Just my kind of article in this weeks Investors Chronicle - Cell Mates (subscription required) - by Ben Power, exploring listed Fuel Cell companies. Of particular interest was the coverage of Polyfuel - a US based company that was one of the first-wavers onto the Alternative Investment Market in London.

Polyfuel doesn't make fuel cells, it makes critical components for them - membranes. The big growth area for Polyfuel is decribed as being portable electronic devices, specifically methanol based membranes.

Anyway, what really caught my eye was this;

the citation of a PricewaterhouseCoopers report on fuel cells, which forecast $46 billion in sales by 2011 and $2.6 trillion by 2021. To give you some idea of how much growth that would be, sales last year were $1.2 Billion. From that same link, AEI followers will have probably noticed that this is way different to what Clean Edge forecast for Fuel Cells out to 2015 - $15.1 Billion, earlier this year.

The difference is time. The PWC figure stems from a very old report - 2002 vintage - which was actually produced jointly between Fuel Cells Canada (a lobby) and PricewaterhouseCoopers. More than a few people have scaled back the demand curve for fuel cells in the last 8 years - and that's an understatement.

Of course, no one really knows how big any market is going to be. But I think it is more likely than the more accurate projections are going to be the most up to date reports forecasting to the nearest point in time. And even Fuel Cells Canada seems to have downgraded its expectations since 2002 - see $18 Billion by 2013 here.

KP Renewables, a stock with a capitalisation of just £15 m is a spin-off from Kwikpower International. Kwikpower is a biotechnology company formed in 1996 to develop or acquire and commercialize, innovative and cost effective technologies to produce clean burning alternative fuels or bio-based chemicals from waste.

KP Renewables meanwhile looks like the higher tech alternative energy company focussed on earning ROCs (Renewables Obligation Certificates) - and interested in wind, biomass, carbon recycling and direct waste disposal. It claims that its Framework PPAs (Power Purchase Agreements) and its project financing capabilities provide the company and the UK’s small renewable energy developers with a unique opportunity to overcome the barriers to entry presented by large power utility companies.

According to their most recent report (no press update since December '05), the company has 520 MW of forward sold power contracts. It's also interesting that they have listings on 3 German exchanges as well.

Germany clearly has a very hungry SRI market.

KP Renewables closed up today at 32.5p

Ecosecurities closed up yesterday at 153p.

The company founded in 1997 has a relatively long history in the carbon marketplace. And they claim to use the widest range of integrated carbon finance tools, from advisory services to carbon project sourcing and development, from transactional and financial solutions to carbon credit trading.

For carbon trading to become the massive market some people think it can, the price of carbon has to become as well known as the price of oil. It also has to price much higher - yesterday the price closed at EUR 16.60 per metric tonne.

Heretofore, the public solar markets have largely been a story of Germany, California and what some call condescendingly "Honorary Westerners", the Japanese.

So news of IPOs coming from China and Thailand smacks of a new wave, let's call it Solar 3.0. Solar 1.0 started with President Jimmy Carter and fizzled out rather like he did on the New York Marathon. Solar 2.0 was driven by Germany and Japan with their government sponsored solar roof programmes. Solar 3.0 involves lower cost manufacturing and silicon sourcing, whilst higher tech Western companies are looking at alternatives to silicon based technologies.

According to New Energy Finance, Zhejang Yuhui Solar is planning to raise $80 m on AIM this summer. Another Chinese company - CEEG Nanjing PV-tech also plans to raise capital and last but not least, the thai transformer maker Ekarat Engineering which has a small but burgeoing solar division, making 15 MW or 100,000 modules per year.

In recent years, I've often thought that alternative energy will only really come of age when Chinese manufacturing moves into it. The signs are that this is just starting to happen. Napoleon once said "Let China sleep, for when she wakes, she will rock the world".

Well, here's to the Chinese rocking the world in alternative energy.

As this lucid article in Slate describes the investment boom in alternative energy, which he describes as the Prius Bubble, is ". . . a process that has repeated itself throughout history—with the railroad and telegraph, for example—investment bubbles frequently kick-start new industries and leave behind innovations and commercial infrastructure that others can use.."

It was certainly true of the Telecoms industry, which almost invested itself out of business by laying fiberoptic cables all over the world, lowering the cost of conventional telecommunications irreversibly and pricing in new web-based telephony.

I'm not entirely convinced that you can apply this to existing alternative energy assets, but do quite agree that there is a known unknown - we don't know what technological breakthroughs are going to come out of this investment boom. The argument makes more sense if you look at alternative energy as a forward purchase at a fixed price - decades into the future with say a wind farm or solar panels. If you take the view that conventional energy prices are liable to rise faster than incomes for the next couple of decades - then it is quite possible that the typical payback period gets that much closer. Renewable energy prices can be fixed into the future of course, because the cost of the fuel - wind, sun, etc. - is free.

For an overview of what's happening in the California Solar Market, take a look at this article.

California is home to quite a few listed solar companies, like Solar Integrated. So the recent legislative approval of SB1 is very important - listen to this podcast interview with Senator Murray . Solar PV - at least for now - remains very expensive which is why it is so tied up with supportive legislation and politics. So the legislative backdrop to the solar market in any country is a very key consideration.

The Cabot Heritage Corporation has just issued a free report (give them some details and you get a 5 page pdf) of 7 alternative energy stocks for the decade ahead.

Those stocks listed are;

Sunpower , Evergreen Solar , MEMC Electronic Materials , Pacific Ethanol, Ballard Power, Medis Technologies and Cameco.

No surprises here except for Cameco - the world's largest low-cost uranium producer. You could say that uranium is an alternative fuel, because it is not a conventional fossil fuel. But nuclear power is one area AEI will not be covering.

A very interesting piece here which explores the ethanol stock universe and some of the surrounding issues in the industry according to analysts.

Of particular note is the current fragmentation of the ethanol market. ADM (Archer Daniels Midland), the biggest, is the only producer with double-digit market share - that's according to Merrill Lynch analyst Diane Geissler.

And Bear Stearns analyst Ann Duignan said she noticed attendees at a recent industry workshop seemed to recognize that rising corn prices and falling ethanol futures indicate tougher margins ahead.

I always wonder about the motives of those who describe President Bush as in the hands of Big Oil. If only because his legislative record vis a vis renewable energy is highly supportive. This started when he was Governor of Texas, whose renewables programme is growing at a tremendous pace - thanks in no small measure to the Renewables Portfolio Standard he signed into action in 1998.

So the news that the Solar America Initiative will have increased annual funding from $80 m to $148 m comes as no great surprise.

The Solar America Initiative (SAI) is a broad national program designed to encourage competition throughout the solar industry by lowering the cost of photovoltaic units and fostering innovation of new technologies. These are worthy aims. The more pertinent question is then not about Bush. But is this an efficient way of using public funds?

AIM listed Ceres Power seems to have had a run of good stories - exactly when things were looking pretty sticky for Alternative Energy stocks.

What fascinates me about the company is that this just might be the first mass market fuel cell application of combined heat and power with its low tech and supposedly inexpensive fuel cell. I tend to think think that cheap (not a bad word in UK English) short payback products trumps high tech almost every time in just about everything. And that's why fuel cells have not yet made a breakthrough - they're just more expensive than the perceived benefit. So can Ceres deliver?

Fuel cell companies have been around for a very long time - yet none of them have produced a commercially successful product - in scale. About 9 months ago I rang up a leading fuel cell company (who shall remain nameless) and asked them what a fuel cell would cost - ballpark - for a vehicle today. They couldn't tell me. Instead they wanted to offer me projections of what it might be in 2010. So excuse my caution about Ceres fuel cells because you can't actually buy them - yet.

To get a balanced view on fuel cells beyond the sometimes breathless optimism, I do reccomend reading "The Hype About Hydrogen" by Joseph J. Romm. I've always got time for someone who labours to debunk hype, but it's very techy and not an always easy read.

Then go to the other extreme and read Jeremy Rifkin's The Hydrogen Economy. He gives the most optimistic forward analysis I've yet seen. It's also extremely well-written and appeals to the broader issues facing the world, past, present and future. Although I certainly don't buy into his explanation that the Roman Empire collapsed because of environmental mismanagement.

Right now, I'm somewhere between the two of them. Romm is now, Rifkin is more a deep future scenario, which is probably much further ahead than he would like. I'm thinking about 10 years out.

Any further than that is more like science fiction and way beyond the return horizon for most investors.

The markets seem to be having a tough time at the moment, but not Clipper Windpower who closed up today over 5% at 440p.

The reason for their rapid climb is the positive response to their announcement of an agreement with BP Alternative Energy, to enter into a long term relationship for the supply of their Liberty turbines.

It's also interesting to see that BP is diversifying its alternative energy portfolio - which is primarily solar - into wind.

There's a lot of disquiet about emissions trading in Europe right now - the world's biggest carbon market.

Clearly, not everyone buys into the idea that this price signal will deliver the intended consequence of pricing in cleaner or rather low carbon energy technologies. Yet any price signal - where before there was none - always influences behaviour. Perhaps the greatest challenge for the carbon markets is to price out much further into the future.

AEI readers may be interested to read my interview with Dr Richard Sandor, who invented carbon trading. In this he explains the scheme and expresses high hopes that if the system is designed effectively, this market could be worth trillions of dollars.

On Thursday last (14th July) Ascent Solar Tech raised about $14 million, after expenses and underwriting costs, following an initial public offering of 3 million units priced at $5.50.

The newly Nasdaq listed company (see website) is different to other solar companies in that it is developing next generation amorphous silicon on plastic substrates. The plan then is to use these to power satellites - anything man-made that orbits the earth and wants continuos cloud free solar power and radiation.

I like the 2nd generation amorphous silicon because generation 1 clearly did not live anything like up to its promise. That was the boom the never happened, the customers just didn't buy. And Solar Ascent's space angle is really intriguing . . .

Conventional silicon-based modules are very heavy and the cost per kilo, according to this article in the Economist " have remained static, at $20,000 per kilo put into orbit, for decades."

The additional point then is that this company is NOT chasing subsidies, like some of its solar brethren. It's focussing on the boom in satellite communications and to some extent, the military industrial complex.

So please excuse the pun, it is right out of the usual solar stock orbit.

This very interesting set of data lays out which US alternative energy stocks have outperformed and underperformed over quarter to date, year to date and over the last 52 weeks.

Here at AEI, we take a global perspective and carry news about stocks outside of the USA and we don't cover OTC stocks. So we won't be covering XSUNX - an OTC stock which was the top-performing in this grouping, with a return of over 400%.

What is clearly discernable is that it has been a tough quarter to date for many of these stocks. Most of the gains and outperformance were long prior to that. Still with Oil now touching $78 a barrel and expected to go higher, it's hard not to see more alternative energy technologies coming to market.

Clean Air Power which closed today at 86.5 has the technology to combine gas with diesel. Petrol or gasoline dual fuel systems are quite common - I have one myself on my car. But with diesel it is just not done. That's what makes this company's technology unusual as well as the fact that it is geared to the US freight market, whereas LPG and dual fuel LPG tend to run off domestic cars.

Amex-listed Xethanol closed down today at 8.79.

The company is unusual in that it's philosophy is to make ethanol not out of America's corn - concentrated in the Midwest. They think the demand for ethanol is actually on the Atlantic, Gulf and Pacific coasts many thousands of miles away. iInstead, their approach is to produce ethanol as near to urban centres as possible with local biomass. Take the waste to the solution, not the solution to the waste is their marketing soundbite.

In recent months, the company has been as high as 16.18. And of interest is that they are diversifying into biodiesel.

It's always amazed me how there is a complete disconnect between climate and the impact of solar technology. By rights of course, Saudi Arabia ought to be the solar capital of the world, given the high solar radiation levels and consistent sunlight of its deserts. Yet it's countries like Germany and Japan that dominate the solar market.

And so to Norway, part of which is in the Artic Circle. Renewable Energy Corporation is according to this wikipedia " the world's largest producer of solar grade polysilicon, the world's largest producer of wafers for solar applications and a major producer of solar cells and modules. It is the only solar energy company to span the entire value chain, from silicon extraction to finished solar module product".

It is the world's largest solar company, market cap around EUR 4 billion - which since going public last May 9th, has drifted down a long wayfrom its launch price of 120.

Anway, I think the company could do with a name change - it's just so vague.

It closed today at 83.75.

Just yesterday, I said that Solar Integrated had taken a hammering. Now I need a new even more emphatic turn of phrase and I'm strugging . . . SIT gets nuked ?

SIT dropped today by just under 29% to 36.93.

The only good bit of news I can see is that they signed a contract with Toyota.

Today's much heralded Energy Review in the UK, appears to have been a bit overshadowed by the debate over nuclear.

The important point is that there is a long-term commitment to 2020 to reach 20% renewables in electricity generation. Considering that according to the last official figures for 2004, windpower contributed only 0.54% to UK electricity, expect high compound growth rates for years to come to get anywhere near that figure.

Duriing an interview on BBC News 24 TV in mid-afternoon, I said that we need to talk much more about the economics of energy costs. Most of the news coverage I thought gave far too much prominence to lobbyists and politicians. When it is taxpayers, consumers and investors who will have to foot the bill.

What is welcome will be the easing of planning restrictions. As I have mentioned here before, they are the single greatest obstacle to the takeup of windpower in the UK.

In a piece yesterday by John Wasik on Bloomberg, a cautious note is sounded about the boom in alternative energy.

He asks, are alternative energy stocks the next dot bomb?

And then suggests - amongst other options - of buying small cap index funds as a way to gain safe exposure. For some people, that may no doubt be true. Of course, every high performing industry in world history eventually reverts to the mean. Booms never do last forever.

But alternative energy is still relatively so small compared to conventional power, it's hard not to see substantial growth for some time to come. There are certain assumptions that you can make about rising environmental concerns, relative scarcity of fossil fuels and accelerating global economic growth pricing in 2 billion people from the developing world. It's also worth noting that these AEI investors are not necessarily only trying to make money - they are, at least in part, driven by SRI ethics and an intangible belief in the technology.

With oil touching $75 a barrel, I wouldn't write off alternative energy just yet.

It doesn't get much worse than this - SIT - today dropped another 17% to 51.9p. Just 3 months ago it was worth well over 300.

This follows the resignation of the CEO Jon Slangerup yesterday.
At the same time, the group announced a programme to cut 1.6 mln usd in costs - some 10 pct of overheads - mainly through staff reductions, and reiterated its revenue guidance.

'We re-confirm our revenue guidance of growth in excess of 80 pct for 2006,' said chief financial officer John Palumbo. 'The headcount reduction will not impact customer deliverables or the company's core business activities.'

As I've argued here before, the company has had problems translating from the USA its business model of providing solar roofing membrane solutions to the European market. What is unforgiveable though is that with some of their large contracts, losses of up to 50% have been made. Why would you sign a loss-making contract?

SIT's results for FY05, released on 25 May 2006, revealed a cash balance of USD 2.2m with full-year losses of USD 17.2m.

The question is, how much further down can SIT go before or if it starts to recover?

One week after its IPO, China Biodiesel International, a company that makes biodiesel - profitably - from waste oil closed up today on London's AIM near 2% at 106p. This waste oil is collected by suppliers and includes old cooking oil, expired oil from grain depots waste oil from animal fats. The company has 16 suppliers both local and national. It also imports waste palm oil from Malaysia.

Some people - like NY Times columnist Thomas L. Friedman - believe that China will be forced to become the first country to go green on a massive scale. Although the Chinese economy is growing at 10% p.a., some figures suggest it is losing 2% from environmental damage.

See these video clips of a seminar with Friedman and Senator Luger that discuss this and other issues.

Certainly, this article in the NY Times seems to think so, based in no small part by the successful acquisition of Aventine Renewable Energy for $66m by Morgan Stanley which is allegedly now worth $750m.

Since going public, Aventine's performance has not been spectacular - far from it. Business Week has picked up on this. See their article IPOs to approach with caution.

NYSE listed Aventine is currently trading at $39.18.