GLG News by Himadri Banerji

Implications: While defining solutions to carbon free electricity, the author outlines the criteria which according to him are eminently satisfied by Concentrated Solar Power i.e. affordable, non exhaustible, available to every country developed or underdeveloped, does not take much fresh water to produce or too much of arable land and available throughout the year, and easy to store; besides, it can be built quickly in hundreds of Giga Watts of Capacity per year. On the policy front, the author suggests that considering that CSP is capital intensive at start, government provides carbon linked loan guarantees and continues the thirty percent tax break till 2016. It mandates a minimum compulsory off take of renewable energy by all utilities, for exponentiation of a self regenerating market primarily arising out of the consequent economies of scale, supported by a positive carbon credit regime and supplemented by favorable learning curves of manufacturers. 

Analysis: While the interventions suggested are already being actively pursue in some countries especially in Europe with salutary effects. Spain for example has a burgeoning CSP industry so has Germany. It is learnt that India and China are betting big on this technology to reduce their dependence on import of oil.

However to suggest that there will be an explosive growth of CSP in preference to coal and nuclear appears far fetched. Transmission systems to evacuate the power from such far off sites will nevertheless pose major challenges, and one need to take into account the losses in energy which will definitely occur in transmission.

Exponentiation of technology may occur only after the entire supply chain supporting the same has matured. If one has to support the world’s CSP electricity demand growing at the rate of over 50- 100 Giga Watts per year, say, we would need over 75-125 Giga Watts of manufacturing capacity of solar dish engines, heliostats, power towers, mirrors, parabolic trough collectors, structures, heat collection tubes, thermal storage systems, turbines, steam generators, tracking system drives etc.
Yet the technology does offer great opportunities to manufacturers and EPC contractors.

The CSP industry consists of large companies (e.g., The Boeing Company, Nexant Inc., Florida Power and Light, and SAIC) that have focused a portion of their resources on CSP and small companies (e.g., Stirling Energy Systems, KJC Operating Company, and WGAssociates) that are focused almost entirely on CSP.

What needs to be recognized as per recent studies, is that if the sizing of the solar plants be increased to greater than 1000MW one really gets the benefits of economies of scale. In fact a recent study has established that there could be a reduction of 18-20 percent in the cost of the plant giving electricity at a reasonable 5-6cents/kwhr

Implications: 1. Unless pragmatism descends on energy costs of renewable like solar, wind etc, we need to seriously examine the nuclear energy options. 2. Carbon free alternative in India and China's power generation program can only come if the countries follow a credible nuclear energy program in the coming years. This is very evident by the data coming out of China at least. 3.We can't see renewable as practical to provide the bulk of our needs at the moment, or conservation, and needless to reiteratet fossil fuel shortages and global warming are even greater perils.

Analysis:

Costs are actually a very good indicator of practicality, and if their signals are observed stop truly daft measures like installing  PV in Germany with present technology, which is all but useless in the winter when it is most needed.

We need to look at a policy of producing a actuarial calculation of nuclear risks, and charging reactor owners premiums based on the risk. Losses associated with Three Mile Island are a possible basis for those calculations.

If the free market does not want to provide the insurance, then the government should be the insurance carrier of last resort, but the insurance should be paid for by the reactor owners and not the public.same is the principle to be applied to decommissioning.

One of the main arguments of the present debate on energy is whether a nuclear energy program should be restarted or not. We can use the cases of Italy and France as a way for evaluating whether it is a good idea for a non nuclear country to get nuclear plants.

Implications: The news of the cancellation of the orders of 150 wind turbines, by an  Edison company in US, following blade failures, placed on Suzlon an Indian Wind Turbine has triggered a debate, 1.Is the company's  technology state of art ?And more significantly, 2. Has the management of Suzlon adopted state of art in the technology and processes in the entire value chain in the manufacture of large wind turbines including all critical components, while adopting technologies in Europe etc.(Does one see more in the recent spate of resignations of senior expatriate executives) 3.With the wind market growing apace around the world, opportunities are opening up for new turbine manufacturers and innovative machine concepts. Does not this pose insurmountable challenges to large manufacturers. 4.Above all the cardinal question is :Are the established players who can’t satisfy the demand on their own, are falling behind while adopting new technology?Is small beautiful.

Analysis: Wind turbine companies like Suzlon who were world leaders today face challenges from some very smart small manufacturers.This should be viewed in the backdrop of rapid growth of wind turbine manufacturers( 70 to date) of various capacities in the world.

China’s Sinovel is more than potent. The spin-off of machinery producer Dalian Heavy Industries has bought Fuhrländer licences and the design and development of 3-MW and 5-MW converters. The design and development order was placed with Austria’s Windtec, an engineering team with many years’ experience, owned since the start of the year by US electronic components manufacturer, American Superconductor (AMSC).

The adoption of state of art has not only remained confined to  the design and manufacture of blades, it is as important if not more for the drive trains and gearboxes.

Wind technology preferences on optimal drive train solutions continue to differ. Options range today from conventional geared drive, with around 85% of world market share, versus a gearbox with multiple generators such as Clipper, the slow-speed Multibrid type drive solution with a single-stage gearbox, and direct drive with no gearbox. Another ongoing wind industry debate focuses on the merits of heavy wind turbine concepts like some proven German 5–6 MW+ class designs set against prominent lightweight models like the Vestas V90-3 MW.

Implications: Speculators are driving prices of gas and oil to irrational levels. This is driven by demand supply gap driven alone. factors like the weak dollar is definitely accentuating the rise. Comprehensive data like hedge fund’s $104 billion invested at the end of 2007 is significantly higher than the $73 billion in the first seven months of last year, according to data from Singapore-based Research Company Eurekahedge is proof of this conclusion. There apparently is no downside and prices are expected to rise only accentuated by the sinking value of the dollar. The matter of deeper concern is that stabilization of the price is clearly not in sight.Imports of liquefied natural gas are running at about 50 percent of year-earlier amounts and prices in the U.S. will have to rise to compete with Asia and Europe.

Analysis: We see a major threat to energy security for the US now. Will these fuel further recessionary trends in the economy driving a positive feedback loop of vicious cycle.The last time the same situation was face by the US economy was in early 1970s; it took over six years to recover, and there are assigns that the present crisis can take much longer unless there is a very serious effort by the government of US to work very extensively on a coherent and comprehensive energy policy which is focused towards energy security.Some steps which are needed to tide over the crisis are1.Restrict speculation by limiting liquidity available to hedge funds.2. Tie up the import of balance gas and oil to build a reasonable stockpile3.Have a large scale import of LNG4. Increase US price for import of LNG.

Implications: Hofmeister of Shell has outlined a twelve point action plan for achieving energy security, and called for attaching equal significance as given to homeland security. The plan needless to say needs national will, technological and human energy, and major financial investments. It is a pity that for a nation which has bred some of the world's leading thinkers and ideas in policy design and planning has never after the second world war designed a coherent and comprehensive energy plan that gives direction to the executive arm of the government for acjhieving energy security for the country.

Analysis:

The outcome of this plan if accepted by congress, will enable government to define legal sanctions which will make public acceptance of efforts to update its electric transmission system, its oil and gas pipeline systems, locating facilities for gasification, siting of power plants, nuclear plants etc easier.Since treating Energy Security at par with homeland security will give sweeping powers to the Government to suppress democratic movements like Greenpeace, climate change, and environmental activism, the policy planners and legal experts have to be careful in defining the limits.However there are many positives in the 12 point action plan suggested, for example a comprehensive and coherent plan for development of coal resources of the country including coal gasification, access to petroleum and gas resources of the nation and the world, proper financial support for the technologies of the future etc. Shell's 12-point plan addresses energy supply, energy demand, and environment. It was compiled after Shell executives visited 50 US cities in 18 months in what the company called "A National Dialogue on Energy Security." Hofmeister is meeting individually with US presidential candidates to discuss the plan, which calls for: Greater access to conventional oil and gas in and off the US. Development of unconventional oil and gas resources, particularly oil shale in Colorado, Wyoming, and Utah.

Implications: The article as per Citigroup predicts a lowering of earnings for the coal industry in light of 1.Stabilization of production post snowstorm and flood related disruptions in China and Australia and extreme power shortages in South Africa. 2. Lowering of volumes owing to regulatory pressures. 3. Earnings will be hit because of predictions of higher input costs of fuel oil, steel and diesel. As per Merrill Lynch however, Japanese utilities, such as Chubu Electric Power Co may need to pay miners in Australia $135 a tonne for coal contracts in fiscal 2008 beginning April, up 143 percent from last year's agreed $55.65. Merrill Lynch had previously forecast 2008 thermal coal prices at $80 tonne. "There is now an obvious scramble for supply with industry sources confirming that Asian steel mills are begging for tonnes at close to any cost," Merrill Lynch said in a report led by Vicky Binns.

Analysis:

The following are the trends in world prices for both coking and thermal coal.Power-station coal prices gained US$13.68 to reach US$139 a metric ton on February 15, up 11% from the previous week, according to the globalCOAL NEWC Index. The coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement in the second quarter rose 2.1% to US$145 a metric ton on Friday. GlobalCOAL's monthly index for thermal coal prices at Newcastle, Australia's biggest coal exporting harbor, rose US$1.71 per metric ton, or 1.9%, to reach US$90.87 in January, the fourth consecutive monthly record. Spot price in US has already surged 37% this year following a 73% rise in 2007.Though this goes directly against the spot price trends in the world, it is an extremely important forecast for thermal and coking coal purchasers of the world to hold on to their money bags for the time being, as prices must definitely stabilize at lower levels. The forecast saving in energy bills can easily run into trillions.Bucking the trend, one of the major utilities recently booked spot thermal coal at 80$ per tonne.

Implications: It is estimated that capturing the full range of energy saving opportunities, would improve global energy productivity by 135 Quadrillion BTUs (British Thermal Units) equivalent to 60 million barrels of oil per day or 150 percent of energy United States consumes today. What is more is that, it will have a spiralling effect on demand side innovation, Leading to a large pull-effect for products and services from manufacturers, utilities and other companies. Far from the conventional belief that conservation will retard economic development.

Analysis:  The questions to be addressed are

(1)Will energy conservation and energy productivity improvement measures yield the magnitude of savings mentioned and what costs and time frame?

(2)What are the impediments to large scale adoption of such measures by the world community, say in the next five years, and what are the accelerators, say Government subsidy, incentives for saving carbon dioxide emissions etc?

(3)How does one design a self sustaining program for achieving success in this direction?

(4)Are the apprehensions of some of the members of the world community that energy saving would perhaps cause a slowdown in economic development in US?

Implications: As in the case of bio-ethanol, the biggest constraint for takeoff of the bio-diesel industry is insufficient supply of the raw material. For example, to fill this gap, vast wasteland areas, estimated at 38 to 187 million hectares in India, that include areas suitable for dryland-hardy bio-diesel crops needs to be made available to local communities. The requirement for US will be definitely higher. This may not be so easy to develop. Thus there is a portent world trade in raw materials for biofuel raw materials as a distinct commodity. Are we then to see the WTO stepping in to regulate the trade, and will this spell doom for biofuels or a boon.

Analysis: As far as US is concerned, it looks evident therefore that the growing demand for biofuels will necessitate importing raw materials for ethanol and biodiesel production to meet the gap between domestic availability of feedstock and demand, which is projected to grow from the present.

Thus the ever expanding requirements of biofuels production, provide significant challenges to the US agricultural and industry trade negotiators in WTO for safeguarding the interests of the farm operators and owners, agricultural lenders, and managers of farm related businesses especially in the areas of designing

1.Tariffs

As for other commodities, import of raw materials for bio fuels will require policies on tariffs.

Biodiesel is considered an industrial good. This distinction has tariff implications. Ethanol and biodiesel could conceivably fall under the WTO Environmental Goods and Services (EGS) negotiations under the Doha Ministerial Declaration, which calls for reduction or elimination of tariff and non-tariff barriers on EGSs.

2.Subsidies

Meanwhile one has to glance at the history of subsidies in US. Subsidies of ethanol production began during the 2nd oil shock of the late 1970s to understand the background.

The Energy Security Act of 1978 provided a $.40/gallon federal excise tax exemption (now at $.51/gallon through 2010).Besides the Energy Tax Act of 1980 established a loan program for small producers of ethanol. It is also well known that DOE funds research on renewable fuels.

In this context it is not erroneous to presume that the U.S. subsidies targeted to domestic ethanol and biodiesel production is likely to be successfully challenged in the WTO?

International Trade Regimes for Raw materials for Biofuel is an inevitability and will help in accelerating production.

Implications: The combined market capitalization of the eight big listed players in the non-hydrogen fuelcell suppliers, at $1.428 billion, topped that of top 10 hydrogen fuel cell makers, at $1.311 billion, for the first time ever, Over the next three years, the share of hydrogen fuel cell makers will shrink to 30 percent of total global sales while the non-hydrogen will chalk up 70 percent, up from the present 50-50 split between the two sectors. In dollar terms, $1 billion in fuel cells, hydrogen and non-hydrogen, were sold worldwide in the past 10 years. Global annual sales stand at $250 million now but they can mushroom into a $10 billion-a-year industry if the non-hydrogen segment really takes off. Thus we are perhaps on the dawn of another revolution in home gadgetry. It is the non hydrogen natural gas fired fuel cell combined heat plant as a sequel to the microwave!!

Analysis: Non Hydrogen Solid Oxide Fuel Cell(SOFC) with Combined Heat plant CHP are nearing commercialization with utility companies like British gas, EOn providing platforms to companies like CERES and CFCL for evaluation and joint development of the home market bound fuel cell.The boiler, which will be marketed by Centrica's subsidiary British Gas, could cut households' energy bills by more than a third. The SOFC emits far less pollution than conventional boilers and can also generate electricity.Both the fuel cells manufacturers are developing the modules which would include the Fuel cell stack and Balance of Plant(BOP, including boiler etc).

Combined with CHP these fuel cells are delivering efficiencies as high as 60 percent( though a conservative 50% is enough to justify economically)

Technical drawbacks however are there, for example these SOFC fuel cells are notorious that they run at very high temperatures (above 600-700 degrees Celsius) and need a long startup time. On account of such high temperatures,they are subject to damage due to thermal shock, and thus have a short commercial life (customers may not like that).

However latest technological breakthroughs in materials have resulted in lowering of the operating temperatures to less than 500 Degree Celsius.

What is encouraging is that from the earlier cost levels of $3000 per KW, these are now slated to hit the market at $1500 per KW and lower. There are economic models which are being developed for as low as
$600-800 per Kw. This compares well with the CCGT( Combined Cycle Gas Turbine Plants).

According to a soon-to-be-released market research by Business Communications Company Inc. (BCC Inc. report GB282: solid oxide fuel cells), global market value of SOFC is forecasted to reach $347 millions by 2008 with an average annual growth rate (AAGR) of 22% per year with the North American market representing about 57% of the global market then (about $198 millions). With zero carbon, low emissions and high efficiencies, the SOFC Non Hydrogen Fuel Cells are bound to penetrate the market.

Implications: Distribution transformers are the equipment which one sees at every nook and corner of the electricity supply network. Its purpose is to convert electricity at high voltage to low voltage somewhat safer electricity before electricity reaches the homes. Most of the world's distribution transformers are made with cores of high grade silicon steel. While converting from high voltage to low voltage there is a loss which is inevitable. The amorphous metal produces much lower losses.They are costly but have better efficiency and the extra costs are paid off within five to seven years. Utilities across the world have been reluctant to go all out with a major replacement plan, and as a result even today the adoption of the amorphous core technology for the distribution transformers is very minimal.China which has the world's largest number of distribution transformers has decided from 1990 onwards for introducing the low loss amorphous core transformers.

Analysis: 1.With the recent international initiatives on reduction of emissions of carbon dioxide, nations like China and India, who are committed to support the international protocols on Climate Change, will definitely subscribe to an agenda for replacement of the existing distribution transformers with amorphous core having much higher efficiency, thereby reducing losses thus directly reducing the need for generating that much power..and the resulting carbon dioxide which causes global warming.

2.Thus if you consider that there will be additional credits available to the users as ROCs or Carbon Credits, the payback can be drastically reduced, say a maximum of two years.

3.The penetration rate starting from 1990 when these countries started installing such transformers has not been sufficient in China and India.

4.It is of interest to all that how much of this additional capacity of Areva in China, or for that matter for any distribution transformer manufacturer, is for the high efficiency amorphous metal core and how much is with the conventional low efficiency silicon cold rolled steel core.

5.It will depend on what is the total market size for distribution transformers in China, and what is the penetration rate of amorphous metal core transformer, which may not be very high as yet.

6.The estimate for the annual capacity addition which yields an annual demand for new distribution transformers both for the utility and industrial customers, is supposed to be at least 240 million KVA( Kilovolt ampere, a measure of the electrical capacity of a transformer) per year with an average size of 200KVA each, which translates to 1.2 million units.

7.Existing capacity installed of Distribution Transformers in terms of KVA and units in China is not accurately known.The estimate could be somewhere in the range of 3000 Million KVA.Considering that some of the old transformers will need to be replaced to reduce the carbon footprint in China, the demand can be an additional 400 Million KVA.

8.Thus the total demand can be as high as 650 Million KVA per year.Each KVA of Distribution transformer can cost $80.
Thus the total potential for DT in China is 30.00 billion dollars per year.

9.Assuming that of this 15% will be with amorphous metal which costs about 10% higher, the total amorphous metal business in China will be a staggering, 5 billion dollars per year.

10.However the amorphous metal capacity installed by Allied Signal, Hitachi, and Areva etc in China can support at the most a demand of 1.0 billion dollars.

11.Areva is seeking to increase its market share in China, the third-biggest nuclear energy user in Asia, after Japan and South Korea, according to the BP Plc's Statistical Review of World Energy June 2006. China also accounts for 24 percent of the world's transmission and distribution market. The question remains as to how much of this is with amorphous metal?

Implications: Implications: Over the next thirty years, the most rapid increase in energy demand is expected to come from the transport sector (+2.1%/yr versus 1.7%/yr for total demand). At present, this sector relies almost exclusively on petroleum products, which brings up two key problems: oil dependence and the reduction of greenhouse gases. CTL has been touted as an alternative for reducing overdependence, and there is a considerable amount of support being dished out for accelerating the commercialization of the technology.

Analysis: Analysis:

Favorable economics at oil above 40$ per barrel
In India and China, the cost of extracting coal is low (about $12/t), therefore the CTL solution may prove competitive compared to conventional solutions provided that the price per barrel oil stays higher than $40/bbl for a very long period.

However, with the carbon emissions from the CTL technology being high,and unmanageable, CTL is definitely out of place in the present greenhouse-gas constrained world.

Implications: Over the next thirty years, the most rapid increase in energy demand is expected to come from the transport sector (+2.1%/yr versus 1.7%/yr for total demand). At present, this sector relies almost exclusively on petroleum products, which brings up two key problems: oil dependence and the reduction of greenhouse gases. CTL has been touted as an alternative for reducing overdependence, and there is a considerable amount of support being dished out for accelerating the commercialization of the technology. The latest is to rekindle the market with subsidy for a risk free assured contract for US military. However, with the carbon emissions from the CTL technology being high,and unmanageable, CTL is definitely out of place in the present greenhouse-gas constrained world.

Analysis: Favorable economics at oil above 40$ per barrel
In India and China, the cost of extracting coal is low (about $12/t), therefore the CTL solution may prove competitive compared to conventional solutions provided that the price per barrel oil stays higher than $40/bbl for a very long period.
As it appears that CTL is out of place in the present greenhouse-gas constrained world.To improve their greenhouse gas emission balance, consideration may eventually be given to capturing the CO2 emitted by these units and storing it in geological formations, which would cost an additional $10 to 20/bbl.
Even if you capture all the carbon dioxide from the process, pure coal-to-liquids have 4% higher lifecycle carbon emissions than conventional fuels.CO2 emissions are higher with CTL than for conventional technologies. The only way to get a 20% reduction in emissions is by blending in a lot of biomass.
The logical questions
Why waste precious underground storage space for carbon dioxide from CTL (which leaves you with a carbon-intenstive fuel) when you could use that space for carbon dioxide from coal gasification (which leaves you with carbon-free electricity)?
Why waste precious biomass blending with coal to make CTL when you could just make cellulosic ethanol directly from the biomass (or you could blend the biomass with coal to make electricity with negative carbon emissions).

Implications: Over the next thirty years, the most rapid increase in energy demand is expected to come from the transport sector (+2.1%/yr versus 1.7%/yr for total demand). At present, this sector relies almost exclusively on petroleum products, which brings up two key problems: oil dependence and the reduction of greenhouse gases. Coal to Liquid( CTL) does offer a viable alternative, at today's oil prices, however critics have been up against CTL, as CO2 emissions are higher with CTL than for conventional technologies. The question is however, long term commitment of resources in developing the CTL business through risk free contracts need to be pursued or not?

Analysis:  To improve their greenhouse gas emission balance, consideration may eventually be given to capturing the CO2 emitted by these units and storing it in geological formations, which would cost an additional $10 to 20/bbl.
However even with above there would still be a need for sequestration as about 4% of carbon footprint would still be visible.

This may add an additional 10$/bbl

Yet, there will be a journey towards self sufficiency and reduction in dependency.

However the cost of oil at which the CTL will become commercially viable would be over 60$/bbl.

With costs hovering around 80$/bbl today, and with volatility in prices, long term decisions have to be taken,as have been boldly pursued by South Africa, and Brazil for alternative fuels.

Implications: The news definitely augurs well for the farmers and however sustenance of growth is dependent on the subsidy the Government gives to the bio fuels industry as a whole. US farm income which had been actually stagnating, will now grow due the boom in bio diesel and ethanol production. However application of World Trade Organization Rules to international trade of biofuels is a likely constraint which may restrain the growth inside US.  

Analysis:

As in the case of bio-ethanol, the biggest constraint for takeoff of the bio-diesel industry is insufficient supply of the raw material. For example, to fill this gap, vast wasteland areas, estimated at 38 to 187 million hectares in India, that include areas suitable for dryland-hardy bio-diesel crops needs to be made available to local communities. The requirement for US will be definitely higher. This may not be so easy to develop.

It looks evident therefore that the growing demand for biofuels will necessitate importing raw materials for ethanol and biodiesel production to meet the gap between domestic availability of feedstock and demand, which is projected to grow from the present.

Thus the ever expanding requirements of biofuels production, provide significant challenges to the US agricultural and industry trade negotiators in WTO for safeguarding the interests of the farm operators and owners, agricultural lenders, and managers of farm related businesses.

1.Tariffs

As for other commodities, import of raw materials for bio fuels will require policies on tariffs.

2.Subsidies

Meanwhile one has to glance at the history of subsidies in US. Subsidies of ethanol production began during the 2nd oil shock of the late 1970s to understand the background.

The Energy Security Act of 1978 provided a $.40/gallon federal excise tax exemption (now at $.51/gallon through 2010).Besides the Energy Tax Act of 1980 established a loan program for small producers of ethanol. It is also well known that DOE funds research on renewable fuels.

In this context it is not erroneous to presume that the U.S. subsidies targeted to domestic ethanol and biodiesel production is likely to be successfully challenged in the WTO?

Biodiesel is considered an industrial good. This distinction has tariff implications. Ethanol and biodiesel could conceivably fall under the WTO Environmental Goods and Services (EGS) negotiations under the Doha Ministerial Declaration, which calls for reduction or elimination of tariff and non-tariff barriers on EGSs. 

Implications: 1.The Challenges in developing transmission capacity to met the goals of 15 % power through renewable by 2020 in US 2.Prevent transmission overload that could take place with the new projects 3.Finding a least-cost and reasonable solution to capacity and operational constraints on the transmission system that will benefit all the stake holders. 4.Existing transmission capacity insufficient to meet the required reliability standards during times of emergency, such as when redundancy in transmission lines reduced. 5.Advanced Network Study and Optimization a must for siting. 6.The cost per Km of transmission lines is prohibitively expensive if met by developer alone, jeopardizing economics and growth of renewable generation. 7.All ratepayers, not just developers, would benefit from the upgrades and should help pay for them.    

Analysis:

Reducing generation at times of transmission constraints would significantly reduce the capital required for transmission upgrades required. I suggest that developers must examine this in detail using Network Study and Optimization tools, before deciding on a siting.

It must be appreciated that in this particular case the reduction has been from 60Million to 11 Million dollars.

However the question remains as to who should pay for transmission upgrades required to accommodate the new generation planned from Renewable Energy.

Requiring the wind developers to pay for at least 25 to 75 percent of upgrade costs is beneficial because it creates an incentive for developers to consider economic efficiencies when they choose locations for their wind farms. That reduces the potential for the shifting of costs from the developers to the customers, which could occur if no upgrade costs were assessed against developers.

All ratepayers, not just developers, would benefit from the upgrades and should help pay for them. Further, requiring developers to pay for the upgrades would threaten the economic viability of his projects and stifle further development of renewable energy in the country.

Implications: For the brand seeking, cleantech only,venture capitalists, who are funding startups, taking positions in fossil fuel firms for spreading their portfolios is definitely required.

Considering the present uncertain state of the renewable industry, for example, investors may look at tech fossil firms whose businesses are in increasing efficiency in exploration of oil and gas, in developing petro product based coatings and polymers, or making fossil energy more efficient.

Investors also can screen out fossil fuel and nuclear energy companies while seeking to inject money into those outfits striving to improve their practices and develop cleaner technologies

Analysis:

1.Nonrenewable sources will probably remain a significant part of our energy mix indefinitely.

2.From an unbiased perspective, there is no serious doubt that it would be salutary to cut back on the world’s consumption of fossil energy in every way feasible.

3.However, this at best can be a counsel of prudence than a general strategy for rectifying the environmental damage caused by human industry.

4.With above as background, it is thus likely that investments in clean energy firms by venture capitalists will also follow a pattern which at best matches with reality. Thus while venture capitalists have invested more than the 785 million dollars in clean tech ventures, but at the same time they have also invested substantially though less in startups offering positions in above.

5. Besides,past experiences of investors in clean tech firms like Capstone in 2000, don't give confidence to bet only on clean tech stocks for quite some time to come, unless some breakthrough occurs.
Please see article "Taking Stock of Green Energy Options..pure play alternate energy stocks can be dicey"

6.Thus renewable fuels still hold a tiny share of the market compared to, for example, oil companies, their shares can be wildly volatile.

7.This trend is further accentuated by the fact that not too many green stock indexes, ETFs, and mutual funds available to American investors. More surprisingly, funds that proclaim themselves eco-friendly sometimes have radically different investing philosophies.    

Implications:

Dynamics of Ethanol usage and production forces major challenges on policy planners in the US government in light of the imperative to have an Ethanol Policy in place.

Major investments will be required in Production Facilities and Infrastructure for delivery of 15 Billion gallons per year of E85 (15% ethanol and 85 % gasoline from retail petrol pumps) by 2012.

One has to realize that the Corn based Ethanol Industry is achieving a sense of maturity, while the alternative of cellulosic Ethanol is still under development.

The delay arising between planning a facility and its availability for commercial production results in requirement of large scale commitments of investments on plants and facilities under construction.

The investment to achieve the goals by 2012 is expected to be in the region of $ 5 billion to $ 6 Billion per year. Considering the state of maturity and the technology, it poses major challenges to investors in managing associated risks.

One also has to consider the usability of the non ethanol producing portions of the crop. For example, deciding whether to use all of the corn, or just the corn cobs to produce ethanol must be factored. If you are able to sell off the corn kernels as food for human or animal consumption then this obviously will change your cost structure dramatically and thus impact the cost effectiveness of different alternatives

Analysis:

The widening supply and demand gap in gasoline and with oil prices forecast to touch 100$ per barrel shortly, it is imperative that US adopts an aggressive Ethanol policy soon for the Transportation sector.

The policy must not only look at dilution percentage and the subsidies but also into the means of production, and capital investment required. The statistics as of today are as follows

• The target of dilution is 15% Ethanol and 90 % gasoline by 2015.
• So, optimistic estimates of ethanol production assume the availability of cellulosic ethanol, which is not commercially available and is unlikely to be for some time.
• The total ethanol that would be required by then is over 15 Billion gallons per year, as against today’s 5 billion.
• It takes about 2 years from planning to eventual siting and commercial production for an ethanol plant and delivery system infrastructure to be in place.
• It takes close to $60 million to build a standard 40 MMgy ethanol plant in the United States. This doesn’t include owner’s costs, such as land purchasing, rail siding and fire protection, among many other things. However, as U.S. ethanol plants get bigger in capacity and quantity, and the raw materials become harder to find, new concerns have surfaced as to where raw materials can be obtained and how much they are going to cost.
• About 95 percent of all ethanol in the U.S. is made from corn
• With High costs, collateral damages from using corn, land use limitations etc, one must look at alternatives to corn,
• An alternative is cellulosic ethanol, made from wood chips, sweet grass etc.
• There is currently no commercial production of cellulosic ethanol
• Also, the country has virtually no infrastructure for dispensing ethanol. Only 600 of the country's 180,000 gas stations are currently equipped to dispense E85 ethanol.
• Ethanol from Corn industry is in a state of sufficient maturity.

The Natural Resources Defense Council is a big proponent of cellulosic ethanol. But in its February 2006 study cited above ("Ethanol: Energy Well Spent; A Survey of Studies Published since 1990") it reports that "the technology to produce this type of ethanol is still being developed and is far from mature