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Monday, March 20, 2006

The Sun May Shine Down on Nano-Solar Sooner Than Expected

The promise of nano-solar technology—the application of nanotechnology to the development of solar cells—has received a lot of attention over the last year. By manipulating matter at the scale of a billionth of a metre, scientists believe they can significantly improve the efficiency of solar cells, on the order of a threefold increase in the electric conversion rate over the next decade.

There are a number of nanotechnologies demonstrating real efficiency gains and costs savings in photovoltaic applications, including carbon nanotubes, quantum dots and dye-sensitized solar cells. Dye solar cells (DSC), however, seem to be breaking out of the pack.

Dyesol, listed down under on the Australian Stock Exchange as DYE, is up 300 percent in 2006 and climbed 1,000 percent in February. This week, Konarka, which licenses DSC technology in North America, received $20 million in a private equity investment, raising its capital fundraising efforts to $60 million. In Japan, auto parts maker Aisin Seiki is producing dye sensitized solar batteries. Major semiconductor manufacturer STMicroelectronics announced its intention to ramp up its commitment to a dye solar cell product line.

Dye solar cells are essentially nano-engineered photosynthesis--a nanocrystalline layer of titanium dioxide absorbs photosensitive dye to generate a voltage—that can produce electricity even when the shine is not shining. The technology is demonstrating efficiencies of 10 percent, higher than other thin film solar cells, and can be produced at a much lower cost than silicon solar cells.

Yet amidst all the buzz around solar IPOs last year, the first solar nanotech IPO in August failed to rise above the din. Following an international conference last month, however, international investors started to scoop up shares of Dyesol. Certainly, the solar hype helped. But the real attraction was the appointment of Michael Graetzel—the inventor of dye solar cells—to chairman of Dyesol’s Technology Advisory Board. DSC production is quickly establishing a global footprint.

The major market for these photosynthesis replicating cells is building integrated photovoltaics (BIPV). When I spoke this summer with Toby Meyer of Solaronix, one of Professor Graetzel’s protégés at the Swiss Federal Institute of Technology in Lausanne, his Swiss-based company expected to be in production within 12 months and planned to establish an early market in parking meters and garden lamps. Dye solar cell manufacturing facilities also are being negotiated across Asia, Europe and North America.

Thursday, March 09, 2006

Biofuels Indices and the Globalization of Trading in Biofuels

The first biofuels index was launched this week—the UBS Diapason Global Biofuel Index—by Swiss bank UBS and commodity firm Diapason. The index should allow all parties along the biological fuels chain (Biomass Feedstock Information Network) to increase their exposure to opportunistic fuels that are derived from agricultural and organic waste sources. By providing a pricing benchmark, biofuels producers, consumers and investors can enter into contracts to hedge their exposure to volatile biofuels prices. The index composition is 30 percent ethanol and 29 percent sugar, and smaller weightings in wheat, barley, rice, lumber and a biodiesel component.

The index, to be denominated in USD, EUR, CHF and JPY, also reflects the globalization of the biofuels industry.
Part of the economic case for biofuels has always been the ability to use on-site opportunistic fuels, thereby eliminating fuel costs and the transportation costs associated with natural gas and oil. The leading example is Brazil’s use of its domestic sugar cane industry to make ethanol to power its transportation sector. In today’s high natural gas and oil price environment, however, it is becoming more economical to ship biofuels across the world’s oceans like oil and liquefied natural gas (LNG).

A recent BBC article says that Japan wants to import six billon litres of Brazil’s ethanol by 2008. The exporting of wood chips to Europe for use in power generation is becoming a growing business for Canada’s lumber industry. Closer to home, President Bush estimates that the United States’ sizable surplus of wood chips and switchgrass could meet 10 percent of energy needs one day. Yet until the US and Europe divert more of their lumber resources to biofuels and as long as energy prices remain high, Canada’s lumber industry has a captive market for its residual waste. The BBC article estimates that oil would have to fall to $35 a barrel to compete with ethanol.

While there are ethanol, sugar and many other major commodity indices that capture biofuel stocks, the biofuels index provides an important global price benchmark to help reduce price risk in the growing international trade of biofuels. The next development will be a futures market in biofuels, in the same way that we trade futures on ethanol or blends of oil on commodity exchanges today. It’s all good. An increase in financial instruments available to manage volatile price risk in the biofuels market will result in an increase in the usage of carbon neutral commodities.

Friday, March 03, 2006

Alternative Energy: A Review of Technologies & Investment Vehicles

A Wells Fargo report Identifying the Opportunities in Alternative Energy has received a lot of attention this week. After reviewing the report, I think it is worth mentioning again. It provides a good overview of investment opportunities in the alternative energy sector.

You can access the report at: https://www.wellsfargo.com/downloads/pdf/about/csr/alt_energy.pdf

Wednesday, March 01, 2006

Clean Coal: The Economics Work

The selection by the US Department of Energy of FuelCell Energy (NASDAQ: FCEL) to participate in its clean coal program has significant upside potential for the maker of solid oxide fuel cells (SOFC). Clean coal is a controversial clean technology. Yet the reality is that the world has a lot of coal and its major energy consumers, including China and the United States, have placed clean coal at the center of their clean energy strategies.

The economics of the SOFC power plant are attractive. FuelCells is targeting 50 percent energy efficiency. The fuel source, coal, is cheap at a few cents per kilowatt hour. Furthermore, in prototypes such as the DOE’s FutureGen—a 275 MW coal-fueled zero emissions power plant—carbon capture and storage is part of the SOFC-based model. CO2 sequestration can add another 3 – 5 cents per kwh. Additionally, there are many ultra-clean spin-offs or value-added processes from coal derivatives, including sulfur-free diesel and hydrogen.

The technology and economics work. However, if dirty coal wants to come clean, it also has to invest in human capital and make coal mining safer.