by Garvin Jabusch

Lord Nicholas Stern recently said, “Strong investment in sustainable infrastructurethat’s the growth story of the future. This will set off innovation, discovery, much more creative ways of doing things. This is the story of growth, which is the only one available because any attempt at high-carbon growth would self-destruct [emphasis added].” More pointedly, the Investment Bank division at Morgan Stanley in 2016 advised clients that long-term investment in fossil fuels may be a bad financial decision, writing, “Investors cannot assume economic growth will continue to rely heavily on an energy sector powered predominantly by fossil fuels.”

What both Lord Stern and Morgan Stanley understand is that the world has changed and our approaches to investment need to change with it. This is at the heart of what I do working in Next Economics and Next Economy Portfolio Theory.

In thinking about Next Economics and investing, then, it’s worth asking two questions. ”What will the world’s economy look like in 10 and 20 years?” And,” What would I like it to look like by then?”

Our answers should, at a high level, inform where we invest. In arriving at a well-informed thesis hinged on the economy’s ongoing evolutionrather than on the economy of the pastwe can position ourselves to take advantage of high-growth areas, and we can have the effect of advancing a far more efficient economy, one with a better chance of thriving indefinitely. As a pop star once wrote (not the one who won a Nobel Prize), “If it’s a future world we fear, we have tomorrow’s seeds right here.”

Every year since founding Green Alpha, we’ve observed innovations emerge and compound like a fast-rolling snowball. Each innovation, improvement, and tool in the economy is smarter than the last and is immediately put to work in the development of a new generation of smart tools, evidently ad infinitum. I’d write a book with a title like Special Topics in Next Economics 2017, but the pace of innovation is so fast that it would be out of date before I could get it done. Still, there are a few trends that I think merit our attention, and our optimism.

Renewable energies.

They’re cheap and getting cheaper. In 2016, we saw the price of solar-generated electricity fall below that of wind, making it the least expensive source of power generation available, half the price of new coal. Wind and solar, being tech-based (as opposed to commodity-based), will continue getting cheaper, and will generate more and more of the world’s energy until they ultimately have most of the energy market share. At some point, markets will understand solar for what it is and begin to value it appropriately. Companies like First Solar, Inc., and Canadian Solar Inc. are leading the transition in world energy, and if they continue to work on innovation, growth, and maintaining strong fundamentals, they could find themselves among the world’s leading power companies.

Is renewable energy adoption at scale for real? President Obama just wrote about the “irreversible momentum of clean energy” in Science, and many of the world’s largest companies are on the same page, working toward running all operations on wind and solar. The poster firm for this is Google Alphabet, which says it will hit its goal of 100% renewable power for all operations this year. The company is a huge consumer of power, and its transition to wind and solar is resulting in large emissions cuts for the economy, as well as business stability and cost controls for their business. Cities are getting in on this, too, with San Francisco, San Diego and others planning to run entirely on renewables by 2035 or sooner. What about arguments that solar makes electricity rates go up? Well, in some places that use the most solar, the opposite is happening, and utility customers are seeing rates fall.

Inevitably, all this adds up to jobs in renewables. Though coal jobs were a focus of the 2016 presidential election, renewables are where more paychecks are. Wind power supports 88,000 jobs, while close to 373,807 U.S. workers are currently employed in solar, a 25% rise in 2016and that number is predicted to rise to 420,000 workers by 2020. Wind power employs 101,738 workers, a 32% increase over 2015. As of October, coal employed fewer than 54,000, according to the Bureau of Labor Statistics. It has been surprising to many observers, like Jigar Shah, that these remarkable economic changes don’t yet get more recognition.

Across the country, wind power has become the “new corn” for Red State farmers, providing a steady source of income in low-income, rural areas. In fact, the 10 congressional districts that produce the most wind energy are represented by Republicans.   California and other states, meanwhile, vow to push ahead in the fight against climate changewith or without President Trump’s blessing.

China is doing more to develop and install renewable energies than any nation. Already the world leader in wind and solar capacity, China now says it will “plow $361B into renewable power generation by 2020, and create more than 13 million jobs” (via Reuters), leaving the U.S. in the dust. According to The Guar
dian, “China now owns five of the world’s six largest solar-module manufacturing firms and the largest wind-turbine manufacturer.” It’s also far and away the world’s leader in electric vehicle production and sales. Also, China is spending over $500 billion to expand high-speed rail. Its war on pollution and commitments to mitigating global warming are real, and China clearly is happy (and even excited) to accept the leadership mantle in sustainable economics, a title many perceive the U.S. has abdicated. Having taken the reins on renewable energy and technology leadership, China is now shoring up the case for its moral leadership as well, made apparent by Beijing’s recent announcement that it will now ban all imports of ivory.

Renewable energyadoption, transportation, storage.

What about renewable energy adoption, plus zero-emissions transportation, plus energy storage? Well, Tesla. I don’t mention this company particularly as a stock recommendation but rather as a primary catalyst and the firm at the nexus of the Next Economy. It’s close to impossible to overestimate Tesla’s importance. Tesla re-introduced, made sexy, and popularized electric cars at a time when major automakers and oil companies were trying to prevent that from ever happening. Tesla’s ambitious approach to battery storage for cars and renewable energy has resulted in their Gigafactory, capable of doubling the world’s current annual output of lithium-ion batteries and lowering costs commensurately. Don’t think storage is a particularly big deal? Consider just one example: After the massive Porter Ranch natural gas leak, the City of Los Angeles decided to invest in battery backup for its electricity supply instead of gas, and has hired Tesla to provide some systems. LA has been among the first big cities to make this move, but then, it was among the first to be bitten by the risks of overreliance on a fossil fuels.

What of Tesla’s and others’ plan to scale up mass-market electric cars? Will that become huge or remain niche?  Consider these developments: Germany, Holland, and Norway have all taken steps to ban internal combustion engine-driven passenger vehicles between 2025 and 2030; more major economies surely will follow. India, for example, is now considering a similar move. Yes, these are ambitious goals that could easily be missed, but even if these nations get only halfway to their targets, it is not only incredibly bullish for any carmaker selling electric vehicles but also bearish for oil, since ground transportation is its primary source of demand.

Farming.

A New Yorker article said it best, “Vertical farming can allow former cropland to go back to nature and reverse the plundering of the earth.” Vertical farms are revolutionary for a number of reasons:

• They uses a fraction of the water required for traditional farming,
• They’re close to or within urban centers meaning no need for long-haul transport,
• Their indoor location eliminates need for pesticides and herbicides, thereby mitigating multiple systemic risks (e.g., ocean pollution from agricultural runoff),
• They can be maintained at a lower cost than conventional farming,
• And they’re more resilient to climate change.

No question, vertical farming is what’s next. Business Insider has posted a nifty photo essay of an indoor farm in Brooklyn if you’re interested in how it looks.

Additional key areas…

Computing power. It’s becoming so massive that our collective ability to assimilate data is now and will increasingly be unprecedented. The question will become, what can we do with this amazing ability?  And let us not forget the key related areas of cybersecurity and fast-emerging artificial intelligence and robotics, all of which are ushering in an era of heretofore unimagined economic efficiencies. What about the Internet of Things? After a slow start, it is coming into its own: “The falling cost of sensors and connectivity means the internet of things is finally a reality.” Lots of opportunity there. In medicine? Don’t get me started on CRISPR-Cas9, a technique to edit genomes, thus opening up endless possibilities in medicine and biology, with equally endless humanitarian, ecological, and commercial applications.

Okay, enough. We’re overwhelmed with innovations and breakthrough after breakthrough. We get it. For those of us trying to assimilate these changes and find the best path forward, the most important point is this: It’s in seeing the world for what it is becoming and not for what it was that investors and markets are going to allocate capital to manage risks and profit from new opportunities. This all leads, not incidentally, in the opposite direction from fossil fuels.

It is funny and yet poignant that some astrophysicists classify we humans as constituting merely a Level Zero Civilization, with nearly infinite scientific and technological prowess yet to be realized. Well, I’m not qualified to evaluate that theory, but what I do know is that so much progress is being made in so many areas, that I wake up every day excited to think about the world anew and uncover its opportunities.

An earlier version of this post originally appeared on worth.com.

Garvin Jabusch is cofounder and chief investment officer of Green Alpha® Advisors, LLC. He is co-manager of the Shelton Green Alpha Fund (NEXTX), of the Green Alpha Next Economy Index, the Green Alpha Growth & Income Portfolio, and of the Sierra Club Green Alpha Portfolio. He also authors the Sierra Club’s green economics blog, “Green Alpha’s Next Economy.”

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by Joeseph McCabe, P.E.

Which vendors at Intersolar 2016 in San Francisco supply the best behind the meter self generation microgrid solutions?  I’ve asked similar questions about utility owned inverters, storage, and microgrids at previous Intersolars. This year I looked into the microgrid highest value propositions for photovoltaics (PV).

What is a microgrid, and why they are coming of age now?

A microgrid is a distinct electric system consisting of distributed energy resources which can include demand management, storage and generation.  Loads are capable of operating in parallel with, or independently from, the main power grid. For this evaluation a microgrid is defined as an isolated circuit that can have a utility feed for battery charging only which provides a high value for a commercial or industrial electricity consuming facility. In this case a facility can receive energy, demand and power factor values from a self generating microgrid and use the utility to charge batteries in times when self generation may not be available. Self generation can come from many generating technologies including fossil fuels, biomass digesters, anaerobic digesters (like at breweries), wind and solar PV. Low cost solar and storage are driving new opportunities for these microgrids.

Microgrids are not new for the solar industry, which has been doing off grid and island systems since before grid interactive inverters were available in the 1990’s. If structured properly microgrids can provide clean, low cost, uninterruptible, reliable and resilient electricity.

Example behind the meter microgrid

Consider a server farm that needs to expand its capabilities with a new room of servers. The facility could pay the local utility to increase its electrical service capacity, and then pay a lifetime of additional $/kWh energy and $/kW demand fees. Or the facility could install a solar electric system with batteries and if it has natural gas, the facility can generate combined heat and power (CHP). The heat is used to air condition the servers with absorption chillers. Multi-port microgrid solutions are now being offered by multiple vendors for these purposes.

As a facilities decision maker, pick a CHP that can supply your air conditioning requirements with absorption chillers. Add a PV system that supplies the electricity for your process for most of the year. My favorite flavor PV system would be integrated with a parking structure. Also pick an electrical storage system that can safely provide the power needed for times when the sun isn’t shining and for when your CHP unit will not be in an economical operating zone. The microgrid will supply clean power and adjust for various loads turning on and off. They can even turn loads on and off for you in a scheduled energy/demand management function. Day and hour ahead weather forecasting can be integrated. A battery charging circuit tied into the local utility can put more DC electricity into the microgrid at the most economical times. In fact a microgrid can be all DC energy reducing conversion to AC losses. And of course any original utility circuitry feeds can remain as a backup to a new microgrid circuit.

Economic value

Energy economic evaluation is straightforward in today’s PV market, coming in at an onsite cost of $0.06 to 0.10 per kWh for larger experienced installer systems (my own utility has a $0.056/kWh PPA system). This would be compared to the utility bill $/kWh which vary widely but are typically above $0.06/kWh for commercial and industrial accounts. April 2016 EIA average estimates are $0.101/kWh for commercial and $0.064/kWh for industrial across the USA. Demand charges ($/kW) can be reliably eliminated from utility bills with a microgrid. CHP systems typically achieve total system efficiencies of 60 to 80 percent. Expensive power factor charges ($/kVAR) can be reduced from utility bills by addressing the facility equipment that is is causing power factor problems, and isolating that/those circuits with a microgrid solution. Whole facility can address these expenses with power factor correcting capable inverters, often a standard function on newer inverters. 

Power factor is a correction billed by the utilities for power delivered by alternating current. It varies when certain equipment causes the apparent power to differ from the true power, this difference is a measure of kVAR. Power factor can be analogized with a mug of beer. The actual beer fluid represents the power in kW, and the foam represents the wasteful kVAR, the kVA being the actual amount of work the utility needs to provide in the form of the total volume. Reducing power factor is like reducing the foam in the mug of beer. I have seen power factor representing 50% of a hospital’s electric bill.

Regulation can also change economic value. The federal Investment Tax Credit (ITC) of 30% applies to the cost of storage, if and only if the storage is charged by the PV system. If you are interested, contact me for an industry white paper regarding these values. 

Utility regulations

The regulatory environment for microgrids is just beginning to be developed. It is a perfect time to explore microgrid opportunity with low cost PV and new battery solutions which were being discussed and demonstrated at the Intersolar event. Any microgrid solutions will most likely be grandfathered in before any new regulations. The California Energy Commission and the California Public Utilities Commission (CEC & CPUC) recently held a conference call to begin a microgrid workshop process. Regulators should keep behind the meter regulations to a minimum because they provide an excellent source of electricity for facilities. In other words, regulators should keep their hands off our collective BTMs unless invited.

The brand new Rule 21 in California outlines functionality required for all new grid connected distributed generation. It is a tariff that describes the interconnection, operating and metering requirements for generation facilities to be connected to a utility’s distribution system. These same equipment standards enable a new class of products that are isolated, or strategically connected to the grid. I am choosing to look at non-exporting microgrid because it is easier from a regulatory environment. At some point I predict the utilities will be asking facilities for access to these isolated microgrids for addressing the utilities’ demand response programs. At which point it should be easier for the utility to pay for and certify the dispatching functionality.

Which companies will benefit?

Various support equipment and services are offered by vendors which are forming strategic relationships with system solution providers. Original equipment manufacturers are teaming with system suppliers along with boutique software companies to supply such systems to the electric utility industry and end commercial and industrial electric users.  A few vendors at Intersolar that seem well-placed to address the example scenario are Ensync, Greensmith, software company Geli, a multi-port microgrid company called Ideal Power (NASD: IPWR), and system integrators who take other vendor wares and integrate solutions like Gexpro (a part of Rexel (OTC:RXEEY)).

Photos below are from the 2016 Intersolar exhibits and should be self explanatory:

New company relationship agreements were announced at this year’s Intersolar event by Ideal Power and sonnen (European residential battery storage company new in the USA), as well as between Gexpro and Geli. Greensmith announced new products for pre-engineered packaged solutions under 1 MW with up to 4 hours of battery backup. Larger systems like a large 20 MW installations are still custom builds for Greensmith. Ensync is combining fast lithium-ion batteries with slower flow batteries to address both immediate intermittency and longer term demand reduction functions.

Facilities managers who want to save money on electric bills or are trying to meet environmental goals can begin an exploration into microgrids by choosing an existing or future electric service circuit for a microgrid.  To do this they need to determine the hourly, monthly and yearly load profiles on the circuit. Then start stacking the latest distributed generation options to determine if there is a viable behind the meter microgrid opportunity.

Conclusion

For the first time, this year Intersolar showed us behind the meter microgrids. In this article we have defined an economical microgrid which can be used as an example to build your own microgrid solution and have presented a few of the companies supplying solutions in this space. Low cost solar and storage solutions have enabled this new class of on-site solution. Regulations are currently minimal for facilities to install self generation equipment. These behind the meter microgrids will become increasingly important for tomorrow’s electricity industry because they have become cost effective for commercial and industrial electricity users.

No Disclosures

Joe is a Contributing Editor to Alt Energy Stocks and can be reached
at energy [no space] ideas at gmail dotcom.  Please contact Joe for permission to reprint.

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United Launches 50% Biofuel Flights On LAX-SFO Route

Jim Lane

In California, United Airlines (UA) will be using jet biofuels produced by AltAir using Honeywell (HON) UOP technology on up to 150 flights a day out of Los Angeles, the Digest has learned. March 11.

A two week, 14-day Los Angeles to San Francisco service will launch United’s jet biofuels plan. After the first two weeks, “pretty much all flights out of LAX will have a component of biofuel,” said a person familiar with the United plan. Flights are expected to begin almost immediately.

Depending on the feedstock used, Honeywell Green Jet Fuel can offer a 65 to 85% reduction in greenhouse gas emissions compared with petroleum-based jet fuel, which helps refiners meet EPA mandates for renewable transportation fuel content. It’s also being delivered at a price comparable to petroleum fuel, marking a major milestone towards the widespread use of renewables fuel.

United will purchase up to 15 million gallons of sustainable aviation biofuel from AltAir over a three-year period, with the option to purchase more.

The AltAir project

In 2013, AltAir and United announced the 15 million gallon deal, saying at the time that they expected to be operating flights in 2014. AltAir Fuels said that it planned to retrofit the idled portions of its Paramount petroleum refinery to produce renewable jet fuel and other products from non-edible oils and agricultural waste. The opening of the AltAir refinery created 150 jobs in Paramount, California. The biofuel is mixed with traditional jet fuel at a 30/70 blend ratio.

AltAir can produce enough sustainable bio-jet fuel to power the equivalent of more than 40,000 flights from Los Angeles to San Francisco over the next three years at its historic 40 million gallons plant.

The Visual Story

Sustainable aviation biofuel: The Digest’s 2016 8-Slide Guide to United Airlines

Merging refinery tech with biofuels: The Digest’s 2016 8-Slide Guide to Honeywell’s UOP

Honeywell’s UOP Renewable Jet Fuel Process

This is third launch we’ve seen using Honeywell Green Fuel.

Last summer, the Disney Transportation bus fleet became one of the first in the country to run on R50, a cleaner renewable diesel (RD) made from used cooking oil and non-consumable food waste. Then, in January the US Navy’s Great Green Fleet sailed on its 2016 mission, using green marine diesel. Now, United takes off with renewable jet fuel all made using the same technology.

“These very public users highlight the fact they the fuels are commercially available, and to have three different modes of jet, marine and road sends a positive message about the technology,” Honeywell UOP renewables czarina Veronica May told The Digest.

It’s been a long road, we note. But not as long as, for example, the path to getting lead out of fuels, May noted.

“Anyone who’s been in the business knows that changes in fuels take years and decades. When you look back, it took 30 years to remove lead. There was the Clean Air Act in 1970 which set the target, but it wasn’t until 1986 that we had all of the lead removed for road transport, and 1990 for all vehicles, and Europe took another 10 years to get the lead out. We’re 10 years into the Renewable Fuel Standard. and obviously the low oil price is rocking the financial market, but these projects are years in the making, and a blip in the price will slow but not stop the momentum.”

May emphasized having the capital and the portfolio of technologies to meet customer needs throughout the commodity price cycle.

“One thing that UOP brings to renewable fuels, is that we are able to continue investment year after year. A lot of groups have great ideas but don’t have the funding, so when gasoline prices are high you get a flurry of activity but they can’t can’t sustain it. Renewables are one part of UOP, and the rest helps to support renewables.”

We asked May about the low price environment and the era of high oil prices. Noting that in the era of high prices that we saw so much diversion of capital and consumer interest to electrics, natural gas vehicles, and reducing drive miles. Is there a pricing sweet spot, we wondered?

“Actually, what you don;t want to see is a lot of volatility. If it would just stay in one range, that would help, because a lot of feedstock prices track the oil price. Another thing that helps is feedstock diversity. Right now we have waste oils, but when camelina and others come along, purposegrown oilseeds crops, there you start getting a foundation, for real expansion.”

“And, it would help if EPA could put out volumes not for a year or two, but for five years, because it takes 3 years to build a project from scratch.”

The Alt Air refinery

AltAir Paramount is using Honeywell’s UOP Renewable Jet Fuel Process to convert a variety of sustainable feedstocks into Honeywell Green Jet Fuel at the world’s first dedicated commercial-scale renewable jet fuel production facility. The plant, located near the Los Angeles International Airport, has also produced Honeywell Green Diesel, a drop-in replacement for diesel made from petroleum, using the same process technology.

AltAir is the second U.S. fuel producer using Honeywell UOP technology to produce renewable fuels, joining Diamond Green Diesel, which is producing renewable diesel in Louisiana

The Renewable Jet Fuel Process makes Honeywell Green Jet Fuel as well as Honeywell Green Diesel from a range of sustainable feedstocks such as used cooking oil, inedible corn oil, tallow, camelina, jatropha and algae. The process is compatible with existing hydroprocessing equipment commonly used in today’s refineries, making it ideal for plants that can be converted to produce renewable fuels.

Honeywell Green Diesel offers up to an 80 percent reduction in greenhouse gas emissions versus diesel from petroleum. Chemically identical to petroleum diesel, Honeywell Green Diesel can be used in any proportion in existing fuel tanks without infrastructure changes. Unlike biodiesel, Honeywell Green Diesel is a drop-in replacement for traditional diesel.

In aircraft, Honeywell Green Jet Fuel can replace as much as 50 percent of the petroleum jet fuel used in flight, without any changes to the aircraft technology, while meeting the current ASTM jet fuel specifications for flight. Depending on the feedstock, Honeywell Green Jet Fuel can offer a 65 to 85 percent reduction in greenhouse gas emissions compared with petroleum-based jet fuel.

“Production by AltAir and Diamond Green Diesel demonstrates that the vision of producing real fuels from sustainable feedstocks has taken the crucial step from technology demonstration to commercial-scale production,” said Veronica May, vice president and general manager of Honeywell UOP’s Renewable Energy and Chemicals business. “Honeywell UOP is committed to continuing to advance its technology to give fuel producers options to use sustainable feedstocks.”

AltAir’s Green Fleet contract

Earlier this year, the U.S. Navy’s Great Green Fleet, a carrier strike fleet of ships and aircraft, began using renewable fuel on regular deployments as part of the Navy’s efforts to demonstrate and deploy alternative sources of fuel, reduce energy consumption, decrease reliance on imported oil and significantly increase use of alternative energy. The ships are being powered by a blend of
renewable marine diesel from AltAir – made from domestic sources of inedible waste, fats, oils and greases – and petroleum-based marine diesel. For the initial delivery in January 2016, AltAir prepared 1.34 million gallons of F-76 type Naval Distillate Fuel containing 10 percent HRD and 90 percent petroleum-based fuel.

The United-Fulcrum partnership

In addition to the AltAir partnership utilizing Honeywell UOP technology last June, United Airlines announced a $30 million direct investment in advanced biofuels developer Fulcrum BioEnergy, obtained an option to invest in five future commercial-scale aviation biofuels plants, and signed offtake agreements for up 90 million gallons of biofuels per year. The offtake contracts are worth an estimated $1.58 billion over the 10-year offtake span, based on the current jet fuel price of $1.76 per gallon, according to Digest calculations.

The shift in United’s fuel purchasing represents 3% of its annual fuel consumption, reported by the airline at 3.2 billion gallons in 2013, and comes after Cathay Pacific invested in Fulcrum BioEnergy in 2014 and signed offtake agreements from the company’s first commercial facility, now under development near Reno, Nevada. The five new plants are expected to range in size between 30 and 60 million gallons.

US Renewables Group, Waste Management and Rustic Canyon, among others, have also previously invested in Fulcrum BioEnergy, which converts municipal solid waste diverted away from landfills into diesel and jet fuel. Fulcrum’s first commercial facility is expected to open before the end of 2017.

Visualizing the Fulcrum technology

Waste Makes Haste: The Digest’s 2015 8-Slide Guide to Fulcrum BioEnergy

The Tesoro partnerships

Where is the petroleum coming from for that portion of the blend? Tesoro, which in January unveiled its own plan to foster the development of biocrude made from renewable biomass, which can be co-processed in its existing refineries, along with traditional crude oil. T he company has identified three new partners in the process:

Fulcrum BioEnergy, Inc.: Fulcrum plans to supply biocrude produced from municipal solid waste to Tesoro to process as a feedstock at its Martinez, California Refinery. An estimated 800 barrels of biocrude per day will be produced at Fulcrum’s Sierra BioFuels Plant in Reno, Nevada, which is expected to be operational in early 2018.

Virent, Inc.: Tesoro and Virent are working to establish a strategic relationship to support scale-up and commercialization of Virent’s BioForming technology which produces low-carbon, biofuel and chemicals.

Ensyn Corporation: Ensyn has applied for a pathway with the California Air Resources Board to co-process its biocrude, produced from tree residue – called Renewable Fuel Oil – in Tesoro’s California refineries.

The Bottom Line

We’ve said it before. These are the golden days of renewable diesel. Offtakers have the interest. The technology works. More feedstock and more capacity, that’s what’s needed. And some of that starts with policy certainty.

So, all eyes on Washington DC and other capitals. Even while we sneak a peek at the California coast where the activity is humming.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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Jim Lane

As the renewables industry searches for effective business models, a strong one emerges in its midst. We look at Green Plains (GPRE) and its businesses.

A recurring theme among the 300+ delegates at ABLC Next this week in San Francisco is the recognition that successful companies change the world not science projects, or failed companies and that any route that leads across the Valley of Death to commercial success is the first step towards a sustainable economy, and that strong lead products are the oxen that get settlers across the desert.

Renewable fuels are sold as a commodity and are produced from other commodities and market prices in commodities swing hard, and success today does not guarantee success tomorrow. But it’s a good moment to pause and reflect on what others can learn from the Green Plains way.

Lessons learned

1. Get a lead product that’s a platform for a company. Green Plains began as a one-horse ethanol producer with two products, corn ethanol and distillers grains. There were unanswered questions at the time about the market acceptance of the products, the viability of the sector, and whether Green Plains could scale to industry-leading size, and when.

2. They chose, in corn ethanol, a product that can support a company, rather than ease a burn rate and provide some hope to investors. There are $1 million lead products and $100 million lead products and $1 billion lead products. The first provides hope and not much more, the second eases a burn rate, the latter can support a company.

3. Gain strength by appplying advanced tehcnologies to advance the business proposition

Today, Green Plains has more than a billion gallons in ethanol production capacity, and is making money even in a tough ethanol market; it has spun off Green Plains Partners (GPP) into a successful IPO and reported its first dividend to shareholders in that venture this week; it has diversified into corn oil and is working hard on monetizing its CO2 production. It is acquiring terminal capacity as well as production capacity.

The latest from Green Plains: The Q3 results

Green Plains recorded net Q3 income of $6.2 million, or $0.16 per diluted share, compared to net income of $41.7 million, or $1.03 per diluted share, for the same period in 2014. Revenues were $742.8 million for the third quarter of 2015 compared to $833.9 million for the same period in 2014.

“We are pleased with our results considering the tight margin environment experienced during the third quarter,” said Todd Becker, president and chief executive officer. “Based on the recent improvement in the forward curve for ethanol margins and current market fundamentals, we believe our fourth quarter operating income will exceed the third quarter of 2015.”

During the third quarter, Green Plains’ ethanol production totaled 215.6 million gallons, or approximately 83.8% of its daily average production capacity. The consolidated ethanol crush margin was $34.9 million, or $0.16 per gallon for the third quarter of 2015, compared to $82.8 million, or $0.34 per gallon for the same period in 2014.

“With our recent acquisition activity, we are putting our strong balance sheet to work for our shareholders,” Becker said. “The purchase of ethanol plants in Hopewell and Hereford, along with expansion projects completed to date, will increase our production capacity to over 1.2 billion gallons per year. We believe each of these transactions will be accretive to earnings in the near term.”

“Global demand for ethanol remains strong, with domestic blending occurring at a record pace and ethanol exports running approximately 6% ahead of last year,” continued Becker. “For the third quarter, ethanol export sales were 21% of our production.”

Expansion activity

• As part of its Phase I ethanol production capacity expansion program, the company has added 35 million gallons of production capacity at a cost of $19.6 million through Oct. 1, 2015. The company anticipates adding another 30 million gallons of production capacity during the first quarter of 2016 and 20 million gallons of production capacity in the second quarter of 2016. The total cost of the Phase I expansion is estimated to be approximately $50 million, or $0.59 per gallon.

• On Oct. 26, 2015, Green Plains announced that it had acquired an ethanol production facility in Hopewell, VA. Operating at full capacity, the facility’s dry mill ethanol plant will increase the company’s annual production capacity by approximately 60 million gallons. Production is expected to resume by the end of 2015 with corn oil processing expected to be operational during the second quarter of 2016.

• On Nov. 2, 2015, Green Plains announced that it had signed a definitive agreement regarding the purchase of an ethanol production facility located in Hereford, TX with approximately 100 million gallons of annual production capacity. Under the terms of the agreement, Green Plains will acquire Hereford Renewable Energy, LLC for approximately $93.8 million.

Analyst reaction

Raymond James analyst Pavel Molchanov writes:

“Green Plains Partners is a derivative play on the U.S. corn ethanol industry, one of the most mature elements of the renewables spectrum. But in contrast to the typical “ethanol stock,” this is a fee-based MLP with zero commodity risk. The name of the game will be dropdowns from the parent company, a long-standing consolidator in a fragmented industry – and there is ample news on that front. Bearing in mind the lofty yield attributes, we reiterate our Strong Buy rating, as detailed in our initiation report from July 21.

* 3Q15 recap. This was the MLP’s first full quarter as a stand-alone public company, so historical comparisons are not meaningful. Revenue of $21.4 million (90% from the parent company) came in below our estimate of $23.6 million, but gross margin of 64% topped our model. Distributable cash flow of $12.9 million was marginally below our model, and coverage was just under 1.0x. The first quarterly distribution, $0.40/unit, has already been declared and will be paid on November 13. We anticipate that the first increase (up a penny to $0.41) will come next quarter.

* Dropdowns… one very soon, one a bit later. Ahead of the 3Q results, yesterday the parent company announced its second ethanol plant acquisition within a week – quite the M&A mini-boom in the ethanol space. The 100 million gallon plant in Texas is being bought from the fuel distributor Murphy USA for $94 million, below replacement value. As with the Virginia acquisition from last Monday, the Texas plant’s associated midstream assets will be dropped down to the MLP. These include a shuttle unload facility and a 4.8 million gallon storage facility. Both acquisitions bolster export capabilities, as the facilities are located near coasts. The Texas plant also has the advantage of being in an area with the world’s largest concentration of cattle in the world, ensuring robust demand for distillers’ grains. The timing of the Virginia dropdown is not as clear (we are modeling mid-2016), but the Texas dropdown should come over the next few months.

* Broader thoughts on ethanol. On September 2, we wrote about the fact that ethanol pricing is temporarily above gasoline – a very unusual state of affairs by historical standards. We pointed out that, despite this headwind, the impact on U.S. ethanol demand is likely to be minimal. The weekly EIA petroleum reports largely confirm this. Despite the non-stop volatility in commodity prices, U.S. ethanol production has remained remarkably stable. As it stands, ethanol production has ranged between 900 and 1,000 Mbpd for 24 straight weeks – and 49 out of the past 51 weeks. What this shows is that industry volumes are essentially immune to what’s happening with pricing.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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by Debra Fiakas CFA

This week Pattern Energy Group’s (PEGI:  Nasdaq), the independent wind power generator, is scheduled to report sales and earnings for the quarter ending September 2015.  The company has cultivated a strong following among analysts for a company its size.  Nine estimate contributions have gone into a consensus estimate of $87.2 million in sales for the quarter, resulting in a net loss of a penny per share.  If achieved the sales hurdle would represent 22% growth over the same quarter last year.  A penny loss may not seem impressive, but it is substantially better than the $0.15 loss the company posted last year for the third quarter.  Indeed, the consensus estimate for the next quarter and next year suggests the company is poised to reach profitability for 2015 and then take off on a run into the next year to potentially reach 40% sales growth and tripling earnings.

Pattern Energy operates fourteen wind power facilities across the U.S., Canada, Chile and Puerto Rico.  Another two facilities are under construction.   With exotic names like Logan’s Gap Wind in Comanche County, Texas and Lost Creek Wind in DeKalb County, Missouri, the wind power sites have a total capacity to generate 2,282 megawatts.
Far away from the windy stretches where its wind turbines spin out electricity, Pattern Energy’s management team is installed in offices at San Francisco’s historic Embarcadero.  Most members hail from Babcock & Brown, the Australia-based investment and advisory firm that went bust during the financial crisis in 2009.   The post mortem for Babcock & Brown suggests it was poorly run, with little regard for prudent leverage or risk management practices.  Reportedly, the Wind Group at Babcock & Brown was central to the problems, paying out substantially more dividends than was earned as operating cash flow.  While normally prohibited, such excessive payments were made by setting up the Wind Group in an off-shore ownership structure.  The ruse allowed Babcock & Brown to portray the company as highly profitable so the company could borrow more from banks as well as pay out management fees and bonuses to senior executives.

According to its financial reports, Pattern Energy recorded $266.6 million in total energy sales in the twelve months ending June 2015, resulting in a net loss of $33.2 million.  However, operating cash flow in the period was positive $98.2 million and the company closed out June with $82.9 million in cash on the balance sheet.   Cash generation is all important, as power generation is a capital hungry business.  Capital investment has averaged over $290 million per year over the past three years.  Dividends are also a drain on cash.  The company is slated to pay out $1.45 per share in dividends over the next year, requiring at least $108 million in cash to cover checks to shareholders. 
To keep things going Pattern Energy has put on some leverage, bringing total long-term debt to $2.0 billion at the end of June 2015.  The company has also sold common stock, raising approximately $867 million over the last three and a half years.   

Investors have been squirming under the added risk associated with higher leverage as well as the specter of losses during the last year.  PEGI began trading downward in mid-July 2015 when the rest of the U.S. equity market took a nose dive.  With a beta of 1.04 we would expect a decline commensurate with the broader market.  However, PESI has not recovered with the rest of the market, leaving the stock price closer to its 52-week low price than it is to the high price. 

For investors who are content with management’s performance and trust financial strength of the company, the depressed stock price is appealing.  The current dividend yield is 6.8%, a yield that could deliver a pleasant breeze to investors’ portfolios.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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by Joe McCabe

Where is the money in microgrids? My goal at this years Intersolar event was to try and answer this question; to figure out the value proposition of microgrids as they relate to distributed generation, storage, renewable energy and photovoltaics. 

A microgrid is an electrical supply and use system that can operate autonomously. Although all microgrids are small relative to the electric grid as a whole, the huge size of the grid leaves a broad range of what can count as “micro.”  Microgrids can be as small as a single building, but range on up through schools and military bases and an entire community, such as San Diego Gas and  Electric’s Borrego Springs CA microgrid which includes Spirae equipment.  Even my plug-in-prius with an an AC inverter can be considered a microgrid.

Islands have microgrids already, with Hawaii leading the experience curve on what an electrical grid looks like with increasing levels of intermittent renewable energy power sources. On the US mainland, research and development projects have funded microgrids using words like resilience and reliability as justification for the work. But it is hard to find the monetization of these concepts which is needed to justify any return on an investment for microgrid functionality.

At this past week’s Intersolar NA 2015 held in San Francisco, microgrid companies were exhibited more frequently than in past years (see my previous articles from Intersolar NA events on racking, storage and what not). Jerry Brown’s most recent inaugural address included the word “microgrid”.  Microgrids provide an added value for uninterruptible power. Unreliable grids are typically found in developing nations, so the US with today’s relatively reliable grid doesn’t typically have a realistic value proposition. The term resilience is being used more often as it relates to the grid with increasing levels of intermittent renewable energy. The cyber security of the grid is and will continue to be increasingly scrutinized. Hurricane Sandy prompted New Jersey to develop the Energy Resilience Bank with funding for systems sized to provide energy to critical loads during a seven-day grid outage.

Use-cases driving the discussions around microgrids are used by the California Smart Inverter Working Group to develop rules around the advanced functionality of inverters with and without electrical storage. A growing group of electrical utility and solar industry professional meet weekly to discuss the new California Rule 21 language, the communications/security/rules/scheduling of valuable advanced functionality.  All inverters sold into California will be required to have this advanced functionality starting at the end of 2016.

Greensmith is a company that exhibited again at this years Intersolar discussing their ability to work with all manufacturers of storage and inverter equipment.

Other companies whose products and services that relate to microgrids at Intersolar included Princeton Power Systems (developers of the Alcatraz Island microgrid),

Dynapower developers of the Green Mountain Rutland City, VT microgrid which includes a PV system on a brownfield landfill privately owned by Frankston Holdings.

Ideal Power has an interesting 125 kW inverter that will take PV, charge and discharge storage and integrate with a generator to provide AC power on a microgrid.

Solar Energy International held a workshop which included microgrid content. In future years you will probably see a focus on microgrids at Intersolar as you saw with the evolution of storage that this year dominated one floor of the Moscone Center’s West hall exhibit space.

Duke, American Electric Power, Berkshire Hathaway Energy, Edison International, Eversource Energy, Exelon, Great Plains Energy and Southern Co. have grouped together on microgrid issues under the umbrella of Grid Assurance.

One of the biggest announcements for this space was the July 1st submission of Southern California Edison’s Energy’s Distributed Energy Plan to the California Public Utilities Commission. Edison indicated they will be opening up their ~20,000 distribution lines to third party vendors of electrical services because Edison’s business is being a wires company. In my view, this opens up the opportunity to genuinely value microgrids at each of the connection points for residential, commercial and industrial customers on the distribution lines. I wasn’t able to answer the question of the value for microgrids within large scale grids in $’s/resilience or $’s/reliability. Perhaps in the not too distant future each utility customer will be charged accurately for the safety, security, resilience, and reliability of its electricity with the help of Edison’s new awareness around their Distributed Energy Plan.

Conclusion

Microgrids will become increasingly important to the storage, solar and wind power industries because they will add security, resilience and reliability values.  Off grid and island systems continue to be successfully implemented.

Rule 21 equipment being required at the end of 2016 and PJM’s frequency markets are enablers for the monetization of microgrids values, possibly by as early as 2017. When you see these values monetized as is currently done with energy ($/kWh), power ($/kW), frequency regulation (PJM) and power factor correction ($/kVAR) are monetized, then microgrids will become widespread.

Joseph McCabe is an international solar industry expert with over 20 years in the business. He is a Solar Energy Society Fellow, a Professional Engineer, and is a recognized expert in developing new business models for the industry including Community Solar Gardens and Utility Owned Inverters. McCabe has a Masters Degree in Nuclear and Energy Engineering and a Masters Degree of Business Administration.

Joe is a Contributing Editor to Alt Energy Stocks and can be reached at energy [no space] ideas at gmail dotcom.  Please contact Joe for permission to reprint.

*************

Thanks to Ravi Manghani of GTM Research, Steven Strong of Solar Design Associates and Solar Energy International  for help with content on this article.

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Jim Lane

Revenue and customer numbers are up at Solazyme (SZYM), 60% YOY growth from Q3 2013 to Q3 2014. But a slowdown in the rollout at Moema capacity leads to a spectacular 58% one-day drop in the stock price.

What happened?

Solazyme has been on a relatively steady downward trajectory for the past few quarters, dropping from the $11-$13 range and down into the $6-$8 range.

And then plunged a stunning 58 percent to $3.14 yesterday – amidst downgrades by Cowen & Company, Pacific Crest and Baird generally to Market Perform or Neutral, and remains at “Underweight” over at Piper Jaffray. Target stock prices have come way down.

All this carnage, we might add, even after a signature partnership with Versalis was announced to commercialize Encapso dilling oils. Versalis said that its initial emphasis for Encapso will be oil and gas fields operated by its parent company Eni, which represent a significant amount of the world’s petroleum drilling activity. Encapso will be featured as part of the company’s recently launched Specialty Oilfield Chemicals product portfolio.

What exactly gives for San Francisco’s [advanced bioeconomy] Giants?

Here’s the news

Total revenue for the third quarter of 2014 was $17.6 million compared with $10.6 million in the third quarter of 2013, an increase of 65%. Third quarter GAAP net loss was $39.7 million, which compares with net loss of $30.7 million in the prior year period. On a non-GAAP basis, the net loss was $35.3 million for the third quarter of 2014, compared with net loss of $22.3 million in the prior year quarter. A reconciliation of GAAP to non-GAAP results are included below.

“Our Clinton/Galva and Peoria facilities are performing well,” said CEO Jonathan Wolfson.”

Good news, so far. Then this:

“Progress at Moema is more mixed with the upstream process operating as expected, while the downstream process will require continued work to establish consistent, fully integrated operations.”

Analysts would, as we’ll see later in this report, used this new guidance from Brazilian operations as a catalyst to downshift the revenue growth rate to around 15% for 2015, targeting $70M instead of $350M.

Then this, on the company’s strategy.

“Commercially, we’re continuing to establish our Encapso and AlgaVia products in the marketplace while focusing additional attention on the development of higher value specialty products,” Wolfson said. “Strategically, we’re moving to intensify our focus on our high-value specialty portfolio, a move that will alter the near-term trajectory of our production ramp but which we believe will ultimately drive greater value for the Company.”

CFO Tyler Painter summarized:

“Our near term focus is on bringing Moema to fully integrated operations and focusing commercial activity around our high-value specialty products. As we execute on these goals, we are emphasizing prudent management of our capital, optimizing our product mix and positioning our manufacturing assets to maximize returns.”

Analysts would use this shift in strategy as further reason to downshift revenue growth, push out the “reaching break-even date” and raise the specter of a dilutive capital raise in 2015 to ensure liquidity for the company on its elongated timeline.

In plain-spoken words

Moema’s delayed, the big volumes are now in 2016 or 2017, so we’re shifting to higher margin, lower-volume markets.

What the analysts say

Pavel Molchanov at Raymond James expressed “frustration” with Moema delay, but said the “strategy makes sense” and saw value with the stock so far down. He wrote:

Downstream issues at Moema: frustrating, but ubiquitous in the space. Production challenges based on downstream processes at the Moema plant in Brazil are the main factors behind the slower-than-expected production scale-up and move down the manufacturing cost curve. Early costs at Moema were both higher, and lasted longer, than originally anticipated. Choppy power and steam operations – yes, something as prosaic as that – are among the specific culprits. None of this, to be sure, pertains to the core of Solazyme’s technology platform, but it’s frustrating nonetheless.

Slow ramp spurs retooling of production strategy. The operational shortfalls at Moema have led to a rethink of the strategy for production expansion. The new mantra – and E&P investors will be very familiar with this – is “value not volume”. Solazyme will further narrow the product range (and thus the scope of customers served), leading to lower sales volumes but higher pricing and blended margins…All in all, we think the strategy makes sense, even though the market clearly does not like the top-line pushout (shares are down 20% pre-market), and we continue to recommend buying the stock, particularly on weakness today.

Jeffrey Osborne at Cowen & Company was rethinking the models. He wrote:

Solazyme reported sub-par results for Q314. Management’s shift from high volume capacity to lower volume / high margin sales comes as a surprise, in the wake of low ASPs in its popular oils. Encapso and AlgaVia progress was stressed, and 2015 sales were guided well below consensus. With the loss of Moema as a catalyst, we are lowering our rating to Market Perform, and our price target to $7

Management’s overhaul in business strategy follows negative margins in typically lower margin product areas. As a result, the company has guided for only a 15% increase in 2015 revenue

The shifted focus to low-volume, high margin sales, in tandem with operational benchmarks falling short, is inhibiting the company from consolidating Moema’s operations in 2015 financials. This accounts for the ~$70 million in 2015 revenue guidance falling drastically short from our and consensus estimates (we were at $350 million previously for 2015).

Management has noted that despite delays, it expects to fully bring Moema onto its balance sheet in 2016, albeit not producing at the previously intended annual capacity of 100k MT/yr. We expect the Moema run rate to fall short of 20k MT/yr by 2016, given the change in strategy, as well as a pause in the completion of the Clinton facility ramp. This could prove ultra conservative; however, we would rather set the bar low.

Meanwhile, Mike Ritzenthaler of Piper Jaffray was trying out for Les Miserables. He wrote:

Start-up & reliability issues, the slower pace of market adoption, and lower than expected ASPs have substantially delayed execution timelines; management used the conference call to reset investor expectations much lower. Even with the technology working as expected, the timeline needed to ramp the facilities (including Moema which is currently experiencing operational issues) is well beyond previous expectations. The business model shift toward value products versus volumes is not surprising, but we continue to see material risk from niche market development and a sizeable capacity overhang (new partner Versalis is targeting ~3k MT of Encapso sales, or ~2.5% of capacity). Further, we see a capital infusion in 1H15 as likely and no longer believe that cash break-even in FY15 is reasonable. We have made healthy cuts to estimates, which result in a lower price target (to $2 from $4) and we maintain our Underweight rating.

The anatomy of the stock’s free-fall

You can see
it right here. The news came out last night, and there was a huge imbalance in the buy-sell. The stock was routed before trading started, opening at $3.85, and falling throughout the day to a intraday low of $2.98 before rebounding to $3.14 at the close.

We’ve seen it before. Pounding of earlier-stage stocks for any delays in the march to break-even. Doubtless we’ll see it again.

Those are timing issues for investors and legitimate for their purposes, of course. But let’s focus on the larger story here while significant ramp-up risk is out there for the long-term, investors have priced in almost zero revenue growth next year, at this stock price, if we take the Cowen & Company analysis which pegged a $4 target price to 15% growth.

Which makes this an opportunity for those who see in the Eni deal the means of revenue growth that investors have discounted for the near-term.

Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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Garvin Jabusch

About three weeks ago, I posted a piece called “RGS Energy, Tempered, Opportunistic Growth,” an optimistic bit of coverage on one of our holdings,  (RGSE), that included an 18-month price target of $10.00 per share. Since then, several developments and pieces of information have come to light that have caused us to revise our assessment of the company.

Thursday, July 3, a quiet half-market day, RGS Energy released a statement announcing plans to monetize its previously filed potential shelf offering; “RGS Energy (NASDAQ: RGSE) has entered into a definitive agreement to raise approximately $7.0 million in a private placement financing transaction. Under the terms of the agreement, RGS Energy will issue units consisting of an aggregate of 2,919,351 shares of its Class A common stock and warrants to purchase up to 1,313,708 additional shares of Class A common stock, at a price of $2.40 per unit.” This deal has been offered to and accepted by as yet undisclosed buyers at well below RGSE’s market price in the $2.90s on July 3. The market reacted unfavorably to this low self-valuation from RGSE, driving the share price down approximately 16 ½ percent in the two market days that have followed the announcement, but even so, the private placement valuation remains below market as of this writing.

It gets more interesting. Not only do participants receive this fire-sale valuation, but also, “[e]ach unit consists of one share of Class A common stock and a warrant to purchase 0.45 shares of Class A common stock at an exercise price of $3.19 per share. The warrants are exercisable beginning six months after issuance and for a period of five years thereafter.” So participants are buying already in-the-money shares, and also getting up to 5 ½ more years to watch the company grow, risk free, before deciding whether to buy more shares at $3.19. Frankly, I’m surprised that management thinks little enough of their firm that they felt the need to offer such a cheap price and also such a fantastic sweetener to raise equity capital. Not knowing all the deal details, I may be missing something, but if this was the best valuation RGSE could get for equity, why didn’t they use low-interest debt instead? As of last report, the company had zero long-term debt, a perfect position for a cash-flow positive business to fund operations on the cheap with some kind of note offering.

All in then, up to 6,137,936 dilutive RGSE shares may be sold at $2.40 and $3.19 per share, representing up to 13.65 percent dilution to the existing shareholders of the previously outstanding 44.97 million shares. This is in exchange for $6.4 million (net: of the $7mm raise, close to 8.6 percent, or $600,000, is going to fees and expenses) in “operating capital,” and “debt repayment,” and not necessarily so much for expansion, except a vague statement about proceeds “to support the launch of its residential leasing platform.”

When we met with RGSE’s CEO Kam Mofid on May 22, 2014, we asked him about the shelf filing that made this transaction a possibility. That day, he told us that a “shelf offering is filed, but it is to be used only opportunistically for tactical expansion.” We understand that business needs can change even in just a six-week period but the terms of the execution of the shelf offering and the uses of capital as represented in the press release don’t seem to agree with Mofid’s in-person confidence in opportunistic growth via smart use of his war chest. And Mofid represented to us that RGSE has no debt except for a revolving credit line with Silicon Valley Bank (SVB), which in late May he told us they pay off in full every quarter. So in what sense can their press release be accurate about using proceeds to pay down debt? Only in the sense that they will pay off the SVB line something they were already doing with cash flow with the new capital. On the contrary, now would have been the time to take on debt rather than issue new equity, thus providing the opportunity to grow the firm to the point where they could get a much better valuation for its shares upon exercising the shelf offing in another year or two.

In the end, we can’t help but feel that RGSE’s newly announced sources and uses of capital conflict with the business approach as articulated to us by the firm’s CEO less than two months before.

In the last post, I wrote that RGSE had every chance of hitting $10 per share by the end of 2015. That was based partially on the rapid growth of the solar installation industry, on our confidence in management ability to execute, and also partly on my assessment of RGSE’s value relative to the total market capitalization of SolarCity (SCTY). Since that post, SCTY has announced plans for massive vertical integration of PV panel manufacturing of the most technologically advanced panels and at prices competitive with any panels out there. This has changed the fundamental nature of SCTY and renders moot my comparison of two installation-only firms.

Where SCTY has added a high-tech manufacturing firm to its business, RGSE has signed a supply agreement with SolarWorld to source panels for installation. We can’t help but notice that it was SolarWorld that persuaded the Commerce Department to levy tariffs on Chinese solar panels imported into the U.S., thus doing more to slow the growth of RGSE’s core business than has any other single entity. According to Forbes, SolarWorld has been called “a crazed agent provocateur” and “[a]t a recent dinner in San Francisco, Suntech chief technology officer Stuart Wenham, an Australian, was just as blunt. ‘SolarWorld is a pariah…No one wants to deal with them.'” SolarWorld’s continuing efforts to undermine the economic competitiveness of solar PV in the United States would seem to fly in the face of RGSE’s long-term business interests.

Finally, then, we have to revise our price target. To external appearances, it seems RGSE may not be acting entirely within the best interests of the firm or its existing shareholders. Eschewing presumably cheap debt in favor of expensive, dilutive equity fundraising, and offering a sweetheart deal to get it done, seems to show an internal lack of confidence in the firm’s valuation and near-term prospects. Nevertheless, the simple fact that RGSE finds itself in one of America’s fastest-growing industries still bodes well for growth, and with the low current valuation, for the possibility of a takeover. We’re lowering RGSE from “buy” to a “hold” rating, and lowering our 2015 price target to U.S. $5.00. While we’re disappointed with current events, and we don’t presently intend to accumulate more shares, we are not planning to immediately exit our position in RGSE, since, as our price target indicates, we do think there’s upside potential from the current $2.53.

Disclosure: Green Alpha Advisors presently holds both RGSE and SCTY. 

Garvin Jabusch is cofounder and chief investment officer of Green Alpha ® Advisors, LLC. He is co-manager of the Shelton Green Alpha Fund (NEXTX), of the Green Alpha ® Next Economy Index,
and of the Sierra Club Green Alpha Portfolio. He also authors the Sierra Club’s green economics blog, “Green Alpha’s Next Economy.”

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Jim Lane

$27 per gallon? $15 per gallon? Fooey! Try algae-based fuels at “the same cost as regular diesel.” Month-long pilot program kicks off in the San Francisco Bay Area.

In California, Propel Fuels and Solazyme (SZYM) are bringing algae-derived fuel to retail pumps for what we believe to be the first time in history. The two leading renewable fuel brands have come together to offer Solazyme’s algae-based SoladieselBD to drivers through Propel’s Bay Area network of retail renewable fuel locations. The month-long pilot program provides the industry’s first opportunity to test consumer response to this advanced renewable fuel.

Solazyme’s algae-based SoladieselBD meets or exceeds ASTM quality specifications and has shown performance enhancements including cold temperature operating performance. The fuel is compatible with existing diesel engines and the fuel’s performance is guaranteed by Propel.

Locations

The fuel will be sold at the same price as conventional diesel fuels and will be available exclusively at Propel’s Clean Fuel Points in Redwood City, San Jose (N. First St.), Berkeley, and Oakland.

“Propel is committed to providing our customers with access to the highest quality, most sustainable, domestically produced fuels, so we’re proud to introduce the next generation of fuels to the retail market,” said Matt Horton, CEO of Propel Fuels. “Propel’s growing station network provides the critical link between these future fuels and today’s consumer fuel tanks, giving our customers a chance to make history.”

The Technology

Solazyme’s technology platform converts plant sugars into oils by feeding the sugars to microalgae in standard industrial fermentation equipment. The algae consume the sugars and convert them into oils rapidly and efficiently.

Testing undertaken by the National Renewable Energy Laboratory (NREL) shows that, in a 20% blend, SoladieselBD significantly outperforms ultra-low sulfur diesel in total hydrocarbons (THC), carbon monoxide (CO) and particulate matter tailpipe emissions. This includes an approximate 30% reduction in particulates, a 20% reduction in CO and an approximate 10% reduction in THC.

“Solazyme’s revolutionary algae-based technology platform has supplied our development partners and customers with advanced biofuels that meet or exceed some of the world’s most stringent fuels specifications and requirements, “ said Bob Ames, VP of Fuels, Solazyme. “We’ve successfully demonstrated our land-based fuels in fleet vehicles and corporate busses, and are excited about this pilot program with Propel because it enables us to make these fuels available to the public.”

More on the story.

Disclosure: None.
Jim Lane is editor and publisher  of Biofuels Digest where this article was originally published. Biofuels Digest is the most widely read  Biofuels daily read by 14,000+ organizations. Subscribe here.

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Charles W. Thurston

Members of the Coalition for Affordable Solar Energy (CASE) railed against the impending “trade war,” arguing that the steep price drop in imported Chinese photovoltaic modules was good for “98 percent” of U.S. solar industry jobs. “We are growing U.S. solar jobs and this trade case will undermine all the advances we have made in the U.S. solar industry,” said one CASE member.

Holding a press conference Thursday morning in Washington after testimony was heard Wednesday by the U.S. International Trade Commission (ITC) about the alleged dumping of Chinese modules in the United States, CASE member Kevin Lapidus, senior vice president for legal and government affairs at SunEdison, a division of MEMC Electronic Materials (WFR), said, “This case is not good for U.S. policy. SolarWorld (SRWRF), a German company, is using the U.S. legal system to compensate for its own business mistakes. It has triggered a global trade war that has mushroomed beyond the United States.” 

Hoyle Kim, general counsel for GT Advanced Technologies (GTAT), went further in his rejection of the dumping charges as bad for the U.S. solar industry: “I strongly feel that this anti-dumping case is a horrible incidence in the legal process intended to protect American competitiveness. Trade barriers will not improve the solar industry and the tariff exercise is counter-productive. The timing of the situation is a pity because of the tremendous technological progress (that has been seen in this country) in increased efficiency and reduced costs.”

Francine Sullivan, the vice president and legal counsel or REC Silicon (RNWEF), observed, “If the Commerce Department does uphold tariffs, it will increase the cost of solar in the United States. Protectionism is bad for the U.S. solar industry.” She added that, “If solar growth is left on its own, the Chinese module capacity and more will be required; solar is a global market.”

George Hershman, vice president of San Francisco-based Swinerton Renewable Energy, a utility-oriented developer, echoed the group sentiment, saying, “There are a number of solar projects on hold now, as this issue gets resolved. Uncertainty and time drive up costs, so we are fighting a race against lower cost solar.”

Lapidus noted that while the European solar industry which also is considering Chinese dumping charges may be slowing, growth is rampant in several other parts of the world. “Many new countries are coming on line as solar markets, like Japan and Saudi Arabia, and regions like Southeast Asia and South America also are very good markets for solar.”

The ITC will determine in early November whether U.S. manufacturers have been harmed by Chinese imports. If the ITC does determine injury has occurred, preliminary tariffs imposed by the U.S. Commerce Department in May, ranging from 30 percent to 250 percent, would continue. Commerce is expected to issue a final ruling by October 10. The dumping complaint was initiated by SolarWorld, and has been joined by several other U.S. manufacturers.

In retaliation, China in May filed a complaint against U.S. subsidies that affected over $7 billion worth of Chinese products.

Charles W. Thurston is a journalist who specializes in renewable energy, from finance to technological processes. He has been active in the industry for over 25 years, living and working in locations ranging from Brazil to Papua New Guinea.
This article was originally published on RenewableEnergyWorld.com and was republished with permission.

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