Ford Airstream Fuel Cell PHEV

The Chevrolet Volt was not the only PHEV concept at the Detroit Auto Show. Ford Motor Company debuted a hydrogen-fueled, battery-powered plug-in in the new Airstream concept vehicle. Hardly a credible showing in my opinion.

In their press release they describe the car as follows:

The system, called HySeries Drive™, is powered by a 336-volt lithium-ion battery pack at all times and has a range of 25 miles on a full electric power. Once the battery pack is depleted by about 40 percent, the hydrogen-powered fuel cell begins generating electricity to recharge the batteries, increasing range another 280 miles, for a total driving range of more than 300 miles.

At home, the battery pack can be refreshed by plugging into a standard outlet. The HySeries Drive powertrain delivers a combined city/highway gasoline equivalent fuel economy rating of 41 miles per gallon and can travel up to 85 miles an hour. ...

The innovative powertrain reduces the size, weight, cost and complexity of a conventional fuel cell system by more than 50 percent. It also promises to more than double the lifetime of the fuel-cell stack.

The HySeries Drive system already is on the road in a Ford Edge prototype, which will be shown publicly for the first time at the Washington, D.C., Auto Show in January.

Phoenix Places Large Order to Altair, Altair Receives 16.6% Ownership in Phoenix

Altair Nanotechnologies Inc. (Nasdaq: ALTI) entered into an exclusive three year supply agreement with Phoenix Motorcars and in return has received a 16.6% ownership of Phoenix.

Altair has received a purchase order for its NanoSafe™ 35 KWh battery pack systems from California-based Phoenix Motorcars for $1,040,000 for battery pack systems scheduled for delivery in February and March 2007.

In addition, the company announced it has entered into a multi-year purchase and supply agreement with Phoenix under which Phoenix has projected orders for 2007 between $16 and $42 Million for up to five hundred battery pack systems.

$42,000,000/500 = $84,000 -- This doesn't make sense. What's wrong?

In consideration for a three-year exclusivity agreement within the U.S., Altairnano received a 16.6% ownership in the company. The three-year exclusivity agreement provides Phoenix with limited, exclusive use of Altairnano’s NanoSafe battery packs in four-wheel, all-electric vehicles having a gross weight up to 6,000 pounds. Phoenix must meet minimum battery pack purchases, annually, to maintain the limited exclusivity agreement. The minimum commitment to maintain exclusivity for 2007 would provide $16 Million in battery pack sales to Altairnano. Altairnano’s NanoSafe battery packs manufactured for hybrid electric vehicles (HEVs) and plug-in electric vehicles (PHEVs) are excluded from the exclusivity agreement.

"The market opportunity for freeway-ready, all-electric, zero-emission vehicles is growing daily," said Phoenix Motorcars CEO Daniel J. Elliott. "Having a best-in-class company such as Altair Nanotechnologies as an equity owner and as a provider of safe, powerful, fast-charging battery packs, will be a major driver for our growth," added Elliott.

Altairnano’s NanoSafe 35 KWh battery pack systems enable Phoenix SUTs to meet California’s Air Resources Board Type III Zero Emission Vehicle (ZEV) standards while providing power for a driving range of 135 miles and driving speeds of up to 100 miles per hour. The NanoSafe battery pack can be recharged in less than 10 minutes at fast-charge stations.

The initial order of battery pack systems, valued at $1,040,000, is scheduled for delivery to Phoenix in February and March 2007, and additional shipments of increasing value are planned throughout the 2007 calendar year. Depending on Phoenix’s level of demand, the entire projected order for NanoSafe battery pack systems may be shipped to Phoenix in calendar year 2007. Under the terms of the multi-year purchase and supply agreement, Phoenix will purchase all battery packs for its electric vehicles from Altairnano.

Phoenix Motorcars’ market strategy targets operators of fleet vehicles, such as public utilities, public transportation providers, and delivery services. This market presents a significant opportunity as there are more than 200,000 fleet vehicles in the State of California alone, with an increasing number of fleet operators now seeking freeway-capable, zero emission, all electric vehicles. The Phoenix SUT and SUV vehicles are the only all-electric vehicles currently on the market capable of meeting California’s Type III ZEV requirements.

Browne out

Jan 18th 2007
From The Economist print edition

An oilman's career encapsulates both the industry's past successes and its new worries

AFP

IT IS hard to summon much sympathy for the bosses of big oil firms. Their companies are among the most profitable on earth, and many of them have egos to match. They are at their richest and most powerful when oil prices rise, emptying the pockets of humbler folk and slowing whole economies. Despite all this, however, there is something poignant in the imminent retirement of John Browne, BP's boss since 1995.

Lord Browne has set the tone for the oil industry for much of the past decade. He was the first oil boss to champion, or at least not try to squash, greenery. There was a degree of public relations in this—BP is certainly not “Beyond Petroleum”, as its slogan claims, although it does have investments in alternative energy. But merely by breaking ranks on the subject, he helped bully his peers into a debate about global warming.

Lord Browne also created the industry's first “super-major” by merging BP with Amoco in 1998. The deal vaulted BP into the top ranks, and forced rival oil firms, including Exxon, Total and Chevron, into mergers of their own to keep pace. In 2003 he persuaded Vladimir Putin, Russia's president, that BP should buy half of a Russian oil firm—a feat no other foreigner has matched. Throughout this expansion, he kept costs down and profits up, to shareholders' delight. Since he took charge, BP's share price has more than doubled, its market capitalisation has risen fourfold and its earnings per share fivefold.

But over the past two years BP's star has dimmed. In March 2005 a fire at an American refinery killed 15 people and injured 170 more. Since then, BP has suffered corrosion and spills on its pipelines in Alaska, delays in developing new oilfields and two investigations of its trading arm for price-rigging. American officials and politicians have pilloried the firm for these failings. Last week, just days before the publication of the latest critical report, when Lord Browne said that he was bringing his retirement forward by 17 months to July, observers assumed that the announcement was intended to draw a line under BP's recent woes, and give his successor a fresh start.

With the benefit of hindsight, critics now claim to see a connection between BP's setbacks and Lord Browne's management style. Several reports prompted by the refinery fire—including one released this week by a panel headed by James Baker, a grand old oilman of American politics—have found that budgets and staff were stretched thin (see article). Tony Hayward, Lord Browne's successor, recently conceded that BP's “more-for-less” mantra could be taken only so far.

Whether BP's managers were negligent or simply unlucky will be difficult to judge—although lawyers will doubtless devote lots of time and money to the question. But BP is hardly the only firm that has ruthlessly cut costs. If there is a clear lesson to be learned from BP's troubles, it is that the strategies that have propelled the oil industry for the past decade, and that Lord Browne epitomised, are reaching their natural limits.

Big-oil nostalgia

BP will clearly have trouble cutting costs much further. In fact, a shortage of skilled workers and equipment is already pushing its bills up. Its biggest fields are maturing, as are those of other Western oil firms, yet access to new reserves is getting harder. Most of the world's most promising acreage lies in the Middle East, where nationalistic regimes restrict foreigners' access. Even countries like Russia, until recently the industry's great hope, are rolling up the welcome mat.

Nowadays, “Big Oil” reigns supreme in only a relatively small niche: the most technologically challenging and expensive projects, such as drilling in deep water, or turning tarry sand into something more useful. Unfortunately, these investments bring higher risks and lower rewards. Such trends should be worrying all oil bosses.

UCS Asserts That ExxonMobil is Clouding Understanding of Climate Change to Delay Action on the Issue

A new report, Smoke, Mirrors & Hot Air, from the Union of Concerned Scientists asserts that ExxonMobil has adopted the tobacco industry's disinformation tactics, as well as some of the same organizations and personnel, to cloud the scientific understanding of climate change and delay action on the issue. According to the report, ExxonMobil has funneled nearly $16 million between 1998 and 2005 to a network of 43 advocacy organizations that seek to confuse the public on global warming science.

"When one looks closely, ExxonMobil's underhanded strategy is as clear and indisputable as the scientific research it's meant to discredit," said Seth Shulman, an investigative journalist who wrote the UCS report. "The paper trail shows that, to serve its corporate interests, ExxonMobil has built a vast echo chamber of seemingly independent groups with the express purpose of spreading disinformation about global warming."

The report details how the oil company, like the tobacco industry in previous decades, has

• raised doubts about even the most indisputable scientific evidence
• funded an array of front organizations to create the appearance of a broad platform for a tight-knit group of vocal climate change contrarians who misrepresent peer-reviewed scientific findings
• attempted to portray its opposition to action as a positive quest for "sound science" rather than business self-interest
• used its access to the Bush administration to block federal policies and shape government communications on global warming

The report documents that, despite the scientific consensus about the fundamental understanding that global warming is caused by carbon dioxide and other heat-trapping emissions, Exxon- Mobil has funneled about $16 million between 1998 and 2005 to a network of ideological and advocacy organizations that manufacture uncertainty on the issue. Many of these organizations have an overlapping—sometimes identical— collection of spokespeople serving as staff, board members, and scientific advisors. By publishing and republishing the non-peer-reviewed works of a small group of scientific spokespeople, Exxon- Mobil-funded organizations have propped up and amplified work that has been discredited by reputable climate scientists.

"ExxonMobil needs to be held accountable for its cynical disinformation campaign on global warming," said Alden Meyer, the Union of Concerned Scientists' Director of Strategy and Policy. "Consumers, shareholders and Congress should let the company know loud and clear that its behavior on this issue is unacceptable and must change."

Honda to Launch Fuel-Cell Cars in General Market by 2018

A post on the Auto Channel reports: The AP reported that Honda Motor Co. expects to have begun selling fuel-cell vehicles in the general market by 2018, a news report said Friday.

"In 2018, I believe the development (of a fuel-cell car) will have been very advanced," Honda President Takeo Fukui was quoted as saying, by Kyodo News agency, in an interview in Tokyo on Dec. 25.

Kyodo said Fukui was confident that many customers will want to buy a fuel-cell car if it costs no more than about 10 million yen ($84,000).

The only reason that I post this news is that it reaffirms my belief that fuel cell vehicles are a long way off and that they will be expensive even then.

Paying the price

Jan 18th 2007
From The Economist print edition

Getty Images

The British oil firm is in trouble. But its rivals face many of the same problems

NO ONE calls upon James Baker, an American elder statesman, to solve a trivial problem. George Bush recruited him to defend his interests in Florida during the disputed election of 2000, and more recently to examine ways out of America's morass in Iraq. The United Nations once asked him to settle a 30-year-old conflict in Africa. So it says a lot about the state of BP, a big British oil firm, that it asked Mr Baker to head a panel to assess flaws in its safety regime.

John Browne, BP's boss, turned to Mr Baker in 2005 after an explosion at one of the firm's American refineries killed 15 people and injured 170 more. Since then BP has suffered a series of further disasters. Last year several of its pipelines in Alaska sprang leaks, briefly forcing the closure of America's biggest oil field and prompting oil prices to jump. BP's trading arm is under investigation for price-fixing. A showcase project at the Thunder Horse oilfield in the Gulf of Mexico has been delayed by a mix of hurricanes and engineering. Last year BP's output declined, and its share price has lagged behind that of rivals such as America's Exxon Mobil (see chart).

Now Mr Baker's panel, which published its findings on January 16th, has determined that BP's management did not devote enough money or effort to ensuring safety at its American refineries. Shortly beforehand, Lord Browne had said that he would bring forward his retirement by 17 months, to the end of July, reinforcing the notion that something had gone badly wrong at BP and that a fresh start was needed to set the firm to rights.

There certainly seems to have been something wrong with BP's safety practices. Mr Baker's report deliberately refrained from assigning blame for the explosion at the refinery, in the small American town of Texas City. But it did argue that the firm placed too much emphasis on preventing personal accidents, such as falls and car crashes, and not enough on preventing operational and engineering failures. Although the panel did not find any evidence that the firm had knowingly skimped on safety, it concluded that budgets had been inadequate and that staff had been overstretched. Moreover, it placed much of the blame for all this on the board and senior managers.

Lord Browne immediately vowed to fulfil all of the panel's ten recommendations. At the same time, he pointed out that BP had already increased spending on maintenance and safety at its five American refineries, from $1.2 billion a year to $1.7 billion. It has also hired more staff, established a new unit to set and enforce safety standards throughout the firm and beefed up the role of its American operations head to include overseeing safety.

Similarly, BP is doing public penance for its failings in Alaska. It has hired three experts on corrosion to assess whether it is monitoring and maintaining its pipelines properly. In response to allegations that it gave whistleblowers short shrift when they pointed to penny-pinching, it has appointed a former judge as an ombudsman, to record and investigate complaints.

Lord Browne insists that there is no pattern to BP's various problems and no over-arching failure of management. Not everyone agrees: Tony Hayward, his successor, said last year that BP's top brass were too imperious and failed to heed the concerns of the lower ranks. Other observers think the management is not assertive enough. Neil McMahon of Sanford Bernstein, a financial-services firm, believes that BP needs to be reorganised to reduce the autonomy of its many units and so ensure more consistent standards and policies.

But for all the fuss, BP's conduct is probably not too different from that of its rivals. Mr Baker's report suggested that most American oil firms probably tolerated similar safety lapses. Fadel Gheit of Oppenheimer, another financial-services firm, points out that before the disaster at Texas City, many refineries used to keep staff and maintenance crews on site, dangerously close to volatile chemicals. By the same token, he says, none of BP's partners in the Alaskan pipeline complained that it was spending too little on maintenance.

If anything, Mr Gheit argues, BP has handled disaster better than its rivals might have done: it has offered to settle all lawsuits arising from the explosion at Texas City and has set aside $1.6 billion to compensate the victims, whereas Exxon Mobil is still fighting a court case related to the massive spill from the Valdez, one of its tankers, off the coast of Alaska in 1989.

The rest of BP's difficulties are hardly unique. BP's rivals are also struggling to increase production, since nationalistic governments are increasingly inclined to exclude Western firms from the most promising exploration prospects. Indeed, BP is in a better position than most, in that it is still clinging to its prolific Russian joint venture, TNK-BP, despite the Kremlin's growing hostility to foreign investment in oil and gas projects.

Likewise, the whole industry is experiencing embarrassing delays and cost over-runs with complex projects like Thunder Horse. That is thanks to the high oil price, which has prompted a boom in exploration and thus created a shortage of labour and equipment. Both Royal Dutch Shell and Exxon Mobil, for example, have increased budgets and stretched timetables for their respective developments on Russia's Sakhalin Island.

Mr Hayward's elevation will not change any of this. As head of BP's exploration and production, he presumably would already be finding and pumping more oil and gas if he could. Furthermore, he has spent his entire career at BP, much of it as Lord Browne's protégé, so he is steeped in its culture. The change of guard may prompt investors to reassess the firm and give its share price a corresponding boost, say analysts. But in the long run Mr Hayward will probably find the job even more gruelling than Lord Browne did.

Ethanol Production Update

The headlines on the latest Renewable Fuels Association (REA) press release are: October production ties all time high, yearly production, demand for ethanol up more than 25%.

This somewhat contrary to what I have been reading in the popular press, that frequently says demand is down. We are still importing expensive ethanol to meet demand. However, the capacity of new plants probably will double over current capacity in the next two years, making me wonder whether we can absorb that much production, forcing ethanol prices down (that will be good for consumers, but bad for producers). Further, that production rate will put a strain on corn production forcing prices of corn up and possibly jeopardize our supply of food corn. No significant cellulosic ethanol production will come on stream in the next two years, so that alternative is no relief for corn supplies during that period. We need to put a moratorium on building more corn ethanol plants which only have a small net energy gain, and wait for cellulosic ethanol to become viable. We should stop subsidizing the construction of new corn ethanol plants.

Solar Engines

Red Herring reports that Carmanah Technologies(OTC: CMHXF) is planning to introduce a line of "solar engines", a bundle that will integrate solar panels, batteries and electronics to power off grid applications like telecom towers and monitoring equipment for pipelines.

This is a new market for Carmanah, whose core business is making solar LED lights, like street signs, airfield lights and lighted marine bouys for off grid applications. Shown is a solar powered light on a telecom tower.

This is the type of installation that traditionally has been served by lead-acid batteries and recently the fuel cell industry has made some inroads. Carmanah's product is a step further than the fuel cells, requiring less maintenance. The Red Herring article also delves into why they are going into this market and the potential market size.

Thanks to Tyler at Clean Break for the tip.

Loveless brothers

Jan 11th 2007 | MOSCOW
From The Economist print edition

AFP

Another Russian gas conflict was averted, but a short oil war broke out instead. Europe should take heed

Get article background

RUSSIA and Belarus, its ex-Soviet neighbour, are supposedly brotherly Slavic nations that are in the process of forming a union state. There are indeed some striking family resemblances. Both have irascible authoritarian presidents—Russia's Vladimir Putin and Belarus's brutal Alyaksandr Lukashenka—and both are inclined to risky diplomatic brinkmanship. This week that similarity propelled them over the brink and into an unfraternal trade dispute. Brief though it may have been, it had important implications for Russia's energy dealings with Europe, and perhaps also for the future of benighted Belarus.

A year ago, wrangling over the price of gas sold by Russia to Ukraine briefly diminished the flow of gas through Ukraine to Europe. At the end of 2006, Belarusian resistance to Russia's demand that it too pay more for gas threatened to unleash another so-called “gas war”. The modest economic growth that Mr Lukashenka terms the “Belarus economic miracle”—which along with his total control of the media and harassment of opponents has shored up his regime—has in fact been largely based on massively discounted Russian gas imports.

In the event, the two countries cantankerously reached a deal on an increased gas price just before their New Year's Eve deadline. But a few days later, an oil war broke out instead: Russia imposed new duties on the crude oil it exports to Belarus (refining and re-exporting it have been a crucial money-spinner for Mr Lukashenka, in effect another big Russian subsidy to the Belarusian economy). In revenge, Belarus demanded a transit fee on the oil that crosses Belarus to other European customers. The Russians refused—and Belarus began siphoning off oil in lieu of payment. On the night of January 7th Russia stopped pumping oil into a pipeline network that crosses Belarus and delivers 12.5% of the European Union's oil needs. Supplies to Poland, Germany and others stopped flowing.

The two countries' tactics may be similar, but their muscle is not. Mr Putin talked of cutting oil production and rerouting supplies. The Russians also threatened duties on all Belarusian goods, many of which would struggle to find markets elsewhere. On January 10th, after the presidents talked on the telephone, Mr Lukashenka blinked; the transit fee was lifted; and oil began to flow again before Europe was seriously affected. Nevertheless, the short but nasty spat has telling lessons.

One is that, with the Russians in this mood, Mr Lukashenka's grip on Belarus may be in jeopardy. While others reviled him, Mr Putin stood by Mr Lukashenka during his rigged re-election last year. But Mr Putin's motive was more aversion to European meddling in Russia's “near abroad”, and to the so-called “colour revolutions” of the kind that overtook Ukraine in 2004, than affection for Mr Lukashenka. Personal relations between the two men are said to be rancid; a proper union between their two countries, a plan Mr Putin inherited from his predecessor, Boris Yeltsin, now looks fanciful. (Mr Lukashenka is said to have cooled on the idea after it became clear that he was unlikely to remain president after the merger.) In the absence of a reliable alternative, defenestrating Mr Lukashenka may not be part of Mr Putin's plan. But the new gas price alone could seriously damage Belarus's mostly state-owned factories and collective farms, and alienate ordinary Belarusians.

The affair also confirms the increasingly poisonous nature of Russia's dealings with many of its former vassals. Energy feuds are both a cause and a symptom of this trend. Georgia, Mr Putin's least favourite ex-Soviet neighbour, has been forced to accept a price for Russian gas that is more than twice the new one for Belarus. But supplies from neighbouring Azerbaijan are helping Georgia through the winter, and they may soon, says Nika Gilauri, Georgia's energy minister, replace Russian imports altogether. With its own oil and gas deposits in the Caspian Sea, Azerbaijan itself recently rejected what Hafiz Pashayev, the deputy foreign minister, describes as the “unreasonable” gas terms offered by Russia, and stopped importing Russian gas. It has also ceased sending its oil through Russian pipelines.

The most important lesson for Europe, however, is once again that over-reliance on Russian energy is dangerous. In principle, the Kremlin's drive to charge its neighbours more for gas is reasonable. Overall demand for Russian gas is outstripping supply; suppressing demand in the ex-Soviet states should make more gas available for export to the more lucrative European market. In the particular case of Belarus, the Russians deserve some sympathy. Until last year they were criticised for coddling Mr Lukashenka with preferential gas terms—and Belarus's re-export of duty-free Russian oil was, as one foreign observer in Minsk puts it, an obvious “scam”.

But however reasonable its aims, Russia's bullying and capricious methods, plus its volatile relationship with energy transit countries and carelessness over the impact on European consumers, have rightly alarmed European leaders. Though Mr Putin pledged to “do everything to secure the interests of Western consumers,” Germany's Angela Merkel spoke of damaged confidence. The Europeans should also note that Russia has emerged from its tussle with Belarus with a 50% stake in Belarus's gas pipeline (payment for which will partly offset the gas-price hike), strengthening the Kremlin's grip on Europe's energy infrastructure. An EU energy strategy released this week talked about the need for diversifying suppliers and dealing with them collectively: the quicker, the better.

Plug-in Hybrids Stabalize Electric Grid

Technology Review has a nice roundup on the advantages of plug-in hybrids (PHEVs), pointing out how the vehicles could help stabilize the grid if they were charged during low demand periods. Some key excerpts from Technology Review:

Such a system could be further optimized by using smart chargers and other electronics. This system would include a charger that runs on a timer, charging cars only during off-peak hours. Researchers at Pacific Northwestern National Laboratory (PNNL) are taking this a step further with smart chargers that use the Internet to gather information about electricity demand. Utilities could then temporarily turn off chargers in thousands of homes or businesses to keep the grid from crashing after a spike in demand.

The next step would be to add smart meters that would track electricity use in real time and allow utilities to charge more for power used during times of peak demand, and less at off-peak hours. Coupled with such a system, the PNNL smart charger could ensure that the plug-in batteries are charged only when the electricity is at its cheapest, saving consumers money.

But what many experts are excited about now is a concept called "vehicle-to-grid," often abbreviated V2G. ... In this kind of system, each vehicle would have its own IP address so that wherever it is plugged in, the cost of the energy it uses to recharge would be billed to the owner. With the right equipment, the car could also return energy to the grid, giving the owner credit. Mock-ups of such systems have already been tested ...

I know some of this information is repetitive to some of my regular readers, but the importance of plug-in vehicles (and electric vehicles) to relieving our dependence on increasingly expensive liquid fuels is so crucial and the word must be spread to as many as possible. While I have said many times that conservation and use of renewables are very important this technology remains the cornerstone of The Energy Revolution.

Thanks to tip from Tyler at Clean Break.

Toyota to Reign in 2007

According to Autopia, for the first time ever, the top selling car company in the world won't be headquartered in the U.S. While GM and Ford are cutting production, Toyota will zoom past GM and produce 9.42 million vehicles across the globe in 2007. GM plans to build 9.181 million vehicles this year. (According to the BBC analysts do not expect GM to increase production significantly in 2007). .... more from Autopia

Toyota becoming number one in the auto industry is not only a blow to GM but to America who has been the leader in car sales for 81 years according to one source. The two rival car giants are now going in opposite directions, with Toyota expecting to add a half million in vehicle sales in 2007, while GM and other American car companies are closing plants and laying off workers. Toyota's rise would also be a victory for its unique corporate culture, the so-called Toyota Way, which is based on an obsession with craftsmanship and constant improvement. It is also a victory for keeping in touch with consumer demands, especially more energy efficient cars, which until this year, perhaps too late, American car companies have chose to ignore, instead offering its gas guzzling models.

Oil's not well

Jan 11th 2007
From The Economist print edition

A fall in commodity prices raises concerns about the appetite for risky assets

WHAT a difference a year makes. When Russia cut off gas supplies to Ukraine in January 2006, crude prices jumped 19% within a few weeks. This year, a similar halt to supplies, because of an oil dispute with Belarus, was a one-hour wonder in the market. The crude price slipped close to an 18-month low on January 9th.

Oil has not been rescued by planned production cuts by the Organisation of the Petroleum Exporting Countries nor by speculation about an American or Israeli attack on Iran, both stories that would normally add several dollars to a barrel.

Some attribute oil's fall to the mild winter in the northern hemisphere, which saw New Yorkers sunbathe in early January. But copper has also been plunging in price, which cannot be blamed on the weather. Other metals have been dragged down in copper's wake. The Economist All-items commodities index, which excludes oil, fell 10.2% in the week to January 9th (see chart).

t is possible that falling commodity prices are signalling a rough patch ahead for the world economy. Perhaps they are catching up with the mood in the bond markets, where the inverted yield curve (in which short rates are higher than long rates) has, many believe, for months been pointing to a slowdown.

But the gloom thesis is not really borne out by recent economic data, which have shown, for example, strong American employment gains and buoyant German manufacturing. Nor are there other signs that investors are becoming depressed about the outlook for global growth. The Baltic freight index, a measure of trade flows, has more than doubled within the past year (also see chart).

It seems more likely that commodity prices are being driven down by two other factors. The first is supply, as higher prices have steadily led to increased production. Dresdner Kleinwort, a German bank, reckons that 2007 could be the first year in the current “super-cycle” in which the supply problems in a range of metals will start to subside. Meanwhile, users of oil have piled up inventories (although the most recent data showed a dip), leaving them less vulnerable to supply disruptions.

The second force is the flow of investment. It is surely no coincidence that the two commodities to suffer most in the recent sell-off are oil, the most-traded commodity, and copper, where speculative excess seemed greatest.

The enthusiasm for commodities in recent years has been part of a general move into “alternative assets”, a term that covers everything apart from shares, bonds and cash. The idea was to find assets that were uncorrelated with traditional holdings, a move that should improve the risk-reward trade-off of portfolios.

When such a fashion takes hold, it can rapidly gain momentum. This is because alternative-asset classes are often small and new investment flows drive prices up very quickly. To those participating in the trend, that confirms the wisdom of their original decision and encourages others to jump aboard.

With commodities, institutional investors often bought index portfolios, which meant putting money into raw materials, regardless of the fundamentals of each market. (One problem for copper is that its index weighting, along with that of other base metals, is being reduced.)

Oil is the biggest single component in most commodity indices. Citigroup estimates that, from 2003 onwards, financial flows had pushed up the price of oil by some $35 per barrel.

Such was the scale of investment flows that the structure of the commodity markets changed. Traditionally, futures prices were lower than spot, or current, prices; a state known as “backwardation”. This allowed investors to buy the future and wait for its price to rise to the spot level. This gain, known as the “roll yield”, was an important part of commodity returns.

But financial speculation forced the futures price of some commodities well above the spot level, an unusual phenomenon known as “contango”. This meant investors in futures were losing money; in other words, the roll yield was negative. So whereas The Economist's commodities index rose 28% in 2006, the Goldman Sachs Total Return Index (which incorporates both oil and the roll return) fell 15%.

That seems likely to have disillusioned many converts to the commodity cause. Speculative investors have been getting out of their positions. They may be worried about Vladimir Putin, but they are more worried about cutting their losses.

The commodity sell-off has been accompanied by a retreat from another risky asset class, emerging-market shares. Suddenly, investors are rediscovering political risk. The botched currency controls imposed by Thailand last month have been followed by Hugo Chávez's plans to nationalise Venezuelan businesses.

Suddenly, the sang froid of investors has been disturbed. God, as the 1960s film “Georgy Girl” explained, always has a custard pie up his sleeve.

Prairie Grasses Yield More Energy Than Corn

A new study led by David Tilman, Regents Professor of Ecology in the University of Minnesota's College of Biological Sciences, published a study showing that prairie grasses are more energy efficient that corn ethanol or soybean biodiesel and are better for the environment. The findings are published in the Dec. 8 issue of the journal Science. According to a University of Minnesota press release:

The study shows that mixtures of native perennial grasses and other flowering plants provide more usable energy per acre than corn grain ethanol or soybean biodiesel and are far better for the environment. Grass-based fuel can lead to a net decrease in atmospheric carbon dioxide, whereas ethanol and biodiesel increase it. Grass-based fuel can even lead to a net decrease in atmospheric carbon dioxide, whereas ethanol and biodiesel increase it.

The beauty of mixed prairie grasses, say the researchers, is that, unlike corn, they can grow in old farmland or in marginal, degraded lands with little or no application of water or fertilizers. The challenge is finding enough such land.

"Biofuels made from high-diversity mixtures of prairie plants can reduce global warming by removing carbon dioxide from the atmosphere," says Tilman. "Even when grown on infertile soils, they can provide a substantial portion of global energy needs, and leave fertile land for food production."

India to Have Natural Gas surplus in Two Years

As reported in the Asia times: A report by India's Ministry of Petroleum has said that the country will possess surplus natural gas in the next two years and its rapidly growing economy is likely to be fueled by it after major discoveries by state-run and private energy companies. Currently, India meets 70% of its energy requirements through imports.

"The major natural-gas recoveries off the east coast and aggressive acquisition of oil and gas blocks overseas might make India a gas-surplus country in another two years, and the natural fuel is all set to replace the country's agrarian-based economy," said the report. "The planned cross-country gas pipeline and city gas-distribution networks will go a long way towards influencing India's economy." ... more

If this proves to be true it could have a stabilizing effect on the cost of gas and oil supplies in the rest if the world.

After Sakhalin

Dec 13th 2006 | MOSCOW
From The Economist print edition

What does Shell's capitulation to Gazprom mean for the Russian energy industry?

Get article background

“GIVE me the man,” ran an old KGB adage, “and I will find you the crime.” A similar rule now seems to apply to energy companies in Russia. For Yukos, once Russia's top oil firm, the crime was allegedly unpaid taxes; with the giant oil and gas project led by Royal Dutch Shell on Sakhalin island, in the Russian far east, it was environmental violations. In both cases the outcome was broadly similar: state-controlled firms ended up taking control of prize assets.

The huge Shell-led project known as Sakhalin II would be unusual anywhere, and in Russia it is unique. It involves the country's first liquefied natural gas (LNG) plant, which will serve lucrative new markets in North America, South Korea and Japan. Sakhalin II is almost finished: it is already producing oil, and LNG shipments are supposed to begin in 2008.

Until this week, though, there were also some perilous peculiarities. Sakhalin II was the only big energy operation in Russia that did not involve a Russian firm: Shell's partners are Mitsui and Mitsubishi of Japan. (Rosneft, a state-controlled oil firm, has a stake in a rival Sakhalin consortium led by Exxon Mobil.) The Shell- and Exxon-led projects were the only two exceptions to the monopoly on gas exports held by Gazprom, the state-controlled gas giant. Along with a Siberian development led by Total, they were also the only projects governed by “production-sharing agreements” (PSAs), contracts signed with the government in the 1990s that some Russians now consider unfairly generous.

The “crime” needed as a pretext to rectify these peculiarities was not hard to find, or invent. The sea around northern Sakhalin, in which the project's offshore drilling rigs stand, freezes for half the year and is home to a rare whale. The twin pipelines that will deliver the oil and gas to the island's southern tip cross around 1,000 rivers and streams, many of which are used by spawning salmon. A few months ago, Russian environmental regulators began to complain and they have since suspended licences and threatened the Sakhalin II consortium with criminal action.

Gazprom was already negotiating for a stake in Sakhalin II when the consortium announced last year that its costs would nearly double, to around $20 billion. Under the terms of the PSA, that will reduce and delay the state's returns. The environmental pressure also raised the prospect of costly delays, to the ire of the customers who have pre-purchased much of the anticipated gas.

Shell has evidently decided that the threat of delays and obstruction was less palatable than cutting its Sakhalin stake. The cuts in proven reserves that will result are a heavy price for a company that is already short of oil. The deal is still being negotiated, but it emerged this week that Gazprom will probably end up with a controlling stake. In return, instead of a share of a Siberian gas field that was once on the table, Shell and its Japanese partners will get cash (though whether they would want more Russian assets must be open to question). The regulatory shenanigans are likely to continue until the price is agreed.

What will that mean for the salmon, the whales and the rest of Sakhalin's beautiful but fragile flora and fauna? Environmentalists have made common cause with the government, but they may find that, despite its failings, the consortium was greener than Gazprom will be. After all, unlike its new Russian partner, the consortium needed to secure loans from multilateral institutions and was sensitive to bad publicity. It will be interesting to see how the environmental regulators behave once Gazprom is installed. The massive tax debts attributed to Yukos's main production subsidiary were magically reduced by the courts after the unit was expropriated by the state and sold to Rosneft.

Shell's capitulation and the Yukos case exemplify the state's ever-increasing role in the energy industry. A second question is how far that trend will go. State-controlled firms look destined to get preferential treatment in the future allocation of extraction licences, and the role of foreign firms looks certain to be tightly circumscribed from now on. (Just how tightly will be partly decided by a new law.)

But what of Russia's existing private firms? Yukos's remaining assets seem likely to be redistributed in another fake auction. More controversial will be TNK-BP, an Anglo-Russian company that is half-owned by BP (foreign and therefore bad) and half by a clutch of tycoons (unpopular and therefore vulnerable). The firm has been hit with big tax bills and other misfortunes; persistent rumour has it that a change of ownership is likely next year. Russian history suggests that all this is unlikely to boost production.

Still, with the world's energy reserves distributed as they are—mostly in places at least as unstable and inhospitable as Russia—the oil majors will not be easily deterred. The enormous Shtokman gas field in the Barents Sea could be an early test of international sentiment. The Kremlin for years tantalised foreign companies and their governments with the prospect of a role in the Arctic project. Then, in October, Gazprom said it would go it alone.

Now Vladimir Putin says foreign partners might be welcome after all. Whether this confusion stems from extreme negotiating tactics or sheer disorganisation is unclear. Either way, as Sakhalin proves, the Kremlin evidently feels it can afford to dispense with the niceties.

Shot Across the Stern

Dec 13th 2006
From The Economist print edition

Was Sir Nicholas's big report on climate change egalitarian, inegalitarian—or both?

TO SHOW that you are up to speed on global warming, you need to know your Rio summit from your Kyoto protocol; your Greenland pump from your carbon sink; and your Harald Sverdrup (a Norwegian oceanographer, who measured sea currents) from your Bjorn Lomborg (a Danish controversialist, who annoys greens). And as if all that were not enough, Sir Nicholas Stern's big report on climate change, published by the British government in October, has forced greenhouse gasbags to master another bit of esoterica: the Greek alphabet.

Actually, just two letters will do: delta and eta. The characters are Sir Nicholas's shorthand for two concepts. Delta determines the weight he places on the welfare of future generations that are not yet here to stick up for their own interests. Eta governs his answer to a different question: how much weight should be given to the consumption of the rich relative to that of the poor?

Just to recap, Sir Nicholas's report concludes that if greenhouse-gas emissions continue on their current path, the cost over the next couple of hundred years in terms of lost output could be colossal. The shorter-term costs of switching away from carbon need not be, however.

His judgments have been controversial, and none more so than his use of Greek, which has been questioned by two eminent economists and a flotilla of economic bloggers. The weight he gives to future generations is too high for the taste of William Nordhaus of Yale University. By contrast, the figure he picks for eta is too low for the comfort of Sir Partha Dasgupta of Cambridge University, who would give the consumption of the poor rather more emphasis than Sir Nicholas does in his treatise.

Sir Nicholas thinks a person born in 2106 should count for as much as one born in 2006. In his defence he cites some big thinkers, including Roy Harrod, a British economist best known as a growth theorist and a biographer of John Maynard Keynes, who thought discounting future generations was just a “polite expression for rapacity”. He admits there is a slim chance these prospective generations will not in fact exist: the earth might be wiped out by a meteorite, for example. For that reason, and that reason only, he discounts their welfare by just 0.1% for every year that passes before they appear.

Sir Nicholas's ethics may be appealing, but according to Mr Nordhaus the economics that follow from them are absurd. Barring any celestial collisions, there will be countless future generations, each with a claim on our consideration equal to our own. Suppose, he argues, that all these generations to come will suffer some minor inconvenience (a few extra mosquitoes, say) that we today could prevent at great cost to ourselves. By Sir Nicholas's moral calculus, even small harms amount to big losses when added up over enough cohorts. Thus we should take even crippling action to avert trivial hardships that may befall our long, long line of descendants.

The present deserves a break for another reason, Mr Nordhaus says. Future generations will not only be born later than us, they will also be richer—much richer. He points out that if consumption per person grows by 1.3% a year, it will rise from $7,600 today to $94,000 by 2200. And yet Sir Nicholas asks the present generation to make an economic sacrifice to help its richer successors.

Alphabetagammadelta soup

Redistribution from poorer to richer seems a bit perverse. Most people accept that a dollar is worth more to a pauper than to a plutocrat. But how much more? Sir Nicholas picks a value for eta of one, which means a dollar is worth ten times more to someone with one-tenth of the income. This may sound like a big difference. But it means a 10% gain in the consumption of the poor—an extra ten cents for someone on a dollar a day—is worth no more in his moral calculus than a 10% bonus for the rich—an extra $100 for someone with a daily budget of $1,000.

Sir Partha thinks this gives the poor short shrift. He argues that an eta of between two and four yields “more ethically satisfactory consequences”. If eta were equal to two, a dollar would be worth one hundred times more to someone ten times poorer.

These shots at the Stern report whistle in from different directions, but Mr Nordhaus and Sir Partha both agree on one point: Sir Nicholas's choices are inconsistent with each other. If Sir Nicholas is such a staunch egalitarian between the future and the past, Sir Partha complains, he should be more egalitarian between the rich and the poor.

For his part, Mr Nordhaus argues that if Sir Nicholas insists on a relatively low value of eta, he must pick a higher value of delta: something like 3% not 0.1%. Otherwise, he argues, the present will always be held hostage to the future, forgoing its own consumption to further enrich all the generations to come.

Opponents of action on global warming have seized upon Sir Partha's sally against Sir Nicholas. But Sir Partha himself supports such efforts. “I have believed for some time that climate change is the most all-embracing problem humanity faces today,” he has written, “and would be happy to vote [to spend] 1.8% of the GDP of rich countries to confront the problem.”

His argument is not as self-contradictory as it sounds. The costs of fighting climate change would fall mainly on today's more affluent nations. Conversely, the benefits that will emerge in the distant future will be felt mostly in poorer countries. Bangladeshis or Somalis should be much better off in 50 years' time than they are now, but they will still be much less prosperous than the average American or western European is today. The high value of eta that Sir Partha advocates may not match that chosen by the Stern review. But it would still justify hefty sacrifices on the part of the rich to shore up the consumption of the poor, even if they have not yet been born.

Why a Hydrogen Economy Doesn't Make Sense

Another study, reported in PhysOrg.com reaffirms my belief that the hydrogen economy is not energy efficient.

In a recent study, fuel cell expert Ulf Bossel explains that a hydrogen economy is a wasteful economy. The large amount of energy required to isolate hydrogen from natural compounds (water, natural gas, biomass), package the light gas by compression or liquefaction, transfer the energy carrier to the user, plus the energy lost when it is converted to useful electricity with fuel cells, leaves around 25% for practical use — an unacceptable value to run an economy in a sustainable future. Only niche applications like submarines and spacecraft might use hydrogen.

Even though many scientists, including Bossel, predict that the technology to establish a hydrogen economy is within reach, its implementation will never make economic sense, Bossel argues. ... more

Safer, Sustainable Energy Investigated

PhysOrg.com reports that In the future a new generation of nuclear reactors will create energy, while producing virtually no long-lasting nuclear waste, according to research conducted by Wilfred van Rooijen, who will receive his Delft University of Technology (Netherlands) PhD degree based on this research subject on Tuesday, 12 December.

Wilfred van Rooijen's research, conducted at the Reactor Institute Delft, focused on the nuclear fuel cycle and safety features of a Gas-cooled Fast Reactor (GFR), one of the so-called 'fourth generation' nuclear reactor designs. These designs have a sustainable character: they are economical in their use of nuclear fuel and are capable of rendering a great deal of their own nuclear waste harmless. The ability to actually build such reactors is however still in the very distant future. ... more

This is further confirmation that a GFR is one of the safest reactors on the drawing board while they reduce nuclear waste considerably.

How Long will the PV Silicon Shortage Last

Red Herring has an article telling of SolarWorld forming a joint venture to "turn dirty metallurgical-grade silicon into high-purity solar-grade silicon." They also report that: "According to SolarWorld, the joint venture will develop and build a manufacturing plant to produce, initially, 1,000 tons (per year?) of solar-grade silicon from metallurgical-grade silicon."

They also report on other recent entries into the solar silicon market and quote Jesse Pichel, a vice president and senior research analyst of technology at Piper Jaffray as saying“There’s no reason to go to metallurgical silicon,”

The article goes on to question this statement.

From all that I have read, the silicon shortage will not go away in a couple of years as some say, but will continue as long as sales of solar modules continue to grow at 25% to 35% a year. This rate of growth is necessary for an extended period if silicon PV solar is to continue to be the major source of PV modules and PV solar becomes the alternative energy source of choice. The only fly in the ointment is if CIGS and/or CIS technology develops as proponents say and it becomes the low cost source. I have no knowledge of the merits of metallugical silicon.

Solar Energy Tax Credit Extended One Year

From the Solar Energy Industries Association via Neal Dikeman in the Cleantech Blog:

"In its waning hours, the 109th Congress today passed legislation that would extend the 30% solar energy investment tax credit (ITC) for homeowners and businesses for one additional year, through the end of 2008."

Neal has some good, bad and ugly comments on this legislation.

Economist Featured Article of The Week

The petrodollar peg

Dec 7th 2006
From The Economist print edition

America should worry more about fixed exchange rates in the Gulf than the gently rising Chinese yuan

AMERICAN politicians and businessmen view China's undervalued exchange rate and its huge current-account surplus as the main cause of America's vast deficit. Thus next week a high-powered delegation led by Henry Paulson, America's treasury secretary, will fly to Beijing to persuade China to take measures to reduce its surplus. But are they heading to the right place? At the global level, the biggest counterpart to America's deficit is the combined surpluses of the oil-exporting emerging economies. They are expected to run a total current-account surplus of some $500 billion this year, dwarfing China's likely surplus of $200 billion (see chart).

Counting only the Middle East oil exporters, the surplus has surged from $30 billion in 2002 to an estimated $280 billion this year. One reason why this gets much less attention than the smaller $160 billion increase in China is that only a fraction of it has gone into official reserves, which are publicly reported. Most of it is stashed in government oil-stabilisation or investment funds, such as the Abu Dhabi Investment Authority, which are much more secretive than the People's Bank of China—but which probably hold just as many dollar assets.

One big difference is that China is now allowing the yuan to rise against the dollar. The exchange rate is up by an annual rate of almost 7% since September. In contrast, the six members of the Gulf Co-operation Council, or GCC (Saudi Arabia, United Arab Emirates, Kuwait, Bahrain, Oman and Qatar), which account for virtually all of the Middle East's surplus, still peg their currencies firmly to the dollar. This is partly in preparation for the GCC's plan to adopt a single currency by 2010. But the bizarre result is that over the past four years of soaring oil prices, their real trade-weighted exchange rates have fallen.

The Gulf economies are running an average current-account surplus of 30% of their GDP, well in excess of China's surplus of 8%. Oil exporters cannot spend their windfall overnight and it makes sense for them to run a surplus when oil prices rise, as a buffer for when oil prices fall. Even so, one can have too much of a good thing.

It might be best for the Gulf states as well as the world economy if they abandoned their dollar pegs and shifted to some sort of currency basket. A more flexible exchange-rate regime would allow them to regain control of their monetary policies and so cool down their overheating economies. By pegging their exchange rates to the dollar, they have had to adopt America's monetary policy, leaving real interest rates too low (often negative) for such fast-growing economies. Credit is growing too rapidly, inflation is rising and the prices of assets, especially property in places such as Dubai, have exploded.

Official price indices almost certainly understate inflation. According to government figures, prices are rising in the UAE at an annual rate of 7%, but independent estimates put it at 15%. The dollar's slide against other major currencies is pushing up the price of imported goods. Only 10% of the GCC's imports come from America (compared with one-third each from Europe and Asia), so from a trade-weighted point of view, the dollar peg makes no sense.

In theory, a higher oil price should imply a rise in oil exporters' real exchange rates; and it is better if this occurs through a rise in the nominal rate rather than higher inflation. The main argument against allowing the exchange rate to rise is that it would harm the competitiveness of the non-oil sector in economies that need to diversify. However, pegging to the dollar has not always been a boon to the economies as a whole. When the dollar strengthened in the late 1990s, non-oil industries were squeezed at the same time that the price of crude was sliding. This is another reason why pegging to a trade-weighted basket would make much more sense.

Oiling the world's wheels

Brad Setser, an economist at Roubini Global Economics, a research firm, argues that the dollar pegs of the Gulf states are also preventing some necessary rebalancing in the world economy. The recent depreciation of their trade-weighted currencies has raised the price of foreign goods and thus may be one reason why the increase in their imports has been unusually weak relative to the increase in exports. If, as seems likely, the dollar continues to fall, it will further drag down their currencies and thus keep external imbalances large.

A fully floating exchange rate would lead to too much volatility, but a bit more flexibility could usefully help oil exporters to adjust to fluctuations in oil prices. A trade-weighted basket, in which the euro had a large weight, would help to stabilise the real exchange rate of the GCC countries and so protect their competitiveness. It still would not ensure that oil exporters' currencies moved correctly in line with the oil price, however.

Some economists have therefore suggested that oil exporters should link their currencies in some way to the oil price. Currencies would rise when oil prices are high and fall when prices were weak. This would help to boost countries' external purchasing power and hence their imports when oil prices boom. It would also help to smooth the local currency value of oil revenues and hence government income, helping to avoid big deficits in bad times and huge surpluses in good times.

Oil exporters argue that they peg to the dollar because oil is priced in dollars and they want to avoid exchange-rate risk. But exchange-rate stability does not guarantee economic stability. On the contrary, a more flexible currency would allow economies to manage oil-price shocks better.

However, a rise in petro-currencies would not be a cure by itself for America's deficit (nor, for that matter, is a dearer Chinese yuan). The main solution to global rebalancing is for America to save more and for surplus countries, including both the oil exporters and China, to spend more. A rise in oil exporters' currencies could play a part in that.

Hydrogen Storage Using Polymeric Foam as a Hydrostatic Pressure Retainment Structure

Two publications suggest a means of containing hydrogen in a pressure vessel that is conformable, lighter and safer than a simple pressure vessel. The potential methods of storing in a vehicle are numerous and none have surfaced that are ideal. This is a rather novel one, but does not strike me as the ultimate answer. The real answer, in my opinion, if hydrogen is needed at all for cars, is to use it in fuel a cell as a replacement for the ICE in a plug-in vehicle.

Examination of Poylymeric Foam as an On-Board Vehicular HPR Hydrogen Storage Media

Hydrostatic pressure retainment (HPR) is an innovative theory for gaseous pressure vessels. An ideal HPR pressure vessel contains an array of spherical cells arranged in a homogeneous fashion that may be likened to a simple-cubic (SC), bodycentered cubic (BCC), or face-centered cubic packing structure (FCC)

The main advantages of HPR pressure vessels over traditional pressure vessels are threefold. First, because an HPR pressure vessel essentially is a matrix of multiple spherical pressure vessels, the outer shell need not be spherical or cylindrical. Rather, the outer shell may take on a conformable geometry, making it more convenient to have a larger tank volume within an automotive assembly. ....

Hydrogen Storage for Automotive Tanks Using Using Hydrostatic Pressure Retainment (HPR) Microstructure

Gas is stored in small bubbles of a foam matrix, thereby forming a series of small spherical pressure vessels. The resulting stress in the material between the bubbles is in a hydrostatic state of tri-axial tension. ....

Agencies line up for plug-in cars, (CNET News.com)

State and local governments are launching programs to see if it's possible to convert their hybrid cars and trucks into plug-in cars. ... The New York State Energy Research and Development Authority recently solicited contract bids for nine plug-ins, said Ray Hull, an official at the agency. If the trial succeeds, the state will try to convert the 535 hybrids it owns into plug-ins. ....

A good article summerizing the status of plug-in vehicles.

Teacher Saves Two-Thirds of his Electricity

The Christian Science Monitor had an article on saving energy at home, that reports on a high school science teacher, Ray Janke, who decided to see what he could do to save on his electric bill.

He exchanged incandescent bulbs for compact fluorescents, put switches and surge protectors on his electronic equipment to reduce the "phantom load" - the trickle consumption even when electronic equipment is off - and bought energy-efficient appliances.

Two things happened: He saw a two-thirds reduction in his electric bill, and he found himself under audit by Mass Electric. The company thought he'd tampered with his meter. "They couldn't believe I was using so little," he says.

Twenty-two percent of all energy in the United States is used for residential purposes. (Transportation accounts for 28 percent.)

Cutting back on electricity used for lighting (9 percent of residential usage nationwide) presents the quickest savings-to-effort ratio. The EPA estimates that changing only 25 percent of your home's bulbs can cut a lighting bill in half. Incandescent bulbs waste 90 percent of their energy as heat, and compact fluorescents, which can be up to five times more efficient, last years longer as well.

This is going to be my major campaign, to reduce use of electricity in the home and I will continue to refer to articles on this subject. If everyone were to be energy conscious at home we could slow down greatly the need for new power plants and in the extreme eliminate any new plants.

The US government has a home energy saver calculator at: hes.lbl.gov. The Energy Star program website is: www.energystar.gov . For tips on sealing your home, go to: www.energyconservatory.com .

Shell/Saint-Gobain to Produce CIS Solar Panels

Shell Erneuerbare Energien GmbH ('Shell') and Saint-Gobain Glass Deutschland GmbH, have announced a joint venture to begin solar power panel manufacturing based on advanced CIS (copper indium di-selenide) technology. The joint venture was recently approved by the European Commission.

The new entity AVANCIS KG will commence construction of the production facilities with operations likely to commence in 2008. The initial annual capacity of the plant will be 20 MW with options for rapid expansion. The joint venture will combine Shell's CIS technology expertise, supported by eight years of CIS marketing experience, with Saint-Gobain's global and in-depth know-how of glass processing and building material manufacturing. Graeme Sweeney, Shell's Executive Vice-President of Renewables, Hydrogen and CO2 said: "Based on our R&D experience in Munich, where the laboratory line delivered record 13.5% efficiency, we believe this facility can achieve industry-leading performance amongst thin-film technologies." This is another effort trying to capitalize on the shortage of silicon with a thin-film technology that may be superior in cost to silicon, but which would have had a much harder time cracking into the market were it not for the silicon shortage. CIS is another solar cell technology with advantages very similar to CIGS technology. Earlier this year Shell sold its silicon cell facilities to concentrate their efforts on CIS.

ExxonMobil Exec: US Gas Demand Will Be 90 Bcf/d by 2030

Dow Jones Commodities News via Comtex - Daily demand for natural gas in the U.S. will jump almost 40% by the year 2030, and half of that demand is expected to be met by imports of liquefied natural gas from abroad. Daily U.S. gas demand is expected to surge to 90 billion cubic feet per day, compared to the roughly 55 bcf/d of current demand, said Richard Guerrant, vice president, Americas, ExxonMobil Gas & Power Marketing, during a presentation at the 2006 Deloitte Oil & Gas Conference.

The U.S. will compete with industrial demand for gas supplies in emerging world markets, and residential demand in China, Guerrant said.

"Europe will need twice the supply of Asia and North America" in 2030, he said.

It isn't just oil, gas is likely to be as big a problem or more so than oil. All these gas peaking power plants are really eating up our gas supply. Geothermal heat pumps,with electricity generated from renewables, carbon free coal plants and nuclear, in that order of preference, are the answer to our electric power needs. Its too bad renewables can't grow fast enough too be the major source. Importing gas is a big enviornmental and logistics problem, and I think the industry is using scare tactics to get some LNG terminals approved.

EIA Annual Energy Outlook 2007 (early release) Published

The Energy Information Administration has just published the 'early release' version of the 2007 Annual Energy Outlook.

The Annual Energy Outlook presents a midterm forecast and analysis of US energy supply, demand, and prices through 2030. The projections are based on results from the Energy Information Administration's National Energy Modeling System. The AEO2007 Early Release includes the reference case. The full publication, to be released in early 2007, will include complete documentation and additional cases examining energy markets.

Overview

Energy Trends to 2030
World Oil Price Concept Used in AEO2007
Economic Growth
Energy Prices
Reorganization of Fuel Categories in AEO2007
Energy Consumption
Energy Intensity
Electricity Generation
Energy Production and Imports

This is one of the must have publications for those of us interested in energy and energy statistics.

Putting the malaise into Malaysia

Nov 30th 2006 | KUALA LUMPUR
From The Economist print edition

As the country approaches its 50th birthday, racial and religious tensions are jeopardising its economic and social success

UPROAR is still raging in Malaysia over inflammatory speeches at the annual congress of the ruling United Malays National Organisation (UMNO) in mid-November. One delegate talked of being ready to “bathe in blood” to defend the race and religion of the Malay Muslim majority against the ethnic Chinese and Indian minorities. The education minister, no less, brandished a keris (traditional dagger), only to be urged by another delegate to start using it. The affair has brought into focus Malaysians' worries that, as their country nears its 50th birthday next year, its remarkable economic and social success is at risk from the increasingly separate lives its three main races are living.

Last weekend these anxieties were voiced by the crown prince of Perak, one of the country's constituent states. He recalled that in his boyhood the races mixed far more freely; nowadays most children go to single-race schools. The prince regretted that some Malay-majority schools have made girls wear headscarves and even told pupils to avoid non-Malays' homes. Malaysians' spirit of give-and-take, he lamented, had been replaced by the idea that progress was a zero-sum game among the races.

Apart from some deadly riots in 1969, the country has so far done remarkably well in handling the awkward racial mix it inherited when the Malaysian peninsula gained independence from Britain in 1957 (Britain's colonies on Borneo joined the union later). The Chinese, now around a quarter of the population, arrived in colonial times to work the country's tin mines. The Indians, now around one-tenth, mainly came to work on plantations. Neither group intended to stay forever but many did. The Malays' fears of being marginalised in their own land grew as the Chinese came to dominate business and the Indians the professions.

At independence, a “social contract” was struck in which the Indians and Chinese got citizenship while the indigenous peoples received privileged access to state jobs and education. After the 1969 riots, a far-reaching positive-discrimination policy was introduced, with the aim of increasing the indigenous groups' share of business ownership from just 4% to 30%.

Supporters of this policy say it has kept the peace, enabling Malaysia to achieve impressive economic growth. Opponents say it has widened the divide between rich UMNO wheeler-dealers and their less fortunate Malay brethren. UMNO itself, having led the country's development for decades, has become perhaps its greatest handicap. The Malay chauvinism and economic nationalism in its ranks are hobbling progress towards reforming and privatising the big government-linked companies, thereby discouraging both domestic and foreign private investment. The fate of Proton, a carmaker (see article) is emblematic: the government has dithered for months over whether to risk UMNO's ire by selling it to a foreign buyer.

Once an emerging Asian champion, Malaysia is slipping down the league. Its stockmarket is falling behind its rivals (see chart). Last year, foreign direct investment was worth only $4 billion, down from $4.6 billion in 2004. Despite having a big base in Malaysia, Intel is putting its new chipmaking plant in Vietnam. A key test of whether the government can boost investment, says Vince Leusner of the American Malaysian Chamber of Commerce, will be agreement on a free-trade pact it is negotiating with America. Concessions will be needed on such tricky issues as letting foreign firms bid for government contracts. To win greater access to the American market—Malaysia's largest—the prime minister, Abdullah Badawi, must brave the wrath of his UMNO backbenchers.

Nor Mohamed Yakcop, the deputy finance minister, points out that the government has a good record on delivering economic reforms—such as last year's loosening of the ringgit's peg to the dollar—despite political noise. But with Vietnam, China and India competing harder for investment, Malaysia has to build on its strengths as a relatively advanced, liberal country and seek more high-technology and creative businesses. Such businesses need talented people—and the widening ethnic and religious gap is encouraging a brain drain, says Azmi Sharom, a law lecturer at the University of Malaya.

Although a national discussion is plainly needed on how to renew Malaysia's social contract and stop its races growing further apart, Mr Badawi has so far tried to close down this debate. He rejected proposals to create an “inter-faith council” and has told Article 11, a group named after the constitutional clause guaranteeing religious freedom, to stop organising public discussions. Malik Imtiaz Sarwar, a Muslim lawyer and leader of Article 11, says that UMNO leaders feel compelled to emit fiery religious rhetoric to outflank PAS, an Islamist opposition party.

Mohamed Jawhar Hassan, the head of ISIS, a think-tank, says that Malays' desire for more overt expression of their Islamic faith, and Chinese and Indian parents' desire to educate their children separately, are “social forces, much more powerful than any government”. Passing laws may not be enough to stem the drifting apart of the races. But there are few other ideas on how to preserve social harmony and prosperity, two huge achievements of which any country turning 50 could be proud.

PROTON - A fork in the road

Nov 30th 2006 | HONG KONG
From The Economist print edition

Malaysia's crisis-ridden national carmaker faces a stark choice

APHanging by a thread

WHAT will become of Proton, Malaysia's struggling carmaker? A political project set up in the 1980s, it never picked up speed, has been overtaken by foreign competitors and has become embroiled in a struggle over its future direction. With its cash reserves running low, it is now in danger of breaking down altogether. The government, which hopes to place the company with a “strategic partner” by next February, simply wants to extricate itself from the mess with the minimum of humiliation. Which route it will take is the subject of feverish speculation.

Proton was set up by the government in 1983 and started building cars two years later in association with Mitsubishi of Japan. It was a central part of the strategy laid out by Mahathir Mohamad, the prime minister at the time, to transform Malaysia into an industrialised nation by 2020. The idea was that a big carmaker would create jobs, provide access to technologies, bring in export earnings and spawn a host of supporting industries. But Proton never got big. Although it once had 65% of the local market, output never rose above 227,000 cars a year and exports never exceeded 20,000 units annually. In an industry dominated by a handful of global giants, each producing 3m-6m cars a year, Proton remains a minnow.

Yet it has refused to scale down its ambitions. Proton has built factories capable of churning out 1m cars a year and has launched a range of models. But quality is poor and low volumes mean it is not able to compete on cost. Even local consumers have become fed up with Proton's cars, with their sharply declining second-hand values. They have switched loyalties to what was once the second national carmaker, Perodua, which is now controlled and very competently run by Japan's Daihatsu, part of Toyota. Proton's market share in Malaysia has fallen steadily in the past few years and is now just 31%.

The crisis has intensified in recent weeks because Proton's cash is running out. In 2003 it had 3.8 billion ringgit ($1.1 billion) in the bank, but today it has only 500m ringgit, half what it had in March. Hence the government's recent announcement that it was in new talks with two big European car groups, Volkswagen and PSA Peugeot Citroën, with a view to selling part or all of its stake to one of them or forming some kind of strategic alliance.

The trouble is that Proton is not just an ailing carmaker. It is also a political hot potato, since it is caught up in the feud between Dr Mahathir and Abdullah Badawi, who succeeded him as prime minister in 2003. Mr Badawi sees the firm as a liability, but to Dr Mahathir any sale would be tantamount to dismantling his legacy. Khazanah, the national investment authority and Proton's main shareholder, is also reluctant to sell because of the write-down it would take. To complicate matters further Proton's management, in an effort to assert control, has signed vague letters of intent with carmakers including Peugeot and China's Chery. And three local car importers, DRB-Hicom, Naza Group and Mofaz, separately offered to buy Proton in order to keep it in Malaysian hands.

But even if a buyer can be found, a sale would cause other problems. Foreign buyers would be interested mainly in access to the market, not in Proton's factories, models or headstrong managers, who insist that a little more investment is all that is needed to turn the firm around. And although another carmaker could use Proton's manufacturing plants, it would make little financial sense, since most parts would have to be imported. Foreign component-makers, put off by Malaysia's rules that give advantages to ethnic Malays, have set up shop in Thailand instead.

Malaysia's government, the prime minister and his meddling predecessor do not have long to decide which way to turn. Should Proton give up and become a tiny part of a global carmaker, or should it struggle on in the hope that things will somehow improve? Selling out to a foreign firm would be humiliating. But Proton's struggles are already a national embarrassment as it is.