Trends I'm Watching

The Implications of Peak Oil

Trend: The gap between future energy demand and the supply of oil looms large.

Eugene Linden in Outside Shot at BusinessWeek.com describes the dilemma that the United States faces as demand for oil supplies increases and supplies decrease. Excerpts below.

Link: From Peak Oil To Dark Age?.

The U.S. is completely unprepared for peak oil, as it's called, and the wrenching adjustments it would entail could easily accelerate global warming as nations turn to coal (see BusinessWeek.com, 4/19/07, "Rx for Earth: Sooner Not Later"). Moreover, regardless of the implications for climate change, peak oil represents a mortal threat to the U.S. economy.

Peak oil refers to the point at which world oil production plateaus before beginning to decline as depletion of the world's remaining reserves offsets ever-increased drilling. Some experts argue that we're already there, and that we won't exceed by much the daily production high of 84.5 million barrels first reached in 2005. If so, global production will bump along near these levels for years before beginning an inexorable decline.

What would that mean? Alternatives are still a decade away from meeting incremental demand for oil. With nothing to fill the gap, global economic growth would slow, stop, and then reverse; international tensions would soar as nations seek access to diminishing supplies, enriching autocratic rulers in unstable oil states; and, unless other sources of energy could be ramped up with extreme haste, the world could plunge into a new Dark Age. Even as faltering economies burned less oil, carbon loading of the atmosphere might accelerate as countries turn to vastly dirtier coal.

GIVEN SUCH UNPLEASANT possibilities, you'd think peak oil would be a national obsession. But policymakers can hide behind the possibility that vast troves will be available from unconventional sources, or that secretive oil-exporting nations really have the huge reserves they claim. Yet even if those who say that the peak has arrived are wrong, enough disturbing omens—for example, declining production in most of the world's great oil fields and no new superfields to take up the slack—exist for the issue to merit an intense international focus.

Wind Replacing Black Gold in Texas?

Trend: Wind may become a key energy source in the United States.

Betsy Blaney at Star-Telegram.com writes that T. Boone Pickens wants to build world's largest wind farm in West Texas. Excerpts below.

Link: Star-Telegram.com | 06/13/2007 | Pickens wants to build world's largest wind farm

Billionaire T. Boone Pickens is planning to cash in on the wind energy boom by building the world's largest wind farm in West Texas.

The oil tycoon wants to install large wind turbines in parts of four Panhandle counties in a project that would produce up to 4,000 megawatts of electricity, Pickens spokesman Mike Boswell said Wednesday.

If Pickens' company, Mesa Power LP, does build the wind farm it would be the largest in the world, American Wind Energy Association spokeswoman Susan Williams Sloan said. It would generate more than five times the 735 megawatts produced at the present largest wind farm near Abilene.

One megawatt is enough to power 250 homes in Texas, Sloan said.

Pickens' proposal, which would cost as much as $6 billion, would fall just short of nearly doubling what Texas had at the end of 2006, when wind power totaled about 2,700 megawatts, she said.

Construction of Pickens' project would begin in 2010 and involve as many as 200,000 acres in Roberts, Gray, Hemphill and Wheeler counties, Boswell said. The farm would have as many as 2,000 wind turbines, and some would be large enough to generate 2.5 megawatts each.

Tech Leaders Go Green

Trend: Technology companies have a plan for reducing energy consumption by computers.

GreenBiz News describes the Climate Savers Computing Alliance. Excerpts below.

Link: GreenBiz News | Intel, Google to Put Computers to Work as Climate Savers

The computing giants have joined forces to create the Climate Savers Computing Alliance, a broad coalition that includes other IT industry companies, government agencies and environmental groups that seeks ways to spread energy-efficient computers and IT power management worldwide.

The list of companies that have already joined the alliance as supporting members reads as a who's-who of the leaders of the IT industry. In addition to Intel and Google, other members include AMD, Dell, Microsoft, IBM, Fujitsu, Lenovo, Sun Microsystems, Hewlett-Packard, and many others. Joining them in the roster are environmental groups including the Natural Resources Defense Council, the World Wildlife Fund and the World Resources Institute, as well as the U.S. EPA. The full list is on the group's website at ClimateSaversComputing.org/program/colleagues.html.

...Google's vice president of operations, Urs Holzle, laid out the two paths that the new alliance will take to achieve the goal, first by increasing the efficiency of computer hardware, and second by encouraging users to use software that uses the power more efficiently.

"Today, the average desktop P.C. wastes nearly half of its power, and the average server wastes one-third of its power," Holzle said. "The Climate Savers Computing Initiative is setting a new 90 percent efficiency target for power supplies, which if achieved, will reduce greenhouse gas emissions by 54 million tons per year -- and save more than $5.5 billion in energy costs."

Businesses and individuals alike are encouraged to join the program. Manufacturers who pledge their support have committed themselves to building energy-efficient products that meet or surpass the EPA's Energy Star guidelines. Businesses must also commit to requiring high efficiency systems for the majority of their corporate desktop PCs and volume server purchases, and take advantage of power management tools on desktop PCs.

Five reasons for the eco-tech boom

Trend: Clean technology could be a major business opportunity.

GigaOM picks five reasons why the mix of tech, business and green is going to be on massive opportunity for innovators. Excerpts below.

My dream: significant breakthroughs will help us achieve energy independence from OPEC in the near future.

Link: GigaOM » 5 reasons for the eco-tech boom.

1). Bigger business revolution than the Internet: Some analysts and investors are starting to call the business of clean technology a bigger opportunity than the Internet.

2). Web as the green organizer: Green is the latest fodder for social networks, web 2.0 services, blogging (us) and videoblogging. Learning about and collaborating on eco-friendly practices is easier now than its ever been with grass roots web tools, a broadband connection and a passionate community. Today Business Objects and nonprofit Zerofootprint Toronto launched an online footprint calculator and social network. Yahoo launched its green site yesterday. And if you’ve never read Hugg, the green Digg, then seriously, go check it out.

3). IT needs earth-friendly: The costs of powering computing is reaching close to the cost of the data centers themselves. Companies like Google that need massive data centers don’t like the sound of that.

4). Gore’s gang — business leaders join in: Gore used to be the quintessential symbol of the intersection of business (savvy investor), tech (he, uh, invented the Internet right?) and green (need we say An Inconvenient Truth). Now all the big business leaders are joining the eco club.

5). Decentralized: In some ways the distribution of digital content driven by the Internet, is going the same way as the distribution of energy - decentralizing.

Demand for solar energy systems soaring in Europe

Trend: The demand for solar energy systems continues to grow in spite of dips in the price of oil.

GreenBiz News reports that Sharp Electronics is doubling the capacity of its Welsh photovoltaic plant. Excerpts below.

Link: GreenBiz News | Sharp Electronics Doubles Capacity of Welsh Photovoltaic Plant

WREXHAM, Wales, Feb. 7, 2007 -- Sharp Electronics is doubling the size of its photovoltaic solar panel plant in this northern Welsh town to meet soaring demand for solar energy systems across Europe. The company announced an investment of approximately $18.2 million in its Wales facility.

Production capacity will be doubled and the existing 110 Megawatts (MW) capacity will be expanded to 220MW. This expansion will make the facility one of the largest PV solar module plants in the world," Sharp said in a statement. The Wrexham plant was opened in 2004 with an annual capacity of 20MW.

Sharp is one of the world's largest producers of photovoltaic panels, which convert sunlight into electricity.

The Sharp Corporation has a long history of involvement in the solar power industry -- beginning research and development in solar energy in 1959 and commencing the mass production of solar cells in 1963.

Wal-Mart moves forward on Solar Energy

Trend: Wal-Mart's RFP for solar energy systems for its stores that could signal a tipping point for solar adoption in the US.

Joel Makower at the Two Steps Forward blog describes Wal-Mart's interest in using solar power for stores. There's an opportunity for a large supplier to install the solar sytems and sell the power to Wal-Mart, which might set a precedent for commercial and residential adoption (I could see General Electric in this role).

Link: Joel Makower: Two Steps Forward: Wal-Mart's Solar Energy Vision

Wal-Mart ... recently issued an RFP, or request for proposal, to install solar energy systems on its stores in five states -- the largest procurement of solar ever proposed. Bids are due on January 5....

The request for proposal ... asks bidders to consider three options in considering how to power Wal-Mart by sunlight:

• a direct purchase by Wal-Mart of turnkey solar energy systems, along with a plan to maintain the systems;
• solar systems that are installed, owned, and operated by the supplier, which would then sell all of the system's electricity output to Wal-Mart; and
• an arrangement in which Wal-Mart would lease solar installations, own all of their electricity output, and have an option to purchase the systems if it desired.

Those three paths represent a pretty good overview of the options available these days to commercial and industrial purchasers of solar. The second and third options, in which the systems are developed and owned (at least initially) by a third party, help to overcome one of solar's major obstacles: its large, up-front capital expense. Companies are more willing to "go solar" if there's no large, up-front expenditure and their monthly energy costs don't change much, or even go down. In its RFP, Wal-Mart is asking solar companies to act like a small-scale utility, owning the equipment, but selling the electricity to Wal-Mart.

(By the way, such arrangements should by no means be limited to companies. Individual homeowners and renters should be able to purchase electricity generated by solar panels on their roofs, installed and owned by third parties, rather than having to buy and install pricey solar panels themselves. We want the power, not the power plants. As Amory Lovins has famously put it, "It's not kilowatt-hours that we want, it's hot showers and cold beer.")

Smart Air Conditioners

Trend: Energy-saving designs leveraging sensors and intelligent adjustments are starting to appear in the marketplace.

In the hot, humid South, air conditioners are essential and power hungry. Treehugger highlights a new line of air conditioners than incorporate sensors and memory to save energy. Excerpts below.

Link: Treehugger: New Line of Highly Efficient Air Conditioners Know Where You Sleep#perma.

Mitsubishi is releasing a new line of air conditioners called the ZW series. These new wall mounted AC units have a few innovations that could have them using up to 50% less power than today's average air conditioner.... the real innovation here is addition of the "Human Sensor Move Eye" (quoting a Mitsubishi press release,) which tracks the location and habits of the living things it encounters, and conditions the air accordingly. It can point itself directly at any hot object, cooling it down, it will also automatically go into power-save mode when all living things leave the room. The unit can track and condition air for one or two people in any given room and isn't fooled by non-moving heat sources, like kitchen appliances. It will, however blow air on pets as well as people.

... the the unit will log the activities of moving heat sources and adjust accordingly. For example, if it registers a heat source every week day at five o'clock for a couple of weeks, it will start blowing at around 4:30, every weekday, of its own accord, in order to most effectively please its master.

Pursuing the Green in Clean Energy

Trend: Many politicicans are seeing energy independence and preventing climate change as viable strategies for the future of the US.

Brett Steenbarger at TraderFeed describes reasons for investing in clean energy and an ETF that provides a good vehicle for investors.

Link: TraderFeed: Pursuing the Green in Clean Energy

Several forces have come together recently to support the pursuit of alternative, clean energy:

1) On the heels of the Iraq experience, the U.S. will look to energy independence as a response to national security that will supplant the recent paradigm of unilateral interventionism.

2) Clean energy is a natural response to concerns over global warming that will help us re-establish ties with ecologically concerned allies abroad.

3) Clean energy is no longer a pipe dream, as the average consumer is now familiar with ethanol and hybrid engines--not to mention higher fuel prices.

4) Energy independence is increasingly seen as a way of taking us out of thorny competitions for resources with Russia, China, India, and developing nations.

5) Most important of all, clean energy has become as American as apple pie. Republicans are looking to launch a large initiative and Democrats are ready to make global warming a national priority.

Bottom line? We're going to see an increasing share of resources devoted to clean energy, which could bring some green to investors in that sector.

The problem, however, is that the sector is highly fragmented. Where do you place your bets: Renewable energy, such as solar? Power conservation? Clean fuels? Power storage? Fuel cell technology?

The best play I can find in the field is the diversified one: the PowerShares WilderHill Clean Energy Fund (symbol PBW). The fund holds 42 stocks across the green spectrum and allots no more than 4% of the portfolio to any single stock.

It may be a while before these stocks generate meaningful profits, and it will take Congress and the President a while to hammer out any clean energy initiatives. It is difficult to imagine, however, that the two parties, struggling for a popular response to problems with terrorism and global warming, won't try to outdo each other by wrapping themselves in the mantle of clean.

And that could mean green for investors with a longer-term horizon.

Disclosure: I own shares of PBW.

EuP: The coming regulation storm

Trend: EuP (energy using product) statistics for manufactured products will be required in the European Union next year. (Is this a preview of new regulations for the US?)

Ephraim Schwartz in his Reality Check column at InfoWorld describes the E.U.’s EuP (energy using product) requirements and the impact. Only companies selling in Europe will be affected immediately. Excerpts below.

Link: EuP: The coming regulation storm, Part 2 | InfoWorld | Column | 2006-11-07 | By Ephraim Schwartz

...the E.U.’s EuP (energy using product) initiative will require manufacturers to track the amount of energy used in the creation of a product from cradle to grave. This includes the energy used to extract raw materials, to push materials through the supply chain, to deliver the product, and finally to dispose of the product at the end of its lifecycle.

Part of the purpose of the EuP regulations ... is to promote recycled materials....

There are supply chain and software issues as well. IT will have to find a data “container” that keeps information in a coherent form for analysis, and to generate reports in a form that’s usable by engineers, marketing departments, and regulators.

EuP will require substantially more information capture and new XML definitions, with the cross-enterprise information transfer posing a big problem....

While current regulations require information collection down to all layers of the supply chain, the adoption of EuP requires adding the uses of energy in the refinement of a product.

Until now, most manufacturers have put in an enormous infrastructure to build and sell products without a thought to environmental attributes. So there is no doubt the cost of doing business will go up in the short term.

But in the future, products meeting EuP minimum standards will receive a CE (Conformité Européenne) approval logo on their packaging. The E.U. will create an ecological profile of the energy used during the lifetime of a product so that green-minded consumers can compare similar products.

And once companies realize that they can’t actively ignore environmental attributes, they will develop standards and it will become part of how they operate. In time, it will reduce waste and the need for new raw materials and ultimately reduce cost.

Reducing Emissions

Trend: Reducing emissions will be big business in the next several decades.

Joel Makower at Two Steps Forward describes Princeton scientists Robert Socolow and Stephen Pacala who have calculated that a series of bold actions over the next fifty years are needed to reduce climate emissions.

Link: Joel Makower: Two Steps Forward: A Stern Warning on Climate (and a Word about Wedges).

Socolow and Pacala argue that stabilizing greenhouse gas concentrations will require reducing emissions by 7 billion tons a year by 2054. To make this more understandable, they identified 15 potential "wedges," each of which could handle one billion tons of the total. Thus, it will take seven such "wedges" to accomplish their goal.

The wedges are sobering in their scale and scope. Here are just five examples of things we must do worldwide, each of which, when phased in over the next fifty years, will prevent the release of 25 billion tons of carbon:

Double the fuel economy of 2 billion cars worldwide from 30 mpg to 60 mpg

Cut electricity use in all homes, offices, and stores by 25 percent

Replace 1,400 large coal-fired power plants with gas-fired plants

Increase solar power 700-fold to displace coal

Increase wind power 80-fold to produce hydrogen for cars

Keep in mind that this isn't an either/or proposition. We'd have to do ALL these things -- plus two more -- to keep greenhouse gas levels stable in check below 550 parts per million, double pre-industrial levels.