I met VegTech Invest CEO, Elysabeth Alfano at the 2023 ESG for Impact Conference, where she made a strong case for investing in food and agricultural systems innovation as a method for reducing greenhouse gas emissions and other environmental harms.  I wanted to learn more about the specific innovative companies she thinks are worth investing in, and so I interviewed her and VegTech Invest Chief Investment Officer, Dr. Sasha Goodman about these themes.  The interview follows. 

 Tom Konrad Ph.D., CFA –

Editor

 Q: Thanks for taking the time to speak with me.  To begin with, can you tell us what VegTech is and why investors might want to invest in the theme.

 Ms. Alfano: VegTech is the innovation that is driving the transformation of sustainable food systems, moving away from inefficient and unsustainable animal proteins and replacing them with nutritious alternatives that are significantly less damaging and, at scale, less costly.  Given the problem-solving nature of these innovations, this theme reflects an anticipated megatrend in which all consumers adopt – to varying degrees – proteins that are more nutritious, more prolific, take less time, require fewer inputs and create less damage.

This represents a significant opportunity to make money with this trend, as well as potentially bring down the carbon footprint of one’s portfolio by investing in this theme.

Q: What percentage of world GHG emissions come from the food system and what is the potential for reducing these emissions by 2030 and by 2050?

 Ms. Alfano: Conservative estimates state that 16.5% of the world GHG emissions come from animals as food.  More significantly, 32% of the world’s global methane emissions come from grazing and growing crops to feed animals.  Life cycle analysis shows the delta of impact for a plant-based burger is 99% less water, 93% less land, 90% fewer greenhouse gas emissions emitted and 46% less energy used.

Impact by 2030 and 2050 will depend on how much capital is driven (through the public markets, but also governments) to VegTech innovations.    According to the Boston Consulting Group, investing in VegTech/Alternative Proteins is 3x-40x more impactful at reducing GHG emissions than investing in alt energy, electric vehicles or alternative building materials.  This is primarily because the CapEx needed to build out the VegTech infrastructure is much lower than the other sectors, so adoption and impact can happen faster.

Q: What are the current options for public market investors to access this theme?

 Our research shows that there is only one option for this theme in the public markets: EATV ETF (NYSEArca:EATV).

 Q: I note that EATV is an actively managed ETF.  Why did you choose an active as opposed to a passive, more index-based approach?

 Ms. Alfano: Markets are dynamic and this sector is dynamic, with anticipated IPOs for novel technology companies. Therefore, we thought it best to have the option to make decisions without restraint. Still, the ETF trades quarterly and, thus, is mindful and disciplined regarding turnover.

Lastly, it is rare to see an ETF led by industry sector experts, but both Stanford educated Dr. Sasha Goodman, Portfolio Manager of EATV, and Elysabeth Alfano, CEO of VegTech Invest, are food systems transformation experts who understand and are involved in the nuances of the shifting global food supply system, as well as being venture and private investors.

Q: How do you decide if a company that’s involved in the food system belongs in the VegTech theme? How many companies are currently in your investing universe?

Dr. Goodman: We continually scan the landscape for plant-based companies, starting with a pool of over 100 potential candidates, as listed in the VegTech non-tracking index EATVi. Companies are selected based on rigorous quantitative and qualitative analysis, including in-depth revenue research. We sample around 50 products per company, aligning them with revenue segments to ensure they meet our prospectus criteria, ultimately choosing those best positioned to leverage market trends in sustainable food systems transformation. These are companies that are innovating for efficiencies and disruption and fit into our categories, which notably include business-to-business players, such as flavor technology and ingredients producers and synthetic biology specialists, in addition to the plant-based consumer goods.

Q: How has the ETF performed in comparison to EATVi?

 As of 10/31/23, the actively managed and non-tracking ETF, EATV, surpassed the EATVi index across the 1, 3, 6, and 9 month cumulative periods, and the 1 year average annualized periods.

Q: What technologies or methods for transforming agriculture are you most excited about?

Ms. Alfano: We are most excited about both fermentation and cultivated meat.  Cultivated meat, growing meat from cells, is still 6-8 years away from scaling, so I will discuss fermentation here.   We have been fermenting foods for hundreds of years: kimchi, vegetables, tea, bread, and beer are a few examples.  It makes good sense that we would now ferment proteins.

Companies like Gingko Bioworks (NYSE: DNA) engages in partnerships and collaborations where they provide their services and expertise to help other companies develop and produce bio-based products. This is often done through the use of Ginkgo’s platform.  Lamb Weston is selling potatoes to be fermented as protein.  AB inBev, the largest fermenter in the world, is now fermenting proteins through its company BioBrew.  It is exciting to see a company of such size and expertise, now focusing its attention on feeding a growing population quality proteins, without damaging the planet.

Q: Under what circumstances is controlled environment agriculture (greenhouses, etc.) better for the environment than field agriculture, and when is it worse?

Dr. Goodman: Controlled environment agriculture (CEA), like greenhouses, is generally more eco-friendly than traditional agriculture. When positioned near urban areas, CEAs reduce transportation emissions, offer fresher product that can last longer and minimize food waste. Their enclosed nature safeguard waterways by limiting pesticide and fertilizer runoff, and operate with 70-95% less water use, also utilizing rainwater collection. Modern CEAs optimize natural light, use energy from biogas, and CO2 from industrial sources, enhancing sustainability. Linking CEAs to renewable energy sources such as wind, solar, or geothermal eliminates dependence on non-renewable energy.

Q: EATV’s full holdings are available for review here: https://eatv.vegtechinvest.com/full-holdings.  Please describe how your top 3 holdings are helping reduce the environmental impact of the food system.

Dr. Goodman: VitaCoco’s (NASD:COCO) specialization in coconuts puts them in a good position in the Plant-based Innovation food supply chain. They currently offer coconut water, coconut milk, and coconut oil. Their coconut milk is a dairy alternative that lasts around 12 months on the shelf, and is less likely to spoil and therefore reduces food waste. Both their coconut water and milk are shelf-stable. Notably, their ability to produce coconut oil positions them well in the supply chain, as it is a popular ingredient in plant-based meat recipes. Coconut oil is currently a primary fat source in many plant-based meats due to its semi-solid state at room temperature, which makes it a better substitute for solid animal fat than other plant oils.  Further, VitaCoco is also committed to eco-conscious initiatives, investing in recycling infrastructure and promoting regenerative agriculture.

Celsius (NASD:CELH) offers plant-based energy drinks made with natural ingredients like green tea extract and ginger. Their products, packaged in recyclable aluminum cans, align with sustainable practices, emphasizing a long shelf life and the use of recyclable materials.

e.l.f. Beauty (NYSE:ELF), while not food-related, focusing on carbon reduction and ethical practices. Material companies like this comprising about 20% of the fund portfolio.

Q: I found a few of your holdings surprising, since I had not previously associated them with food system innovation.  Can you tell me how you believe DOLE and TESLA are helping make our food system more sustainable?

Ms. Alfano: Dole (NYSE:DOLE) is the OG of non-dairy ice cream, if you will, with the Dolewhip product.  But much more on the cutting edge is that Dole is upcycling is pineapple skins to produce alternative leathers.  Ultimately, if we are making less beef, we are making less leather.  And given the environmental footprint of a tannery, that’s a good thing.

Alternative materials act as a follow-on hedge with alternative proteins if you will, per the above.  It is for this reason that EATV focuses around 80% on food and 20% on materials. Not only does this give the fund diversification, but also capitalizes on the innovations that are occurring around replacing environmentally damaging animal products from supply chains.

Enter Tesla (NASD: TSLA).  Tesla was the first car manufacturer to mandate only having alternative leather in its vehicles. This prompted Mercedes and BMW to have around 50% alternative leather for their cars.  Automobile leather is second only to shoe leather for its large-scale production, so it is meaningful to have car companies move away from leather per Tesla’s initiative.

Q: One company I immediately expected to see were companies focused on plant-based food products like Beyond Meat (NASD: BYND and SunOpta (NASD:STKL), but I was surprised to note that these names each account for less than 1% of your portfolio, when your top holding (Vita Coco/COCO) is almost 10%.  Why do you have such low allocations to such obvious VegTech names?

Ms. Alfano: We allocate in the fund according to a mix of qualitative and quantitative considerations: performance, financials, potential IP moats, CapEx spends, EBITDA and revenue growth and profitability, volatility, in addition to considerations of environmental and human rights goals. The companies can’t just have great innovations. They also have to be well performing companies for larger allocations.

The markets have been tricky and that has been almost without exception for all companies, bar a few.  We believe two things are at play: small and mid-cap companies, which is around 70% of EATV, are undervalued at the moment, leaving room for a great buying opportunity.    The markets have not yet priced in the magnitude of demand and necessity for food systems transformation.   Thus, currently, EATV offers high growth companies and low growth prices.  We do believe it is a great time for buyers to get into the EATV ETF as we see food innovation coming to take center stage in the investment community on the near horizon.

 Q: Moving beyond investing for a moment, can you describe a few actions people can take in our personal lives to help make the food system more sustainable?  What is the potential for each of these actions to reduce our own carbon footprints?

 Ms. Alfano: For starters, investors can invest in the EATV ETF to potentially lower the carbon footprint of their portfolios.  EATV is determined by ACA Global’s Ethos ESG to be the only ETF to be Carbon Neutral without buying credits due to the emissions avoidance impact of the fund.  It isn’t producing large amounts of emissions, thus, doesn’t need credits to cover them up.  Perhaps this is best illustrated by the following:  Ethos ESG has found the global temperature warming potential (image attached) of EATV to be 1.18C, well below the Paris Accords recommendation.  For a reference point, the global temperature warming potential of one of the most common investments, the S&P 500 index, is 3.87C.

Beyond investing to lower the carbon footprint of one’s portfolio, Project Drawdown, the Physician’s Committee for Responsible Medicine and the Intergovernmental Panel on Climate Change (IPCC) all agree that one of the most important things one can do for the environment is to remove meat and dairy in part or in full from one’s diet.

The LinkedIn, San Francisco headquarters took its employee cafeteria two-thirds plant-based for 1 month, with meat and dairy still available, but less than usual, and the employees 1) dropped their meat consumption by 55% and 2) the company as a whole dropped its CO2 by 14,000kg.  Further they received letters of thanks from the employees who had been trying to eat better for their own health and healthcare costs but were finding it hard when fried meat and rich dairy fats were the choices they were given.  They were happy for the healthier options and the company was also happy to reduce its CO2 numbers and in the long-term, they believe, their corporate healthcare costs while improving employee productivity.

 Q: What else do you think stock market investors should know that I have neglected to ask about?

 According to OurWorldinData.org, 41% of the world’s tropical deforestation is driven my growing crops for animal feed and grazing animals.  According to the United Nations, animal agriculture is the leading cause of biodiversity loss and deforestation due to growing crops and grazing for animals who get the food instead of people.

According to the U.N., the population will grow from 8B to 9.7B by 2050, but we won’t get more land or water.  A growing middle class in Africa, India and China will increase the demand for meat without the natural resources to sustain this.

These aren’t new data points and governments around the world are deeply focused on food insecurity and the political insecurity that comes from this.  Israel, China, the Middle East, Singapore, German, Holland, Canada and the U.S. are all investing in the infrastructure and innovation, along with private investors and now, through EATV, and the public markets.    Shifting the food systems isn’t a nice option or a preference. It is a necessity and the production and adoption is expected to shift quickly according to meat industry experts at Cargill.

Synthesis Capital, based on the think tank, ReThink X, anticipates the tipping point adoption of 10% around 2035 with earlier investment opportunity and growth to be made before the tipping point.

We believe the VegTech sustainable and prolific proteins theme, as exemplified in EATV, is a very strong thesis.  Please reach out to either Stanford educated Chief Investment Officer, Dr. Sasha Goodman, or VegTech Invest CEO, Elysabeth Alfano at Info@VegTechInvest.com. For more information on the Plant-based Innovation & Climate ETF, EATV, and to view the full holdings, visit https://EATV.VegTechInvest.com.

The post EATV: An ETF for Investing in the Agricultural Transition (Interview) appeared first on Alternative Energy Stocks.

By Tom Konrad Ph.D., CFA

The market for reliable back-up power in homes and businesses is booming.

With more people working from home and increasing news coverage of power outages due to severe weather events and public safety power shutoffs in California (not to mention domestic terrorism), power reliability seems like it’s destined for a long term boom.

New Competition

A decade ago, if you wanted backup power, a generator was the only option.  Now, there are an increasing number of battery-based alternatives beginning to compete with generators to provide back-up power.  While most battery-based solutions are better than gas or propane generators when it comes to carbon emissions, none of them can yet beat traditional generators in every way most homeowners and businesses consider important.  It’s more of a “horses for courses” type scenario with the best solution depending on price, the amount of power needed, the length of power outage the buyer is preparing for, and convenience. 

Here is a list of options a homeowner might consider and how they stack up.

Natural Gas Generators

Traditional gas generators which run off the utility gas network are a relatively inexpensive solution for a homeowner looking to power their entire home for extended power outages lasting days or weeks.  The main downside for such gas generators is that they won’t work if the weather events or other factors cause a gas outage at the same time as an electrical outage.  For example, during the 2021 Texas Power Crisis, one of the major causes was a cascading problem of cold temperatures shutting down both gas supplies and electric generation.  The resulting lack of electricity caused further problems with gas supply leading to further electric shortfalls, and so on.  All in all, gas supply dropped by approximately 56 percent (and production in Texas dropped by approximately 40 percent) during the crisis.  This means that even people who had home gas generators may not have been able to use them when the power went out.

Liquid Propane Generators

Generac and competitors’ propane generators share the low cost and most of the convenience of gas generators but cost more to run because they rely on propane stored in a tank on the premises, and delivered propane fuel costs far more than pipeline gas.  On the other hand, local storage of the fuel makes them more reliable in an electrical outage that lasts a few days even if the crisis also affects the natural gas supply.  On the downside, the generator will eventually use all the fuel in the tank, and a prolonged crisis may interfere with propane deliveries.

Gasoline and Diesel Generators

Gasoline and Diesel generators are typically smaller than the natural gas and propane generators. They typically do not have the capacity to power a whole home and deliver their power through outlets on the generator itself.  Although they are not a solution for whole home power backup, they can be used to power critical loads like the refrigerator to prevent food from spoiling and charging electronics.

They are also commonly used by building contractors to work on sites that are not yet connected to the grid.  Their relatively low price point (hundreds as opposed to thousands of dollars) appeals to people who want some backup power but find that a whole home generator is too much for their budget.

Home Battery Backup

There are now a number of home energy battery brands in addition to the best known Tesla (TSLA) Powerwall.  These include the PWRcell offering from home generator leader Generac (GNR), as well as offerings from Panasonic (Tokyo:6752 or US ADR:PCRFY), microinverter maker Enphase (ENPH), and solar manufacturer SunPower (SPWR).

Until the recent passage of the Inflation Reduction Act (IRA),  the only way to get 24% the US federal Investment Tax Credit (ITC) for a home battery system was to install it with a solar system in such a way that it charged primarily from the solar.  The IRA both extended and raised the ITC to 30%, and made it applicable to stand-alone battery systems.

Now that home battery systems can be installed independently from solar and still qualify for the ITC, we can expect demand to increase as homes and businesses that are not good candidates for solar suddenly see effective prices fall by 30%.

Batteries vs Generators

Even with the tax credit, however, home battery storage is likely to remain relatively expensive compared with generators for the purpose of maintaining power during an outage. 

If a generator has enough power to supply the electricity need, it can continue to supply that need as long as it is connected to a large enough storage tank or to the gas network.  Because of this, increasing the duration that a generator can protect against a power outage costs very little.  In contrast, doubling the duration that a battery system can protect against a power outage requires doubling the size of the battery, which will nearly double the cost.

Because of this, generators have a significant economic advantage compared to stand-alone batteries when it comes to ensuring long term power supply.  But while secure power supply may be the main attraction for consumers of home battery storage and generators, batteries are far more attractive to grid operators and utilities because of many services they can provide that generators cannot:

• No direct greenhouse gas (GHG) emissions: Electricity from batteries is as clean as the power used to charge them. Small generators, which rely almost exclusively on fossil fuels produce GHG emissions usually far in excess of other electricity on a utility’s grid.  Any reliance on generators makes it harder for a utility to meet its targets for GHG emissions reduction.  While some utilities have voluntary GHG targets, many also are subject to legally binding targets imposed by their regulators and state governments.
• Load shifting and renewable energy integration: Increasing solar and wind penetration on the grid is rapidly changing net usage patterns for electricity.  This trend is particularly pronounced in states that have been early adopters of solar, like California and Hawaii.  Both have now adopted compensation schemes for solar that give homeowners strong incentives to pair solar with battery systems. Since these battery systems also give the homeowners some protection against power outages, this eats into the market for home generators.
• Utility grid upgrade deferral: Batteries can also be used to delay or replace expensive grid upgrades.  Utility power lines and transformers need to be sized to the peak power usage that passes through them, even if this peak only occurs for a few hours per year.  If controlled by the utility, batteries in homes can help with this: by charging when the local line or transformer is operating well below its peak capacity, and supplying that power to meet local demand when it otherwise would be operating at or above peak.  

Green Mountain Power has an interesting pilot program where it leases home battery systems to customers at a subsidized rate in return for the right to use that battery for both utility upgrade deferral and load shifting so long as it keeps enough charge in the battery to assure the customer that they will have protection from a power outage.  Battery system owners can also enroll in the program in exchange for an upfront payment of up to $9,500.  A payment that large could easily influence a homeowner to prefer a battery backup system over a generator.

I expect similar programs to proliferate around the country as utilities and their regulators become more familiar with the benefits batteries can deliver to the grid.

…And It Also Provides Backup Power

An even larger potential disruptor for the generator market is devices that consumers buy for other reasons, but which can also provide power in a blackout.  A prime example of this is the Ford (F) F-150 Lightning: an all-electric pickup truck which can also power your home with the right electrical upgrades.  Electric cars from Nissan and VW are expected to have similar capabilities soon.

The F-150 is only the most prominent example of battery powered vehicles, devices, and appliances that can also deliver backup power.  Many other electric and plug-in hybrid electric vehicles come equipped with standard 120V outlets, while the Kia EV6 has an adapter which turns the charging port into a functional 120V outlet.  Even if an electric or hybrid vehicle does not come with a 120V outlet, an inverter costing $300 or less plugged into the cigarette lighter or attached to the car’s traditional 12 volt battery can serve much the same purpose.  This ability of an electric or hybrid vehicle to power one or more standard outlets is referred to as “Vehicle to Load” while the F-150 Lightning’s ability to replace a home generator is often called “Vehicle to Home.”

While Vehicle to Load cannot replace the utility of a whole home generator, it can easily replace the functionality of smaller gas and diesel generators.  Homeowners who already have electric cars that can power their refrigerator and charge their electronics will also be less likely to spend thousands of dollars on a generator to power their whole home during infrequent outages.

Energy Storage Equipped (ESE) Appliances 

Nor are cars the only devices that can provide incidental power backup.  Owners of Ego battery lawnmowers, snowblowers, and other devices can buy the Ego Nexus Power Station which uses the batteries from those devices to provide all the functionality of a gasoline or diesel generator that can be used indoors.

Photo: The author and other members of the Marbletown Environmental Conservation Commission and Rondout Valley High School Environmental Club with their all electric entry in a holiday parade. The trailer is being towed by a 2012 Toyota RAV4 EV and the lights and music on the trailer are powered by a Ego Nexus Power station.  Other entries trailers in the parade have lights powered by gas or diesel generators.

Another potential development is the including of batteries in home appliances that have not previously had them.  These Energy Storage Equipped (ESE or “Easy”) Appliances also provide incidental power backup.  The main purpose of the batteries is to enable efficient electric appliances like induction stoves and heat pump water heaters to replace their gas counterparts without expensive electrical upgrades.  The batteries allow them to deliver high power performance (like an induction stove’s unmatched ability to boil a large pot of water in minutes) while plugging in to a typical low-power electric outlet.  The extra cost of the battery is offset by lower installation cost and the new investment tax credit for battery storage, effectively delivering a device that not only delivers high performance cooking at no extra cost, but also provides an external outlet which can power your fridge and other critical loads during a power outage.

While neither the Nexus Power Station nor an ESE appliance can deliver the full performance of a home generator, if someone gets one because they need a new stove or snowblower, they will probably be less willing to pay thousands of dollars for a home generator.

Conclusion

While the market for reliable home power is expanding, companies that sell home generators seem  likely to benefit only in the short term.  Longer term, increasingly ubiquitous electric and hybrid electric vehicles with Vehicle to Home and Vehicle to Load capability, along with Energy Storage Equipped (ESE) appliances and utility programs that subsidize (or give away) home battery storage will disrupt the market for generators in a way with which they cannot compete.  

How will a home generator installer persuade a customer to spend many thousands of dollars on a home generator when they already have most of the resiliency benefits it can supply for much lower cost, or even for free as an extra feature of an appliance they would have bought anyway?

A few people still buy high-end digital cameras for the capabilities that a cell phone can’t yet emulate, but those people (and those capabilities) are becoming fewer and fewer.  Ten years from now, we’ll be saying the same things about home generators’ capabilities and home generator buyers..

DISCLOSURE: No positions in companies mentioned in this article.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post How New Battery Applications Will Disrupt the Home Generator Market appeared first on Alternative Energy Stocks.

If you want your money to help with the transition to the clean energy economy, most investment advisors will probably try to accommodate by finding a few green mutual funds for you.

There are now hundreds of mutual funds and ETFs that brand themselves as green, but many will not meet your definition of what is “green.” This could mean not being completely divested from fossil fuels, investing in nuclear power, or owning too much of non-fossil fuel stocks like Apple (AAPL) and Facebook (FB) and not enough green-focused  companies like Tesla (TSLA).

An investment advisor who does not consider values investing to be important will also not be particularly good a choosing investments that match your values.  So it makes sense to choose a specialist.

Below is a list of the specialist environmentally focused investment advisory firms I am aware of.  I’m sure there are many more, so if you know of them, please leave a comment.  I’d love to expand this list to have at least one in every state.  Until then, most advisors should be able to meet your needs remotely.

DISCLAIMER: Inclusion in this list should not be taken as an endorsement of any investment advisor. To be included, advisors simply have to be licensed and have environmental values investing featuring prominently on their websites.

DISCLOSURE: The author is a research analyst for JPS Global Investments. 

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by Paula Mints

In July, Unprofitable residential solar lease company Sunrun (RUN) announced that it would acquire its unprofitable competitor, Vivint Solar (VSLR). Each share of Vivint stock will be exchanged for .55 shares of Sunrun’s common stock. Sunrun indicated that there were great synergies between the two companies.

Comment: Remember when Tesla (TSLA) adopted Solar City, a company founded by Elon Musk’s cousin? Sorry – remember when Tesla acquired money-losing Solar City and claimed strong growth and profits would follow? Great synergies. A wonderful future. Rainbows, kittens, and a profitable solar future for all.

The residential solar lease and residential PPA offers little synergy for customers, other than giving away their ITC and paying much more over time for having a solar system on their roof than they would if they bought it in the first place. Companies operating in the space need the cheapest cost of hardware (not always the best), fastest installs (not always the best), to reuse equipment when customers withdraw (including inverters), and to keep on adding customers to feed the machine.

Lesson: Watch this one as typically, when one unprofitable company buys another, they just create one big unprofitable company – albeit one with synergies. Gotta have those synergies.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here. 
This article was written for SPV Reaserch’s monthly newsletter, the Solar Flare, and is republished with permission.

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by Paula Mints

Walmart takes on Tesla Solar for Poor Quality Installations and Components

Early in August, after several quarters of slowing sales, Tesla (TSLA) announced a restart of its residential solar lease, referring to it as solar system rentals.

Around the same timeframe, Tesla stated that it had no timeline for the availability of its solar tiles.

On August 20, Walmart (WMT) filed a breach of contract lawsuit against Tesla/SolarCity in the commercial division of the New York State Supreme court claiming “years of gross neglect” leading to several fires at its facilities. According to court documents, one fire took place after the systems were deenergized.

Comment: Where to start, where to start …concerning Tesla’s residential lease program, given over a year of poor performance and the current allegations of gross negligence, it is fair to ask what exactly is being restarted.

Concerning Tesla’s solar tiles, from a technical standpoint, there are reasons that solar tile products have a niche position in the solar industry: they are too expensive, they are less efficient, they are less reliable. Silence is often better than repeated assurances that go unresolved.

As to the Walmart/Tesla fires. The problem is that the solar industry in the aggregate will find itself answering for the alleged poor performance when all questions should fall squarely upon Tesla.

Lesson: Tesla is teaching its audience not to trust its announcements and its quality, and that is the lesson.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here. 
This article was written for SPV Reaserch’s monthly newsletter, the Solar Flare, and is republished with permission.

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by Debra Fiakas, CFA

Market share for lithium technology has been extended by another 22 megawatts with the selection of lithium-based batteries by Duke Energy (DUK:  NYSE) for three separate of power facilities operated by Duke Energy Florida.  Duke did not specify the source of the lithium-based batteries, but the company seems to have an affinity for Tesla’s (TSLA:  Nasdaq) battery products.  Last year Duke Energy with its partner University of South Florida chose Tesla’s lithium-based batteries for a 100-kilowatt solar project in St. Petersburg, Florida.

Application of lithium-based technology in a relatively small, microgrid application like that in St. Petersburg is no surprise.  Lithium-based batteries offer high energy density and low self-discharge. Modest maintenance requirements are also a plus.  However, the advance of lithium-based batteries for utility-scale power projects is notable given performance limitations lithium technology.  The risk of over-charge or excessive discharge requires extra circuitry to keep lithium-based batteries within safe operating limits.  This increases the cost of lithium batteries that are otherwise already come with a high price tag due to the cost of the lithium electrolyte.

Duke’s plans to ‘go lithium’ will not break any records for lithium technology.  Its power plants in Florida are dwarfed in size by the largest project in the world using lithium-based storage technology, the Hornsdale Power Reserve in Jamestown, South Australia.  With 100 megawatt capacity it has been serving the Hornsdale Wind Farm since November 2018.  Owned by the French renewable energy company Neoen, SA (NEOEN:  EPA), Hornsdale Wind farm has an energy production capacity of 315 megawatts.

Neoen chose Tesla’s Powerpack for its Hornsdale project.  The cost was reportedly $91 million. Neoen management commented that Tesla was chosen because Tesla’s CEO Elon Musk personally guaranteed timely installation.  However, it could be Powerpack performance capabilities that won the order.  Early testing by Neoen showed the Powerpack responding within seconds to changes in frequency on the electrical grid, switching from full-charge to discharge and back again. This represents an improvement over conventional generators that respond in a lagged and stepwise manner to frequency changes.  Based on data from the Australian Energy Market Operator, Neoen estimates it could save as much as AUS$40 million each year from efficiency benefits.

Neoen’s experience and perhaps that of Duke as well may relate more to Tesla’s microgrid design than to the lithium technology that drives the battery chemistry. Tesla’s microgrid solution incorporates the Powerpack with software and controls to manage power and energy flow.  At the heart of the system is the microgrid controller that uses a cost-based optimization algorithm.

For investors who are reluctant to jump on the roller coaster ride that is operated by Elon Musk and Tesla, there are alternative.  Tesla is not the only lithium-based battery or microgrid player.

One alternative for power producers is Saft Batteries owned by Total SA (TOT: NYSE).  Saft was tapped by Kotzebue Electric Association in Alaska to set up energy storage for remotely located wind power plant 30 miles north of the Arctic Circle.  French electric grid operator, RTE also selected Saft’s lithium-ion battery system for backup power at a substation.

Another major player is Samsung SDI (006400:  KS) that supplied 13,000 battery modules for a solar power and storage project operating in Hawaii’s Kauai island. Samsung’s lithium ion batteries reportedly replaced lead acid batteries in the project.

At the opposite end of the spectrum is Powin Energy Corporation (PWON:  OTC/PK). Powin also has a foothold in Hawaii at Adon Renewables’ solar storage project.    The system features both Powin’s battery pack and system management software.  Expect to see the Powin name more frequently.  Powin is also working with San Diego Gas & Electric and Southern California Edison in the U.S.  The company has a partnership with Hecate Energy for six energy storage projects in Canada.  Two of the six projects together total 52.8 megawatts and will be the company’s largest undertaking to date.

PWON is a microcap stock largely because the company has reported a can $19.2 million in sales in the last twelve months accompanied by a loss of $17.2 million.  The company used $6.6 million in cash to support operations during those twelve months, a cash burn rate that did not appear to be  supported by recently reported cash balances.

Battery producers are not the only vehicles to tap the growth and earnings potential in energy storage.  Privately-held Advanced Microgrid Solutions, now called AMS, provides software to manage energy storage assets. Besides changing its name to an acronym, the company has tossed aside its renewable power project development hard hat in favor of a new reputation for artificial intelligence.   AMS recently raised $34 million in a Series B private placement of common stock so it may be a while before investors has chance to get another bite of this promising company.  That said, it is not beyond reason that AMS could come back to the capital market in the future, if not for another private round, then for an initial public offering.

For those investors who want to ‘charge up’ their returns with stakes in battery storage, it appears the choices are limited.  On the one hand there are large, well established players involved, but battery storage is but a small part of their profile. Pure plays can be found, but profits may remain elusive.  Small, private innovators are getting involved, but only qualified investors need apply.

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.

This article was first published on the Small Cap Strategist weblog on 6/6/19 as “Lithium Technology Tapped for Large Energy Storage Projects”.

The post Lithium Technology Dominates Large Energy Storage Projects appeared first on Alternative Energy Stocks.

There is a clutch of self-driving cars and cars with autonomous driving features on the market today.  Drivers just cannot seem to get enough of them.  Apparently, the idea of zooming down the highway with little to no responsibility holds considerable appeal.  Then again, maybe it is the novelty of the idea that will eventually give way to the next fad.

In August 2018, Cox Automotive revealed the results of a survey that found fewer Americans are embracing self-driving technology than previously thought.  A surprising 49% of respondents said they would NEVER own a fully-autonomous car.  This is up from 30% naysayers two years ago. Views on the safety potential in self-driving cars have shifted as well.  The Cox survey found that 45% of the respondents in the recent survey believe the roads will be safer with self-driving cars.  The confidence level was 63% two years ago.

Why have automotive manufacturers put so much time, effort and capital into a technology that is losing favor with consumers at such a fast pace? According to the Brookings Institute by the end of third quarter 2017, over $80 billion had been invested in technology to deliver cars with various levels of driving autonomy.  CB Insights reports another $4.2 billion was invested in the first nine months of 2018.

Automotive manufacturers are certainly not responding to a clamor for autonomous driving from consumers.  Interest in self-driving cars really came first from the U.S. military where automatic vehicle deployment could help keep soldiers safer.  Over half of casualties in combat zones involve military personnel making critical deliveries of fuel, food and supplies.  Car makers grabbed onto the idea because production of self-driving cars could help them overcome the short comings of highly cyclical sales pattern associated with its present production lines.

Unlike the cars we know today that are the equipment of an individual driver, autonomous driving cars could be operated collectively.  Certainly individuals could still own or lease a car, but likely the technology could give rise to various service models for transportation and delivery. Consequently, the buying decision could shed its cyclic nature, giving automotive manufacturers hope for consistent revenue throughout the year.

Automotive manufacturers are certainly willing to dictate to consumers what they want, not because the product is a good for consumers but because the product has great advantage for the producer  –  consistent quarterly earnings that drive stock prices!  All of a sudden the $80 billion investment seems like a bargain.

History has recorded ambitious manufacturers as winners and we expect a repeat.  Autonomous driving cars could be a compelling investment opportunity.  The early entrants to the competition have been the most popular so far:  Tesla (TSLA:  Nasdaq), Alphabet (GOOG:  Nasdaq), Audi AG (NSU:  DE), and Toyota (TM:  NYSE) to name just four.

In the next post we explore a few less obvious options.

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.

This article was first published on the Small Cap Strategist weblog on 12/18/18 as “Manufacturers Going All Out for Self-driving Car Tech.” 

The post Manufacturers Going All Out for Self-driving Car Tech appeared first on Alternative Energy Stocks.

by Paula Mints

In 2018, the US market for PV deployment is estimated at ~12-GWp. As the US does not have sufficient domestic cell manufacturing capacity to meet its demand, most of the 12-GWp will be met by imports of cells or, modules. Following the implementation of cell/module tariffs there were, as expected, new capacity announcements in the US, primarily for module assembly. If all the current announcements came true it would add an additional 4.2-GWp of module assembly and 1.7-GWp of cell manufacturing (thin film and crystalline) capacity to the US. First Solar (FSLR) is responsible for 1.3-GWp of the new module assembly and cell capacity announcements.

Including current US capacity, even if all the module assembly and cell manufacturing capacity announcements came to pass the US would still not have enough cell and module capacity to fulfill its demand. Module assembly is faster to establish but primarily requires imported cells. With tariffs on cell imports above 2.5-GWp, someone, somewhere along the value chain is going to eat margin that is, either the importer will absorb the tariff, or the domestic buyer will absorb the tariff, or the end user will pay a higher price for the PV installation.

In a price-taking industry such as the solar industry, the end user rarely chooses to absorb the higher price. Solar industry participants have little to no control over the price function as they are actors in a highly competitive industry where end users have no conception of manufacturing costs and there is an entrenched and well-funded competitor – conventional energy. Climate change crisis aside (and it should not be put aside), the conventional energy infrastructure is in place and it is very difficult to replace it with the renewable energy technologies. Habits will need to change, education will need to take place, new infrastructure developed and nascent technologies (such as storage) need to mature.

And frankly, adding module assembly capacity alone without additional cell capacity will not cut it.

The US needs new cell capacity and given the cost of new manufacturing capacity, manufacturers will need to consider whether the markets in the US, Canada, Mexico and countries in Central and South America will be worth the effort. The US offers a large market, but it faces a decreasing ITC, a lack of Federal government support, and then there are the tariffs. The US has yet to feel the full effect of the Trump Administration’s tariff, um, strategy. On a positive note, individual states are stepping up with programs for community solar and residential solar with storage while retaining an interest in utility-scale solar deployment.

Individual state plans aside, if the US wants to encourage domestic cell manufacturing it will need to invest, incentivize, exercise caution and have patience. Caution because no one needs another Solyndra, and patience because cell manufacturing is a years-long plan, not an overnight, instant gratification-satisfying success.

Taking the announcements in Table 1 one-by-one:

Jinko Solar (JKS): Announced a multi-gigawatt module deal with NextEra (NEE) as well as a module assembly facility in Jacksonville, Florida. Shifting announcements about capacity followed with rumors stabilizing at an expected 400-MWp and planned commercial output in Q4 2018.
Status: not going to happen in Q4 2018, look ahead to Q4 2019 and potentially 150-MWp.

First Solar (FSLR): Plans to expand its Ohio facility to 1.6-GWp of series six, but, hold on, series six is slow out of the gate and the company’s expected full capacity date of EO 2019 is not entirely reasonable given the history of its series six ramp problems. Status: Likely to be additions, though not the announced volume.

Hanwha Q-Cells Korea (HQCL): Announced 1.6-GWp of new module assembly capacity by Q4 2019. This is a reasonable timeframe to establish some degree of module assembly though 1.6-GWp is a stretch. The company needs to decide whether the investment, as well as the higher cost of manufacturing in the US, is worth the market opportunity. Status: Likely to add a fraction of the announced capacity.

Sunpreme: Out of the blue the company announced 400-MWp of monocrystalline bifacial cell and module capacity in Texas with manufacturing and product availability in 2019. Could be a press release gone awry. Given that the company did not offer detail about whether it had a building in mind or, if the capacity would be greenfield or any detail about equipment let alone detailing a reasonable pilot production scale up schedule the status is: Give me a break.

LG Solar (066570.KS): Announced 500-MWp of module assembly capacity at its facility in Alabama for its 60-cell premium residential rooftop product. LG has not announced a date for equipment move-in, and even module assembly requires a period of pilot scale production. The target date for commercial product availability is Q4 2019. LG will face the same market issues and additional costs as other manufacturers. Status: Likely to move ahead with a degree of module assembly in the US at a lower volume than announced.

And, two not on the list:

Tesla (TSLA) Solar Shingles: In its Q3 call, Tesla gave an update on its solar shingle product. In sum, production has been delayed from Q4 2018 to the first half of 2019 due to the “complexity” of the product. Tesla did not give details on expected efficiency, manufacturing cost, price/Wp when available, and what the company means by complexity. Translation … this is a highly complex and expensive product to manufacture likely fated to serve a niche market of people who want to own a Tesla roof. Status: Expect more delays. Final comment, there is a long history of companies announcing solar shingles and tiles as a great innovative idea whose  time is here now … still not here for a variety of very good technical reasons. Tesla solar is using more of its imported Panasonic HIT modules, rebranded as Tesla. This is
outsourcing.

SunPower (SPWR): SunPower took a gamble that its acquisition of SolarWorld’s Oregon facility would help it earn an exemption for its IBC cells and modules. Maybe it worked or, maybe it won the exemption based on its IBC technology alone. Whatever the reason, the company is plunging ahead with its acquisition and will upgrade the Oregon facility’s module assembly for its P-Type modules (imported cells). Status: This one’s a go, albeit an expensive one. Expect a revival of some of the Oregon facility’s monocrystalline capacity and an upgrade to its module assembly.

The Lesson is about Risk and Reward

Manufacturing in the PV industry is akin to an acrobat balancing on a very thin high wire where the acrobat is the manufacturer and the very thin high wire are the margins the industry has accepted overtime. As the industry has effectively commoditized its cell/module product, there are very few high value markets for manufacturers. Competition is a battle for share where the winners are those who can best absorb margin pain.

A decision to establish module assembly or cell manufacturing in a market is not taken lightly. The US is an expensive manufacturing location. Manufacturers serious about establishing a base in the US need to accept that their costs will be higher than in other countries and hope for an expanding market to make it worth the expense and effort.

One example of a US manufacturing failure for a variety of reasons is Suntech. In 2009 China-based and former industry leading manufacturer Suntech chose Arizona for its first 50-MWp module assembly facility. By 2013 it had shuttered the facility.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here. 
This article was written for SPV Reaserch’s monthly newsletter, the Solar Flare, and is republished with permission.

The post US Solar Manufacturing Announcements: The Real And The Hype appeared first on Alternative Energy Stocks.

by Paula Mints

First Solar (FSLR) offered a great lesson about the announcing of plans (man plans, god laughs) in July when during its Q2 release call it discussed the yield problems slowing commercial production of it’s Series 6 large format module. The production delays are due to a single point of failure causing a bottleneck. First Solar expects to enter volume production with its Series 6 module early in 2019.

Muted-kudos to First Solar for discussing a not-so-secret problem with Series 6 production. The kudos are muted because if the company had been more circumspect in the first place there would be nothing to retract and defend.

Back in November 2016 when First Solar announced that it would leapfrog over its planned series 5 module and commit future production to its large area Series 6 the company enthu-siastically announced 3-GWp of Series 6 commercial capacity in 2018 and stated that the new format would offer cost advantages.

In 2017 First Solar spent $175-million retooling its Ohio manufacturing facility for its Series 6 ramp. In April 2018, amid rumors and leaks of problems ramping Series 6 as well as continued announcements that Series 6 was the future restarted manufacturing for its Series 4.

During the play, Waiting for Godot, by Samuel Beckett, others arrive, but Godot never does. Seriously though, it will obviously take a while for First Solar to recoup its investment in its own Godot. Meanwhile, prices for solar modules are currently being driven down by a market disruption in China – making it less likely that its Series 6 will be cost effective if and when it does arrive.

First Solar might want to rethink its continued optimistic announcements about its Series 6 and suppliers, such as tracker manufacturers, might consider constraint in developing products for this long-long-long awaited release. Seriously, again, continuing to announce and then retract release dates can do real damage to a company. Rumors rev, confidence falls. In this regard, continued announcements of Tesla’s solar tile rooftop product offer an example. Tesla (TSLA)  finally reduced announced optimism about its roof tile to a murmur.

Paula Mints is founder of SPV Market Research, a classic solar market research practice focused on gathering data through primary research and providing analyses of the global solar industry.  You can find her on Twitter @PaulaMints1 and read her blog here

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Graphite is the most widely used material for battery anodes.  The anode is the positively charged electron collector in a battery.  It collects and accelerates the electronics emitted by the battery’s cathode.  Graphite gets the anode job because it is has excellent electric conductivity and resists heat and corrosion.  Plus it is light weight, soft and malleable.

As satisfied as manufacturers might be with graphite anodes, none would balk at an alternative material that boosts battery performance or reduces cost.  Scientists believe battery capacity can be increased as much as ten times by using silicon for anodes.  It requires six atoms of carbon to bind one single atom of lithium. Theoretically silicon can bind four atoms of lithium at the same time.    Add to that feat low cost and abundant supply, it is not surprising the largest battery manufacturers are looking closely at silicon as an anode material.

Automotive manufacturer Bayerische Motoren Werke (BMW:  DE) may be the first to incorporate a silicon-based anode into a battery for its electric vehicles.  BMW hybrids slated for introduction in 2023, will have be equipped with battery packs that have silicon-based anodes.  The luxury car maker has tapped Sila Nanotechnology to fix silicon’s flaw  –  swelling and pulverization during the battery charging cycle.  Sila’s ‘packaging’ approach appears to offer a work around, making it possible to build a silicon-dominant anode.

Model S fans may cry foul at BMW’s first place claim, arguing that Tesla (TSLA:  Nasdaq) has had advanced anodes in its premium cars for several years.  True enough in 2015, Tesla announced an update to its Model S power pack that included faster acceleration performance, much of which was delivered through the use of higher energy density battery cells.  Tesla’s Model 3 battery cost about $200 per kilowatt hour, well below prevailing costs.   The boost in performance was enough to win over 300,000 pre-orders the first week.

The anodes in Tesla’s 90 kilowatt hour battery pack supplied by Panasonic (PCRFY:  OTCMKT, 6752:  Tokyo) are laced with silicon.  The enhancement creates a 30% increase in energy density with implications for battery cost and form factor.  Yet the silicon content in the Tesla battery anode is less than 10%, leaving the anode graphite-dominant with just enough silicon to tweak performance.

As successful as Panasonic’s battery pack has been for Tesla, its contribution to enhanced performance has 3M Corporation (MMM:  NYSE) has also taken a run at silicon anodes.  3M began accumulating patents as early as 2012, claiming 40% increase in cell density with its silicon alloy composed of silicon, iron and aluminum.  In 2015, 3M acquired privately-held Nanoscale Components, which had developed a pre-lithiation technology that involves putting extra lithium in the anode.  Apparently, Nanoscale’s patented process helps extend cycle times, overcoming one of silicon’s shortcomings while retaining its capacity benefits.  3M estimated its anode alloy materials could lead to a 20% reduction in required battery volume through greater battery energy density.

A stake in Panasonic encompasses a broad portfolio of consumer and business electronics.  In the twelve months ending June 2018, the company reported $73.8 billion in total sales, providing $2.2 billion in net income or $0.95 per share. During that period operations generated $3.5 billion in cash, demonstrating that Panasonic is a cash generative business.  The sales-to-cash conversion rate was 4.7% in that twelve month period.  At the end of June 2018, the company had $11.8 billion in cash on the balance sheet  –  enough to completely pay off outstanding debt of $11.7 billion.

The pile of cash also makes it possible for Panasonic to maintain a generous dividend payout policy near 28% of net income.  The current forward dividend yield of 2.2% might be tempting for income hungry investors.  The shares are trading at 10.8 times the consensus earnings estimate for 2018.  The multiple appears compelling compared to the broader consumer and office electronics sector, which is valued near 16.0 times forward earnings.

3M shares are a bit more expensive at 18.3 times the consensus estimate.  That is at least partially explained by the fact that from the standpoint of fundamental measures 3M is the better of Panasonic. 3M delivered a 21% operating profit margin on $32.8 billion in sales in the last twelve months.  This compares to an operating profit margin of 5.0% for Panasonic.  Return on equity and return on assets were 40.1% and 12.2%, respectively.  Panasonic is a laggard with 14.1% ROE and 4.0% ROA.

Recent earnings at 3M have grown 17.3% year-over-year, helping to justify the current MMM valuation.  The company has its own ample dividend payout, which is expected to total $5.44 in 2018.  This translates to a forward dividend yield of $2.7%.

Of course, 3M and Panasonic have accomplished enhancement of a graphite-dominant anode with the addition of silicon alloy.  This is a plus for their battery customers in the near-term, but far short of the objective of a silicon-dominant anode pursued by Sila Technologies and the other eight developers listed in the post “Better Battery.”  This group, which is by no means exhaustive, represents a significant competitive threat to the major battery manufacturers.  Notice it was Sila that won the order from BMW and not a major automotive battery manufacturer.  We expect some to solve the problem with strategic acquisitions.

A123 Energy Solutions, which is a subsidiary of NEC in Japan, has moved on from a troubled past to become a top battery manufacturers in the world. The company has jump started its own silicon-based anode development with the acquisition of Leyden Energy in June 2014.  Leydon has had multiple research and development projects underway based on patented technology acquired from Dupont.  Leyden scientists, some of whom were transferred to A123’s research and development team, has made progress with electrolytes that are compatible with high energy density materials such as silicon anodes.

Terms of the Leyden deal were not disclosed.  If A123 is able to bring a competitive battery to the market that will win contracts with automotive manufacturers, no doubt they will consider it a bargain.  The deal could serve as an incentive for smaller companies to forge partnerships or larger companies to find a tech savvy developer.  Change is afoot in the battery industry and there appears to be opportunity for investors of all risk profiles.

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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