be half the price, or less, and the payback period for the fuel cell would lengthen considerably.

What it can do is allow commercial customers to claim some green cred for reduced emissions while paying close to the going market rate for power.

However, I expect a solid handful of more mature companies (like FuelCell Energy, Kyocera, UTC, and Ballard Technologies) to give them a run for their money.

If the Bloom Box does, in fact, sport a 50% efficiency gain over utility plants — which I think still needs to be proved — then that should confer an advantage on it in the form of carbon reduction incentives. That may be the best advantage the Bloom Box has.

There are certainly important intangible benefits in distributed generation and baseload (24x7) capacity, as my readers well know.

However, the Bloom Box's reliance on natural gas cannot be overlooked, and it appears that nearly everyone has overlooked it here.

The short lifespan of the device and the need to swap out the cell stack every five years must be factored in as well. The cost of maintenance and the availability of service technicians are important questions that still loom over the Bloom.

By comparison, a rooftop solar installation is low tech, low maintenance, and far more durable.

In short, I view the Bloom Box as a modest gain over the status quo in natural gas fired power supply. A world-changer it is not.

Too Big To Grail

The most interesting part of the Bloom Box story is the social aspect.

Lesley Stahl's gushing 60 Minutes take on the Bloom Box was, in so many ways, a paragon of everything that's wrong with energy coverage in the media.

She was in hot pursuit of "the next big thing," and found the unit to be "awfully dazzling" in a market "worth bazillions."

"I'm installing a power plant!" she exclaimed with childlike glee, as she peeled the shipping packaging off a new unit.

She was obviously very impressed that the technology was an inversion of an invention that could produce oxygen so people could live on Mars.

Her opening statement, "In the world of energy, the Holy Grail is a power source that's inexpensive and clean, with no emissions," is either a complete non-sequitur, or a concise demonstration of her energy illiteracy. One leans toward the latter explanation after watching her ask if the box could use solar as a power source, and Sridhar's humoring affirmation.

The pressure is clearly on the MSM to make some noise for Holy Grails.

There is also something telling about the appetite for hope in the way the blogosphere lapped up the excitement around the unveiling. The appeal to authority of the brass on stage clearly worked, producing uncritical comments like "Gee whiz, $400 million in capital, it clearly works, it's cheap, and fits in my backyard? I'm in!"

The fact is that the energy problem is too big to grail. Or, as the peakists say, "There are no silver bullets, only silver BBs."

BBs as in Bloom Box.

I want to be clear. I spent nearly two decades in the computer industry before I got seriously into energy. I used my first computer (a very early, educational prototype) at the age of five, in 1969. I saw the computer revolution firsthand, and I know the power of technological development.

But I also know that the ingrained optimism of Silicon Valley entrepreneurs — as much as I love them — simply does not translate to the challenge of generating or saving hard BTUs. No single technology will save us. Moore's Law does not apply here. The history of energy is littered with the bodies of enterprising souls just like them.

One thing I will say: Only a venture capital firm with the power of Kleiner, Perkins could coordinate such a media blitz and star-studded unveiling, and wow the socks off the media. My hat is off; they scored a major coup with this one.

I remain staunchly rooted in numbers and of the mind that it's better to have no hope than false hope, because it pushes us toward real solutions.

The Doomsday clock is ticking. It's time to put aside childish things, retire the phrase "Holy Grail" permanently, and get real about energy.

Until next time,

Chris

P.S. While the Bloom Box is no doubt a step in the right direction in the ongoing search for energy's Holy Grail, we still need to consider other sources of energy to deal with the scope of the oncoming energy crisis — and all signs point to nuclear as a viable option. Green Chip has uncovered a little-known metals company with a monopoly on the new "monter metal" that will change the nuclear game. This brand-new report reveals this $0.16 company about to launch to the top of the industry.  

Editor's Note: Kudos to Lux Research, The Oil Drum, Wired and WattHead for their informed commentary on the Bloom Box.

The new bill would've also done away with the state's distributed energy standard, which requires 30 percent of all renewable power produced by utilities to come from rooftop systems.

Well, it looks like that bill was killed on Thursday after a flood of opposition forced a few less-than honorable policy makers to backpedal.

One very influential opponent to the bill was Suntech Power (NYSE:STP), which made it crystal clear that the state could very well lose the company's new manufacturing facility that would ultimately end up creating a lot of jobs for currently-unemployed Arizona residents.

Of course, it didn't take long for one bureaucrat to complain that the Legislature was being unfairly criticized as being anti-solar. According to House Speaker Kirk Adams, the Legislature has done several things in the past year to bolster the solar industry's efforts. Particularly SB 1403 which provides incentives for bringing high-wage manufacturing to the state.

So the question is, if these guys are so pro-solar, why would any of them support a bill that would essentially gut the industry's progress in the Grand Canyon state?

It's all politics. It's always politics with these guys. But thankfully, enough folks were fired up enough to let these guys know that solar will not be an afterthought in the state's energy mix.

Jeff

• Rooftop solar PV installations will see a subsidy cut of 16%.

• Ground-based modules installed in yards and other open, non-arable patches of land will be 15% less funded by the changed FIT.

• PV projects at dumps and old army bases, which along with contaminated industrial plots are called "brownfields," are set for an 11% cut.

The most dramatic shift we can expect in the second half of 2010 is a complete elimination of incentives for large solar panel arrays on arable land. State news agency Deutsche Welle reports that farmers have been crying foul about investors snapping up fertile tracts to "harvest the sunshine." MP Peter Altmaier, a leader of Angela Merkel's own Christian Democratic Union party, insists, "There must be no more panels installed on arable land."

Aside from that apparent inclination toward a total prohibition, the expected FIT changes for H2 are just that — expected.

Don't Believe the FIT Hype

Though the catchier headline may be to say that Germany's government is yanking the rug out from under its homegrown clean energy champion, the entire point of a feed-in tariff program is to phase the industry to grid parity with its fossil-fuel counterparts.

Coal and natural-gas fired power plants generate electricity for about 20 euro cents per kilowatt-hour. Under the FIT — which is set up to pay a premium for energy generated by photovoltaic panels (the same system can be applied to other sources) — Germany has already gone from a whopping 57 euro cents (c) per kWh in 2004 down to 39c now.

It's all part of a process initiated back in 2000, when the Bundestag passed its Renewable Energy Act. "Cleantech" hadn't dawned yet, and oil was far from record highs it reached later in the decade.

So Germany was ahead of its time and has reaped the benefits of a steroid-injected clean energy economy. Berlin's goal was always to wean producers and installers off the government juice, and that's what we're seeing now.

The come-down hasn't caused the German solar industry to fall flat on its face. Rather, companies like Q-Cells — whose facilities I toured in summer 2008 — are staying on their toes.

The FIT plan will be taken up again on Friday, at which point investors will have a more certain basis for what to do with their money. In the meantime, shares of Q-Cells (Frankfurt: QCE) rose on Tuesday, February 23, a day after draft FIT changes leaked. 

Q-Cells investors turned bullish after the company announced that at the end of 2009, its cash position was nearly 65% better than they anticipated.

That stockpile leads me to believe that German solar companies are padding themselves for a blow. Their dominance as producers is due to the size of the market that was created by government mandates, not the other way around.

For installers at all levels — household, commercial, and large-scale "solar farm" developers — now is the time to get capacity in place.

Q-Cells says it's sold out of panels for the first half of 2010, and analyst reports I see every day from solar power suppliers around the world (especially China) indicate that nearly all shipments are being directed to Germany to feed the frenzy. That shift in focus for the first half of 2010 is going to be one of many in the full year and years to come.

German FIT Changes Spread Far and Wide

It costs about 1 billion euros per month to subsidize new solar schemes, and relief for rate-payers must be part of the political calculation going into the finalized FIT cuts. However, the government maintains its target for 66 GW of solar power capacity by 2030 — up from 9 GW today.

Gordon Johnson of Hapoalim Securities thinks the less-than 3 GW per year growth that the 2030 target implies could set solar stock buyers up for a fall, since analysts have based estimates on higher annual increases.

The fact of the matter is that even German companies aren't putting their eggs in one basket these days. If anything, the government has done German solar panel producers the favor of forcing diversification.

The Desertec initiative to get 15% of Europe's electricity from North Africa by 2050 is being led by ten German companies, and in mid-February, Desertec CEO Paul van Son contrasted that undertaking with Germany's rural unrest over solar.

"There's a vast amount of sunshine" in North African countries like Morocco, Tunisia, and Algeria, points out van Son, "and there are vast amounts of space."

Germany is big, but of course it's much more fertile than the Sahara, and no one will tell you it's sunny.

On the other hand, Italy is making long strides toward grid parity between its solar capacity and fossil-fuel plants by virtue of its Mediterranean climate. Look for that country to draw some of the salespeople out of Germany after July.

The point is that international solar power companies — from polysilicon providers up to module makers  —all have their heads on a swivel right now. Average sales price (ASP) will be a concern as any national subsidy cut directly affects the money being pumped in from the top.

Long-term solar power bulls are in a good position here, as some stocks and funds like the Claymore/MAC Global Solar Index ETF (NYSE: TAN) appear oversold.

Here we see TAN's performance over the past six months, with a couple of my favorite technical indicators on top:



The Williams Percentage Range indicator gives a heavily oversold reading, and TAN is breaking below its lower Bollinger Band. You can see that the last time W%R was at this level, we didn't see a recovery... but reports about the German FIT were coming in unfiltered flurries at that time.

Now, we have more information, and it's reasonable for investors to look ahead at how companies will adjust to new subsidy conditions, rather than just freaking out and running for the exits.

I'll get back to you with even more complete information next week after the Bundestag session takes the FIT changes from rumor to reality.

Regards,

Sam Hopkins

International Editor