Friday, January 30, 2009

Oil and Renewables

"Our view is that oil production will peak in the near future. We need to develop... alternative energy sources." - Katsuaki Watanbe, President, Toyota

Accounting for 80% of total US energy consumption in 2007, fossil fuels are a significant part of America's energy mix. In 2007 renewables accounted for only 7% of US energy consumption. On 16 January 2009 the International Energy Agency projects global oil demand in 2009 at 85.3 mb/d. As the world's most actively traded commodity, the price of oil directly influences energy prices. As the price of oil increases, renewable energy grows in value, as the price of oil falls, renewables become less economically and financially attractive.

Last summer oil was approaching $150/barrel, this represented an increase of 50% in 6 months, and 6 times 2003 levels. Since the summer, oil prices have fallen by about 75%, to just over $40 per barrel. During this same time frame solar companies like FSLR reflected the price of crude and were posting major gains, but like oil prices, solar stocks fell towards the end of the summer.

Using words like 'incredulous' and 'inexplicable' many pundits are at a loss to explain oil's meteoric rise and rapid descent. In a Huffington Post article entitled What Goes Down, Must Go Up? Matt Simmons an oil industry analyst with nearly 40 years of experience, "notes that plummeting prices haven't been driven by any material declines in global demand, 'Crude oil has peaked' and 'Its future decline could be swift,' giving credence to his warning that 'What goes down can come right back!' The logic of his analysis suggests that oil prices cannot sustain for long at $40/barrel."

According to John Kilduff, a senior vice president with MFGlobal, "Nothing depresses energy prices more than a dismal employment outlook that curbs fuel usage." Fuel prices will likely start to increase in the spring, however we are unlikely to see $150 barrels of oil in 2009. We are currently experiencing a recession-induced demand drop, (The expected two-year contraction in oil demand would be the first since 1982 and 1983). "At the first signs of a real and sustained improvement in the economic outlook, oil prices should rebound and [there will be] a run-up to $70-a-barrel oil, and that will happen quickly," says Kilduff.

An October 2008 report entitled "Ratcheting Down: Oil and the Global Credit Crisis", indicates that $100/barrel are eminently justifiable. "Simmons has often said that oil at even $150/barrel is still incredibly cheap." To make his point, "Simmons invokes the perspectives of the new leadership at the International Energy Agency -- 'Current energy supply trends are patently unsustainable,' 'Future of human prosperity depends on how we tackle our energy issues', Consequences of policy/investment inaction are shocking', 'Massive investment required', and 'Time is running out and [the] time to act is NOW!' -- and closes his presentation by declaring that 'Yes We Can' solve this bleak energy future, but we now need to sprint into hasty retreat from our addiction to oil and gas.'"

Fatih Birol (IEA), wrote on March 2, 2008, “We are on the brink of a new energy order. Over the next few decades, our reserves of oil will start to run out and it is imperative that governments in both producing and consuming nations prepare now for that time. We should not cling to crude down to the last drop – we should leave oil before it leaves us. That means new approaches must be found soon..... The really important thing is that even though we are not yet running out of oil, we are running out of time.”

Increasing our reliance on renewable power is the only logical response to address dwindling supplies of oil and crucial environmental considerations, not to do so would invite calamity on a scale that would dwarf the current economic crisis. "In the longer run, unless we take serious steps to prepare for the day that we can no longer increase production of conventional oil, we are faced with the possibility of a major economic shock and the political unrest that would ensue." Dr. James Schlesinger, former U.S. Energy Secretary

The logic is inescapable, energy conservation and renewable power benefit us ecologically and economically. Increases in the price of crude have many implications for investors, including the fact that increasing oil prices will be good for alternative energy. If you choose to invest in renewable energy do so while oil is still cheap.

"One thing is clear: the era of easy oil is over. What we do next will determine how well we meet the energy needs of the entire world in this century and beyond." - David O'Reilly, CEO, Chevron

Wednesday, January 28, 2009

Investing in CleanTech: Efficiency Upgrades and Renewable Energy

In the US CleanTech* will continue to move forward in spite of the global economic recession. However, as indicated by frozen credit markets we still can't see the light at the end of the tunnel. Ongoing tribulation in the housing and banking markets, uninspiring consumer spending, and daily job cuts make it clear that we have not hit bottom yet.

According to President Obama, energy is a matter of national security, and crucial to the future of the American economy and national security. Obama’s energy plan calls for a $150 billion investment in clean technologies over the next 10 years. It emphasizes GHG reductions, energy efficiency programs, low-carbon biofuels, and renewable energies. Obama plans to impose measures that ensure that American utilities generate 10 percent of electricity from renewable sources by 2025. Obama's focus will help drive the Green megatrend forward in the hard months and years ahead.

President Obama's concerns about energy are well founded. The International Energy Agency (IEA) indicated that fossil fuels will simply not be able to keep pace with US energy demand. In response the President has confirmed the future of renewable energy in the US. The IEA World Energy Outlook (12 November 2008) indicates that renewable energy will soon become the second largest source of electricity.

The IEA's World Energy Outlook also reports that coal may not be as abundant as once thought and the world will hit a gas plateau by 2020, and go into decline by around 2025. In North America, producing gas wells have tripled since 1971, but natural gas production is actually falling. Many suggest nuclear is the solution to America's energy requirements, but there are limiting factors, like the availability of uranium.

We are coming to understand that oil is a finite resource. We now find one barrel of conventional oil for every 4 we consume. New wells drilled over the last few years have nearly doubled, but production has remained flat. About 75% of the world's current oil production is from fields that were discovered prior to 1970, which are past their peaks and beginning their declines. And the remaining 25% comes from fields that are now 10 to 15 years old.

Apart from scarcity, as the leading source of GHGs, fossil fuels come with the added distinction of being an environmentally destructive source of energy. A new energy economy is required to manage dwindling supplies of fossil fuels. Failure to address these issues now could prove to be a crisis more devastating than anything we have faced thus far.

The Obama administration has proposed two major approaches to managing energy, enhancing efficiency and expanding alternatives. Renewable alternative energy sources like solar, wind and geothermal, will be increasingly important contributors to America's new energy mix. The Department of Energy (DOE) has indicated that the entire US power demand could be met by a solar system covering about 9% of Nevada, an area of approximately 92 miles by 92 miles. (The extension of solar energy tax credits and increased utility focus on renewable power will further brighten solar's future). The DOE has also stated that wind has the potential to provide 5,800 quads of energy each year, that is 15 times the current global energy demand. According to M.I.T., there are over 100 million quads of accessible geothermal energy worldwide, that is 2500 times the worlds yearly power consumption.

In terms of energy efficiency, governments can be expected to increasingly demand green buildings for both themselves and the private sector. This should help the Green-building industry continue to grow at a prodigious rate, but the focus should begin to switch from new buildings to greening existing buildings. Enhanced efficiency in the automotive sector could also play an important role in helping to make America more energy efficienct. According to the Institute for the Analysis of Global Security, if all cars on the road were hybrids, and half were Plug-In Hybrid Electric Vehicles by 2025, US imports would be reduced by 8 million barrels per day. That's about 80% of current US daily consumption.

There is strong evidence that Green will just keep growing. In a January 19, 2009 article written by Jacklyn Rome, cleantech* is described as, "one of the fastest growing areas of investment within the venture capital and private equity community, showing constant growth since 2003 and accounting for 7.4% of total venture investment in 2007. According to data compiled by Cleantech Group, LLC, the 3rd quarter of 2008 saw $2.6 billion invested in 158 deals in the sector, with total investments in 2008 projected between $7.6 and $8.1 billion. This represents 30% growth in comparison to 2007’s $6.01 billion, $2.2 billion of which was invested in U.S. companies. Internationally, interest in cleantech has grown in countries around the world, particularly in the Middle East, Europe, and China. As new regulations are put into effect globally, particularly in emerging markets such as China, demand for innovative energy sources and cleantech solutions will grow as existing resources are depleted."

Last year's spike in fossil fuels fueled the recession and put the entire global community in a very vulnerable position. But this glimpse into the future also created fertile ground for a renewable energy bull market. Cleantech and more specifically renewables may prove to be amongst the greatest investment opportunities of the 21st Century. Critics have been silenced by the momentous growth of renewable industries and the number of double and triple-digit winners. Despite the current economic downturn, cleantech remains one of the only sectors still projecting investment growth.

Thousands of investors are planning to profit from the integration of renewable energy and efficiency upgrades in the US, the question is, will you be amongst them.

*The cleantech category is comprised of a variety of subsectors that represent products, services, and technologies created to reduce greenhouse gas emissions, develop energy independence, promote energy efficiency, and conserve natural resources. Subsectors within the category include, solar, wind, biofuels and geothermal. Infrastructure to support alternative energy generation. Energy storage incl. batteries, fuel cells, etc.. Agricultural productivity and natural pest control technologies. Materials and manufacturing processes requiring less resource intensive inputs. Pollution control, recycling, clean coal, and wastewater/water technologies.

Tuesday, January 27, 2009

Conservative Budget: No Green for Canada

An hour ago the Conservatives released the Canadian budget, but from a Green perspective there is not much to report. The budget plans for $40 billion in federal government spending over the next two years and a planned deficit of $85 billion over the next five years. Yet despite this unprecedented government spending, there is very little for Green.

The budget outlines infrastructure building programs worth 12 billion, and 3 billion goes into a program for home renovations. The home renovation tax credit program entitles households to as much as $1350 and is valid until February 2010. (The total housing package is worth 8 billion). Although Obama's team has put forward impact data questioning the utility of tax cuts, the Conservative budget offers an additional two billion in income tax cuts. Except for a few dollars to improve grid efficiency, Green industries like clean-energy get no support from this Conservative government.

Sadly, Canadians have missed a valuable opportunity to begin building a twenty-first century Green infrastructure. Rather than elaborating a strategy focusing on the key levers of the economy the ruling government has sprinkled money around with the cynical hope of keeping their hold on power.

Obama's Executive Orders

Although only two weeks old, the Obama administration is tangibly demonstrating its commitment to Green. Unlike previous Presidents, Obama is doing more than talking about reducing US dependence on foreign oil. Yesterday the President signed two executive orders and Secretary of State Hillary Clinton appointed a special envoy for climate change.

On Monday 26 January 2009, President Obama introduced his executive orders as follows, "I want to be clear from the beginning of this administration that we have made our choice: America will not be held hostage to dwindling resources, hostile regimes and a warming planet. Today I’m announcing the first steps on our journey toward energy independence, as we develop new energy, set new fuel efficiency standards and address greenhouse gas emissions."

Obama's executive orders direct the Environmental Protection Agency to reconsider a waiver denied to California to toughen auto emission standards. He also ordered federal transportation officials to develop new federal rules directing automakers to start making more fuel-efficient cars for the 2011 model year. As indicated by the President, the goal "is to help America's automakers prepare for the future. The American Recovery and Reinvestment Plan before Congress places a downpayment on this economy. It will put 460,000 Americans to work with clean energy investments and double the capacity to generate alternative energy over the next three years. It will lay down 3,000 miles of transmission lines to deliver this energy to every corner of our country. It will save taxpayers $2 billion a year by making 75 percent of federal buildings more efficient. And it’ll save working families hundreds of dollars on their energy bills by weatherizing 2 million homes."

Obama made it clear that he seeks to seize the promise of energy independence, "for the sake of our security, our economy and our planet, we must have the courage and the commitment to change." Obama also said dependence on foreign oil "puts the American people at the mercy of shifting gas prices, stifles innovation and sets back our ability to compete."

Perhaps most importantly, Obama has promised that Green will continue to receive attention even when gas prices fall, and this is precisely what free markets cannot do on their own.

Obama concuded, "Now is the time to make the tough choices. Now is the time to meet the challenge at this crossroad of history by choosing a future that is safer for our country, prosperous for our planet, and sustainable. Those are my priorities, and they’re reflected in the executive orders that I’m about to sign."

Monday, January 26, 2009

The Canadian Budget: Green Stimulus?

Tomorrow, Canadian Conservative Finance Minister Jim Flaherty will table the latest federal Budget and many expect to see support for the Green economy. The budget will feature a $34-billion deficit with investments in infrastructure and tax cuts, to succeed it must appease the popular will to stimulate Canada's economy and satisfy the opposition to ensure the government's survival.

The Finance Minister has stated that the budget will introduce notable tax changes as a means of supporting the wavering economy, "(w)e are in extraordinary times (that call) for some extraordinary thinking." The Prime Minister said that the government will take "big comprehensive actions" with the Budget.

It is expected that the Budget will introduce tax incentives aimed at encouraging environmental change and supporting the Green economy. Energy efficiency rebates and retrofit programs will likely be expanded. Other possible programs include hydro developments, a northern natural gas pipeline, and expanded rail services in metro areas.

We should be looking at renewable indigenous sources of energy production. Canadians seem to like hydro and geothermal energy. However, the cost effectiveness of alternative energy projects is effected by the price of oil, and as oil values are expected to remain low in the short term, these projects require government intervention in the form of subsidies.

The Obama administration has made it clear that the Green economy is a high priority issue. To remain competitive and to balance environmental and economic objectives, the Canadian government must integrate its Energy and Environmental strategy with the new American Administration.

An effective stimulus is not simply a make work project, nor is it about partisan political interests. Our current economic climate demands that our political leadership invest and manage capital with the aim of retooling our economy for a more competitive future.

As reported in the National Post four former Liberal and Conservative Prime Ministers have called for a Green stimulus. With the prevailing economic climate the old polemics have no place. Conservatives must employ 'liberal' stimulus economics and Liberals who seek to be credible members of the opposition must embrace free markets and globalization.

The community of nations is working more closely than it has in recent memory, given the level of environmental and economic integration in the world today, we can only hope that the Liberals and the Conservatives will find common ground to confront one the greatest challenges in a generation.

Friday, January 23, 2009

Post Inaugurial Green Market Report

The only thing markets hate more than uncertainty is the certain admission of economic calamity. With references to 'Valley Forge' and images of 'snow stained with blood' the new President made the magnitude of the challenges clear. Rather than lyrical poetry inspiring hope, we heard the hard truth rendered in measured prose.

Investors are understandably wary, as the President was taking the oath of office, the American banking system, the life blood of the economy, was in deep distress. The Treasury Secretary, Timothy Geithner tried to allay market fears by stepping in and pledging more banking relief. And on Wednesday stocks rallied closing higher erasing most of the losses of the previous day. On Thursday the major indexes fell more than 2% after Microsoft Corp's earnings missed expectations and lower than anticipated housing market data added to economic concerns. Today markets closed with the NASDAQ posting an 11 point gain. The Green Market's Solar, Energy Efficiency and Lighting portfolios are also up today averaging an almost 2% gain, while Wind and Geothermal declined less than 1%.

This extreme volatility is supported by contrary signals. "The bulls point to a tenacious support at S&P 500 (SPX) 800 to 820; an oversold stochastic, which almost gave a buy signal on Wednesday; grossly oversold internal indicators yesterday; and high fear numbers by the Association of American Investors (AAII) and others. But the bears say that a breakdown is almost upon us and point to the higher CBOE Volatility Index (VIX), a foreboding series of charts, and a world banking crisis that seems to have no end."

Despite the market turmoil and recession fears, as The Green Market has been saying for some time now, some Green sectors are likely to benefit from the Obama presidency. Obama's energy team is focused on renewables and this has fueled insider optimism. "The folks that they've chosen are complementary," says Julie Blunden, a vice president of solar company SunPower (SPWRA) "Most of them know each other and they have a breadth of experience across the country, including several markets that are important to renewable energy going forward."

In a January 22 article entitled "Industry Outlook for Alternative Energy Stocks: Speculative - Bullish" Senior Analyst Jonathan Kolb said, "Solar and wind power generation have emerged as the most rapidly growing renewable energy sources. Many companies engaged in the solar power market offer profitability with strong average long-term annual earnings growth expectations of approximately 40%, stock price valuations significantly discounted from their recent historic highs, and a favorable political environment."

Dramatic change in Washington brings uncertainty with it, and as much as that inspires fear in some, it also gives others reason to hope. Most Americans and many around the world see him as the most influential and inspiring figure of our times. As a Presidential candidate Obama helped to inspire a record 69 million voters, and as President his inauguration had more viewers than the Super Bowl (94.5 million). Obama's ability to command an audience empowers the ideas he promotes.

Renewable energy and energy efficiency are central to the President's stimulus plan for American economic renewal. In the inaugural address on January 20, 2009, President Obama reiterated his pledge to transform U.S. energy policy. The Obama Administration is working with Congress on a stimulus plan that invests heavily in renewable energy sources like solar and wind and rebuilding the electricity transmission grid. Wednesday the Obama administration said that three quarters of its $875 billion economic stimulus package should be spent within 18 months. Earlier today the President said Congress is "on target" to approve a massive new stimulus package by Feb. 16.

However, there are risks, Kolb is rightly concerned that "the global economic crises may temper alternative energy sales and earnings growth. And continued weakness in the debt and equity markets, could raise the costs of capital for firms in this emerging sector, and may prevent project financing, working capital requirements, and new research and development."

The recession, the lack of available credit and recent oil prices threaten to undermine the rise of renewables. The success of solar depends on a substantial improvement of the financing environment and the Obama administration has indicated that it will make credit available. The price of oil and coal make investments in renewables less attractive. But many expect the current supply cutbacks in oil and natural gas will lead to increased energy prices later in 2009.

Aggressive monetary and fiscal policy could lead to the beginning of an economic recovery this year and this presents a compelling profit opportunity for Green investments in America's new energy economy.

Wednesday, January 21, 2009

Excerpts of Obama's Inaugural Address

"Forty-four Americans have now taken the presidential oath. The words have been spoken during rising tides of prosperity and the still waters of peace. Yet, every so often the oath is taken amidst gathering clouds and raging storms.

That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.

Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.

Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America – they will be met. On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.

On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn out dogmas, that for far too long have strangled our politics. [W]e understand that greatness is never a given. It must be earned.

This is the journey we continue today. We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions – that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking.

For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act - not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology’s wonders to raise health care’s quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories.

The question we ask today is not whether our government is too big or too small, but whether it works. And those of us who manage the public’s dollars will be held to account - to spend wisely, reform bad habits, and do our business in the light of day – because only then can we restore the vital trust between a people and their government.

Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control – and that a nation cannot prosper long when it favors only the prosperous.

The success of our economy has always depended not just on the size of our Gross Domestic Product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart – not out of charity, but because it is the surest route to our common good. [We need] even greater cooperation and understanding between nations.

And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to suffering outside our borders; nor can we consume the world’s resources without regard to effect. For the world has changed, and we must change with it. [We must] embody the spirit of service; a willingness to find meaning in something greater than themselves.

What is required of us now is a new era of responsibility – a recognition that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.

So let us mark this day with remembrance, of who we are and how far we have traveled. In the year of America’s birth, in the coldest of months, a small band of patriots huddled by dying campfires on the shores of an icy river. The capital was abandoned. The enemy was advancing. The snow was stained with blood. At a moment when the outcome of our revolution was most in doubt, the father of our nation ordered these words be read to the people:

Let it be told to the future world...that in the depth of winter, when nothing but hope and virtue could survive...that the city and the country, alarmed at one common danger, came forth to meet.

In the face of our common dangers, in this winter of our hardship, let us remember these timeless words. With hope and virtue, let us brave once more the icy currents, and endure what storms may come. Let it be said by our children’s children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God’s grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations."

Monday, January 19, 2009

Obama Effect: Timing an Early Rally and Long Positions

Today is Martin Luther King Jr. Day in the US, a federal holiday marked as a national day of community service. Tomorrow Mr. Obama will be sworn in as the 44th president of the United States. For most Americans and others around the world, this historic moment offers the promise of renewal and the hope that comes with a different approach to the difficult problems of our times.

As reported in a January 13 article entiled 'Buy Stocks On Expected Obama Rally', President-elect Obama’s plans to stimulate the economy "should create an Obama rally in the early days of his presidency." The author of this article recommends, "taking select long positions. Look for stocks that are exhibiting bullish signs in early trading and start accumulating positions. There are risks, as we are now entering earnings seasons, as well as economic related news to contend with, but in all, traders should be able to score some points off the incoming administration."

Although Obama's proposed policies have been well received by most, markets fear the uncertainty of change. In an Option's Zone article, John Jagerson suggests we should pay very close attention to Presidential cycles. "there are some very consistent statistics about presidential terms that may help us make some estimates about the next four years. What we found is that it really doesn't matter who the president is, but that it is someone new and that the cycle of presidential life has begun again."

"Statistically, over many administrations, an unusual pattern has emerged." This is what is known as the presidential stock market cycle. The data reveals that historically the first year of a president's term offers a very modest gain for stock markets (4%), the second year is little better (6%), the third offers the most substantial returns (18%), and the fourth is stronger than the first and second years but not as strong as the third (10%). The pattern holds true whether you use small caps or large caps or a mix of small and mid-cap stocks.

Jagerson explains it this way, "The excess governmental activity in the first year creates a lot of uncertainty. By the time the third year comes around, the administration is typically "retrenching" and trying not to mess up too much before they have to run for office again. That slowdown in activity may remove some of the uncertainty in the market, which could be one explanation for the boost in the third year."

The Obama Effect will benefit some stocks, but in 2009 we are likely to see continued volatility as markets adjust to policy changes. "An aggressive and risk tolerant small-cap investor can provide a small hedge against a decline without eliminating the possibility of some profits. Covered calls on a small-cap ETF may be just the solution." The same author explains how "a covered call with an expiration of January 2010 can provide a hedge of 10% of the total value of the ETF while still providing the opportunity for 20% maximum profit, should the market rally. In some cases, this potential return could be much higher if you sold the covered calls on a month-to-month basis during the next year."

There are several key dates that Obama Effect investors should note. The oath of office and Presidential Address on January 20, and the passing of an Obama stimulus plan by Congress (within the first hundred days). Wednesday, January 21 will be President Obama's first full day in office. He will convene a meeting of his top economic advisers and issue several executive orders on issues including the environment. (CNN reports that another option under consideration is an executive order raising fuel efficiency on automobiles.) When stocks move up after inauguration, lock in profits, and when congress starts debating an Obama infrastructure bill, assume long positions. During the week of February 23, look for President Obama to deliver a speech to a joint session of Congress underscoring the dire state of the economy.

Each president has had a legislative agenda which in turn effects different sectors of the stock market. Under Clinton tech stocks sky rocketed, under Bush it was oil, with Obama it will be renewable energy. Understanding how to earn short term profits before taking long term positions will provide investors with a good strategy for leveraging the Obama effect.

Friday, January 16, 2009

The Obama Effect (Obama Stock)

As the American Presidential inauguration is about to begin, it has become increasingly clear that President-elect Obama's recovery plan relies heavily on investments in Green. Renewable energy projects are crucial pieces of his $1 trillion new energy economy stimulus strategy. Obama plans to invest $150 billion in clean energy projects over 10 years on things like wind and solar farms. In addition to the spending, Obama has already has pledged to push for new mandates on energy and efficiency. (eg: 10% of US electricity must come from renewables by 2012 and 25% by 2025). Congressional leaders and Obama aides recently suggested that $50 billion will be proposed to build new transit lines, make buildings more efficient, and manufacture vehicles with smaller environmental footprints.

As reported on PR Newswire, to meet the President-elect's goal of doubling renewable energy production in the next three years, Congressional leaders together with Obama's new Cabinet are planning a $25 Billion stimulus package. Obama’s stimulus package also calls for $20 billion in clean energy tax credits. A new agency, the National Clean Energy Lending Authority could receive as much as $10 billion to extend low-interest loans, grants or guarantees to wind, solar and other renewable energy projects. President-elect Obama's Cabinet favors an $8.6 billion extension of the Federal Production Tax Credit, a program that speeds-up the building of new wind power generation projects.

Obama’s plan calls for energy efficiency overhauls for 75% of federal government buildings and 1 million low income homes. Obama has also promised massive investment to build a modern electrical grid and loan guarantees for manufacturers of lithium-ion batteries.

According to the Business & Media Institute, when stocks rose on Election Day 2008, the media credited investors’ excitement to Democratic nominee Sen. Barack Obama. AFP emphasized that the rally was the largest Election-Day rally in history. One global news agency trumpeted the biggest Election Day rally in history as an “Obama effect”.

The solar industry has already felt some rays of sunshine from Obama's pledge to invest in renewables. And Obama's influence on the market is not limited to the US, the 'Obama Effect' was credited when markets soared in Europe and Latin America last November.

Although certain types of businesses might be “at risk” under Obama, (ie, tobacco, Big Oil, brokers, pharmaceuticals). On the whole we can anticipate a favorable market response. USA Today said, "In election cycles since World War II, the Dow Jones industrials have posted bigger average returns under Democratic presidents.” My own research indicates that the S&P 500 has responded favorably in 4 of the last 6 Presidential inaugurations.

In an article entitled "Ideas For a Post Inauguration Obama Bounce" Seeking Alpha reports that "Some of the largest profits in history were spawned from legislation and court rulings. Take solar energy for example. After the introduction of the Solar Energy Research and advancement Act of 2007, investors watched as solar companies’ share prices exploded. One of the biggest winners was First Solar Inc (FSLR). The bill was brought before the House of Representatives on June 19, 2007. Over the next 12 months, First Solar’s shares jumped 300%. Another was SunPower Corp (SPWRA). SunPower’s shares blew up 151% in just six months. Both of these gains can be directly attributed to a small bill being read in the House. This can happen on any particular day with any particular piece of legislation. We never know which bill or act will cause such run ups. But after November 4, we have a pretty good idea."

With the Obama administration preparing to usher in a new era of prosperity by weaning America away from fossil fuels, some of the best opportunities are in renewable energy and energy efficiency. Even prior to the 'Obama effect', renewable energy was the fastest growing sector in the US economy and it continues to be a powerful economic engine. Sales of new materials and equipment for the renewable energy sector reached $25 billion in the US this year, up from less than $10 billion in 2004.

According to Seeking Alpha, there is an 'Obama profit opportunity' fixing renewable energy's fatal flaw; energy storage. ZBB Energy Corp (ZBB) designs and manufactures a special type of fuel cell storage device called Zinc Energy Storage Systems (ZESS). ZBB’s systems are used worldwide in the renewable energy fields. What makes the ZESS so interesting is that it only takes three to four hours to charge.

As reported in PR Newswire, in the wind sector, most turbine manufacturers are foreign owned and not likely to qualify for stimulus dollars. Analysts expect US based wind power project builders, to be big winners. New Jersey's NRG Energy (NYSE: NRG) has just completed its second wind project in Texas and Denver based Nacel Energy (OTC Bulletin Board: NCEN) also has 2 wind projects in Texas.

There is a lot of room for growth in the US solar sector (see previous solar posts including Solar Stock Picks). Particularly noteworthy is New Mexico's Emcore (Nasdaq: EMKR). Both Emcore's semiconductors and Evergreen's solar modules expected to benefit from increasing demand as the Obama stimulus plan is implemented over the coming months.

Inaugural events commence tomorrow Saturday, January 17 and culminate with the oath of office and address on January 20. An estimated 4 million people are expected in Washington in the next few days and the inaugural address can expect an international audience in the hundreds of millions.

Seeking Alpha believes that within the first 100 days of Obama’s inauguration, the demand for wind and solar will multiply. However, falling polysilicon prices, ongoing banking fallout, tight credit and declining crude prices give investors reason to be wary. The question is, will Obama's programs be enough to inspire investors after inauguration day? Besides galvanizing hope, Obama gives us a trillion tangible reasons why we can expect certain industries to respond favorably.

Thursday, January 15, 2009

Geothermal Stock Review

Geothermal offers abundant energy with minimal environmental impact and it is located right beneath our feet. Geothermal systems use the Earth's stable ground temperature to heat in winter and cool in summer. Geothermal, (also know as Geoexchange) has been recognized by both the Environmental Protection Agency and the US Department of Energy as the "most efficient and environmentally friendly way to heat and cool a building." The downside of geothermal has always been the large up-front cost associated with the ground loop.

Obama's massive energy overhaul of federal buildings may justify the the up-front cost given the savings provided by geothermal in the long term. In addition, a new federal tax credit for geothermal systems was passed in 2008 (10% for commercial installations, $2000 for residential), which serves as an additional stimulus for the growing private sector market.

This is an opportune time to consider geothermal investments. Here are 4 geothermal companies located in North America.

Geothermal Heat Pump Stock Picks

Waterfurnace Renewable Energy (WFIFF.PK): Waterfurnace manufactures heat pumps for both residential and commercial buildings. According to their third quarter financial statements, the company is in good shape from a liquidity perspective. They eliminated an unused line of credit in the quarter, paid off the balance of outstanding bonds they had used to build their facilities and their current assets exceed total liabilities. Their cash flow from operations is growing. Waterfurnace paid a dividend of over 3%.

LSB Industries, Inc. (LXU): Their climate control division, which includes heat pumps and air handling systems, accounts for about 41% of sales. LSB has a strong balance sheet and their current assets exceed total liabilities. Both Waterfurnace, LSB boast strong balance sheets and inexpensive valuations. They are likely to receive a boost from the stimulus package.

Nevada Geothermal Power (NGLPF.OB): Although Nevada Geothermal is currently unprofitable, their Blue Mountain geothermal project has sufficient financing to take it to production, which the company expects near the end of 2009. As the expectation of revenue draws nearer, expect the stock price to appreciate.

Raser Technologies, Inc. (RZ): Raser is an energy technology company focused on geothermal power development and technology licensing. It has an innovative business model for developing geothermal power plants. Using United Technologies's modular PureCycle turbines, they can start development of a geothermal site with only a 10MW plant, and then expand rapidly. They are currently commissioning their first project, consisting of 50 PureCycle units in Utah. Having recently raised $20M in new equity capital, Raser appears to be adequately funded in 2009. This should be long enough for them to start earning revenues.

Geothermal's simplicity comes with low operating cost and low environmental impact, it has a long life expectancy and requires very little maintenance. It is a system that pays for itself in a short number of years. Geothermal is an efficient means of reducing our reliance of fossil fuels and the noxious emissions that come with them.

Wednesday, January 14, 2009

Lighting Stock Review

There is value in companies that help people and businesses save money by using energy more efficiently. The stock belonging to companies associated with energy efficiency will benefit from the recession. Here are a few companies that specialize in energy efficient lighting.

Koninklijke Philips Electronics (NYSE:PHG): Koninklijke Philips Electronics N.V. (Royal Philips Electronics) is the parent company of the Philips Group (Philips). As of January 1, 2008, Philips’ activities are organized on a sector basis, with Lighting being one of the 3 key sectors. World leaders in energy efficient lighting, Philips has an operating cash flow of $1.7 Billion, with $3.3 Billion on hand. Philips continued acquisition of other lighting firms at reduced prices will cement their world leadership in efficient lighting.

Cree, Inc. (NASD: CREE). Cree is a leader in bright white LEDs, with no debt, and an operating cash flow of $312 million. Despite a major customer's difficulties, Cree should be able to weather this financial storm. Cree may even persue some small acquisitions.

Lighting Science Group (LSCG.OB): A manufacturer of LED fixtures. Although they have good products in an industry poised for explosive growth, Lighting Science is struggling to keep its head above water. The company has a twelve month operating cash loss of $19M. Despite the positive outcome of a patent case with Philips and resolution of a dispute with the former CEO, Lighting Science will need help to survive the tight credit market ahead.

The lighting industry is poised for explosive growth over the next couple of years. However, in today's tight credit market, when assessing a stock, consider liquidity ratios.

Next: Geothermal Stock Review

Energy Efficiency Stock Review: The Smart Grid

President Obama has promised to propel the US economy into the 21st Century by providing a massive push for Green initiatives like energy efficiency. The US will need to build more high-voltage transmission lines that can move renewable energy from isolated areas to cities. The introduction of smart grid technology is an efficiency initiative that will enable the US to save massive amounts of power. The utility industry estimates smart meters alone can cut electricity consumption by 20-30% during peak hours.

As reported in CNNMoney.com, "in 1950, 20% of the nation's economic output was directly dependent on electricity. Now that number is 60% and rising fast, said Jesse Berst, editor of smartgridnews.com, an industry Web site. In an era of energy scarcity and global warming concerns, he said building a better grid is essential for economic growth. Berst, a former tech analyst, says the investments made in smart-grid technology over the next couple of decades will dwarf those that fueled the tech boom."

On January 8, US President-elect Barack Obama renewed the call for investment "to begin work on a new 'smart' electric grid to replace the nation's old, fragmented and inefficient system."

Making this work will require considerable investment. The utility industry estimates it would cost about $50 billion to equip every home in the country with a smart meter. Melissa McHenry, a spokeswoman for American Electric Power, one of the country's largest utilities, says an investment of $60 billion would enable the country to transport enough energy to offset 20% of its current total electricity use with renewable power.

The Brattle Group, a think tank, estimates the nation will need to spend up to $1.5 trillion on its electricity system over the next 20 years. Brattle estimates a smart grid could cost about $900 billion over the next two decades. That includes money for computers, meters and software to digitize the grid. An investment in cleaner energy could put the figure at $2 trillion, and would include building new power plants, transmission lines, and focus on conservation.

With all that investment, electric grid stocks and more specifically smart grid stocks represent significant opportunities. Here is a list of electric grid stocks in industries that should benefit from Obama's recovery program.

Grid Stocks

The ABB Group (ABB): Involved in a number of areas related to transmission and distribution systems. The company makes cables, transformers and various other products related to power electronics and management.

Allegheny Technologies, Inc. (ATI): Producer of products with grid applications, among them are a number of specialty alloys and metals for transformers and efficient grids.

Composite Technology Corporation (CPTC.OB): Commercializing an innovative transmission cable solution.

General Cable (BGC): Makers of a range of cables, including transmission and distribution cables of different voltages and underground cables.

MasTec Inc. (MTZ): A subcontractor to the utilities and communication industries, building, installing and maintaining electricity transmission infrastructure.

Quanta Services (PWR): A contractor to the power transmission and distribution industry, with services including infrastructure design, installation and maintenance.

Resin Systems (RS.TO): Makers of composite utility poles for electricity transmission and distribution. Although wood, concrete and steel still dominate, as in other applications, composites have great potential.

Siemens (SI): Makers of a range of products for the power transmission and distribution sector, including switchgear, transformer and substations.

Valmont Industries (VMI): Makers of transmission and distribution poles from concrete, steel or a mix of the two.

Smart Grid Stocks

Expanding transmission capacity is only part of the challenge, making the transmission infrastructure digital makes it smarter and more efficient and this is a major priority of the Obama recovery plan. Here are some smart stocks that should benefit from Obama's planned spending.

EnerNOC (ENOC): Designs, among other things, demand response solutions for grid operators and utilities.

Itron (ITRI): Leading maker of smart meters, the key tool on the consumer end of a smart grid.

Comverge (COMV): Maker of smart meters and works with utilities to design smart grid solutions revolving around demand response.

RuggedCom (RUGGF.PK): Designs critical systems for building a smart transmission and distribution including communication applications for electric utility substations and communication equipment embedded at various points of the grid.

Energy efficiency is a priority for the Obama administration and with the inauguration of the 44th President of the United States in less than a week, American electric grid companies make attractive buys, providing they have a strong balance sheet.

Next: Lighting Stock Review / Geothermal Stock Review

Tuesday, January 13, 2009

US Government Spending and Energy Efficiency Stock

In November of last year, President-elect Obama outlined his then $175 billion stimulus plans. Now the package has ballooned to between 800 billion and 1.3 trillion dollars. It promises to double renewable energy generation, while providing green jobs and tax relief. It also envisions investment in infrastructure, education, and the Internet. As of the beginning of this year, between the Federal Reserve bank, the Treasury Department, and the Congressional Budget Office, government money allocated to manage the economic crisis is estimated at up to $8 trillion. Upgrading the US electric grid alone has a 20 year cost of 2 trillion dollars. It is unavoidably ironic that so much is being budgeted on what amounts to efficiency.

The President-elect and the Congress are working on the details of the recovery plan. The Obama transition team has also been given the green light by the Bush administration to use the remainder of Paulson's $700 billion financial bailout. The Fed is lending billions to financial companies and buying mountains of debt. And the Treasury Department is overseeing the financial bailout program that is in effect buying into a partial ownership of the banks.

Obama's recovery plan includes approximately $300 billion in tax cuts for individuals and families. Business gets $100 billion in tax incentives and refunds to encourage job creation. And there will be $25 billion for infrastructure including investments in building, roads, bridges, and schools.

At a speech at the LSE earlier today Ben Bernanke said Obama's recovery plan could provide a "significant boost" to the economy, although he recommended that the government inject more money into banks. Bernanke also wants the government to do more to manage bad assets and like the President-elect, he wants government to do more to curb home foreclosures.

A letter from Obama's incoming economic adviser Lawrence Summers to congressional leaders on Monday "called for a comprehensive approach — beyond the stimulus package — to deal with the crisis." The Federal Government appears committed to a comprehensive approach to stimulating the economy and Green is an integral part of it. The President-elect is committed to long-term investment in renewable energy. He has also pledged to "modernize more than 75 percent of federal buildings and improve the energy efficiency of two million American homes."

As stated by Obama in a radio address late last year, "First, we will launch a massive effort to make public buildings more energy-efficient. Our government now pays the highest energy bill in the world. We need to change that. We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs"

Environmental values are part of the Green vision of the new economy. Although that vision aspires for meaningful solutions like public transit, energy efficiency tax credits, and a Green national infrastructure bank, the reality is, there are very few shovel-ready projects that qualify for what the Guardian's Dean Baker calls "21st century green infrastructure."

Still, there are industries that are likely to prosper from the influx of government money. Industries related to high efficiency such as building, materials, retrofitting and firms related to electricity distribution infrastructure (communications networks), can expect to grow.

Investors can benefit from massive government spending, but they must be able to identify viable opportunities and navigate against strong macroeconomic headwinds. Understanding where government money will go is key for investors looking to capitalize on government spending. Energy efficiency is central to the Obama administration's economic recovery plan and there are opportunities in industries associated with energy efficiency.

Next: Energy Efficiency Stock Review: The (Smart) Grid

Monday, January 12, 2009

Wind Stock Review

During 2008, the wind industry achieved a growth rate of more than 42 percent in the US. In recent years, more than $7 billion has been invested in new wind power plants worldwide.

Smart investors see value in renewable energy and wind power is an important part of that picture. Here are 3 of The Green Market's wind stock picks. The performance of these stocks will be reviewed in a forthcoming Green Market post after the years end.

Western Wind Energy Corp. (WND and WNDEF) Western Wind is in the business of acquiring land sites, capital and technology for the production of electricity from renewable sources. Western Wind conducts its operations through its wholly owned subsidiaries in Arizona and California. Management of Western Wind includes individuals involved in the operations and ownership since 1981.

Western Wind announced a 72% increase in revenues for the third quarter (ended September 30, 2008). The Company's financial position as at September 30, 2008 was strong with a cash balance of $3.1 million, working capital of just under $3 million, loans payable of only $0.9 million and shareholders' equity of over $22 million.

Mass Megawatts Wind Power Inc (MMGW) Also known as the Multiaxis Turbosystem, Mass Megawatts is engaged in the production of wind turbines and sale of wind generated electricity. Financial figures show that the company recorded a net loss of USD90,484 (USD0.02 per share) in the second quarter ending 31 October 2008. In the previous fiscal year, net loss of USD48,480 (USD0.02 per share) was reported for the second quarter ending 31 October 2007.

However, the future looks bright for Mass Megawatts as they have introduced an improved augmenter technology that reduces the cost for heavy and expensive components. The recently announced new augmenter reduces the electric generation cost below traditional wind turbine technologies. As a result, Mass Megawatts can be directly competitive with fossil fuel power plants such as coal and natural gas at more locations than traditional wind power plants.

Nonetheless, Mass Megawatts could be affected by risks and uncertainties, including the ability to produce a cost-effective wind energy conversion device, secure the necessary zoning approvals, remain competitive, finance marketing and general economic conditions.

Composite Technology Corp. (CPTC) was recently recognized by QualityStocks as an industry leader in composite technology, designs, manufacturers and markets. They refereced Composite Technology's diversified line of products that solve many of today's power industry problems. On December 29, 2008, Composite Technology announced that its subsidiary DeWind has shipped the last five D8-2000 wind turbines for a wind power generation project in Chile. The company previously shipped five turbines to the Port of Houston.

These are 4 wind stocks that should see some significant growth this year.
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Next: US Government Spending and Energy Efficiency Stock

Thursday, January 8, 2009

Wind Stock

Wind power is of increasing importance to the US economy as evidenced by the growing number of investments in wind turbine manufacturing capacity. Wind provides clean power that reduces greenhouse gas emissions and enhances energy security.

The US continues to be the fastest-growing wind power market in the world and with President-elect Obama's trillion dollar Recovery and Reinvestment Plan, the US is seeking a leadership role in total wind capacity. According to the US Department of Energy (DOE), wind is the largest source of new power generation in the US after natural gas. Wind power has experienced a 30% annual growth rate in the last 5 years and in 2007 that climbed to 46%, with $9 billion invested in US wind plants in 2007 alone. According to a DOE report, "wind is on a path to becoming a significant contributor to the U.S. power mix."

The DOE report entitled “20 Percent Wind Energy by 2030”, examines the technical feasibility of harnessing wind power to provide up to 20% of the nation’s total electricity needs by 2030. It indicates that the costs of integrating intermittent wind power into the grid are modest. Wind can be reliably integrated into the grid for less than 0.5 cents per kWh. No material constraints currently exist, achieving 20% wind is not limited by the availability of raw materials.

"Most notably, the report identifies opportunities for 7.6 cumulative gigatons of CO2 to be avoided by 2030, saving 825 million metric tons in 2030 and every year thereafter if wind energy achieves 20 percent of the nation’s electricity mix."

According to the DOE's annual report, the wind power industry is distributed across much of the US. Market growth is spurring manufacturing investments in the US. New and existing foreign and US based manufacturers either initiated or scaled-up production. Wind turbine prices and installed project costs have risen since 2002. Turbine price increases have been driven by weakness in the dollar, higher prices for materials and energy inputs, and shortages in certain turbine components.

Wind project performance has improved in recent years. This improvement in project performance has been driven in part by enhanced project siting and technological advancements. Wind power is competitive and has provided good value in wholesale power markets. Despite rising project costs, in recent years, wind power has consistently been priced at, or below, the average price of conventional electricity, as reflected in wholesale power prices.

The rationale for wind power is clear and the technology is financially viable. Renewable energy is a central part of Obama's '21st century economy'. We require a comprehensive approach to scaling wind power. To reach DOE targets, 7,000 wind turbine installations will have to be built per year by 2017, that is more than double the amount of wind turbines installed in 2007.

The current US Wind infrastructure cost $25 billion to build and it produces 1% of annual US electricity demand. This means that an estimated $500 billion will be needed for wind energy to reach the DOE's 20% target. There are significant profit opportunities arising from the billions about to be poured into the wind energy industry. American wind stocks are poised for huge, long-term profits.

Next: Wind Stock Review

Monday, January 5, 2009

First Solar (FSLR)

First Solar (FSLR) epitomizes the kind of returns that make investors Green with envy. After a gain of more than 790% in 2007, many investors wrote off FSLR as overvalued, yet both short and long, FSLR continues to distinguish itself as a lucrative investment.

In 2008, the majority of FSLR's losses began in late August, with shares plunging more than 59% after August 21. Late last year, FSLR led solar stock with a 20% rally for the week of December 15-19 and like the rest of The Green Market's solar picks, FSLR has been going strong since the start of the new year. The last week in December, solar was down, almost across the board. Then as predicted by The Green Market, solar stock began to soar. Since the beginning of the year, The Green Market's solar picks have advanced at a tremendous rate led by Evergreen at almost 27%. Monday saw SunPower add another 9% and Canadian Solar added another 8% to the 8% advance it saw last week. FSLR continues to lead, growing 16% over the last 6 trading days.

FSLR has innovated the least expensive solar panels on the market, although the more common crystalline silicon panels are more efficient than FSLR's cadmium tellurium thin film panels. First Solar was founded in 1999 and has its headquarters in Tempe, Arizona. It has a market cap of 9.53 billion. It competes with Evergreen Solar and SunPower. First Solar's CEO is Michael Ahearn and their CFO is Jens Meyerhoff. It reported a TTM revenue of $1.01 billion.

First Solar's customers are largely in Germany, France and Spain. All three countries have feed-in tariff policies, which require utilities to pay government-set rates for all solar energy produced in the country. The solar electricity rates are higher than the prices for conventional power, making solar energy development a lucrative business. The feed-in tariffs have made Germany and Spain the top two solar markets worldwide.

In a December 12 article, Ucilia Wang, worried that First Solar's thin-film panels might be piling up in European warehouses. "A ThinkEquity research note estimated that six key First Solar customers aren't able to install the solar panels quick enough. Those customers might have an even tougher time doing so in 2009, when First Solar is due to ship even more panels to them than it did in 2008."

"Based on the aggregated intelligence of 120,000-plus investors participating in Motley Fool CAPS, solar, First Solar received a distressing ranking [in December]. One of those who believe FSLR will underperform the S&P 500, noted that the First Solar bear case all boiled down to valuation: 'While there has already been a big correction in the price, a few more years of growth at the expected levels are needed to justify current levels.' Another commentator said 'First Solar is a classic good business-bad stock situation.' According to him, 'First Solar is good company, and they make the least expensive panels, but because they are not generating positive free cash flow, they should be considered overpriced.'"

According to a mid-December article in Forbes "this [bullish] sentiment has shown signs of deterioration recently" and may be a hint "that pessimism could be taking hold of FSLR." According to the same article "short-sellers are also increasing their bearish bets on the security. During the most recent reporting period, the number of FSLR shares sold short ballooned by more than 31% to account for 14.3% of the stock's total float. Should this trend continue, it could increase selling pressure on the security, thus perpetuating its weak price action. Wall Street analysts have yet to reassess their bullish positions, however. Currently, 13 of the 21 brokerage firms following FSLR still rate the shares a "buy" or better, according to Zacks.com. Meanwhile, Thomson Financial reports that the average 12-month price target for the stock rests at $176.72 per share - a premium of more than 50% to the stock's December 11 close at $117.57 per share. This configuration increases the chances of downgrades or price-target cuts, which could provide additional selling pressure for FSLR."

To date, FSLR continues to defy the wisdom of the pundits. Even if oversupply proves to be an issue it may effect crystalline silicon panel makers more than First Solar. According to Travis Bradford, president of the Prometheus Institute, which tracks the solar market: "It says a lot more about crystalline silicon module pricing than First Solar's value offerings. If the best-value product is piling up, then it's really bad news for the less-valued products." There may be some adjustments in the medium term, but FSLR is an industry leader in a promising sector. Their inexpensive thin panel has made First Solar a prominent player in the solar energy sector.

Next: Wind Stock

Sunday, January 4, 2009

Solar Stock Review

As 2009 commences, some of those who were bearish on solar late last year, appear to have seen the light. 2008 saw solar stocks slide. The early part of 2008 hit solar hard, then after recovering in the spring, the summer saw government involvement reducing solar's demand in Germany and Spain with state incentives in Japan and the US. Then there was the evaporation of credit with the housing and financial crisis, culminating in the failure of Lehman Brothers. After November's solar deflation, there appears to have been a trend of laying off temporary workers, and 'right-sizing'. The year ended with the fallout of a 50 billion dollar corruption story of alleged broker fraud.

The market is volatile enough without having to contend with the additional uncertainty of corruption. It is easy to understand why many investors worry about the integrity of brokers and express concerns about the agendas of investment firms.

Investors are looking for ways of protecting their money. A recent U.S. Energy Department report may offer some clues. The report said that total electricity use will increase and much of this increase will come from renewable sources such as solar. From its inception early in 2007, The Green Market has been a champion of solar as a Green-good and a sound investment. Late last year while the pundits were sharing their fear of the light, The Green Market began advocating buys in undervalued solar. As predicted by The Green Market, solar shares have rallied on higher oil prices.

However, sector funds are volatile and there are several concerns for prospective investors in solar, not the least of which is a recent report alleging that certain Chinese wafer-makers are dumping their production on the market. The evaporation of credit and tougher underwriting requirements, are also serious concerns for the solar sector, as are a growing reductions in production and sales outlooks.

There are several convincing factors that should lead to solar's rise. An eight-year extension of solar incentives and a one-year extension of wind tax credits is setting the stage for scores of new large-scale power projects. The realization of President-elect Obama's pledge to invest $15 billion each year during the next decade to support private sector efforts toward clean energy. Ernst & Young's Muscat said "governmental incentives will continue to drive demand, and the positives in the [solar] industry will eventually outweigh the negatives. The sector might see some mergers or buyouts in the short-term, but the companies that emerge should be stronger. I do believe that the cleantech renewable energy sector will be the first to emerge when the market stabilizes."

With this in mind, here are summary reviews of 4 of my 5 solar picks: SunPower, Evergreen Solar, Canadian Solar, and Suntech. (I will explore FSLR in my next post).

SUNPOWER (SPWRA): In anticipation of the President-elect's bold subsidizes and a windfall tax on oil firms, an Oct 5th 2008 article entitled "Obama Stock" radiated praise for SunPower. SunPower manufactures and sells photovoltaic (PV) solar panels for the residential, commercial and utility-scale markets. Late last year, SunPower won a contract with Florida-based utility FPL to build the largest photovoltaic plant in North America, a 25 megawatt utility-scale plant in Florida. "SunPower's main advantage is that its cells have an average efficiency of 22% compared to an industry average of just 15% -- SunPower's cells are the most efficient in the industry. That means that SunPower can generate the same amount of energy as competitors' cells using a far smaller panel."

EVERGREEN SOLAR (ESLR): Hurt by the failure of Lehman Brothers, Everygreen solar cut its outlook through 2009, citing financing difficulties among its customers. On December 8, 2009. EverQ kicked its IPO and took a new name. The joint venture of Q-Cells, Renewable Energy Corp, and Evergreen Solar, is now known as Sovello. Q-Cells caused a commotion early in December, driving down leading shares including industry leading First Solar by double digets. Evergreen Solar develops and manufactures solar power cells and panels using their proprietary crystalline technology, called String Ribbon.

CANADIAN SOLAR (CSIQ): Relatively smaller companies like Canadian Solar saw their stocks get cut in half late last year. The company provides solar power solutions beyond residential and commercial panels. Most notably, Canadian Solar's use of a low-cost alternative to polysilicon incited considerable interest. As an important module-maker for companies who only manufacture cells (ie: JA), Canadian solar may benefit from price concessions. To its credit, Canadian Solar has a geographically diversified customer base.

SUNTECH POWER (STP): Stock prices fell alongside other solar stocks this fall. Fourth-quarter revenue is being guided down around 40%. The failure of Lehman hurt and it appears customer credit is behind Suntech's decline. Approximately 35% of expected sales have been delayed, and the "vast majority" have been shifted to 2009. Due to macro concerns, Suntech has put a temporary hold on its 2009 expansion plans. However, with raw material prices plummeting and spending going toward better efficiencies rather than expansion, Suntech is on the fast track to grid parity.

Although 2009 may see a couple of Solar casualties, the ongoing strong demand for solar products is trumping price adjustments. Despite the bearish predictions of the pundits, smart investors are glowing as solar offers short profit opportunities and a bright future.

Next: First Solar

Friday, January 2, 2009

Happy New Year

Over the course of the last 10 months the Green Market has covered a wide range of issues including the economy, small business, politics, marketing, ethics, investment opportunities and government incentives. Along the way I hope I have provided resources and information that have proven useful to readers. In the coming year the Green Market will continue to examine the challenging business of Green with the ongoing objective of helping people turn Green into gold. I would like to thank all my readers and wish you all health and prosperity in 2009.

Solar Stock Picks: Timing

Although many pundits have gloomy predictions for solar, success in the market is often achieved by targeting undervalued stock when other investors are wary. This certainly seems to be the case for solar so far this year. This despite a New Year's Eve, Digitimes report indicating that certain Chinese wafer-makers have been "dumping" their production on the market.

Any assessment of solar must factor the impact of President-elect Obama's 775 billion dollar commitment to rebuilding the American economy through harnessing the power of the sun and the wind. Renewable energy is his 'priority', and he has explicitly and repeatedly referenced solar and wind power as the key features of his energy plan. In light of this massive stimulus, here are my solar stock picks.

FIRST SOLAR INC. FSLR
SUNPOWER CORP. SPWRA
Suntech Power Holdings Co., Ltd. STP
EVERGREEN SOLAR INC. ESLR
CANADIAN SOLAR INC. CSIQ

Between December 15 and 17, following Obama's announcement of his team on energy and the environment, all the solar stock in my energy portfolio increased in value. THE GREEN MARKET's solar stock picks advanced 5% the first day and added an additional 10% the following day before tailing off.

Despite the bearish sentiments expressed by some commentators, solar has started the year strong. The solar stock included here represents a moderate level of risk and a very significant return potential.

Next: My Solar Stock Picks Reviewed