Players in the solar field - both photovoltaic and concentrating - are optimistic that they will achieve parity with coal, currently the lowest cost generating source, within eight years.  They believe two factors will make that happen.   First, the full social costs of coal including primarily a cost for carbon dioxide emissions will come into play.  Secondly costs for solar generation will continue to decline.  But according to a representative of Abengoa, a very large and sophisticated player in solar, the point at which the costs will meet will be …

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It is fascinating to watch the re-arrangement of the power levers in American business as the credit squeeze separates those who have been wise stewards of capital from those who have been foolish - and transfers decisions into the hands of the wise.  Who says capitalism is not working?   A handful of institutions and individuals such as Jamie Dimon of J. P. Morgan are emerging as controlling players and foremost among them is Warren Buffett. 

The Wall Street Journal report posted below tells the story of Buffett’s new role as …

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Rough Seas This is just simply tough, this business of unwinding the radically leveraged bets of unregulated financial institutions - investments banks and hedge funds - and the unregulated bets of radically leveraged institutions - banks, Freddie, Fanny.  Bear may be followed  by Lehman.  Now hedge funds are liquidating and dropping like pop-ups just past the infield as their investors pass the threshold of acceptable pain and call back what’s left of their funds.  In the wake of hedge funds’ liquidating sales the real worth of great companies like …

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Xcel ditching 2 coal plants, going to solar PUC approves plan to help meet 2020 goal By Gargi Chakrabarty, Rocky Mountain News (Contact) Wednesday, August 20, 2008 Judy Walgren © The Rocky/2004 Xcel’s Cherokee plant operates in Denver. Xcel plans to close two coal-powered plants to meet a mandate to provide …

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A study released on 7/30/08 by Amercan Clean Skies Foundation and Navigant Consulting states that U.S. unconventional natural gas deposits are sufficient to supply 118 years of U.S. demand at 2007 levels.  Newly developed fracking and horizontal drilling techniques have made it possible to recover enormous quantities of gas from tight sands, coalbed methane, and gas shale formations, reports the Oil & Gas Journal (8/4/08) On the demand side, some leaders are starting to advocate the use of NG in lieu of petroleum to power cars.  Two Congressmen, Rahm …

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The economy, the stock market, and our understanding of the future direction for energy and transportation may all be on the brink of major changes .  This letter will open a discussion of these ideas. 

A Very Tough Month

Before turning to the future, I must confess that the immediate past month was  most painful for the EIS portfolio.   Oil prices hit a violent downdraft in July, which especially impacted my “options on futures” strategy.  It declined in value by about 33%.  Since the purpose of these options is to provide portfolio …

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Phillips, the European electrical company, is betting large that the ultimate lighting product will be L.E.D.s, not C.F.L.s, a topic I have discussed before.  “Philips is betting the store on the L.E.D. bulbs, which it expects to represent 20 percent of its professional lighting revenue in two years.” But the cost problem has not yet been solved.  L.E.D.s are now mostly found in commercial and industrial operations where experts can judge the long-term ROI, not in residential sites.   Apparently Phillips thinks it can solve this problem within …

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John Mauldin, an economist and investment advisor who often offers both unusual and insightful views recently wrote that new applications for solar power plants are booming.  He said: “The July 21 Fortune has a great article on the rush to build solar power plants in the deserts of California, Arizona, and Nevada. Applications have been filed to build plants that would generate a theoretical 60 gigawatts of electricity. To put that into perspective, California only uses 33 gigawatts. And the biggest and richest firms are lining up to get land …

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An Israeli company that currently operates a wave-based power generating pilot plant in Haifa has sold two new models to China.  If it proves economical, prospects for further sales to China and others would seem to be very bright.  Thanks to my friend Jeff Stonberg for bringing this to my attention. The Israelis’ claim the capital cost for their wave-generating station is far less than any other alternative including coal, gas, wind or solar.   Just on an intuitive basis and specifying that I know less than nothing about the subject, …

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Here’s a good discussion of companies involved in energy storage for utilities:   As expected, A123 Systems filed a registration statement for a planned $175 million IPO last Friday. I believe the A123 IPO, together with recent industry reports by Merriman Curhan Ford and Lux Research, will begin to draw attention to the energy storage sector in a whole new way and mark the beginning of a major upward trend in a basic industry that’s been undervalued for years. While it seems that nobody really wants to …

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Much is written about “alternative energy” and the relief from high oil prices that might come from solar, wind, nuclear or some other approach.  But all of these are “solutions” to a problem that as of now does not exist: a lack of electricity. Our oil problem is caused by too much use of petroleum, not a lack of electricity.  The only way we are going to solve the oil problem is to drive cars that do not include the current petroleum based power plants and to transition freight and …

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Yesterday two idea clusters rose above the myriad others that floated in, out, and around my mind.  One started my day, the other came near the end.  They stood in juxtaposition like The Future and The Past.  Together I think they point to an important feature of our Rapid Transition from the Hydrocarbon Age toward the Electron Age.   

The first idea cluster came at a breakfast presentation by Marshall Goldman, the urbane, erudite former Wellesley professor and Russian expert who recently wrote Petrostate: Putin, Power, and the New Russia. Goldman’s …

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“We’re going to beat coal.”  That quote from an Ausra representative encapsulates this story.  Ausra projects their concentrating solar system will generate electricity at a 10 cent/kw cost in 2010 and 8 cents when cost reductions now on the drawing board are implemented.  Ausra is just one of many concentrating solar efforts backed by sophisticated blue ribbon investors and utilities that are in the process of being being implemented, as the Bloomberg report posted below describes in detail.  Concentrating solar, my friends, will be the Big Bertha of oil substitution …

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General Electric has demonstrated a new, low cost technology for producing LED lighting.   If it proves successful and competitive in quality, it could have significant impacts on the speed at which LED’s will come to dominate future lighting technologies and at which the vast efficiency improvements of LED’s will reduce the consumption of electricity.  It also might allow G.E. to dominate the LED field and possibly hurt the competitive position of CREE, Inc.  Since CREE stock sells at a high multiple of estimated 2009 earnings, which estimates are coming down, …

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2008 Thus Far: A Preview of Coming Attractions

My concern has been that at some point shortages of oil will cause a falling-stocks, rising-oil phenomenon that will crush my oil related stocks along with the whole market. 2008 has started like that. Oil was up 6.34% as of 2/29 (per the ETF symbol OIL) but stocks were down 8.5% (in terms of the S&P 500 ETF symbol SPY). For oil-related stocks, the falling stock market trumped the rising oil market, as I have expected. IYE, a broad-based oil-stock ETF, was down …

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