Future Energy

Peak in the Green Energy Cycle??????????

                                       

                                Source: WSJ Environmental Capital blog

Will a Retreat in Public Green Concerns Let Business Step Back as Well?

Yesterday's Wall Street Journal Environmental Capital blog had an interesting article about Duke Energy's acquisition of Catamount Energy Corp., a small wind-power developer based in Vermont (see Blowing In: What's Behind Duke's Wind-Power Push?, June 27th).  The WSJ cites the usual business benefits of investing in a rising industry and a clean, green one at that.  However, they also raise an interesting question regarding another potential motive - burnishing their public image (greenwashing?).

"But maybe the deal is just a way to burnish Big Power’s image at a time when energy companies are taking fire from all directions. Catamount’s wind-power assets are a drop in the bucket compared to Duke’s overall generation mix. Catamount’s U.S. assets, part of the massive Sweetwater wind-farm complex in Texas, equates to about 300 megawatts of power, or about one-quarter of some of Duke’s big coal-fired plants and less than 1% of Duke’s total generation portfolio."

While the WSJ doesn't pursue the question any further, it does make one wonder about how much this might be a factor driving clean energy investment.  Here in Canada some of the biggest wind energy developers are companies like Suncor, whose primary business is extracting oil from the northern Alberta oilsands, and Transalta, whose business is mostly coal-fired power.  Their renewable power segments are too small to have a significant impact on their financial outcomes but they do allow them to consistently make the public "most sustainable companies" types of lists (e.g. Dow Jones Sustainability, Global 100, etc.).

The question comes up at an interesting time as well.  The Globe & Mail yesterday reported that the energy crisis has taken the public's attention off of green issues (see Energy Crisis Supplants Environment as Top Concern, June 27th).   

"The environment, last year's top issue, has been pushed to No. 3, with just 16 per cent of Canadians surveyed saying they now consider it their primary concern.  .....  The findings were part of a survey that compared the thoughts of Canadians and Americans on a broad array of issues.

The Americans surveyed were also concerned about the high cost of gas – 19 per cent said it topped their list of priorities. But gas prices were outdistanced by the economy, which was cited by 33 per cent of people south of the border.

In Canada, 18 per cent of respondents said the rising cost of gas was the most important issue. That was equal to the percentage in this country who named the economy as their No. 1 concern. In the past three years, gas prices have rarely been mentioned by people surveyed by the Strategic Counsel; the highest number was 4 per cent in July of 2006."

Similarly, in their June 23rd edition, the Globe & Mail reported on a survey among Canadian business leaders that found declining support for addressing climate change (see Green Begins to Fade, June 23rd).

Canada's corporate executives have cooled in their enthusiasm for carbon taxes or "cap-and-trade" systems, as high oil prices and economic concerns make them leery of policies that will boost the cost of doing business.

The latest quarterly C-Suite survey of top executives shows that decision-makers are still keen on combatting climate change, but investing in new technologies is much preferred to government-imposed regulation.

Now Canada's business leaders have never been enthusiastic about addressing climate change or any other environmental issue for that matter, but the public's about face could certainly give cover to business and government leaders who would rather avoid the whole set of issues.  And if that's the case, will one of the underpinnings of the surge in clean energy spending be removed?

I think its a definite possibility.  However, because current levels of clean energy investment reflect a confluence of a number of factors, some of which are getting stronger as oil prices rise, it may be impossible to sort out.  I expect that the overall trend is still towards more rather than less investment.

Is B.C. Really Interested in Developing Clean Energy?

A short piece by Patrick Brethour in the Globe & Mail today illustrates why B.C. has been so slow to bring clean/renewable energy onstream over the past decade (see You Take The Risk, We'll Take the Gravy, June 13th). 

The provincial crown corporation that controls the electrical sector in the province, B.C. Hydro, appears to be making it more difficult to develop privately financed power generation in the province.  Despite the Liberal government's stated policy of fostering the development of privately developed, clean energy.

Reviewing the most recent RFP for electrical generation, Mr. Brethour highlights two apparent roadblocks. 

"Buried in the depths of the document asking for proposals is a paragraph that will give B.C. Hydro the ability to buy the “residual rights” to a power project once the term of the initial electricity-purchase agreement expires...... However, B.C. Hydro is, in effect, expropriating those profits and demanding that any bidder spell out, now, how much it will be willing to sell for two, three or even four decades down the line."

and

"In a similar vein, B.C. Hydro is requiring bidders to commit to construction costs in November for their proposed projects, while waiting until mid-2009 to actually award contracts. If, or more precisely when, costs spike in the meantime, it will be the bidders who pay the price for the utility's languid pace of decision making."

Despite an abundance of opportunities for small-hydro and wind power as well as some favourable sources of geothermal power (not to mention a whole coastline of opportunities for wave and tidal power), B.C. has seen renewable energy develop at a glacial pace.  And B.C. Hydro has long been seen by private power developers as more of a roadblock than a facilitator with respect to renewable power development.

The result is a province that despite a long history as a major hydropower generator is now a net importer of more than 10% of its total electricity needs.

This problem is not just limited to B.C.  Much of the Canadian electricity market is controlled by provincially owned entities which have monopolies or near-monopolies on the generation and distribution of electrical power.  This position puts the provincial crown corporations in the role of gate-keepers to the Canadian electricity market and provides them with enormous power to either facilitate .. or frustrate .. respective governments' energy policy. 

Our current era of climate change and peak oil will require fundamental shifts in energy supply and huge amounts of new investment.  But as the article notes, "the residual rights clause will make power projects less attractive to financial investors."

Resistance to change like that exhibited by B.C. Hydro is likely to have significant, negative effects on the provincial economic well being.  And, while Premier Gordon Campbell is being hailed for his leadership stance on responding to climate change, BC Hydro's approach is likely to frustrate the long term changes required to effectively address provincial greenhouse gas emissions.

The obvious conclusion: If you are looking at investing in B.C. IPP's, beware!

Should Anyone in Their Right Mind Try to Develop Micro-Power?

A recent article in the Financial Times does a good job of capturing the frustrations that can attend the development of clean, small-scale power generation (see Water Power Project Generates Little Return, by Carola Hoyos, May 31st).   Ms. Hoyos profiles a U.K. family's efforts to develop micro-hydro at the site of a 700 year old water mill.

"For more than 700 years the Tillingbourne river has produced power on the spot where Neil and Candace McMahon's converted mill house now stands. A southern wall of Old Netley Mill, which dates from 1860 when this part of Surrey produced much of Britain's gunpowder, still shows distinctly where the water wheel once turned."

After much frustration the family meets with limited success.

"As for the McMahons, they are a little rueful that, even with the pleasant prospect of no more power bills, it will probably take more than 40 years of selling the extra electricity they generate back to the grid to recoup costs of buying, installing and maintaining the turbine.

"I'll probably be dead by then," says Mrs McMahon."

All this despite national policy intended to foster clean energy.

"Hurdles to forming green energy - whether sun, water or wind - that could help to mitigate global warming are not confined to the Old Netley Mill and ministers cannot count on the small group of green crusaders who have money, time, tenacity and ideology to spare. Planning permission problems, insufficient production of solar panels and wind turbines, and the economic burden of going green risk derailing the national goal to cut carbon emissions by 60 per cent before 2050."

There is some irony in the Financial Times also reporting in the same day the failure of a U.K. micro-power support program (see Micropower Program Proves Partial Failure, May 31st.). 

The number of homes in the UK generating their own energy has risen by just 18,000 in the last four years, figures released on Monday will show, suggesting an £86m government programme to subsidise installations has partially failed.

While the two stories focus on the U.K. I suspect they could equally be applied to many a jurisdiction, not least to my home, B.C. in Canada.

Wave Power Rises Again?

The most recent issue of the Economist takes a brief but interesting look at the resurgence of wave power development in recent years (see The Coming Wave, June 5th).  As the article says, wave power is still in its infancy.  However, the magazine is able to identify a number of companies that are on the cusp of deploying commercial systems.   Going a step further, U.K's Pelamis Wave Power Ltd., already has a commercial multi-unit wave farm in place off the coast of Portugal, although, the company's website describes it as being in the commissioning phase. 

While the Economist identifies five companies currently pursuing commercial development of wave power, only two are publicly listed, including:

• Finavera Renewables Inc. (TSXV: FVR)

In December 2007, this Vancouver based company signed an agreement with Pacific Gas & Electric to begin installing its Aquabouy generators in a wave farm off the California coast by 2012.

• Ocean Power Technologies Inc. (NASDAQ: OPTT)

The company has been conducting ocean trials off the coast of New Jersey since 1997 and is in a joint venture with Iberdrola SA to establish a 1.39 MW wave farm off the northern coast of Spain.

The companies that are profiled appear to be taking a variety of approaches to developing commercially viable technologies.  (Wikipedia gives a good overview of the science behind wave power.)

As the article points out, the ideas for wave power have been around for decades but the public policy support and economic environment has been lacking.  However ....

"But at last there are signs of change. Big utilities are taking the technology seriously, and are teaming up with wave-energy companies. Venture-capitalists are piling in too, as they look for new opportunities. Several wave-energy companies are thought to be planning stockmarket flotations in the coming months."

Among the private companies examined, those "piling in" look to be the A-list of renewable energy investors, including the likes of Blackrock Investment Managers, 3i, Carbon Trust, Norsk Hydro Technology Ventures and Sigma Capital, among many others.

Enjoy!