ReneSola closed up 38 pence to 267 today after the manufacturer of solar wafers for the photovoltaic industry disclosed a significant uplift to its planned 2007 production capacity expansion.

Ecosecurities is up nearly 10% on the day and Trading Emissions is up over 4%.

The reason why is that the EU is getting tough on carbon emissions for 2008-2012.

Yet the closing price of (European) carbon today is down at EUR 8.10.

This is further evidence of my view that the price of carbon is not actually all that important to alternative energy. It's just not high enough to matter. National government support systems are far more influential. But above all, the carbon price that really matters is the price of oil. No way would there have been the boom in alternative energy technologies since the beginning of the century if oil hadn't sextupled and more in price from $9 per barrel in late 1999 to around $60 today.

Schmack Biogas AG , gained 1.3 euros, or 3.6 percent, to 37.3 euros. The company's third-quarter pretax profit more than doubled to 2.1 million euros, after 900,000 euros a year ago. Revenue rose to 29.1 million euros from 12 million euros.

Quite apart from these results, what is impressive about Schmack Biogas is their sense of purpose - just look at their website - so upbeat.

There are 2 biological markets for waste fuels;

1) waste cooking oils for biofuels - I suspect this is not quite as good as is made out - see my previous post

2) waste fuels from agriculture - this I see huge potential in as the huge volume of waste remains largely untapped

If Schmack Biogas could break out of the German market and tackle other countries such as the USA it could establish global leadership. There might be a very good case for a takeover of Environmental Power Corp
- it's US equivalent, especially with the dollar so weak against the euro right now. Both companies however appear to be preoccupied with their home markets.

Petrotec AG, has decided how to make the best use of their new funds - EUR 60 million - following the recent IPO.

It plans to build one biodiesel plant in Germany, one in the UK and two in the United States by the end of 2009.

Petrotec is one of the biodiesel companies that places an emphasis on used cooking oil from fast food chains as a feedstock. The cynic in me wonders whether this is a good long term bet considering how certain European policymakers would not mind taxing and regulating the likes of McDonalds and KFC out of existence in the pursuit of public health. I'm not wholly convinced that there will always be endless supplies of used cooking oils as a feedstock. Not least because there are no end of websites that tell you how to make your own biodiesel and if the price of oil is high enough, this black market and its inherent lower costs will emerge.

Nordex AG, the German wind turbine manufacturer is having trouble finding staff in East Germany - a part of the country with 20% unemployment.

"The market for engineers is non-existent here," says Margrit Mertens, head of personnel at Nordex, whose main plant is located in Rostock in one of the east's most depressed areas.

So it's hardly surprising that they are looking to expand in China as I wrote here on November 22nd. You wouldn't really look at Germany today as a profitable manufacturing centre compared to the potential and returns of the developing world.

Renewable Energy Generation - a company listed on London's AIM, is expanding its role in Canada, following the purchase of AIM Power Gen by REG.

N.b. do not confuse the AIM - Alternative Investment Market with AIM Power Gen - completely unrelated acronym

REG appears to be shifting its wind expertise from Eastern Europe and the UK to include Canada. Not a bad choice considering Canada's potential and lack of public opposition to wind power.

As this article here indirectly suggests, there is much to fear for carbon trading companies that had previously made the assumption that it was here to stay, rise in price and become more liquid.

This may well prove to be a bridge too far . . .

Not long after Suzlon started selling wind turbines into China, now Germany's Nordex has the first multi-megawatt turbines now leaving the new joint assembly facility in Yinchuan. "This is a major step forward for us. Local production facilities are crucial for success in China in the future. And what we’re talking about is one of the world’s largest growth market," says Thomas Richterich, commenting on the delivery of the first 1.5 MW turbine. The Chinese government wants to increase the installed wind farm capacity from a current volume of around 1,500 MW to 30,000 MW by 2020.

It's curious how wind turbines have stopped getting bigger. 3 years ago, I wrote a paper for the Economic Research Council on the future and cost of renewable electricity entitled Recharging The Nation and I assumed that by 2010, 5 MW wind turbines would be standard. This has not happened. It is now thought that the optimal size for wind turbines is 2.5 MW or less. And manufacturing has still not moved from batch-processing to continuous manufacturing. To do so with massive 5 MW turbines is even less likely.

I still think though that really, really large wind turbines are the future. The logic is inescapable - double the size of the windswept area and receive eight times the power generation.

So wait for a fall in steel prices and go figure.

D1 Oils - the company that is making a bet on Europe needing to buy into biodiesel at low cost from abroad - has just announced that takeover talks have ended but they remain interested in an investor taking a large non-controlling stake. In a separate statement the company said it has completed the sale and leaseback financing package for its D1 20 refinery assets, announced in September.

I think you can sum up D1 Oils with 3 points;

i) They believe the cheapest and productive feedstock will win - imported jatropha seeds
ii) They believe distributed small refineries like their D120 which produces 8000 metric tons per year is the future
iii) Europe will need a lot more biodiesel than it is able to grow and refine

All of this makes good sense. It's just that it is highly speculative until they start making a lot more sales. Maybe we'll see this in the next year or two. The challenge for this type of biodiesel company is to start making profits before cellulosic biofuels come to market - perhaps 10 years or more away.

That's what this article thinks.

A creed is a statement or confession of belief — usually religious belief — or faith. So actually, I don't think investors should have anything to do with creeds. It should really be about numbers and rational, independent-minded judgement. Beliefs tend not to be based on data.

However the article wisely points out that a shortcoming of carbon trading ". . . is the political blank space that looms after 2012, when the Kyoto agreement expires. Further moves to curb emissions will follow, but if there is a gap, credit values could slump".

This is a very real possibility. But carbon financing is not the premier financial tool for the alternative energy producer. Typically, they can count on various forms of government support (tax credits, feed-in tariffs, quotas, regulations etc.) and last but not least, a high price of oil that prices in their technology. I almost had to eat my hat on oil prices which as I wrote here were in a new trading range - $60 - $80 - when they dropped below $60. Sadly, the price has recovered back to over $60 due to the assasination of a Lebanese cabinet minister yesterday.

The threat of further unrest and war in the Middle East has a very indirect impact on alternative energy's future and will do so for some time.

Now for what the article says on solar costs which I would also contend is not correct . . .

Applied Materials' Mr Gay points out the cost of generating solar power falls steadily over time. The first cells, in satellites, cost about $200 per watt of generating power. By last year the price had fallen to about $2.70 per watt. That equates to a price decrease of about 18% every time production doubles, he calculates. Price decreases come inexorably with volume, he argues, so subsidies simply help to speed the process up by stimulating extra sales.

I'd like to know how the figure of $2.70 a watt is reached, I suspect this is a factory output cost. The best indication of solar prices - that I know - is the Solar Buzz Index. It very clearly shows that in its 4 year history, prices have basically, net-net, not moved from $5.60 in July 2002 to $5.47 this November 2006.

Add to that, the clear fact that although production has increased and indeed quadrupled since 2001, we have not seen the lowering in prices as decribed by this equation - 18% for every doubling. It is the last few years that matter, because before that this was a very tiny industry.

Annual solar pv production figures

2001 - 395 MW
2002 - approx 500 MW
2003 - 744 MW
2004 - 1200 MW
2005 - 1727 MW

Price decreases will come with volume - ordinarily - but the solar market is anything but free. Manufacturers may be banking the price falls for themselves and not passing them onto consumers. The fact is that government intervention through subsidies has actually served to keep prices high because the subsidy has worked in the reverse interest of the consumer to the producer.

All this goes to show that prices of alternative energy will over a long enough time period fall, but nothing like in a straight line and they will go up too on the way down. The worst thing anyone can ever do to alternative energy is to overstate the case. The solar industry's constant recitement of the fact that increased production reduces prices is flat wrong and no amount of repetition will make it any more right. Subsidies have in fact kept prices high because they have made it profitable to stay in a frothy silicon market, when alternative feedstocks to silicon could have been invested in which very likely could have delivered lower costs.

This week's Economist magazine (and it is a magazine, although they pretentiously call it a newspaper!) has a special on investing in alternative energy.

It's very good but it would be boring to tell you what I agree with. So here are a couple of points that I think are incorrect;

The leader says (sorry, a subscription link);

"The cost of wind power has come down from 8-10 cents to 3.5 - 4 cents per kilowatt hour since 1990"

The price of windpower has actually gone up in the last 2-3 years for 2 reasons;

i) Rise in the price of steel - leading to 20 - 25% increase in the cost per installed megawatt of onshore windpower from $1m to 1.2m and even as high as 1.4 m.
ii) Backup costs have risen. Although these are highly marginal for countries with small wind penetration and high consistent wind speeds such as the UK, the reverse is true for Germany. Backup has to be provided quickly and this means gas which has undergone the mother of all price hikes in the last few years.

Recently, more than a few people have started voicing their concerns about the benefits of biofuels being not all they are cracked up to be - read this article for a blistering critique of biofuels on environmental grounds.

So it's intriguing to see that D1 Oils is playing up the point that " . . . it is careful to ensure that jatropha does not replace food crops for farmers in Zambia, and it does not plant in nature reserves or protected areas".

It's all about trade-offs. I don't doubt that replacing vast swathes of forest or untouched land with monoculture biocrops would yield a net decline in biodiversity. Yet Brazil has shown how their ethanol programme has saved a great deal of cash being spent on imported oil - apparently profitable with oil in excess of $30 a barrel. This of course gives them more money to do other things, perhaps even save rare species.

This debate is also nothing new. When Julius Caesar arrived in Britain in 54 B.C., he proclaimed the country to be one huge, horrible forest. Today, it is perhaps just 10%. Civilisation started with agriculture because it required order, many additional divisions of effort and above all credit. Debts were incurred for the first time because crops could only be produced once a year. In return for protection of the farmers, hunter gatherers could look forward to a steady supply of food.

Anyway, I digress. The point is this - until (and if) the cost breakthrough is made with cellulosic biofuels, the world will need a lot of land to grow the biofuel feedstock crops. The demand is just too great not to do otherwise.

ITM Power has been undergoing a very substantial price-rise over the last 2 months. The company's main asset appears to be its low cost electrolysers - costing around $164 kw - potentially - compared to a more typical $2000 off the shelf cost today.

So news today that they have just reached a memorandum of understanding with Hydrogen Engine Center merits close attention.

The deal is that ITM offers an assured supply of hydrogen using its (their words) "low cost" electrolyser technology and in exchange HEC will offer a complete system package using its engine technology. HEC - see website here designs, manufactures and distributes alternative-fueled internal combustion engines and power generation equipment.

You can see the potential synergy between both firms. Definitely one to keep an eye on.

Alkane Energy - a company that specialises in the capturing of waste coal methane and turning it into power - is trading up on the completion of 3 new projects.

Given that there's so much coal left in the world and India and China's clear intention not to decouple economic growth from rising carbon emissions, there ought to be a a good opportunity for Alkane to go international. Right now, they've only got one plant in Germany and 3 more on the way.

It's a shocking figure that China produces 35% of the world's coal but over 80% of the mining deaths - more than 6000 a year. I have heard that this is because Chinese miners like to smoke on the job, igniting any waste methane that may arise.

So there's a real opportunity for someone to get some carbon credits, set up a waste methane plant and save some lives into the bargain. China plans to increase electricity production by 6 times by 2020, so they need all the power they can get.

Canadian Hydro Developers - a developer, owner and operator of 18 renewable energy generation facilities totalling net 230 MW in operation with an additional 384 MW nearing construction has just announced Q3.

Buried within the detail, I was amazed to find out that they had actually signed last July one 20 year and even three 40 year Electricity Purchase Agreements from BC Hydro for the supply of 44.5 MW of electricity from hydroelectric projects.

With a 40 year power purchase agreement, all manner of investments become economically viable as they can pay for themselves and more within that time period. Typically in Europe the ppa lasts just 15 years and not many power plants can recoup costs that fast - probably only gas and partially subsidised wind. That's why capital intensive industries like nuclear are screaming for 40 year carbon contracts. As I have opined here before, fully amortised hydropower assets produce the cheapest electricity bar none. This I'm now beginning to realise is best achieved with long-term ppa contracts. So why not extend it to some of the other renewables?

This may be a cheaper way of subsidising alternative energy.

Yet Canada has the advantage over European nations of being a growing country and can make a bet on future electricity demand, regardless of who its customers might be in 40 years. In Europe, 15 year ppas are based on an established client base and demand levels that will probably not change much.

It's hard to judge - how can you do this optimally?

I hope to come back to this theme and explore it again shortly.

Hydrogenics (see charts, news and prices on our site) are currently down over 10% percent.

This is following a third quarter loss that widened year-over-year due to an impairment charge and weaker than expected revenues. An impairment charge by the way is an adjustment in the accounting value of an asset.

And what a big impairment it was - compared to the previous quarter, out of the net loss of $90.7 million $79.9 million is attributable to the impairment of intangible assets and goodwill.

Last year, the solar sector as a group outperformed the NASDAQ by more than hundredfold, increasing in average value by 134%. As we near the end of 2006, however, the solar stock performance data is anything but bright. In fact, the average loss through the first three quarters is – 11.98%, while the average gain from the leading US Indexes was up + 6.13%, according to independent Wall Street analyst Peter Lynch.

Solar PV industry revenues in 2005 were up 50% and profits up 149% compared to 2004, according to Photon Consulting. (Figures for 2006 are not yet available.) Photon projects total global new solar capacity to be 2,400 MW in 2006 with an average global module price of $4.50 per watt and an average installation price of $7.93 per watt.

Back in May, Samsung signed a deal with MTI to ultimately provide them with direct methanol micro fuel cells for their portable cell phones.

Today we hear that the first batch of prototypes have just been delivered to Samsung.

Forgive my scepticism, but I'm not convinced that there is a crisis in battery power for mobile/cell phones warranting micro fuel cells. If it runs out of power, charge it up. Big deal. The real challenge has to be with laptops. A laptop from 10 years ago could probably do an hour without power. Exactly the same today. Mobiles may be using more power, but I much prefer a big screen and keyboard to write anything serious.I'm just a bit concerned that the micro fuel cell industry is one that will stay at the prototype stage for a very long time.

Interesting piece here about how a VC fund sees great opportunities in China for environmental and alternative energy technologies. . .

"The country's environmental protection watchdog estimated in September that it would cost about $136 billion, close to 7 percent of gross domestic product, just to clean up all the pollution pumped out in the country in 2004. Venture capital executives said China's aspirations to be more green pave the way for the creation of clean energy and other environmental start-ups, and investors have taken notice. Shares in China's Suntech Power Holdings Co. Ltd (STP.N: Quote, Profile, Research), a solar cell maker, have risen nearly 72 percent since raising US$396 million in a New York IPO last December."

Suntech (see our page link for prices, news and stock fundamentals http://altenergyinvestor.advfn.com/suntech.html) of course is well known to AEI followers.

A lot of people think clean coal technology - i.e. the carbon-sequestrated rather than the clean air kind - will be a major player in the near distant future. I'm not so sure. The world's first clean coal station will be built in the UK but I doubt the Chinese will follow suit unless the West is prepared to pay for it. Meanwhile, Chinese manufacturing and enterprise with its long production runs is highly likely to start creating some deflation in alternative energy technologies before too long. So there you go - China is a curious mix of the problem and the solution.

When Europe started its Emissions Trading Scheme, as a follow-on from the Kyoto clean development mechanism, it was assumed that a lot of the clean energy investment would take place in Europe. What no one anticipated was that virtually all of the clean offset investments took place in the developing world.

And so to China, where according to Camco International the Jinan Iron and Steel Group Corp of China has agreed to sell about 12.3 million metric tons of emission credits generated by a project to capture and use greenhouse gases from the steelworks.

At current European spot carbon prices (the world's highest at around EUR 9.40 per ton), that's worth about $146m.

Also, take a look at the spike in the price of Camco's stock on the 12 month chart that happened at the end of October. That's because of the publication of the Stern Review of the Economics of Climate Change on 30th October - which argued that the right price for carbon was $85 a ton, a good nine times higher than it is now. Highly improbable if you ask me, but you can see why investors would be encouraged to hold stocks that are involved in carbon trading.

Polyfuel revealed today that its new, ultra-thin membrane delivers over 40% more power than any fuel cell membrane previously available.

I've never seen micro fuel cell performance measured this way. I always thought the benchmark was how many watt hours can it deliver per kilo?

Hitherto, I understood the going rate was about 200 watt hours compared to 350 for lithium ion batteries and to put it all in perspective - 12 to 13,000 for petrol / gas.

Anyway, my point is this;

When are micro fuel cells going to hit the shops and will consumers like them?

There do seem to have been a lot of false dawns on this and I've yet to convinced of the market case. Throwaway batteries may be expensive but people still buy them. Rechargeable lithium ion seem to work ok because no one is ever that far from a power point. And most of all, liquids are now viewed with extreme suspicion by security guards, particularly at airport terminals . . .

Are micro fuelcells a solution in search of a problem?

A very insightful article here by Tom Bergin on Reuters about the first wave of biopetroleum producers - well worth a careful read.

Biofuels still only produces just 1% of total transport fuel in the world - so the growth potential could be massive, especially if like me you think peak oil will happen in the next 20 years. So why haven't the oil companies taken to it?

It's not as if with oil at 60 dollars plus a barrel, they don't have the cash.

The answer is "technology ... because the current first generation of biofuels technology gives a competitive edge to agribusinesses rather than oil companies. The simple manufacturing processes employed today mean that the key to profitability in biofuels production is feedstock costs. Access to cheap seeds and grain provides an edge, not expertise in operating complex facilities, the oil companies' specialty."

This will not continue apparently because the next generation of biofuels "... involve producing gases from cellulose-rich material including straw and waste lumber, which is then converted into liquid fuel. The feedstock costs much less than vegetable oils, and less land is needed to produce a given quantity of fuel".

Cynics at this point might say, now we know why President Bush's administration's has such enthusiasm for cellulosic biofuels . . . it's the future of Big Oil !

Meanwhile, relatively small companies like Switzerland's Biopetrol Industries AG are sitting pretty while the rest of us are waiting for the cellulosic biofuel revolution. Don't hold your breath - I suspect it might well be a good 10 years off yet. This technology is not off the shelf and there are always long lead-times in the investment horizon of the Oil Majors.

Gamesa closed up today by nearly 3% on what turned out to be a record close for the Madrid Stock Exchange.

Gamesa has no doubt also benefitted from a recent contract worth EUR 2.3 billion from Iberdrola - the largest ever in the history of the wind sector.

Of course it helps Gamesa to get the business when Iberdrola is its largest shareholder.

Here we go again. In a scene that is being repeated continually in many corners of the world, a windfarm developer - in this case, unusually, Vestas - has had its application thrown out by a combination of planners and local politicians.

Vestas makes wind turbines and has a blade manufacturing unit on the Isle of Wight. And yet, the company which employs 600 on this tiny island is not able to site a wind turbine there.

Windpower is increasing worldwide, but far, far more windpower projects never get off the drawing board because of planning objections. That's why I think there's a strong case for the industry concentrating on sparsely populated poor countries and exporting it through high voltage transmission cables to richer countries.

Gamesa can count on the support of US Steelworkers in the rustbelt - hardly surprising because wind turbines need a lot of steel in the towers.

The company set up its US Headquarters and a manufacturing plant in Pennsylvania. And Governor Rendell wants to go further, calling for a bold new national initiative to develop renewable sources of energy. That's as maybe but one thing is for sure - as a Democrat he will not have any trouble holding on to his governorship at these elections.

I like Hydro - it really is the most inexpensive form of electricity generation bar none. That's only true of course if the hydro plant's capital costs are fully paid off, because levelled over a lifetime of up to 200 years just about everything looks cheap.

And so there's a lot to be said in holding mature hydropower generating assets, which may be why Infratil has just taken a majority holding in Trustpower.

New Zealand receives 70% of its power from hydro and as a young country that encourages skilled immigration, I doubt very much that there will be any let up in demand for Trustpower.

Aventine REH has just reported third-quarter net earnings of $5.29 million, or 12 cents a share, compared with $17.7 million, or 49 cents a share, a year earlier.

Obviously, this wasn't meant to happen. Received opinion assumes that alternative energy prices only go one way and that's down because the price of the underlying fuel is free (at least for sun and wind). But because markets are inefficient and the global economy is still suboptimal, there are unpriced externalities that have to be factored in too. Like;

i) The commodities global supercycle - raising the cost of steel and so that of wind turbine towers, and increasing the price of installed wind per megawatt by approx 25% over the last 3 years

ii) A lack of capacity in high grade silicon production - keeping solar prices at where they were 4 years ago

iii) And now we see with bioethanol producers something similar - they too are not immune to the run on corn and high oil prices increasing their freight prices