by Debra Fiakas, CFA

Published by the Climate Accountability Institute, the Carbon Majors Reportlays bare the truth about which companies are responsible for industrial greenhouse gas emissions.  One hundred fossil fuel producers are linked to 71% of global industrial greenhouse gases emitted since 1988.  Something like a line in the sand for climate scientists, 1988 is the year human-induced climate change was official recognized by the Intergovernmental Panel on Climate Change.

Fossil fuels in the form of coal, crude oil and gas are by far and large the culprits.  Rolling forward three decades later, we can observe in the charts below that fossil fuel production has actually increased since those panelists first locked arms to accept human responsibility for the changes underway on Planet Earth.

Despite irrefutable scientific argument, political will to address the climate issue has faltered.  Government officials have paid little more than lip service to regulatory changes that would drag polluters onto a cleaner but fair playing field.  Investment in renewable energy has been paltry in comparison to the continued tax breaks and subsidies that fossil fuel producers still receive.  Recent U.S. policy changes go so far as to support unprofitable coal producers, encourage new oil production in previously protected lands and waters, and facilitate cheap pipeline transportation for shale oil gas.

Since advocacy has not worked and our world has moved from a climate concern in 1988 to a full blown crisis in 2019, it is time for investors to take action with their capital.  It is no longer just a matter of considering potential erosion in profits due to reduced demand for coal, oil and gas.  It not even any more a matter of portfolio risk in the event that corporations are held liable for environmental harm from fossil fuel combustion.  It is time to recognize that fossil fuel producers are killing their customers.  This is not a viable business model and it deserves a ‘short.’

The previous post, “Top Greenhouse Gas Emitters”, listed the three companies and a fourth industry group in one country that are collectively responsible for 25% of total greenhouse gas emissions between 1988 and 2015.  All are largely controlled by governments and therefore are beyond the reach of investors. However, among the companies responsible for an additional 25% of greenhouse gas emissions are several with publicly traded stocks that are in the control of minority shareholders like you and me.

Interestingly, all but two of the stocks in the list below trade on the New York Stock Exchange and represent over $1.1 trillion in market capitalization.  That is a very large number that is probably dangled in front of any politician who even suggests curbing emissions.  What cannot be missed in the discussion is that these NYSE-listed companies are also responsible for 8.7% of those gases that keep melting glaciers, stirring up violent weather and foiling our air.  The consequences of those emissions are known to many, including every insurance actuary who raises premiums to cover respiratory illness costs, every community that has had to spend tax dollars on cleaning up after climate-related natural disasters, and every farmer who sees reduced crop production.  The consequences need to be appreciated by investors as well.

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 6/28/19 as “Fossil Fuel Industry: Killing the Customer”.

The post Fossil Fuel Industry: Killing the Customer appeared first on Alternative Energy Stocks.

This post was last updated on 4/27/2022.

Environmental market stocks are publicly traded companies whose business involves the trading of commodities designed to represent an environmental attribute, such as renewable electricity, the environmental benefits of renewable energy (Renewable Energy Credits [RECs]), Carbon Offsets and other types of environmental offsets.

Crius Energy Trust (KWH-UN.TO, CRIUF)
GlyEco, Inc. (GLYE)
Hannon Armstrong Sustainable Infrastructure (HASI)
Just Energy Group Inc. (JE)
KraneShares Global Carbon ETF (KRBN)
Trading Emissions PLC (TRE.L)

If you know of any environmental market stock that is not listed here and should be, please let us know by leaving a comment. Also for stocks in the list that you think should be removed.

The post List of Environmental Markets Stocks appeared first on Alternative Energy Stocks.

According to Plastics Europe Research Group, over 35 million tons of plastic material was produced globally in 2016, the last year for which full-year data is available.   That brought total plastic production to 9 billion tons since 1950.  All of those plastic materials remain in existence somewhere  –  still in use, landfills, junk yards, blowing around the countryside, waterways, oceans, fish stomachs. The post “Plastic Contagion’ on April 13^th outline the dangers presented by plastic waste, ranging from respiratory failure from toxic emissions to reproductive interference in aquatic animals.

The building burgeoning volume of plastic waste has sent environmentalists scrambling for solutions to the plastic waste problems.  The last post “Four Rs in Plastics Solution” on April 17^th described the American Chemistry Councils’ recommendation to ‘reduce, recycle and recover.’  Only about 25% of plastic is recycled.  The Recycling Coalition of Utah estimates that the other 75% of plastic was recycled it would save 1.0 billion gallons of oil and 44 million cubic yards of landfill space.  Recycling plastic takes apparently takes 88% less energy than making new plastic from raw materials.  Energy savings alone makes a good case for plastic recycling.

Capital invested in the recycling sector gets a double return on top of earnings: preventing plastics pollution and saving energy.  Investors have some choices in the recycling sector.

Recyclers do not accept every type of plastic.  Most consumers are familiar with the ‘chasing arrows’ symbol on plastic products.  Inside the symbol is a number that corresponds to a type of plastic, each with differing chemical characteristics that make them reusable or recyclable.  The recycling industry has formed up along plastic type.

Few public company investment opportunities

Sims Metal Management (SGM:  ASX or SMSMY:  OTC) does not have the corporate moniker for plastics, but its municipal recycling services has expanded the company beyond its origins in metals recycling.  Based in Australia, Sims has turned a scrap metal business into a multinational materials enterprise.  Sims is the primary recycler for municipal waste in some of the largest cities in the world, including New York City.  The company claims it is successful in diverting over 10 million metric tons of metal, electronics, plastics, glass and paper from landfills around the world.

In 2017, Sims recorded AUS$5.1 million in total sales, providing AUS$182 million in operating earnings.  Revenue increase 9% in 2017 compared to the prior year.  Operations generated AUS$266.4 million in cash flow in the year, representing a sales-to-cash conversion rate of 5.2%.  Return on capital was 8% in 2017, giving management some bragging rights with shareholders looking for good returns on corporate investment.

Strong cash flows mean is supporting a strong balance sheet with low leverage. Cash net of AUS$5.5 million in debt was AUS$378.5 million at the end of December 2017.

Valuation is attractive for SGX.ASX as the stock trades in the Australia equity market.  The stock trades at a multiple of 14.8 times estimated earnings for 2018. Generous icing is added to the cake by a forward annual dividend yield of 4.1% at the current price level.

For the purist investor KW Plastics is an alternative to Sims.  KW Plastics is the largest plastics recycler in the world, with more than 100 million pounds of silo capacity and the ability to process more than a billion pounds of plastic annually. The company focuses on polyethylene and polypropylene type plastics and produces ‘post consumer’ resins for manufacturers looking for sustainable materials to use in their products.

Unfortunately, KW Plastics is privately held, leaving most investors on the sidelines.  The Troy, Alabama based company has reportedly reached revenue levels between $20 million and $50 million and is profitable.  At a more mature stage, the company is not likely seeking capital from outside investors.

Plastics recycling sector poised to grow

The field of plastics recycling may change in coming years.  The sector is attractive for existing and new entrants.  Research and Markets, an industry research firm, estimates the global plastic recycling market is growing at about 8% annually and should see high single digit growth through 2025.

The sector is highly fragmented with numerous small players around the world. Consolidation seems inevitable.  This is especially the case given that there have been recent technological advancements in plastic recycling that may be required to remain competitive.  Capital constraints may make technology upgrades difficult for some players, who might decide sale to a large entity the best path.

Leading Plastics Recyclers

Schoenberg & Co. Inc.                                   PLASgran Ltd.

MBA Polymers UK Ltd.                                  KW Plastics

Kuusakoski                                                      Hilex Poly Company LLC

Fresh -Pak Corp                                              Envision Plastics.

Delta Plastics of the South LLC                    \Dart Container Corporation

Custom Polymers Inc.                                   Consolidated Containers Company

CarbonLite Industries                                    B&B Plastics Inc.

Avangard Innovative LP                                 ARORA FIBRES Limited

Advanced Environmental Recycling Technologies

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.

The post Plastic Recyclers Chasing Arrows appeared first on Alternative Energy Stocks.

by Elaine Thompson

Bloomberg New Energy Finance, in an executive summary of its New Energy Outlook 2017 report, predicts renewable energy sources will represent almost three-quarters of the $10.2 trillion the world will invest in new power-generating technology.

Analysts outline several reasons for this increase in spending, such as the decreasing costs of wind and solar and consumers’ increasing interest in solar panels. Competition between power sources also continues to grow, with products like utility-scale batteries upsetting coal and natural gas’s roles in the marketplace.

But more importantly, state-driven renewable portfolio standards pave the way for additional ventures in renewable energy technologies, particularly when it comes to wind power. Another element is electricity deregulation, a mandate initiated by the federal government in the 1990s. Thanks to it, the decision to regulate or deregulate electric markets now rests on individual states.

How Deregulation Creates Competition in the Electric Market

To understand how the legislation on deregulation influences states, clean energy companies, and renewable energy stock prices, you first need to understand regulation. If a state chooses to regulate electricity, consumers are essentially locked into a single electricity provider and its set prices.

Andrew Kleit, professor of energy and environment economics at Pennsylvania State University, explains in an interview with The Wall Street Journal, “In a regulated system, government agencies make basic production and grid-access decisions, and set electricity rates in a way that guarantees utilities a certain rate of return on capital investments and other approved costs. Because utilities’ profits are a function of how much they spend, there is little incentive to cut costs and increase efficiency.”

The situation occurs in many states, including Utah. There, Rocky Mountain Power (RMP) provides power to the majority of the state. The provider also is vertically integrated, meaning it owns every part of the supply chain from generation and transmission to distribution.

Because of that, consumers possess little, if any, choice when they start looking for an electricity provider. It’s RMP or nothing. Consumers sometimes encounter challenges, too, when they desire renewable energy options because RMP and state agencies regulate alternative energy sources and their use.

Texas, however, offers a counterpoint to Utah. The Texas electricity market is deregulated, resulting in competition and consumer choice. People can shop around and find the provider with the best prices, billing practices, or services.

How Deregulation Affects Growth in the Energy Sector

Just Energy (JE) uses deregulation to its advantage, attracting consumers who want to avoid fighting with local utility companies. The renewable energy provider is succeeding with its efforts—since its founding in 1997, it has come to parent several subsidiaries, including Amigo Energy, Hudson Energy, Just Energy Solar, and TerraPass. It also plans to continue its expansion into other deregulated states and nations.

However, electric regulation doesn’t prevent providers from taking steps toward a greener, cleaner future. Puget Sound Energy, for example, resides in Washington, another regulated state. It works within the state’s guidelines to provide clean energy through its green tariff, which allows the provider to sell renewable energy to business customers on a subscription basis.

Another energy provider named Ameren (AEE) also offers an interesting insight to the energy market. It provides energy to both Missouri and Illinois, but the former is regulated while the latter is deregulated.

Ameren views the hurdles that come with this split as no hurdles at all. It recently announced its plans to generate more electricity through solar and wind in Missouri to further reduce carbon emissions. Ameren disclosed few details about the initiative, but the provider presumably could use green tariffs or power purchase agreements (PPAs) to facilitate this goal.

How Deregulation Affects Your Energy Company’s Future

Regulation and deregulation are only two of many factors affecting renewable energy companies and stocks. But the two are worthwhile considerations because they impact the ease with which an energy provider can innovate and iterate. By understanding that reality, investors can make more informed decisions when selecting which company to back on the stock market.

How is this information going to affect the future prospects of your renewable energy company? If a state is deregulating or changing renewable energy policies, how can you know which companies will be helped or hurt?

If a company was a main utility provider in a state shifting to deregulation, it might expect to see a loss in its consumer base as it begins competing with other providers. However, in the same scenario, a company that has a good product, is run well, and is connected to its customer base will likely succeed and find that more competitive economic environment to be profitable.

It can be difficult to keep up with conversations about energy regulation—they vary by state, and discussions constantly evolve as politics change and social demands shift.

An investor can use their knowledge of regulation to have a better understanding of how much market competition their company might be facing or how much bureaucratic meddling might go on.

For consumers, the bottom line is that no matter if a state is regulated or deregulated, renewable energy yields lower costs and reduces future price risk.  How a state is regulated will make the difference as to whether local utilities profit from the transition, or lose business to more nimble renewable energy providers.

Elaine Thompson is a freelance writer whose work focuses on consumer technology and sustainability. As an outdoor enthusiast, she’s passionate about writing that highlights renewable energy in a substantial way.

The post How Energy Deregulation Affects States and Stocks appeared first on Alternative Energy Stocks.

by Noah Kaufman

A group of prominent conservative Republicansincluding former Secretary of State James Baker III, former Treasury Secretary Hank Paulson, former Secretary of State George Shultz and former Walmart Chairman Rob Waltonmet with key members of the Trump administration on Wednesday about their proposal to tax carbon dioxide emissions and return the proceeds to the American people. Such an economy-wide tax on carbon dioxide could enable the United States to achieve its international emissions targets with better economic outcomes than under a purely regulatory approach.

Attributes of the Republican Carbon Tax Proposal

While the details on the plan from the newly formed Carbon Leadership Coalition (CLC) are considerably less specific than a legislative proposal, this is a well-thought-out and ambitious plan that makes a good-faith effort at addressing many of the difficult choices on the path to enacting a carbon tax. Consider the following attributes:

• Significantly reduces emissions. The group proposes a tax that would start at $40 per ton of carbon dioxide emissions from fossil fuels and increase over time. A paper released by CLC provides a useful summary of recent modeling efforts on the effects of a carbon tax on emissions. It concludes that the CLC proposal (including the effects of rolling back some regulations) would reduce greenhouse gas emissions roughly 28 percent below 2005 levels by 2025, the upper end of the United States’ commitment under the Paris Agreement on climate change. It also implicitly recognizes concerns of the environmental community by calling for a rate that is high enough to provide greater emissions reductions than regulations already in place. WRI research shows that models tend to underestimate the emissions reductions from a carbon tax, so it seems likely that the United States would achieve its 2025 emissions target under this proposal.

• Benefits for poor and middle classes. As WRI research has shown, a carbon tax’s effects on household finances are most heavily dependent on how the revenue is used. According to the CLC proposal, all tax proceeds would be returned to the American people on an equal basis via quarterly dividend checks. CLC chose this approach because of its transparency and because the longevity of the policy would be “secured by the popularity of dividends.” In addition, this tax-and-dividend approach would be highly beneficial to poor and middle-class households, who would receive far more in dividends than they would spend on the tax. (Of course, these householdsand all householdswould also benefit from cleaner air and reduced risks of climate change.) High-income households, on the other hand, would be better off if the revenue were used in other ways, such as to lower other taxes.

• Addresses concerns about U.S. competitiveness and international action. A core pillar of the CLC proposal is a “border carbon adjustment.” Exports to countries without comparable policies would receive rebates for carbon taxes paid, while imports from such countries would face fees contingent on the carbon content of their products. The border carbon adjustment would protect the competitiveness of energy-intensive companies and those that are subject to foreign competition. It would also encourage all U.S. trading partners to adopt similarly stringent policies, which is necessary to achieve meaningful global progress on climate change.

• Cost-effectively reduces emissions. As economists will tell you, putting a price on emissions is the most cost-effective way to reduce them because it encourages producers and consumers to seek out the lowest-cost opportunities to reduce their emissions. Economic models show that for decarbonizing the U.S. economy, economic outcomes are far better with a carbon tax as the centerpiece of policy efforts as compared to a strictly regulatory approach.

• Offers potential for bipartisan support. Transforming to a low-carbon economy is an objective that Democrats widely support, but it will require new and comprehensive legislation that attracts Republican support as well. Prominent Republicans are supportive of the CLC proposal because it embraces both free markets and limited government with its plan to eliminate regulations that are no longer necessary with the existence of the carbon tax (“Less Government, Less Pollution,” as CLC puts it).

More Details Eventually Needed

The CLC proposal will need to gain support from policymakers currently in office for it to become proposed legislation. If it does, important details will need to be filled in. Examples include:

• Details of the regulatory reform. The CLC plan involves replacing much of EPA’s regulatory authority over carbon dioxide emissions. Environmental groups are likely to push for mechanisms to ensure that the emissions reductions needed to meet climate goals are sufficiently certain; the Environmental Defense Fund recently described options for combining such “Environmental Integrity Mechanisms” with a carbon tax. In addition, the policy should avoid eliminating regulations that are not duplicative with a carbon tax. For example, WRI research has explained why supporting the research, development and deployment of the next generation of low-carbon technologies will lead to more cost-effective decarbonization in the long-run.

• Support for coal communities. While the near-term effects of a carbon tax on the vast majority of American households and businesses would be small, communities of coal industry workers (and others whose livelihoods are tied to a high-carbon economy) are already struggling. In order to avoid making the situation worse, certain policy measures must be in place to help rebuild these economies. Whether by allocating tax revenues to economic development in these communities (just a small sliver of the tax revenue could provide enormous help) or though separate legislation, support for workers in the fossil fuel industry should be a key consideration in designing our country’s decarbonization strategy.

There is strong support for carbon taxes among the American public and in the business community, including more than two-thirds of all Americans and more than half of Republicans. Nearly 40 countries and more
than 20 sub-national jurisdictions are now pricing carbon.

Despite this support, political gridlock and the powerful corporate opposition have obstructed policy action at the U.S. federal level. Overcoming these entrenched interests will require courageous politicians. This proposal deserves serious attention from the Trump administration and policymakers on both sides of the aisle.

Noah Kaufman is an economist for the U.S. Climate Initiative  at the World Resources Institute.  The focus of his work is on carbon pricing and other market-based climate change solutions.

The post The Republican-Proposed Carbon Tax appeared first on Alternative Energy Stocks.

by Debra Fiakas CFA

Glyeco recycles waste glycol into reusable antifreeze, windshield wiper fluid and air conditioning coolants for the automotive and industrial markets.   The used coolant and antifreeze liquids are frequently contaminated with water, dirt, metals and oils.  The company uses a proprietary technology at the foundation of its recycling system to eliminate contaminants.  The company focuses mainly on ethylene glycol in its six processing plants.

Last month chemical recycler GlyEco, Inc. (GLYE:  OTC/QB) acquired Brian’s On-Site Recycling, a provider of antifreeze and air conditioning coolant disposal services in the Tampa, Florida area.  The deal extends Glyeco’s market share and geographic footprint.  The company also gains expertise through the members of Brian’s management team who have agreed to join Glyeco to advance the Glyeco brand in Florida.  Terms of the transaction were not disclosed and Glyeco is keeping mum on the revenue and earnings contribution expected from Brian’s
Image result for glycol imageStill the idea of recycling a hazardous chemical is beguiling.  Ethylene glycol and propylene glycol are the preferred raw materials used for water-based antifreeze due to a mix of favorable properties:  high boiling point, low freezing point and thermal conductivity.  Glycol is typically made from natural gas or crude oil  –  non-renewable and polluting sources.    Glycol does breakdown in water, but it can deplete oxygen levels and kill fish and other aquatic life.  While propylene glycol is more or less non-toxic, it can be extremely corrosive when exposed to air.  On the other hand, ethylene glycol is decidedly poisonous.

The company is still struggling to get the business going.  In the twelve months ending March 2016, Glyeco reported $7.5 million in total sales.  Unfortunately, the antifreeze recycling business is not profitable.  The net loss in that period was $12.3 million or $0.16 per share.  The company had to use $1.3 million in cash to support operations.  With a cash kitty of $3.8 million at the end of March 2016, there is something of a cushion for the company until the business gains sufficient scale to generate profits.  The acquisition of Brian’s should contribute to that end.

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.

The post GlyEco Expands Antifreeze Recycling Footprint appeared first on Alternative Energy Stocks.

Jim Hansen

Last week, I wrote that the U.S. is on course to set a new export record of coal. A few days later the EIA made similar projections and estimate that exports will reach 125 million tons for 2012.

One side effect of the success of U.S. coal exports is the degree to which may they have cancelled out the carbon emissions reduction experienced in the U.S. as shale gas displaced coal in the power generation sector. This question of displacement was addressed in a study just released by researchers at the University of Manchester.

The Study’s lead author Dr. John Broderick had this comment on how the coal to gas switching is being broadly viewed. “Research papers and newspaper column inches have focused on the relative emissions from coal and gas. However, it is the total quantity of CO2 from the energy system that matters to the climate.”

“The calculations presented in this report suggest that more than half of the emissions avoided in the US power sector may have been exported as coal. In total, this export is equivalent to 340 MtCO2 emissions elsewhere in the world, i.e. 52% of the 650 MtCO2 of potential emissions avoided within the US.” [Link is to full 29 page report pdf]

It is easy to forget that oil is not the only energy resource with global interactions. Changes in nuclear power use in Japan and the linkage of LNG prices to an oil benchmark impacted the price of seaborne LNG putting pressure on European power generators to expand their use of coal. Add this to the drop in the price of North American thermal coal to levels that made it more competitive in foreign markets and the movement of this carbon intensive fuel shifted off shore.

The issues of climate and energy are bonded at the hip. If either side in the debate over climate and energy forget that relationship the outcome will be unsatisfactory for everyone. One sided solutions are destine to fail the test of time.

Jim Hansen is an investment advisor at Ravenna Capital Management based in Seattle, Washington. He has spoken at the ASPO-USA national conference as well given other public and academic presentations. His weekly report The Master Resource Report is available online.

The post Has Shale Gas Reduced Carbon Emissions? appeared first on Alternative Energy Stocks.

by Debra Fiakas CFA

Algae in the River Wate photo via BigStock

My post “Algae Takes Flight” featured Algae-Tec (ALGXY:  OTC/PK),  Lufthansa’s new biofuel partner.  Algae-Tec has agreed to operate an algae-based biofuel plant in Europe to supply Lufthansa with jet fuel.  Lufthansa is footing the capital costs of the plant, which is to be located in Europe near a carbon source.  Algae thrive on carbon so industrial plants and power plants using fossil fuels make the best neighbors.  Lufthansa has agreed to purchase a minimum of 50% of the algae-based biofuel Algae-Tec can produce.

Australia-based Algae-Tec is not Lufthansa’s first biofuel source.  The same week it inked the deal with Algae-Tec, Lufthansa also entered into a memorandum of understanding with synthetic fuel developer Solena Fuels Corporation.  Solena has already decided on a location at the PCK Industry Park in Schwedt/Oder, Germany.  The plant will use municipal waste to produce bio synthetic paraffinic kerosene, which Solena calls Bio-SPK.

Lufthansa is eager to adopt biofuels in order to comply with the European Union’s emissions trading system (ETS), which added aviation to the mix of industries that must reduce carbon emissions in the EU region.  Airlines had until March 2012 to reach compliance to the EU standards.  In the future, airlines that do not comply could face fines of US$128 per ton of carbon dioxide emissions.  Non-compliance could lead to a ban from European airports.  It is not surprise that According to the U.S. Energy Information Administration, worldwide over 5,000 barrels of jet fuel are used each year, resulting in as much as 635 million tons of carbon dioxide emissions.

Lufthansa burns at least nine million tons of jet fuel each year.  The airline has had some difficulty in sourcing renewable fuels that could reduce it carbon footprint.  In July 2011, Lufthansa began using Neste Oil’s (NEF: Berlin) NExBTL renewable aviation fuel in an Airbus A321 aircraft.  Flights between Hamburg and Frankfurt were run in both directions four times a day.  One of the engines of the aircraft operated using a blend of 50% NExBTL renewable aviation fuel and 50% fossil fuel.  However, in January 2012, Lufthansa announced it would be discontinuing flights using renewable jetfuel because it had not been successful in securing long-term sources of biofuel. In all, Lufthansa completed 1,187 biofuel flights between Hamburg and Frankfurt that relied on biofuel.  Lufthansa claimed CO2 emissions were reduced by 1,471 tons.

It would seem that meeting aviation emissions standards in Europe would be a source of significant demand for renewable fuels.  However, it might be premature to expect anything more than modest shifts in fuel sourcing.  After considerable pushback from China and India airlines, the European Union has been considering a rollback of emissions standards.  Members of the U.S. Senate met in August 2012 with representatives from twenty countries to draft a resolution against the EU’s fines.  The group was unable to reach agreement, but the meeting made clear that U.S. leadership is more concerned about profits than environmental sustainability.

In the meantime, several biofuel companies have been cozying up to the aviation industry.  Amyris (AMRS: Nasdaq)is working with Brazil’s Azul Airlines.  Solazyme (SZYM: Nasdaq) has been mentioned as in cooperation with both United and Quantas airlines.  Honeywell’s UOP (HON:  NYSE) is working with India’s Kingfisher Airline, United Airlines, British Airways, France Airways and Spain’s Iberia.  U.S. carriers alone used at least 16.4 million gallons of aviation fuel in 2011 (U.S. Bureau of Transportation Statistics).  At least a third of that is used in international flights.  It presents a very large market opportunity for the biofuel producer that can deliver renewable fuel.  Unless, of course, politicians get in the way.

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. 

The post Emissions Standards Driving Algae Aviation Fuel Sourcing…or not appeared first on Alternative Energy Stocks.

Tom Konrad CFA

I recently interviewed Richard Domaleski, CEO of World Energy Solutions (NASD:XWES).  World Energy is a comprehensive energy management services firm whose core offering is extremely price competitive energy sourcing (that is, finding an energy provider to supply all of a client’s energy needs at the lowest possible cost.) 

They achieve competitive sourcing using an electronic energy exchange designed to achieve much better price discovery in what is traditionally a very opaque market.  According to Domaleski, a recent KEMA study showed that only 7% of large commercial, industrial, and government customers are sourcing their energy online; the rest are using traditional brokered or paper-driven deals.  World Energy currently has about 5% of the market, leaving plenty of room for growth.  Among their current customers are the General Services Administration (the Federal Government’s procurement arm), several state governments, General Dynamics Land Systems, and Brown University, to name a few. 

They also partner with Energy Service Companies (ESCOs).  ESCOs sign energy customers up to a “Performance Contract” under which the ESCO is paid a fixed fee in order to deliver a defined set of energy services (lighting and temperature levels, for example), and the ESCO makes energy efficiency improvements using their own capital to reduce energy use while still delivering the defined energy services.  The lower energy use quickly repays the ESCO’s out of pocket capital cost, leading to lower (and stable) energy bills for the customer, and a healthy profit for the ESCO.

Domaleski says that 143 such ESCOs and other procurement companies now use World Energy’s procurement platform to source their energy.  When I asked for names, he cited non-disclosure agreements but was able to say that one prominent one was SAIC (NYSE:SAI).  Yet adoption of World Energy’s platform is not universal.  One prominent ESCO they pitched but did not convince is the leading pure-play publicly traded ESCO: Ameresco (NYSE:AMRC).

Is it Green?

Getting electricity and natural gas at lower prices may be a compelling proposition for World Energy’s customers, but environmentally concerned investors should think twice before calling it green.  A lower price for energy is more likely to discourage than encourage energy conservation, and hence lead to higher, not lower energy emissions.  Energy sourcing may or may not include the sourcing of green power or Renewable Energy Credits (RECs.)  A REC is a way of accounting for all the green or environmental attributes of a MW of electricity.

World Energy draws a distinction between “physical green power” and RECs, with the former being produced from renewable sources on the same ISO as the customer, and the RECs often produced somewhere else in the world.  I don’t think this is a very useful distinction, since the actual power produced is often not the same as the power consumed due to both proximity and timing issues.  A simple example of why this is so can be seen in the case of a supermarket that signs up for 100% locally produced wind power.  While a nearby wind farm will indeed be producing the same number of kWh as the supermarket consumes, the supermarket keeps its lights on and continues to run its refrigeration even when the wind is not blowing at the local farm.  In this sense, “physical green power” is just normal electricity with bundled RECs.

What really makes a REC (or “physical green power”) green is additionality.  If the price of the REC is enough to ensure that a wind farm that would not otherwise have been built is indeed built, then the REC is additional.  World Energy’s ability to extract the lowest possible price for RECs may work to undermine the additionality of those RECs.  After all, which is more likely to increase the chances of a wind or solar farm being built: a $10 REC, or a $20 REC?

Low Price as a Gateway Drug

Yet it’s hard to see saving money as a bad thing, and I find World Energy’s numerous ESCO partners very encouraging.  If World Energy’s procurement platform enables ESCOs to offer potential customers performance contracts at lower prices, more such customers will sign up, and receive the energy efficiency improvements that are the ESCOs’ bread and butter.

World Energy also offers energy efficiency improvements to their direct customers as well as helping those customers capture the utility incentives available for energy efficiency and Demand Response programs.  Demand Response companies like Comverge (NASD:COMV) and EnerNOC (NASD:ENOC) may use World Energy’s demand response exchange, but also compete with them to sign up customers directly.  As with ESCOs, World Energy does not say which Demand Response providers use their exchange, but they did say that they have 20 leading providers signed up.

One of the most significant barriers to energy efficiency is simply the complexity of options on offer.  Although the internal rate of return on efficiency investments is very high, the absolute number of dollars available from energy efficiency is seldom enough to sell a facilities manager. Facilities managers seldom have an incentive or expertise to save energy, although this is improving as companies become more energy aware and make changes to employee incentives to fit the new goals.  Yet it is still generally difficult to get most facilities managers to give energy the attention it needs in order to capture the available energy savings.  Lower energy prices, on the other hand, are easy to grasp and communicate to higher-ups.  If World Energy and ESCOs working with them can offer a facilities manager a one-stop shop for both lower energy prices and additional energy savings, they’ll be much more willing to take action, even with weak internal incentives.  One step World Energy has recently taken to make this decision much easier is their  strategic investment in Retroficiency a company whose technology will allow World Energy to conduct virtual energy audits for clients based on the detailed energy usage data they are already collecting.  This will allow facilities managers to easily identify the particular buildings in their portfolios most likely to benefit from more detailed energy audits and retrofits.

Other Businesses

World Energy also runs other trading platforms, most notably the platform for trading carbon credits under the Regional Greenhouse Gas Initiative (RGGI).  With New Jersey pulling out of the ten-state RGGI climate initiative, I thought it would be interesting to get Domaleski’s perspective, but he was unable to comment due to a confidentiality agreement with RGGI.  This exchange is part of their Green green product line, which accounts for approximately 5% of World
Energy’s business and includes other environmental commodity trading as well as RGGI.

At the urging of a utility, World Energy has also recently launched a wholesale energy exchange.  This exchange enables utility and municipal customers to find the best price for power from World Energy’s 500 suppliers.  This must be a useful service, because in the four years since the exchange was launched, they have signed up 70 large customers.  The company’s Wholesale division accounts for roughly 15% of revenues.

Conclusion

The move to internet based energy sourcing seems like an inevitability, and World Energy has a powerful first mover advantage.  While online procurement of energy may not be green in and of itself, the savings on offer serve to get building managers in the door.  If World Energy or its ESCO partners can then include significant energy efficiency and green power in the mix, we have the formula for a significant shift towards a more energy efficient economy.

In this sense, World Energy may be a lot like Wal-Mart.  Customers come in the door for low prices, but then find it easy to buy energy efficient products as well.

DISCLOSURE: Long ENOC,COMV.

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 Is Energy Sourcing the Gateway Drug to Energy Efficiency? appeared first on Alternative Energy Stocks.

From Small Fries to Big Shots? Part 1 of 2

by Bill Paul

Feel like rolling the dice on some small alternative energy stocks that appear to have big-time potential?

Just remember: sometimes you roll snake eyes.

First up: World Energy Solutions Inc. (Symbol: XWES), which currently trades on NASDAQ for $3 and change per share.

Worcester, MA-based World Energy Solutions operates online exchanges for energy and green commodities, including the one administered by Regional Greenhouse Gas Initiative Inc. (RGGI), the regulatory scheme under which 10 Northeastern and Middle Atlantic states "cap" their power plants’ emissions by requiring plant owners to buy permits for the gasses they emit.

World Energy Solutions is a poster child for how to run a cap-and-trade system. "RGGI auctions continue to run like clockwork," RGGI’s chairman recently said, adding, "RGGI is showing that cap-and-trade works."

With Europe and Asia already well on the way to having full-blown cap-and-trade systems, it would seem only a matter of time before World Energy Solutions attracts far wider investor interest (and just maybe a corporate suitor). While the company is still in the red, last month it reported that third-quarter and nine-month losses had narrowed significantly from a year ago, on increased revenue.

Next up: geothermal power developer Ram Power Corp., which trades on the Toronto Stock Exchange under the symbol RPG (RPG.TO, RAMPF.PK). Nevada-based Ram shares also currently sell for $3 and change, although just two months ago they were selling for under $1. But then the World Bank’s International Finance Corp. proposed to arrange $216 million in debt financing for the company’s 72 megawatt geothermal project in Nicaragua, now due to come online in 2011.

Ram Power’s chairman clearly believes this is the start of something big for his firm. Chris Thompson said this past week that "Ram Power’s mission (is) to be the premier provider of geothermal energy in Central America. We see this region, especially Nicaragua, as an area where our company can develop stable, long-term energy supply relationships."

Unlike World Energy Solutions, Ram’s third quarter and nine month losses widened – significantly so – from year-earlier results, though that clearly hasn’t hampered its recent stock activity. The company has other geothermal interests in Nevada, California and Canada.

(Next Week: Two more small fries whose prospects appear promising.)

DISCLOSURE: None

DISCLAIMER: This is a news article.  Please read terms and policy.

Bill Paul is Managing Editor of EnergyTechStocks.com.

The post World Energy Solutions (XWES) and Ram Power (RPG.TO) Appear Promising appeared first on Alternative Energy Stocks.